Imported Cars and Large SUVs Targeted
The federal government has proposed new tax measures on imported vehicles, large SUVs and expensive electric vehicles under Budget 2026-27.
The move is expected to make luxury petrol cars and high-value electric vehicles more expensive from next month.
According to the budget speech, federal excise duty will be imposed on imported cars. The duty will also apply to SUVs with engine capacities above 2000cc and up to 3000cc.
The government has also proposed increasing duty on vehicles with engine capacities above 3000cc.
These measures are aimed at vehicles that fall in the higher price and higher engine categories.
The government said the decision is part of its plan to ensure a fairer distribution of the economic burden.
The proposal signals that buyers of luxury vehicles may face higher costs in the new fiscal year.
Expensive Electric Vehicles Also Included
The proposed tax measures will also apply to luxury electric vehicles valued at more than Rs20 million.
This means high-end EV buyers may no longer receive the same level of tax benefit as users of smaller and more affordable electric vehicles.
The government said incentives designed to promote electric mobility should not be used to subsidise extremely expensive vehicles.
The policy appears to separate luxury electric vehicles from electric transport options meant for wider public use.
This could affect imported premium EVs that are priced above the proposed threshold.
The measure may increase purchase costs for wealthy buyers, while protecting concessions for lower-cost electric mobility.
EV Incentives Continue for Affordable Transport
At the same time, the government has decided to retain the existing concessional tax regime for electric motorcycles, rickshaws, cars and buses for another year.
This means tax support for more accessible electric transport will continue.
The budget also proposes extending a 1 percent sales tax facility to imported electric trucks.
The government says this approach will help promote electric mobility without giving excessive relief to buyers of very expensive EVs.
Electric motorcycles and rickshaws are seen as important for ordinary commuters and small transport operators.
Electric buses and trucks can also support cleaner public transport and commercial movement.
The new proposal creates a two-track policy. Affordable and utility-based electric vehicles will keep incentives. Luxury cars and high-value EVs will face higher taxation.
For consumers, the policy may affect vehicle buying decisions in the coming months.
For the auto market, it may shift demand toward smaller vehicles, locally supported electric options and lower-cost transport alternatives.
If approved, the new tax measures will become part of the federal budget framework for FY2026-27.
