Pakistan notifies new levy on traditional vehicles to fund green transition

Pakistan’s Federal Board of Revenue (FBR) has formally announced the rates for the newly introduced New Energy Vehicles Adoption Levy, under the provisions of the New Energy Vehicles Adoption Levy Act, 2025. The move is part of the government’s broader fiscal reforms introduced in the Finance Act, 2025, aimed at accelerating the transition to environmentally friendly transportation technologies.

According to the FBR’s official notification, the levy will be imposed under Section 3 of the Act and will apply to manufacturers and importers of internal combustion engine (ICE) vehicles. The amount payable will depend on the engine size and whether the vehicle is produced locally or imported.

The revenue collected under this levy will be deposited into the Federal Consolidated Fund.

The levy is structured on an ad valorem basis, meaning it will be calculated as a percentage of a vehicle’s invoice or assessed value, inclusive of applicable duties and taxes. However, the levy will not apply to: new energy vehicles (NEVs), ICE vehicles meant for export, and vehicles owned by diplomatic missions or those specifically exempted under government notifications.

Importers will be required to pay the levy at the time of clearance into Pakistan.

The notification also outlines several regulatory provisions:

• Sub-section (2) refers to the First Schedule, which details the applicable levy rates.
• Sub-section (3) empowers the federal government to revise these rates, add new vehicle categories, or remove existing ones via official notification.
• Sub-section (4) reinforces exemptions for NEVs and certain ICE vehicles, supporting the government’s clean mobility and diplomatic commitments.