Government expects Rs122 billion from ICE vehicle levy in FY2026-27 to support Pakistan’s transition to cleaner transport.
ISLAMABAD: The Federal Board of Revenue (FBR) has doubled its projected collection under the New Energy Vehicle (NEV) Adoption Levy for FY2025-26, estimating receipts of Rs20 billion against the original target of Rs10 billion, according to official budget documents.
The revised projection represents a 100 percent increase over the initial estimate, highlighting the government’s growing reliance on the levy to finance its clean transport agenda and promote the adoption of environmentally friendly vehicles.
The NEV Adoption Levy is collected under the New Energy Vehicles Adoption Levy Act, 2025, introduced through the Finance Bill as part of Pakistan’s broader strategy to encourage a shift from conventional internal combustion engine (ICE) vehicles to new energy vehicles.
Rs122bn projected from ICE vehicle levy
Official documents show that the levy imposed on the first sale of locally manufactured and imported ICE vehicles is expected to generate approximately Rs122 billion in revenue during FY2026-27.
Under the levy framework, a 1 percent levy applies to the first sale of locally manufactured and imported two- and three-wheeler ICE vehicles, whether new or used.
A 3 percent levy is charged on four-wheelers with engine capacities between 1,300cc and 1,800cc, while buses and trucks are subject to a 1 percent levy.
Supporting Pakistan’s green transition
The government introduced the levy to accelerate the adoption of new energy vehicles, reduce dependence on fossil fuels and curb greenhouse gas emissions from Pakistan’s transport sector.
The measure forms part of Pakistan’s broader environmental and climate strategy aimed at promoting cleaner transportation technologies and supporting sustainable economic development.
Collection mechanism
Under the law, manufacturers of locally assembled and produced ICE vehicles are responsible for collecting the levy from buyers and depositing it with the government.
For imported vehicles, the levy is payable by importers at the time of import.
By placing the responsibility on manufacturers and importers, the government aims to ensure efficient collection while using fiscal incentives to encourage the transition towards cleaner and more energy-efficient vehicles.