The government has proposed significant discounts on electric vehicles (EVs) and higher taxes on petrol-powered cars in the 2026-27 budget. This initiative aims to make electric vehicles more affordable for the general public while discouraging the use of fossil fuel-powered vehicles. The proposed budget includes substantial tariff and tax exemptions for the import of EVs, plug-in hybrid electric vehicles (PHEVs), and charging infrastructure. Conversely, taxes on the import of certain fossil fuel-powered vehicles are proposed to be increased. The Finance Minister, Amir Khosru Mahmud Chowdhury, announced these plans to promote the use of environmentally friendly vehicles. The proposed budget aims to reduce the current tax burden on EV imports, which stands at approximately 93%. For EVs priced up to $25,000, the tax rate is proposed to be reduced to 64%, and for those up to $50,000, to 80%. Additionally, exemptions on all taxes and duties, except VAT, are proposed for electric buses used for student transportation in educational institutions and other electric buses and trucks until June 2031. The import of new PHEVs is also proposed to be incentivized by reducing supplementary duties and completely waiving regulatory duties for vehicles with engine capacities up to 1,800 cc and 2,000 cc, respectively. The total tax burden on these vehicles is proposed to be reduced significantly. Furthermore, the advance income tax on the registration and renewal of all types of electric vehicles is proposed to be reduced, with a tiered rate based on capacity. The import of chargers and charging station equipment is proposed to be completely exempt from all taxes and duties to encourage the development of a nationwide charging network. On the other hand, the tax burden on imported cars with engine capacities between 1,200 cc and 1,600 cc is proposed to be increased from 132.36% to 155.88% to discourage the use of fossil fuel-powered vehicles. This tax increase is expected to significantly raise the market price of petrol-powered cars. For example, a car with an import value of $300,000 would see its market price increase by approximately $705,000 due to the proposed tax increase. The budget also proposes tax exemptions for the local production of electric vehicles and their components to attract investment in this sector. Institutions involved in the high-value addition of electric vehicle bodies, welding, painting, and assembly are proposed to be exempt from all taxes and duties except for a 3% import duty. Those involved in lower-value addition through parts assembly and painting are proposed to be exempt from all taxes and duties except for a 15% import duty. Local producers of electric buses and trucks are proposed to be exempt from all taxes and duties except for an additional 5% VAT until June 2031.
FAQ
- What is the proposed tax rate for electric vehicles priced up to $25,000?
- The proposed tax rate for electric vehicles priced up to $25,000 is 64%.
- What is the proposed tax rate for electric vehicles priced up to $50,000?
- The proposed tax rate for electric vehicles priced up to $50,000 is 80%.
- What is the proposed tax increase for petrol-powered cars with engine capacities between 1,200 cc and 1,600 cc?
- The proposed tax increase for petrol-powered cars with engine capacities between 1,200 cc and 1,600 cc is from 132.36% to 155.88%.
