ISLAMABAD — In a bid to accelerate electric vehicle (EV) adoption and meet global climate commitments, the government of Pakistan has unveiled plans to produce 2.2 million electric vehicles—primarily electric motorcycles—over the next five years. To finance these ambitious subsidies, the government is introducing tiered levies on buyers of new petrol and diesel vehicles, a move that caught lawmakers off guard during a National Assembly committee meeting on Wednesday.
The Standing Committee on Finance was surprised to learn that the Finance Bill 2025–26 did not mention the proposed levies, despite their substantial fiscal implications. Under the new structure:
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A 1% levy will apply to new cars up to 1300cc,
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2% for 1301–1800cc vehicles, and
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3% for vehicles above 1800cc.
Committee Chairman Naveed Qamar noted the omission, prompting a law ministry official to admit the levies were mistakenly left out of the bill. The funds generated will go toward EV subsidy programs, aimed at transforming Pakistan’s transportation sector.
Reversal on Solar Tax Exemption
In another significant development, the committee approved a 10% sales tax on solar equipment, reversing earlier protections for the renewable energy sector. Qamar clarified that the proposal originated from the National Assembly, not the Senate as previously assumed.
Federal Board of Revenue (FBR) Chairman Rashid Langrial assured that the tax would be implemented only after parliamentary approval. He also announced aggressive measures to broaden the tax base: non-registered individuals will soon be barred from operating bank accounts until they register with tax authorities. Once compliance is ensured, accounts will be reinstated within 48 hours.
FBR will use electricity consumption and income data to identify unregistered commercial entities, beginning with industrial units in Karachi.
Debt Burden, Power Tariffs, and IMF Conditions
The Power Division disclosed plans to borrow Rs1.275 trillion from commercial banks at below-market rates to reduce circular debt. The borrowed amount will help retire liabilities of Independent Power Producers (IPPs) and the Power Holding Company (PHC), with Rs683 billion used immediately and the remaining Rs592 billion paid over six years.
This financing will be recovered from consumers through a Rs3.23 per unit Debt Service Surcharge (DSS), which exempts lifeline electricity users. “This is an IMF condition, and we must fulfill it,” said the power secretary.
Petroleum Carbon Levy and Levy Cap Hikes
Officials from the Petroleum Division confirmed a new carbon levy of Rs2.5 per litre on all petroleum products from July 1, which will double to Rs5 per litre next year. The levy will also apply to furnace oil, which continues to power IPP plants, despite its removal from public sector use.
Currently, the petroleum levy stands at Rs77 per litre on petrol and Rs78 per litre on diesel, with plans to raise the cap to Rs90 per litre.
No More Tax Amnesties, Says Finance Minister
Finance Minister Muhammad Aurangzeb delivered a stern message to the committee: “The era of tax exemptions and amnesties is over.” He emphasized a shift toward enforcement and compliance. “We must now ensure compliance, not continue offering carrots.”
Aurangzeb added that expanding the tax base and tightening loopholes are necessary to fulfill Pakistan’s economic commitments and ensure fiscal sustainability.
