ISLAMABAD – The federal government has decided to withdraw its proposal to raise the sales tax on hybrid vehicles with engine sizes of up to 1800cc.
The proposed tax hike, which would have raised the rate from the current 12.5% to 18%, was expected to generate additional revenue of Rs7 billion.
However, the plan was shelved following deliberations by the National Assembly’s Standing Committee on Finance.
With this decision, the existing reduced tax rate of 12.5% for these hybrid cars will remain unchanged. This is the second time in the current fiscal year that authorities have rolled back a planned increase in sales tax on hybrid vehicles ahead of formal budget approval.
According to the current automotive policy, tax rates on hybrid cars are protected from increases until at least June 2026, offering stability to both consumers and manufacturers in the sector.
Meanwhile, the proposed sales tax increase on smaller vehicles with engine capacities up to 850cc remains in place. If approved, these vehicles would see their sales tax rate rise from 12.5% to 18%.
On June 10, Minister for Finance and Revenue Muhammad Aurangzeb unveiled the federal budget 2025-26 with a total outlay of Rs17,573 billion with an aim to promote inclusive and sustainable economic growth.
The finance minister said the net revenue receipts have been estimated at Rs11,072 billion. The FBR collections are likely to be Rs14,131 billion, which is 18.7 percent higher than the current fiscal year and non-tax revenues will be Rs5,147 billion.
