Ministry of Industries Raises Alarm Over Proposed Tax Hike on Hybrid and Electric Vehicles
The Ministry of Industries and Production has voiced serious concerns over the planned increase in taxes on hybrid and electric vehicles in the upcoming Budget 2024-25. The ministry asserts that this hike violates export and auto industry development policies, as outlined in a letter to the Finance Division and Federal Board of Revenue (FBR).
Contradiction with Auto Industry Development Policy
In a significant development, the proposed jump in sales tax from 8.5% to 25% directly contradicts the goals of the Auto Industry Development and Export Policy (AIDEP) 2021-26. The current policy supports lower taxes of 1% for electric vehicles and 8.5% for hybrid electric vehicles (HEVs), aiming to boost technology adoption.
Impact on Investments and Future Plans
The ministry highlights substantial investments by leading manufacturers like Toyota, Hyundai, and Sazgar in HEV production under AIDEP. It warns that imposing higher taxes without consultation could deter future investments in HEV technology, including plans by Honda, Suzuki, and Kia to enter the sector.
Environmental and Policy Concerns
Additionally, the tax hike is viewed as undermining national climate change and renewable energy policies. The ministry urges a reversal of the sales tax increase to uphold policy objectives and support sustainable development.
related: Budget 2024-25 – Increased Custom Duties On Imported Used Hybrids
Commitment to Review
Meanwhile, the FBR Chairman has assured the Senate Standing Committee on Finance of a review regarding incentives for local HEV production. The move comes amidst concerns raised by stakeholders, including the auto sector’s substantial investments and the sudden policy change.
Industry Reaction and Economic Impact
Indus Motor Company (IMC) underscores the sector’s investments totaling $100-150 million in HEV manufacturing, emphasizing the adverse economic implications of the tax revision on ongoing and future projects.
Looking Ahead
The situation underscores a critical juncture for Pakistan’s auto industry and policy framework, requiring balanced measures to promote technological advancement while supporting economic sustainability and environmental goals.
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