KARACHI: The Ministry of Industries and Production (MoIP) has reportedly opposed the proposed increase in the general sales tax on hybrid electric vehicles (HEVs) from 8.5 per cent to 25pc for FY25.

The ministry believes such an increase would counter the goals of the National Climate Change Policy and Renewable Energy Policy 2019, which aim to encourage the adoption of clean technologies.

In a letter to the Ministry of Finance and the Federal Board of Revenue (FBR), the MoIP said that imposing higher GST without proper consultation jeopardises the existing and future investment in hybrid electric vehicle technology.

The ministry said the increase in GST also contradicts the commitment made under para 3.7(iv) of the Auto Industry Development and Export Policy (AIDEP) 2021-2026, which states that sales tax for both locally manufactured and imported hybrid cars, SUVs, vans and LCVs is to be 8.5pc.

‘No clarity on restrictions on used cars import’

AIDEP is designed to promote new, fuel-efficient and environmentally friendly technologies. Sales tax is set on electric vehicles below 50 kWh batteries at one per cent and on hybrid electric vehicles at 8.5pc, which is 50pc of the prevailing rate. This policy aimed to ensure the faster adaptation of these technologies.

The ministry also pointed out that Toyota, Hyundai and Sazgar Engineering Works have already invested in the manufacturing of hybrid electric vehicles based on this policy. Additionally, companies such as Honda, Suzuki and Kia are planning similar investments in the near future.

Pakistan Automotive Manufacturers Association (PAMA) Director General Abdul Waheed Khan, in a letter to the Special Investment Facilitation Council (SIFC), said it is regrettable to note that the government has withdrawn its assured support at a time when the hybrid electric vehicle industry at its embryonic stage.

He warned that if price relief is no longer available, the new technology vehicle will not survive in the open market, which would not only frustrate the government’s policy but also discourage further investment.

He said that the old reduced rate of GST may be restored on locally produced hybrid vehicles.

Used car imports

The car market is abuzz with reports about curbs on used car imports or increased regulatory duty (RD). Local assemblers are tight-lipped despite putting extra pressure on the government to control used car imports.

However, the assemblers were sure that the government would make decisions in the FY25 budget to curb second-hand car imports.

All Pakistan Car Dealers and Importers Association (APMDA) Chairman Mian Shoaib Ahmed said he cannot confirm whether the government has restricted or imposed RD on the import of used cars in the budget. “The issue is pending,” he added.

Published in Dawn, June 23rd, 2024