An official from the Engineering Development Board (EDB) warned that raising the general sales tax (GST) on electric vehicles (EVs) from 1% to 18% could jeopardise the government’s efforts to promote EV adoption in Pakistan.
The remarks came in response to a notice from the Federal Board of Revenue (FBR) issued to an electric scooter manufacturer, which highlighted that the company was paying 1% GST instead of the standard 18%.
Under the approved EV policy, GST on the sale of two- and three-wheelers was set at 1% for a period of five years, aiming to encourage the growth of the EV market.
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However, according to the FBR notice, scooters, which fall under the category of two-wheelers, were not explicitly mentioned in the policy, raising questions about whether they are eligible for the reduced tax rate.
“Raising sales tax will jeopardise the government’s efforts to promote electric vehicles,” said an EDB official in response to Business Recorder queries.
The official emphasised that the policy was designed for two-wheelers, which includes electric scooters, adding, “scooters are a perfect e-vehicle in the two-wheeler category”.
Despite the FBR’s position, industry experts argue that the EV policy should encompass all types of two-wheeled electric vehicles, including scooters.
An industry official explained to Business Recorder that scooters are a key part of the electric vehicle ecosystem, and their exclusion from the policy could undermine the broader goal of increasing EV adoption.
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The FBR calculated a tax liability of Rs40.9 million at the differential GST rate.
The company in question has paid 1% sales tax as per the EV policy. It is licensed as an EV two-wheel manufacturer with EDB.
Muhammad Sabir Shaikh, Chairman of the Association of Pakistan Motorcycle Assemblers (APMA), also voiced his concerns, stressing the importance of government incentives in driving EV adoption.
“All the countries where EVs made significant inroads did so when the government provided incentives,” Shaikh noted.
He questioned why anyone would switch to electric vehicles without adequate support, adding, “Why would anyone leave tested and tried fossil fuel vehicles if there are no incentives?”
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Shaikh also highlighted the long-term benefits of EVs for the economy, pointing out that they are not as technologically complex as traditional internal combustion engine vehicles. “Once EVs are accepted by the market, it will be easier to localize, and this will also help reduce fuel imports,” he added.
Criticising the FBR’s notice, Shaikh warned that such actions would discourage potential entrants into the EV space and slow the development of the industry. He called on the government to resolve the ambiguity in the policy to support the growth of electric vehicles in Pakistan.
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