ISLAMABAD: The government has decided to consult the International Monetary Fund (IMF) on the proposed auto policy, with plans to share the initial approved draft with the global lender, sources said.

According to official documents, the proposals include new taxes and levies on electric vehicles (EVs), expensive cars, locally manufactured vehicles and imported automobiles to generate additional revenue.

The IMF has reportedly called for an 18% sales tax on electric vehicles. However, the government is considering alternative measures to compensate for the potential revenue loss instead of imposing the proposed sales tax rate on EVs.

Under the proposed policy, a 10% Federal Excise Duty (FED) may be imposed on electric vehicles valued at more than $75,000. According to the document, revenue generated through this duty could help reduce the sales tax rate to 1% on electric vehicles priced below $75,000.

The government will also consult the IMF on imposing an additional Federal Excise Duty on vehicles valued at more than Rs20 million, the document stated.

Another proposal involves introducing an Automotive Development Levy on locally manufactured and imported vehicles with engine capacities exceeding 1,000cc.

According to the estimates outlined in the document, the levy on cars could generate between Rs37 billion and Rs188 billion over the next five years. Meanwhile, levies on buses and trucks could yield between Rs45 billion and Rs232 billion during the same period.

Sources said the government is considering a 2% Automotive Development Levy on locally manufactured vehicles with engine capacities above 1,000cc, while a 10% levy has been proposed for locally manufactured vehicles with engine capacities of 2,001cc and above.

The proposals are expected to be discussed with the IMF as part of consultations on the country's auto policy and revenue measures. The final decision will depend on the outcome of the consultations and the government's approval of the proposed policy.