The government has reduced the sales tax rate on locally manufactured hybrid electric vehicles to support the automotive sector and make hybrid cars more affordable.
The federal government has announced a reduction in sales tax on locally manufactured hybrid electric vehicles (HEVs) with engine capacities of up to 2000cc. Under the latest decision, the applicable sales tax has been reduced from 25% to 18%.
The move is expected to provide relief to the local automotive industry and could help improve the affordability of hybrid vehicles manufactured in Pakistan. The tax adjustment also reflects the government’s efforts to encourage the production and adoption of more fuel-efficient vehicles.
Finance Division Issues New Sales Tax Notification
The Finance Division issued S.R.O. 1525(1)/2026 on September 13, 2026, introducing amendments to the existing sales tax framework. The notification modifies S.R.O. 297(1)/2023, which was originally issued on March 8, 2023, and later amended through S.R.O. 370(1)/2024 dated March 8, 2024.
The latest notification specifically changes the applicability of the sales tax provisions outlined in Table-II of the earlier notification.
HEVs Up to 2000cc Excluded from Table-II Provisions
According to the amendment, the government has added a new proviso after Table-II in the relevant sales tax notification. The provision states that the rules under Table-II will not apply to locally manufactured hybrid electric vehicles with engine capacities of up to 2000cc.
This change effectively brings the sales tax rate for eligible locally produced hybrid vehicles down to 18%, compared with the previously applicable rate of 25%.
The reduction applies to hybrid vehicles manufactured locally and does not indicate a blanket sales tax cut for all hybrid or imported vehicles. Therefore, the impact will depend on the vehicle’s engine capacity, manufacturing status and applicable tax regulations.
Notification Takes Immediate Effect
The Finance Division has confirmed that the amendment will come into force immediately. As a result, eligible locally manufactured hybrid electric vehicles can benefit from the revised sales tax treatment from the date of notification.
The decision may influence pricing strategies among local automakers and could support greater consumer interest in hybrid technology. However, the actual impact on vehicle prices will depend on manufacturers, dealers and other applicable costs.
The government’s latest tax adjustment marks a significant development for Pakistan’s hybrid vehicle market, particularly for locally assembled models with engine capacities of up to 2000cc.