In a move to promote electric mobility, the government has proposed an Energy Vehicle Adoption Levy on both locally manufactured and imported internal combustion engine vehicles under the Finance Bill 2025-26.
As per the Federal Board of Revenue (FBR), the new Energy Vehicle Adoption Levy aims to discourage the use of traditional fuel-powered vehicles and support a shift towards electric vehicles, including electric motorcycles and rickshaws.
Under the proposed framework, manufacturers of internal combustion engine vehicles with engine capacities below 1300cc will be charged one per centum ad valorem of the invoice price, inclusive of duties and taxes. The same rate applies to imported vehicles under 1300cc, calculated on the assessed value.
Vehicles with engine capacities between 1300cc and 1800cc will face a two per centum ad valorem charge for both locally manufactured and imported units. This levy is also inclusive of duties and taxes and is applicable to manufacturers and importers alike.
For vehicles exceeding 1800cc, a higher levy of three per centum ad valorem will be imposed on both domestic manufacturers and importers. The valuation for this levy includes the invoice price and duties and taxes for local vehicles, and the assessed value plus taxes for imports.
The levy also extends to commercial transport: buses and trucks powered by internal combustion engines will incur a one per centum ad valorem charge, applicable to both local manufacturers and importers.
The implementation of the Energy Vehicle Adoption Levy reflects the government’s broader strategy to curb emissions and align with global efforts to increase electric vehicle adoption. The proposal, if approved, will become part of the 2025-26 fiscal policy framework.