New Auto Policy 2021-26: All You Need to Know

The federal government has set the Auto Industry Development and Export Policy (AIDEP) 2021-26 with the goals of ensuring better quality, safety systems in cars, and affordability of small cars to Pakistani customers.

According to a draught prepared by the Ministry of Industries, the government has proposed tax exemption for locally assembled cars with engine capacities of up to 800cc.

The Ministry of Industry has recommended that additional customs duty on small cars, excise duty on locally assembled cars, and withholding tax on cars with engine capacity up to 800cc be removed under the new auto policy.

The draught, released by the Ministry of Industries and Production’s Engineering Development Board, also recommended lowering import duties on electric vehicles in order to encourage people to use environmentally friendly EVs. According to the Auto Policy 2021-2026, the electric vehicles import duty reduces to 25% to 10% for one year.

However, the board decided to lower the regulatory duty on hybrid CBU imports (15 percent for above 1,800cc, 0 percent for 1,800cc, and below).

The following are the highlights of the Auto Policy 2021-26:

  • Import duty on Electric Vehicles (EVs)import duty plans to minimize from 25% to 10%.
  • If the car manufacturer delays the vehicle for more than 60 days (2 months), the company will be charged KIBOR + 3%.
  • Every year, the tax exemption on imported vehicles will be reviewed.
  • Automobile manufacturers will set a 10% export target by 2026.
  • Tax breaks for the export of vehicles and spare parts
  • Customs duty on electric vehicle spare parts has been set at 1%.
  • Customs duty on CBU imports of electric vehicles lowered from 25% to 10%.
  • Electric motorcycle parts will be subject to a 1% customs duty.
  • To reduce hybrid electric vehicle sales tax to 8.5 percent.
  • The regulatory duty on hybrid CBU imports will be reduced.
  • The regulatory duty on hybrid vehicles of more than 1800 cc will be reduced by 15%.
  • After June 30, 2022, there will be a ban on locally manufactured/imported vehicles.

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