The government is considering reducing the sales tax on hybrid vehicles from 25% to 18%. The proposed change would apply to both imported and locally assembled hybrid vehicles.
Officials believe the reduction could lower vehicle prices and revive consumer demand. Consequently, the proposal has been forwarded to the Ministry of Finance for consideration.
Tax Hike Reduced Demand For Hybrid Vehicles
Under the Finance Act 2026, the government increased the sales tax on hybrid vehicles from 8.5 percent to 25 percent. The revised tax rate took effect on July 1, 2026.
However, authorities later concluded that the sharp increase negatively affected vehicle prices and sales. Therefore, policymakers are now considering restoring a lower tax rate.
The reduced tax regime remained effective until June 30, 2026. Nevertheless, the concession expired after it was not extended under the Finance Act 2026.
According to local media reports, the government has prepared a summary recommending an 18 percent sales tax. The proposal is currently awaiting further consideration by the Ministry of Finance.
Move Aims To Encourage Hybrid Vehicle Adoption
Officials expect the proposed reduction to provide financial relief for vehicle buyers. Additionally, the measure could encourage greater adoption of hybrid electric vehicles and electric vehicles.
The government considers cleaner transportation an important part of its environmental and energy goals. Therefore, lowering taxes may help accelerate the transition toward fuel-efficient vehicles.
At present, a 25 percent sales tax continues to apply to the import and local supply of hybrid vehicles. Any reduction will require official approval before taking effect.
Industry stakeholders are closely monitoring the proposal, hoping it will improve affordability and stimulate demand across Pakistan’s automotive market.
