Small Cars to Go Beyond Reach of Pakistanis After Govt’s Latest U-Turn

The federal government is once again moving to increase the sales tax on locally manufactured or assembled motorcars with engine capacity up to 850cc, top-level sources confirmed to ProPakistani.

Last week, the government had initially rejected the proposal to hike the sales tax on small cars.

According to senior officials familiar with the matter, earlier directives to raise the sales tax from the current 10–12.5% to a higher slab of 15–18%, originally shelved during internal budget deliberations, have now been revived for inclusion in the Finance Bill 2025.

The decision has been taken to boost revenue generation in the face of mounting fiscal pressures ahead of the FY 2025-26 budget.

While small cars have historically benefited from lower tax rates to promote affordability for middle-income consumers, the proposed hike signals a shift in fiscal priorities.