ISLAMABAD – Another move that could shake local auto industry, as International Monetary Fund (IMF) urged Pakistan to scrap sales tax exemptions currently offered to locally manufactured hybrid and electric vehicles and bikes.
As per online reports, the global lender wants full 18% sales tax applied starting next fiscal year. At present, hybrid vehicles produced locally enjoy tax breaks under Eighth Schedule, but this exemption is set to expire on June 30, 2026.
As of late 2025, hybrids with engines up to 1800cc are taxed at just 8.5pc, while those between 1801cc and 2500cc are subject to 12.75% sales tax.
During discussions with Ministry of Industries and Production, IMF insisted that these vehicles and bikes be removed from the Eighth Schedule and included in standard tax regime. If implemented, this would end preferential treatment that helped promote cleaner, energy-efficient transportation in Pakistan.
Such move could dramatically alter local hybrid vehicle market, which has so far thrived under reduced taxes. IMF’s recommendation sparked debates over future of green vehicles in Pakistan, raising questions about affordability and government’s commitment to eco-friendly transport initiatives.
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