Stakeholders decry 18% GST on EVs against EDB policy

MoIP to write letter to cabinet to clarify EV policy as FBR notices create panic

KARACHI:

To promote the Electric Vehicle (EV) revolution in Pakistan, the Ministry of Industries and Production (MoIP) plans to write a letter to the federal cabinet, providing a clear explanation about the General Sales Tax (GST) applicable to EV motorcycles, scooters, and other two-wheelers. This move aims to dispel the "concocted confusion" regarding the 18% GST being applied instead of the 1% imposed under the government's EV policy.

Auto sector analysts, experts, assemblers, and dealers expressed concerns to The Express Tribune stating that the confusion began when the Federal Board of Revenue (FBR) issued notices to certain electric scooter manufacturers, despite the policy allowing a 1% GST for EV motorcycles. Currently, electric scooter assemblers are being asked to pay the standard 18% GST, which contradicts the Electric Development Board (EDB) policy. The EV policy, constituted by the EDB, specifies that GST on two- and three-wheelers should remain fixed at 1% for five years, from its implementation in 2021, as part of a broader effort to promote electric vehicles and reduce the nation's fuel import bill and environmental pollution.

Industry stakeholders argue that any changes to the policy should involve consultations with all relevant parties to ensure a stable and sustainable framework for EV motorcycles, scooters, and all types of two-wheelers.

Muhammad Sabir Shaikh, a senior auto sector analyst, expert, and dealer, explained that FBR officials misunderstood the EV policy when issuing these notices, adding that MoIP will soon provide clarification. He stressed that the prime minister has been striving to introduce EV bikes, rickshaws, cars, and buses to cut fuel imports and curb pollution, particularly in major cities like Lahore and Karachi. However, the FBR's actions have unsettled the burgeoning EV industry, forcing manufacturers to focus on legal challenges rather than on advancing the transition to electric vehicles.

"Sales of EV scooters are increasing daily because people appreciate their maintenance-free nature and the lack of fuel costs," Shaikh added. "Yet some forces are spreading negativity, undermining the industry's growth."

He explained that electric vehicles represent the future worldwide and criticised the lack of incentives to support this industry, which he believes is being hindered for vested interests.

A senior EDB official confirmed that the MoIP will formally communicate with the federal cabinet, affirming that the GST should be 1% as per the policy.

Another auto sector analyst, Mashood Khan, pointed out that motorcycles and scooters are the primary mode of transport for middle-class Pakistanis, who are already burdened with high taxes, rising utility bills, and soaring costs of education and healthcare. He urged the government to review its approach, arguing that while there are still challenges in EV adoption—such as insufficient charging infrastructure—the increased taxation disproportionately harms an already struggling segment of the population.

"The government should be making it easier for these people, not adding to their burdens," Khan concluded.