ISLAMABAD: The federal government has proposed a new car levy. Pakistan’s draft auto policy would place a 10% levy on vehicles above 2,000cc and 2% on mid-size cars, sources told ProPakistani.
The draft policy has been approved by Prime Minister Shehbaz Sharif. It applies to internal combustion engine vehicles, both imported and locally assembled or manufactured.
New car levy Pakistan: the proposed rates
Under the draft, cars with engine capacities between 1,001cc and 2,000cc would face a 2% levy. Cars above 2,000cc would face the full 10% rate. Vehicles below 1,000cc would be exempt.
Two-wheelers, three-wheelers and agricultural tractors would carry a zero rate. Prime movers other than agricultural tractors, trucks, light commercial vehicles, buses and vans would each face a 2% levy.
The proposed rates are as follows:
| Vehicle category | Proposed levy |
|---|---|
| Two and three-wheelers | 0% |
| Agricultural tractors | 0% |
| Cars below 1,000cc | 0% |
| Cars 1,001cc to 2,000cc | 2% |
| Cars above 2,000cc | 10% |
| Prime movers (non-agriculture) | 2% |
| Trucks and light commercial vehicles | 2% |
| Buses and vans | 2% |
The levy is still part of a draft. Its final shape, including the basis on which the rates will be calculated and the date from which it takes effect, will determine how much car prices actually rise.
What it means for buyers
The structure spares small cars, which dominate Pakistani roads, from any new burden. Buyers of 660cc and 1,000cc hatchbacks, the most popular segment for first-time and middle-class buyers, would see no change under the proposal.
The heaviest hit falls on luxury and large-engine vehicles. A 10% levy on cars above 2,000cc would add a significant sum to already expensive SUVs and sedans, most of which are imported.
The mid-range segment, which includes popular 1,300cc and 1,500cc family sedans assembled in Pakistan, would absorb a 2% increase. That is smaller, but it lands on the segment where most salaried buyers sit.
The proposal arrives weeks after the government moved in the other direction for the smallest vehicles. On September 13, the prime minister announced a relief scheme for users of motorcycles, autos and vehicles of up to 800cc to ease the burden of rising global oil prices.
That relief came as part of a wider set of fuel-price measures tracked in our earlier coverage of the auto policy, and the new levy now sits alongside it as the government tries to balance revenue needs with protection for small-vehicle owners.
Revenue push behind the move
The levy fits a broader revenue drive. The government has been widening the tax net and revisiting exemptions across sectors, a push discussed at a recent tax reform workshop with the IMF in Islamabad.
Cars are an attractive target because the base is narrow and documented. Every registered vehicle passes through a traceable chain of importers, assemblers and dealers, which makes a levy easier to collect than taxes on harder-to-track sectors.
For the auto industry, the key question is timing. Assemblers will watch whether the 2% rate on locally made mid-size cars pushes buyers toward smaller models or delays purchases. The draft gives no effective date yet, so showrooms are operating on the old price lists for now.
Until the final notification is issued, the proposal remains what it is: a draft with rates that could still change.
Which cars would face the 10% levy?
Cars with engine capacities above 2,000cc, mostly imported luxury SUVs and large sedans, would face the full 10% rate under the draft.
Are small cars affected?
No. Cars below 1,000cc, two-wheelers, three-wheelers and agricultural tractors would be exempt from the levy.
When will the levy take effect?
No date has been announced. The rates are part of a draft policy, and the final implementation details are still to be decided.
