Cabinet allows incentives for electric vehicles

ISLAMABAD: The Federal Cabinet has granted massive tax exemptions to facilitate promotion of four-wheeler electric vehicles (EVs) in the country.

The summary forwarded by the Ministry of Industries was approved by the cabinet allowing one per cent sales tax for locally-made EVs up to 50 kwh and light commercial vehicles (LCVs) up to 150 kwh. The cabinet also capped the duty on import of charging equipment at 1pc.

At the same time, the EVs will also be exempt from federal excise duty (FED) whereas the import of plant and machinery for manufacturing of these vehicles would also be duty-free.

The government has further removed additional customs duty (ACD) and accounting services and tax on EV imports.

As per the policy, there will be only 1pc tax on import of EV parts for manufacturers. Apart from the tax facilities, the government has also waived registration and annual renewal fee for EVs in Islamabad.

The ECC had earlier ratified the EV policy for four-wheelers last week rationalising costs of purchasing, manufacturing and promoting use of EVs in the country.

The inter-ministerial committee constituted by the Federal Cabinet had finalised the proposals with regard to EV Policy (four-wheelers) and the fiscal incentives shall remain in force till June 30 2026. The policy for two-wheeler and three-wheeler EVs has already been approved by the ECC.

As per the documents, individuals interested in manufacturing EVs (two- and three-wheelers and heavy commercial vehicles) may be facilitated through policy intervention which could not be covered in the EV Policy (two- and three-wheelers and FICVs) approved by the Economic Coordination Committee meeting held on June 10 earlier this year.

The waiver of ACD and value added tax on imports of completely built-up EVs (two- and three-wheelers and HCVs) has been proposed till June 30 2025.

The delay in the finalisation of four-wheeler policy was mainly due to its inherent complexities and long consultative process with existing original equipment manufacturers.

EV technology is at a formative stage and comparatively expensive viz-a-viz traditional fuel vehicles. Governments throughout the world are trying to make this technology affordable through different financial and fiscal incentives including disbursement of direct financial subsidy.

Published in Dawn, December 24th, 2020