ISLAMABAD: Negotiations between Pakistan and the International Monetary Fund (IMF) have entered the final stage for the release of a $1.2 billion loan tranche, ARY News reported Wednesday, citing sources.
The discussions are focused on several outstanding issues, including the government’s new auto policy and sales tax treatment for electric vehicles (EVs).
IMF Seeks Higher EV Sales Tax
According to sources, the government has yet to decide whether to impose an 18% sales tax on electric vehicles priced up to $75,000.
The IMF has demanded an 18% sales tax on EVs within this price range.
However, the government has maintained that the reduced sales tax was introduced to encourage environmentally friendly vehicles and support EV adoption in Pakistan.
Officials said Pakistan and the IMF had agreed on a 25% sales tax for electric vehicles priced above $75,000.
Vehicles above this threshold have been classified as luxury vehicles, according to a briefing in Islamabad.
Government Assures IMF on Gift Scheme
The government has also assured the IMF that vehicles received under the gift scheme will not be allowed to change ownership for one year.
Pakistan has briefed the IMF on its position regarding the auto policy, while discussions continue on the remaining issues.
IMF Objects to EV Tax Concession
Earlier, the IMF demanded the removal of a sales tax concession for electric vehicles and their parts in Pakistan.
During talks over the release of the fifth tranche of the country’s financial assistance, the IMF questioned the reduced sales tax rate currently applicable to EVs.
The IMF reportedly argued that the concession was discriminatory because other vehicles were subject to higher sales taxes.
Under proposed changes to Pakistan’s new auto policy, the sales tax on electric vehicles and their parts could rise to 18%.
The final decision will depend on the outcome of the ongoing discussions between Pakistan and the IMF.
