FED on luxury electric vehicles to be effective from July 1
The federal government has decided to impose a Federal Excise Duty (FED) on luxury electric vehicles (EVs) under the 2026-27 federal budget, which is scheduled to take effect on July 1.
According to the new taxation plan, only electric vehicles valued at more than Rs20 million (approximately $75,000) will be subject to the FED, while EVs priced below this threshold will remain exempt from the tax.
The details emerged during a recent meeting of the National Assembly's Finance Committee, where officials of the Federal Board of Revenue (FBR) briefed lawmakers on the proposed measures. During the session, FBR officials clarified that the excise duty on luxury electric vehicles has been set at a lower rate than the duty imposed on conventional internal combustion engine (ICE) vehicles.
However, the proposed tax drew criticism from several members of the committee, who also highlighted the country's inadequate electric vehicle infrastructure.
Committee member Hina Rabbani expressed concern over the policy, arguing that electric vehicles are already more expensive than conventional vehicles. She said imposing a 30 percent duty on EVs was a misguided approach, particularly as the sector is evolving rapidly with new technological advancements emerging every six months.
Another committee member, Sharmila Farooqui, urged the government to adopt a clear and consistent policy regarding electric vehicles. She questioned whether the government genuinely intended to promote EV adoption, calling for an end to mixed signals on the issue.
Meanwhile, committee member Shahida Akhtar stressed the urgent need to develop a nationwide network of electric vehicle charging stations. Referring to the country's power and infrastructure challenges, she questioned how EVs could operate efficiently without adequate charging facilities.
The new tax measures will come into force from July 1, 2026, as part of the federal budget, subject to the completion of the legislative process.