Electric Vehicle Tax Proposals:Senate Standing Committee Postpones Decision

In a significant development, the Senate Standing Committee on Finance and Revenue convened a meeting on to deliberate on various tax proposals outlined in the Finance Bill 2024. The meeting was chaired by Senator Saleem Mandviwala and attended by esteemed members of the committee.

Tax Proposals on Electric and Hybrid Vehicles Spark Debate

Senator Faisal Vawda vehemently opposed the proposed hike in tax rates on electric and hybrid vehicles, emphasizing that this technology is being globally encouraged and supported to reduce carbon emissions and promote sustainable transportation. He argued that increasing tax rates on eco-friendly vehicles would contradict the government’s environmental goals and discourage their adoption in Pakistan.

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Vawda Criticizes Sudden Policy Changes

Senator Vawda criticized the sudden policy changes, citing the 25 percent sales tax on vehicles valued above Rs. 15 million as an example. He lamented the disparity in tax rates between imported and locally manufactured vehicles, creating an uneven playing field for the automotive industry.

Uncertainty for Vehicle Importers

Vawda pointed out that individuals expecting vehicle deliveries within the next six months are unaware of the new policy, which would result in additional taxes. This uncertainty would lead to confusion and financial burden on importers and consumers alike.

 Senate Standing Committee Postpones Decision

After intense discussion, the committee decided to postpone the matter for further deliberation and consultation with stakeholders. This move is seen as a positive step towards finding a solution that balances the government’s revenue goals with the need to promote eco-friendly transportation.

Federal Government Proposes Withdrawal of Tax Exemptions on Electric Cars

In the previous week’s Finance Bill, the federal government proposed withdrawing tax exemptions on electric cars valued above $50,000. These vehicles were previously imported duty-free to promote their adoption and reduce Pakistan’s reliance on fossil fuels.

Impact on High-End Electric Vehicles

The new policy proposes taxing high-end electric vehicles like the Audi e-Tron/e-Tron GT and BMW i8, valued above $50,000, at the same rate as regular cars. This move is expected to increase the prices of these vehicles, making them less competitive in the market.

Affordable Electric Vehicles Unaffected

In contrast, more affordable electric vehicles like the MG ZS EV, MG4 EV, and Rinco Aria, priced below $50,000, are likely to remain unaffected by the new policy. This will ensure that eco-friendly transportation remains accessible to the masses.

Increase in Withholding Tax on Non-Electric Cars

The government has also proposed an increase in withholding tax charged on non-electric cars, which will further add to the financial burden on the masses already struggling with record levels of inflation.

Impact on the Automotive Industry

This move is expected to make cars more expensive for the general public, who are already facing significant economic challenges. The increase in prices would lead to reduced demand, impacting the automotive industry and related businesses.