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, which gives the industry more time.

Why the Extension Matters

Setting up local assembly lines requires investment that pays back over several years. When an exemption may end soon, investors hold back. By pushing the EV CKD sales tax exemption out to mid-2027 under the Finance Act 2026, the budget gives assemblers and investors a clearer view of what lies ahead. It also helps cleaner transport and local manufacturing.

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 saving carries through to assembly costs and, in the end, to how competitively locally assembled EVs can be priced.

Compliance and Documentation

To claim the exemption without problems, 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, can cause trouble at audit. The exemption ends on 30 June 2027, so plan around that date as part of compliance.

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. Zaffre Tech built it so a time-bound exemption is enforced automatically, and Zaffre HRM follows the same approach 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 clear sign of support for local EV manufacturing. Businesses that keep their records organised around it will get the benefit and stay ready for audit.

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

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