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EV CKD Sales Tax Exemption Extended to 2027: What Manufacturers Should Know

Zaffre Tech · June 16, 2026

Encouraging Local EV Assembly

CKD stands for "completely knocked down," meaning a vehicle imported as a kit of parts and assembled locally rather than brought in fully built. To encourage domestic electric vehicle (EV) assembly, the government has exempted EV CKD kits from sales tax. The Federal Budget 2026-27 extends this exemption to 30 June 2027, giving the industry a longer runway.

Why the Extension Matters

Setting up local assembly lines requires investment that pays back over several years. A short-lived exemption creates uncertainty and discourages commitment. By pushing the EV CKD sales tax exemption out to mid-2027 under the Finance Act 2026, the budget gives assemblers and investors clearer visibility, supporting cleaner transport and local industrial capacity at the same time.

How the Exemption Works

  • EV CKD kits imported for local assembly are exempt from sales tax under the Sales Tax Act 1990.
  • The exemption now runs until 30 June 2027.
  • It targets assembly inputs rather than fully imported finished EVs.

Note that the wider budget separately introduces federal excise on luxury EVs and luxury imported vehicles, so this CKD relief is specifically about supporting local assembly, not blanket EV relief.

A Cost Illustration

  • Without exemption, sales tax at 18% on a Rs 5,000,000 CKD kit would add Rs 900,000.
  • With the exemption, that Rs 900,000 cost is removed at the kit stage.

That difference flows through to assembly economics and, ultimately, to the price competitiveness of locally assembled EVs.

Compliance and Documentation

To claim the exemption cleanly, assemblers must document that imported kits genuinely qualify as EV CKD and are used for local assembly. Mixing exempt CKD inputs with taxable items, or losing track of which consignments fall under the exemption window, creates audit exposure. Because the exemption has an end date of 30 June 2027, planning around that horizon is part of the compliance picture.

How Zaffre Axon Supports EV Assemblers

The Zaffre Axon finance and inventory modules let you tag EV CKD consignments as exempt, track them against the 30 June 2027 deadline, and keep import documentation linked to each batch. The exemption logic is configured centrally, so finance, procurement and tax filings all read from the same source of truth. Zaffretech built this so a time-bound exemption is enforced automatically, and Zaffre HRM keeps the same discipline across the wider Zaffre platform.

Action Points for the Sector

  • Confirm which kits qualify as EV CKD.
  • Apply the exemption and document eligibility per consignment.
  • Track usage against the 30 June 2027 expiry.
  • Keep exempt and taxable inputs clearly separated in your books.

The extension is a meaningful signal of support for local EV manufacturing. Businesses that organise their records around it will capture the benefit while staying audit-ready.

References: Finance Act 2026 (Federal Budget 2026-27); Sales Tax Act 1990; FBR.

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