Budget 2026–27 introduces new taxes on high-end imports while extending relief for local EV assembly
Pakistan has introduced significant changes in its automotive taxation framework under the Budget 2026–27, imposing a Federal Excise Duty (FED) on high-end imported vehicles, including luxury electric vehicles (EVs), while simultaneously extending incentives for local EV manufacturing.
According to the new policy, imported vehicles ranging from 2000cc to 3000cc will now be subject to Federal Excise Duty. In addition, the government has increased duties on larger vehicles exceeding 3000cc, signaling a clear shift toward discouraging high-displacement luxury imports.
A major highlight of the budget is the decision to impose FED on luxury electric vehicles priced above Rs20 million (2 crore).
For years, premium EVs benefited from tax exemptions under green energy incentives, but the government has now closed this to broaden the tax base and increase revenue collection.
Despite tightening taxes on imports, the government has extended relief for the local electric vehicle industry.
The exemption on Completely Knocked Down (CKD) kits used for EV assembly has been extended until June 30, 2027. This move aims to sustain investment momentum and support domestic production.
The exemption covers small electric cars and SUVs with battery capacities of up to 50 kWh, ensuring continued support for mainstream EV assembly in Pakistan.
It also includes light commercial electric vehicles with battery capacities up to 150 kWh, expanding coverage for manufacturers operating in the local market.
Industry experts view CKD kits as essential for reducing production costs, as they allow vehicles to be assembled locally from imported parts, making EVs more affordable and competitive.
Officials stated that the extension is designed to prevent rising manufacturing costs that could have slowed down the growing EV sector.
The policy is expected to stabilize the industry, encourage further investment, and promote long-term growth in Pakistan’s electric mobility ecosystem while balancing revenue needs with industrial support.
