The Federal Board of Revenue (FBR) has reduced sales tax on locally manufactured hybrid electric vehicles, offering relief to buyers of hybrid cars with engines up to 2000cc.
Under the new decision, the sales tax rate has fallen from 25% to 18%. The revised rate took effect on September 13, 2026.
The FBR issued the notification on Monday under the relevant provisions of the Sales Tax Act, 1990.
New Sales Tax Rate for Hybrid Vehicles
The FBR issued S.R.O. 1525(I)/2026 to amend its previous sales tax notification.
The amendment adds a new proviso after Table-II of the earlier notification. It states that the provisions of Table-II “shall not apply to locally manufactured hybrid electric vehicles with engine capacity up to 2000 cc.”
The notification took effect immediately.
The move changes the tax treatment of locally manufactured hybrid vehicles after the government previously shifted them to the standard sales tax regime.
Hybrid Cars Previously Faced 25% Sales Tax
Hybrid vehicles previously benefited from a concessional sales tax rate of 8.5%.
However, that concession expired, after which authorities moved hybrid vehicles under Schedule II of SRO 297(I)/2023.
As a result, locally manufactured hybrids became subject to the 25% standard sales tax rate.
The latest decision now reduces that burden to 18% for eligible locally manufactured hybrid vehicles with engine capacities up to 2000cc.
Impact on Hybrid Car Prices
The reduction could help lower the prices of locally assembled hybrid vehicles, depending on how manufacturers pass the tax saving on to consumers.
It also brings hybrid vehicle taxation closer to the government’s broader push toward New Energy Vehicles (NEVs).
However, Pakistan continues to finalise its wider automotive policy amid ongoing consultations with the International Monetary Fund (IMF).
Auto Policy Sets Different Treatment for EVs
Pakistan’s proposed five-year Auto Policy 2026–31 also addresses the taxation of different vehicle technologies.
The draft, recently approved by Prime Minister Shehbaz Sharif, calls for hybrid electric vehicles and conventional Internal Combustion Engine (ICE) vehicles to receive equal treatment in terms of duties and taxes.
At the same time, the policy proposes substantially greater tax relief for Battery Electric Vehicles (BEVs) compared with hybrid vehicles.
The latest FBR decision therefore provides immediate tax relief for locally manufactured hybrids while the government continues shaping its long-term strategy for Pakistan’s automotive industry.
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