Encouraging Development Sales Tax On Locally Manufactured Hybrid Cars Will Remain Unchanged

Encouraging Development Sales Tax On Locally Manufactured Hybrid Cars Will Remain Unchanged

Concern Over Tax Hike on Local HEVs
There was significant concern among local car manufacturers when the government proposed increasing the General Sales Tax (GST) on Hybrid Electric Vehicles (HEVs) from 8.5% to 25%. This unexpected announcement threatened to impact the burgeoning sector, which has seen investments totaling around $100-125 million in Pakistan.

Industry Protest and Appeal
Leading companies like Toyota, Sazgar Engineering (Haval), and Hyundai, currently involved in local HEV production, strongly objected to the tax hike. They appealed to the government to reconsider the decision, highlighting the potential negative effects on their investments and the future of HEV technology in the country.

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Government Response and Stakeholder Concerns
During a Standing Committee on Finance meeting, concerns were raised about the adverse impact of such a tax increase on the progress and attractiveness of HEV production in Pakistan. The Ministry of Industry and Production emphasized the substantial investments made by major automakers and warned that unilateral tax hikes could undermine current and future commitments to HEV technology.

Policy Alignment and Climate Objectives
The Ministry also pointed out that raising taxes without prior consultation contradicted national policies on climate change and renewable energy. They urged the government to revert to the 8.5% sales tax rate as outlined in the Auto Industry Development and Export Plan (AIDEP) 2021-26.

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Government Decision and Relief Announcement
In a recent address to the National Assembly, Finance Minister Muhammad Aurangzeb announced that the lower sales tax rate would remain applicable to HEVs listed in Schedule 8 and Serial No 73. This decision provides relief to local manufacturers, ensuring that prices of locally produced hybrid cars will not surge.

Imported Used Hybrid Cars
However, clarity is still awaited on whether imported used hybrid cars will receive similar tax relief, with updates expected soon.

Public Opinion and Engagement
What are your thoughts on the government’s decision to maintain the lower tax rate on locally produced hybrid cars? Share your views with us in the comments section below.