The series of demands from the International Monetary Fund continues, as new conditions linked to Pakistan’s $7 billion loan program have come to light, potentially impacting the country’s growing electric and hybrid vehicle industry.

According to sources, the IMF has demanded the abolition of sales tax exemptions on locally manufactured electric vehicles and electric bikes. The proposal calls for the imposition of the standard 18% General Sales Tax (GST) from the 2026–27 fiscal year.

Hybrid electric vehicles also targeted

The IMF has also urged Pakistan to end tax exemptions on locally manufactured hybrid electric vehicles, sources revealed. Currently, these vehicles enjoy tax relief under special provisions aimed at promoting cleaner transportation.

At present, locally manufactured hybrid electric vehicles are fully tax-exempt until June 30, 2026. After that period, a sales tax of 8.5% applies to hybrid vehicles up to 1,800cc, while vehicles up to 2,500cc are taxed at 12.75%.

Vehicles into normal tax regime

Sources said the IMF raised these demands during talks with the Ministry of Industries and Production. The lender has called for the removal of sales tax exemptions from the Eighth Schedule of the Sales Tax Act and their inclusion in the normal tax regime.

Locally manufactured hybrid electric vehicles and bikes are currently exempt from sales tax under the Eighth Schedule. The IMF now wants this exemption removed, effectively bringing these vehicles under the standard GST framework.

Tax exemption likely to end

If accepted by the government, the tax exemption on locally manufactured hybrid electric vehicles and electric bikes will end from next year. The move could significantly affect prices, consumer demand, and Pakistan’s transition toward environmentally friendly transport.