The federal government is considering reducing the sales tax on hybrid cars from 25% to 18% in a move aimed at supporting Pakistan’s growing hybrid vehicle market. If approved, the proposal is expected to make hybrid electric vehicles (HEVs) more affordable for buyers while encouraging the shift toward cleaner and fuel-efficient transportation.
According to government sources, a summary recommending the tax reduction has already been forwarded to the Finance Division. The proposal will now require approval from the Federal Cabinet before it can be implemented.
Hybrid Car Sales Tax Proposal (Expected)
| Details | Information |
|---|---|
| Current Sales Tax | 25% |
| Proposed Sales Tax | 18% |
| Vehicle Type | Hybrid Electric Vehicles (HEVs) |
| Current Status | Proposal Submitted |
| Next Step | Federal Cabinet Approval |
Why Is the Government Considering This Tax Cut?
The government increased the sales tax on hybrid vehicles after the previous tax concession expired on 30 June 2026. As a result, hybrid vehicles became subject to the standard 25% sales tax, increasing prices for consumers.
Officials have now reviewed the impact of the higher tax on the automobile market and believe that reducing the rate to 18% could help revive demand while supporting Pakistan’s environmental and energy goals.
The proposed reduction is also expected to encourage more buyers to choose hybrid vehicles over conventional petrol-powered cars.
Previous Tax Structure
Before the recent increase, hybrid vehicles enjoyed a significantly lower tax rate.
| Period | Sales Tax Rate |
|---|---|
| Before July 2026 | 8.5% |
| Current Rate | 25% |
| Proposed New Rate | 18% |
The lower tax concession expired after the government decided not to extend it through the Finance Act 2026, resulting in hybrid vehicles being shifted to Schedule II of SRO 297(I)/2023.
What Could This Mean for Car Buyers?
If the proposal receives cabinet approval, buyers may benefit from:
- Lower prices on hybrid vehicles.
- Reduced overall purchase costs.
- Increased availability of fuel-efficient cars.
- Better long-term fuel savings.
- Greater access to environmentally friendly transportation.
Although the reduction will not restore the previous 8.5% concession, lowering the tax to 18% could still provide noticeable relief for consumers.
Boost for Pakistan’s Hybrid Vehicle Market
Pakistan’s demand for hybrid vehicles has grown steadily in recent years due to rising fuel prices and increasing awareness of environmentally friendly transportation.
Industry experts believe that lowering the sales tax could:
- Encourage more consumers to switch to hybrid vehicles.
- Support investment in the automotive sector.
- Reduce fuel consumption.
- Help lower vehicle emissions.
- Promote cleaner transport across the country.
Proposal Still Awaits Approval
It is important to note that no final decision has been made yet. The proposal is currently under review by the Finance Division and will only become effective after receiving approval from the Federal Cabinet.
Until then, hybrid vehicles will continue to be subject to the existing 25% sales tax.
Final Thoughts
The government’s proposal to reduce the sales tax on hybrid cars from 25% to 18% could provide significant relief for consumers while encouraging the adoption of cleaner and more fuel-efficient vehicles in Pakistan. If approved by the Federal Cabinet, the move is expected to support the local automobile market and strengthen the country’s transition toward sustainable transportation.
Motorists planning to purchase a hybrid vehicle should continue following official government announcements for the latest updates on the proposed tax reduction.