Car Levy to Earn Government Rs188.58bn Over Five Years, Projections Show
The federal government aims to collect around Rs188.58 billion through the new car levy Pakistan has proposed for locally assembled vehicles over five years, according to revenue projections in the draft auto policy approved by Prime Minister Shehbaz Sharif.
The estimates put projected collections at Rs37.71 billion in 2026-27, rising to Rs38.46 billion in 2027-28, ProPakistani reported. Collections of Rs38.29 billion are expected in 2028-29, followed by Rs37.30 billion in 2029-30 and Rs36.83 billion in 2030-31, bringing the five-year total to Rs188.58 billion.
The government expects annual collections from the locally assembled vehicle category to remain relatively stable throughout the period, ranging from Rs36.83 billion to Rs38.46 billion a year.
Car levy Pakistan: how the slabs work
The draft policy sets different levy rates according to vehicle type and engine capacity. Cars below 1,000cc would carry a zero rate, while vehicles between 1,001cc and 2,000cc would face a 2 percent levy. Cars above 2,000cc would carry a proposed rate of 10 percent.
The rates would also cover imported and locally assembled internal combustion engine vehicles. Two- and three-wheelers and agricultural tractors would be exempt, while trucks and light commercial vehicles, buses and vans, and specified prime movers would carry a 2 percent rate.
The policy document also provides separate estimates for levy collections on imported vehicles. The final revenue impact would depend on implementation, the calculation mechanism, and the volume and mix of vehicles sold or imported during the five-year period.
The bigger picture: Rs232bn combined
Readers should note that the Rs188.58 billion figure covers locally assembled or manufactured vehicles only. MediaBites and Profit by Pakistan Today reported that the levy is projected to generate over Rs232 billion over five years across the board — the difference being the separate estimates for imported vehicles.
Revenue from the levy would help finance the Drawback of Local Taxes and Levies (DLTL) scheme for exporters, research and development, vendor development, independent audits and the establishment of an automotive testing institute. The government also proposes allocating Rs2.1 billion from the levy to support the Vendor Upgradation and Technology Transfer Programme.
This follows our October 20 report on the draft auto policy, which covered the government’s rejection of the IMF’s proposed 18 percent sales tax on EVs and the phased customs duty cuts. The levy on conventional cars is the other side of that bargain: cheaper EVs, pricier big-engine vehicles. Our coverage of Brent crude’s five-month high and the fourth-quarter growth slowdown tracks the wider economic pressure behind these tax choices.
FAQs
What is the new Automotive Development Levy?
It is a proposed levy on conventional vehicles under the draft Auto Policy 2026-31, with rates of 0 percent for cars below 1,000cc, 2 percent for 1,001–2,000cc, and 10 percent for cars above 2,000cc.
How much revenue will the car levy generate?
Projections put collections from locally assembled vehicles at Rs188.58 billion over five years — about Rs37–38 billion a year. Including imports, other outlets put the combined figure above Rs232 billion.
Which vehicles are exempt from the levy?
Two- and three-wheelers, agricultural tractors and cars below 1,000cc are exempt. Trucks, light commercial vehicles, buses, vans and specified prime movers would face a 2 percent rate.
When will the levy take effect?
The draft policy targets a law on the Automotive Development Levy by December 2026. The final impact on prices will depend on implementation and how much of the levy manufacturers pass on to buyers.
