The federal government has increased the indirect tax burden on hybrid vehicles after the Budget 2026-27. The change took effect on July 1 following the implementation of the Finance Act 2026-27.
According to official sources, the government did not extend the reduced sales tax concession for hybrid vehicles. Consequently, the tax relief available during the previous fiscal year has expired.
Before the budget, many expected the concession to continue into the new financial year. However, the final Finance Act contains no provision to extend the reduced sales tax regime.
Tax Burden Rises to Around 25 Percent
Sources said hybrid vehicles now face the combined impact of several indirect taxes. These include the withdrawal of reduced sales tax concessions and the applicable Federal Excise Duty on imported vehicles.
As a result, the overall indirect tax burden on imported hybrid vehicles has increased to around 25 percent. Officials expect the revised taxation to affect vehicle prices nationwide.
The change applies after the previous concession expired under the sunset clause. Therefore, importers and buyers will now face higher overall tax costs.
Imported Hybrid Vehicles Become Costlier
The higher tax burden is expected to increase the prices of imported hybrid vehicles. Consequently, consumers may face greater costs when purchasing fuel-efficient vehicles.
Previously, tax incentives encouraged buyers to switch to hybrid vehicles with lower fuel consumption and emissions. However, the withdrawal of those concessions is likely to reduce part of that price advantage.
Industry observers believe the revised taxation could influence consumer demand in the hybrid vehicle market. Meanwhile, the government has not announced any replacement incentives for hybrid vehicles.
