# New auto policy: 1% EV tax to 2031, IMF's 18% rejected, up to 10% levy on big cars

Source: Searchable (https://searchable.pk/news/auto/new-auto-policy-ev-sales-tax-and-car-levy)
Type: News article
Author: Searchable Editorial
Published: 20 Oct 2026
Updated: 20 Oct 2026
Retrieved: 21 Oct 2026

> The draft approved by PM Shehbaz Sharif spares cars up to 1,000cc, charges 2% on 1,001 to 2,000cc and 10% above that, and keeps electric cars cheap to tax.

**Pakistan's new auto policy keeps the sales tax on battery electric cars at 1% until 2031 and turns down the IMF's proposal to raise it to 18%**, [ARY News reported](https://arynews.tv/pakistan-approves-new-auto-policy-rejects-imf-proposal-to-raise-ev-sales-tax) on Tuesday 20 October, citing the policy document. The same draft, approved by Prime Minister Shehbaz Sharif, adds a new **Automotive Development Levy** of up to 10% on petrol and diesel cars above 2,000cc, [ProPakistani reported](https://propakistani.pk/2026/10/20/govt-to-impose-new-10-car-levy/), citing sources.

The levy still needs a law: the policy targets legislation by December 2026, and the effective date and the price it is charged on have not been announced.

## The proposed car levy, by vehicle

| Vehicle | Proposed levy |
| --- | --- |
| Cars up to 1,000cc | 0% |
| Cars 1,001cc to 2,000cc | 2% |
| Cars above 2,000cc | 10% |
| Motorcycles, rickshaws (2 and 3 wheelers) | 0% |
| Agricultural tractors | 0% |
| Trucks, LCVs, buses, vans, prime movers | 2% |

The levy applies to internal combustion engine vehicles, both imported and locally assembled, according to ProPakistani. ARY puts the expected yield at more than **Rs 232 billion over five years**, to be spent on export incentives and on upgrading local parts makers.

**What it could mean in rupees:** if the levy is charged on the ex-factory price (not yet confirmed), a 1,300cc car priced at Rs 5 million would carry about Rs 100,000 more, and a 2,400cc SUV at Rs 15 million about Rs 1.5 million more. An 800cc or 1,000cc hatchback would carry nothing. Our [car loan calculator](/tools/cars/car-loan-calculator) shows what such a change does to a monthly instalment, and the [car registration tax calculator](/tools/cars/car-registration-tax-calculator) the tax you already pay at registration.

## Electric cars: tax rates to 2031

- **Battery electric vehicles:** 1% sales tax from 2026 to 2031.
- **Range-extended EVs:** 6%.
- **Plug-in hybrids:** 9%.
- **Luxury EVs:** a 10% federal excise duty on electric vehicles worth more than $75,000 (about Rs 20.8 million at today's [dollar rate](/data/usd-pkr)).
- **Import duty:** cut in phases, with lower tariffs for small EVs under $15,000.
- **Financing:** the EV loan limit rises from Rs 3 million to Rs 10 million, and the longest term from three to five years.

## Exports, local parts and safety

The policy sets a target of **$6 billion in vehicle exports** and **$1.2 billion in auto parts exports by 2030-31**, according to ARY. Carmakers get mandatory export targets: those that meet them earn 5% of export value back, plus 10% on exports above the previous year. A maker that misses its target two years running could lose its manufacturing certificate.

Other measures in the document:

- Tariffs across the auto sector cut to **15% by 2030-31**.
- A new **Pakistan Automotive Testing Institute** for certification and audits.
- Global safety standards for both local and imported cars.
- Consumer protection clauses in every sale agreement, and two audits a year of incentive payments.

## What to do if you are buying a car

Nothing changes at the showroom today: the levy needs legislation, and no notification has been issued. If you are choosing between a 1,300cc and a 2,000cc-plus model for delivery in 2027, the gap could widen once the law passes. We will update this story when the Ministry of Industries publishes the final policy.

## Frequently asked questions

**What is the sales tax on electric cars in Pakistan under the new auto policy?**

1% for battery electric vehicles from 2026 to 2031, 6% for range-extended EVs and 9% for plug-in hybrids, according to the policy document reported on 20 October 2026. The IMF's proposal of 18% was rejected.

**Which cars will pay the new Automotive Development Levy?**

Under the draft, 2% on cars from 1,001cc to 2,000cc and 10% above 2,000cc. Cars up to 1,000cc, motorcycles, rickshaws and tractors are exempt. It needs legislation, targeted for December 2026.

## Sources

- Pakistan approves new auto policy, rejects IMF proposal to raise EV sales tax (20 Oct 2026) (ARY News): https://arynews.tv/pakistan-approves-new-auto-policy-rejects-imf-proposal-to-raise-ev-sales-tax
- Govt to Impose New 10% Car Levy (20 Oct 2026) (ProPakistani): https://propakistani.pk/2026/10/20/govt-to-impose-new-10-car-levy/
- Govt Rejects 18% IMF Tax on EVs (20 Oct 2026) (ProPakistani): https://propakistani.pk/2026/10/20/govt-rejects-18-imf-tax-on-evs/

How to cite: "New auto policy: 1% EV tax to 2031, IMF's 18% rejected, up to 10% levy on big cars", Searchable, 20 Oct 2026, https://searchable.pk/news/auto/new-auto-policy-ev-sales-tax-and-car-levy