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Why Toyota Pakistan and Other Industry Players Disagree

Indus Motor is not the first local industry participant to challenge this interpretation.

During the Customs classification process, stakeholders including Indus Motor Company, PAMA, Sazgar Engineering and other industry participants argued that REEVs should be treated more like series hybrids because their total energy system still relies partly on petrol and produces emissions when the generator engine operates. They also argued that EV-specific fiscal benefits should not automatically extend to vehicles that continue to consume fuel.

The Customs committee nevertheless reached a majority decision in favour of 8703.80 for the specific Deepal S05 and Forthing Friday configurations.

There is another important nuance: the World Customs Organization has already adopted a new dedicated subheading for this type of vehicle under the HS 2028 framework, separating vehicles that use only electric motors for propulsion but also carry an internal-combustion engine solely to charge the battery. That new structure is scheduled to take effect from January 1, 2028.

Why the Tax Classification Matters

Vehicle classification can directly affect the duties, sales tax and other fiscal treatment applied to a model, so different classifications can influence its final price and competitive position.

Pakistan’s current Sales Tax Act already treats certain electric vehicles differently depending on factors including local assembly, battery capacity and whether the vehicle is imported or locally supplied. For example, the Act separately specifies reduced-rate treatment for some locally assembled electric four-wheelers and imported EVs up to specified battery capacities.

That makes the REEV definition commercially important. However, the correct tax treatment of an individual model cannot be determined from the marketing term “REEV” alone; its technical architecture, PCT classification, localisation status and applicable tax provisions all matter.

CarAdvisers Insight

The most useful way to understand this dispute is to separate technology classification from environmental policy.

Technically, the Customs position focuses on what mechanically drives the wheels. From that perspective, a REEV with no mechanical engine-to-wheel connection can fit the electric-propulsion heading.

The industry objection focuses on the energy source and fiscal intent: if a vehicle can consume petrol and produce tailpipe emissions, should it receive the same tax advantages designed for battery-only EVs?

Those are related questions, but they are not identical. Until regulators issue a new determination or tax rule, CarAdvisers would avoid describing REEV classification as proven “tax misuse.”

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FAQs

Is a REEV an electric car or a hybrid?

Technically it combines elements of both. The wheels are driven electrically, but an onboard combustion engine can generate electricity. Under the existing customs ruling for the examined vehicles, that architecture qualified under the electric-motor propulsion heading.

Which REEVs were covered by the Pakistan Customs ruling?

The published decision specifically covered the Deepal S05 REEV imported by Master Changan Motors and the Forthing Friday REEV imported by Capital Smart Motors. Customs explicitly said the ruling was not automatically applicable to every REEV.

Has FBR ruled that competitors misused GST relief?

Not in the sources reviewed. Indus Motor has raised the allegation and the matter is reportedly under regulatory review, but that should not be presented as a confirmed finding of tax wrongdoing.

Stay connected with Car Advisers Blogs for trusted reviews, market intelligence, and the future of mobility in Pakistan.

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