Govt Confirms Latest Taxes: Rs. 2.5 per Liter Carbon Levy & New EV Charges

Starting from July 1, 2025, a carbon levy of Rs2.50 per liter will be imposed on petroleum products. This comes as the government plans to cap the petroleum levy (PL) at Rs90/liter. The levy currently stands at Rs77/liter on high-speed diesel (HSD) and Rs78.02/liter on petrol. The decision came in after discussion between Finance Division and Petroleum Division while being opposed by senate yesterday . The national committee has approved this in principle but wants clarification on whether it should be classified as a levy or a tax.

New Taxes on Vehicle Buyers for EV Subsidies: To fund Electric Vehicle (EV) subsidies, new taxes will be levied on car purchases:

• 1% levy on cars up to 1300cc
• 2% levy on cars between 1301cc and 1800cc
• 3% levy on cars above 1800cc

However, committee members were surprised these levies weren’t in the Finance Bill 2025-26. The committee also deferred consideration of the New Energy Vehicle Adoption Levy Act, 2025 due to concerns about a lack of a comprehensive plan for EV transition.

It was mainly because of inadequate recharging stations, and the exclusion of hybrid vehicles. They’ve asked the Ministry to present a detailed implementation plan. While Pakistan currently has 76,000 EVs, officials aim to significantly boost production to 2.2 million in five years, primarily focusing on electric motorcycles

Power Sector Reforms and Debt Management

The government plans to borrow Rs1.275 trillion from commercial banks at a rate 0.9% below the three-month KIBOR. This borrowing aims to retire existing power-related debts, to eliminate Independent Power Producers (IPPs) and Power Holding Company liabilities within six years.

This includes Rs683 billion specifically for Power Holding Company dues, with an annual repayment of Rs323 billion. While a surcharge of Rs3.23/unit will be applied, lifeline consumers will be exempt and continue to receive subsidized rates. The committee has recommended approval of the revised amended draft of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997.

Solar Energy and Electric Vehicle Promotion

The committee clarified that the recommendation for solar taxation originated from the National Assembly panel, not the Senate. Previously, the committee had advocated against any tax on solar to promote renewable energy.

Other Key Discussions

• Sales Tax Act, 1990: The committee approved most clauses of the proposed amendments but proposed changes to some provisions. Provisions related to fraud have been deferred for further consideration.
•  Export Finance Scheme (EFS) and Cotton: The committee recommended a review of the EFS for raw cotton and suggested that tax imposition on local cotton production should be brought to parity with imported cotton. These observations will be sent to the Secretary of Commerce and Chairman, FBR.
• Stamp Act: The committee deferred amendments to the Stamp Act due to the continued use of the term “non-filer,” a category that has been removed from applicable laws.

It appears the committee is taking a cautious approach to new financial measures, seeking clarity and comprehensive plans before full approval.