Good News for auto industry

ISLAMABAD: Pakistan is preparing a series of tax relief measures for its domestic auto industry in the upcoming federal budget, as part of efforts to boost local manufacturing and reduce vehicle costs. ARY News reported.

According to sources, under the National Tariff Policy, the proposal is to abolish additional customs duties and to reduce regulatory duties on the auto industry.

The proposal to revise customs duties on CKD kits is also under consideration. Non-localised parts could face a 5 percent duty, while localised components may be taxed at 10 percent, in a move aimed at encouraging domestic production.

Officials also plan to expand the scope of the country’s electric vehicle (EV) policy. Instead of focusing solely on battery electric vehicles, the revised framework would include all new energy vehicles, such as plug-in hybrids, range-extended vehicles, and fuel cell cars.

Sources say local auto manufacturers may be granted special concessions to assemble a limited number of electric bikes, rickshaws, and cars, while each company could be allowed concessional duties on up to 100 vehicles, with the incentive scheme proposed to remain in place until 30 June 2027.

There are also plans to give preferential treatment to locally assembled electric vehicles over fully imported units, while keeping the average tariff for domestically produced vehicles below 6 percent.

In addition, the government is considering a gradual reduction in tariffs on imported petrol-powered vehicles.

Conversely, the Pakistan Automotive Parts and Accessories Manufacturers Association has suggested exempting electric bikes, rickshaws, and vehicles from certain duty conditions.

The association has further proposed two separate tax categories for new energy vehicles: a 1 percent tax on battery electric vehicles and a 9 percent tax on plug-in hybrids, range-extended, and conventional hybrid vehicles.

Sources add that there is also a proposal to extend concessional customs duties on CKD parts until 30 June 2028, a move expected to provide long-term stability to the local auto sector.