New Car Levy to Earn Govt Rs. 188 Billion

The Pakistani federal government plans to generate approximately Rs. 188.58 billion over a five-year period through a new Automotive Development Levy applied to locally assembled or manufactured vehicles, as per revenue projections outlined in the draft auto policy approved by Prime Minister Shehbaz Sharif. Projections anticipate collections of Rs.

37.71 billion in the fiscal year 2026-27, with an increase to Rs. 38.46 billion in 2027-28, rising to Rs. 38.29 billion in 2028-29, followed by Rs. 37.30 billion in 2029-30, and concluding with Rs. 36.83 billion in 2030-31. The combined total for the five-year span is projected at Rs. 188.58 billion.

The draft policy distinguishes levy rates based on vehicle type and engine capacity. Vehicles with engines under 1,000cc are exempt from the levy, while those with engines ranging from 1,001cc to 2,000cc would be subject to a 2 percent levy. Vehicles exceeding 2,000cc would attract a proposed levy rate of 10 percent. These rates extend to both imported and locally assembled or manufactured internal combustion engine vehicles.

Two- and three-wheelers, as well as agricultural tractors, are exempt from the levy, while trucks, light commercial vehicles, buses, and vans, along with certain prime movers, would be subject to a 2 percent levy.

The government anticipates relatively consistent collections from the locally manufactured vehicle category, fluctuating between Rs. 36.83 billion and Rs. 38.46 billion annually throughout the five-year period. However, the final revenue impact hinges on the policy's execution, the calculation mechanism employed, and the volume and composition of vehicles sold or imported during the five-year timeframe.