Confusion surrounds the future of general sales tax (GST) on hybrid vehicles after the FY26-27 budget announcement. The current concessional tax rates will expire on June 30 under the Auto Industry Development and Export Policy (AIDEP).
However, the government has not confirmed whether it will retain the reduced GST or impose higher rates.
Auto Industry Awaits Government Decision
Most auto assemblers avoided commenting on the proposed GST changes. Meanwhile, Finance Minister Muhammad Aurangzeb did not address the issue during his budget speech.
One local assembler said industry stakeholders continue discussing the matter with policymakers. He added that the government could either slightly increase the GST or maintain existing rates after consultations.
Reports also suggest the International Monetary Fund wants Pakistan to raise the GST. However, the assembler could not independently confirm the claim. According to Topline Securities, hybrid vehicles may face an 18 percent GST for models up to 1,800cc. Vehicles between 1,801cc and 2,500cc could face a 25 percent GST.
Higher Taxes May Impact Hybrid Demand
Hybrid vehicles have witnessed strong demand over the past two years. Rising petrol and diesel prices encouraged many buyers to switch to fuel-efficient models. If higher GST rates take effect, consumers could face significant price increases.
Meanwhile, the government has extended the one percent GST concession on imported CKD kits for eligible electric vehicles until June 30, 2027. The extension aims to support local EV production, improve affordability, and encourage further investment in Pakistan’s electric vehicle sector.
