The federal government has turned down an International Monetary Fund (IMF) proposal to impose an 18 percent sales tax on electric vehicles as part of Pakistan’s new Auto Policy 2026-31, RBN has learnt.

The policy draft also proposes reducing customs duty on eligible imported electric vehicles priced up to $75,000 from 50 percent to 25 percent, followed by a further reduction to 15 percent by fiscal year 2030-31.

The proposed framework sets different sales tax rates for alternative-energy vehicles. Range-extended electric vehicles would face a 6 percent rate, while plug-in hybrid vehicles would be taxed at 9 percent.

Prime Minister Shehbaz Sharif approved the draft policy on Tuesday. The six-year plan seeks to encourage electric vehicle adoption through changes to import duties and taxation.

Sources said the proposed customs duty reductions would be introduced gradually over the policy period.