Govt Plans to Reduce Sales Tax on Hybrid Cars

The federal government is considering reducing the sales tax on hybrid electric vehicles (HEVs) from 25 percent to 18 percent, sources told ProPakistani.

A summary proposing the tax reduction has been sent to the Finance Division for consideration. The proposal will require approval from the federal cabinet before it can take effect. Earlier, the reduced tax rate was available until June 30, 2026, but expired automatically after the government decided not to extend the concession through the Finance Act 2026.

The higher rate replaced the previous concessional regime under which hybrid vehicles were subject to a reduced sales tax of 8.5 percent. Following the expiry of the exemption, hybrid vehicles were shifted to Schedule II of SRO 297(I)/2023, making them subject to the standard 25 percent sales tax.

Sources said the government has since reviewed the impact of the tax increase on the hybrid vehicle market and is now considering restoring a lower rate of 18 percent to support demand and promote the transition to hybrid and electric vehicles.