Hybrid Cars Face 25% Additional Tax After Budget 2026-27

The federal government has effectively increased the indirect tax burden on hybrid vehicles to 25 percent as of 1 July 2026 after allowing a key tax concession to expire under the Finance Act for FY2026-27, high-level sources informed ProPakistani a short while ago.

Sources via official correspondence confirmed that the 1-2 percent reduced sales tax exemptions on hybrid electric vehicles under the previous fiscal year’s sunset clause were not extended in the Finance Act that came into effect on July 1, 2026.

Before the budget was enacted, there were expectations that the concession would continue into the new fiscal year. However, the final law contains no provision to extend the reduced sales tax regime for hybrid vehicles.

Sources directly stated that hybrid vehicles are now subject to the accumulated impact of multiple indirect taxes, including the withdrawal of the reduced sales tax and the applicable Federal Excise Duty (FED) on imported vehicles.

The combined effect pushes the overall indirect tax incidence on imported hybrid vehicles to around 25 percent.

The increase is expected to make imported hybrid vehicles significantly more expensive, reversing part of the tax advantage that had encouraged consumers to shift towards fuel-efficient and lower-emission vehicles.