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Pakistan's EV Future at Risk with 18% GST Hike on Scooters

Jawad  13 Sep 2024   156
Pakistan

Pakistan's EV Future at Risk with 18% GST Hike on Scooters

Raising the GST on electric scooters from 1% to 18% could severely hinder the government's efforts to promote electric vehicle (EV) adoption in Pakistan. Recently, the Federal Board of Revenue (FBR) issued notices to several EV scooter brands, pointing out that they have been paying only 1% in taxes instead of the full 18%, as originally intended.

EV Two-Wheelers Policy
Previously, the policy for electric two- and three-wheelers required manufacturers to pay just 1% sales tax, designed to stimulate sales and increase EV adoption. The sudden demand for the remaining 17% contradicts the government’s initial strategy, potentially leading to a drastic decline in productivity for EV scooter companies. This could ultimately harm their contribution to sustainability efforts in Pakistan.

Environmental Goals and NDC Agreement
The government introduced these incentives with environmental goals in mind, particularly the Nationally Determined Contributions (NDC) signed with the United Nations Development Program (UNDP). Under this agreement, Pakistan aims for a 50% reduction in projected emissions by 2030, with 15% being from domestic resources and 35% dependent on international grant funding. Promoting electric vehicles was one step toward achieving these targets.

National EV Policy and Sales Tax
In 2019, the Ministry of Climate Change introduced the National Electric Vehicle Policy, which is effective for five years. This policy mandates that all locally manufactured EV two- and three-wheelers should be sold with a 1% sales tax, making these vehicles more affordable for consumers. This measure was designed to reduce EV prices and encourage greater adoption in the market.

FBR Notice Creates Conflict
The FBR's recent notice contradicts the policy by arguing that electric scooters were not explicitly mentioned. This confusion could discourage local sales and slow down EV progress. If this 17% tax differential is imposed, scooter brands may be forced to increase prices, making EVs less accessible and jeopardizing the government's environmental goals. Addressing this contradiction is crucial for the future of EVs in Pakistan.
EV future Pakistan 18 GST scooters Pakistan EV risk Electric scooters tax GST impact EV EV industry Pakistan Pakistan electric scooters GST increase EV EV growth Pakistan Pakistan EV taxation
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