Electric and hybrid vehicles may become costlier in Pakistan after Budget 2026-27

Electric and hybrid vehicles in Pakistan could become more expensive from the next fiscal year as the government considers major changes in taxes under Budget 2026-27.

According to reports, the federal government is reviewing tax reforms after discussions with the International Monetary Fund (IMF). The IMF has reportedly pushed for ending several tax exemptions and reduced rates, saying they mainly benefit higher-income groups.

Under the proposed changes, the sales tax on electric vehicles could rise sharply from 1% to 18%. At the same time, the current reduced tax rate of 8% on hybrid vehicles may also be removed, bringing them under the standard 18% sales tax.

Officials involved in the discussions say the IMF considers electric and hybrid vehicles as luxury items used mostly by wealthy consumers. Because of this, the lender is not supporting special tax concessions, even though these vehicles are seen as environmentally friendly.

The government had tried to maintain lower tax rates for electric vehicles, but so far, there has been little progress in negotiations.

Pakistan is currently working on a long-term financial program with the IMF, which includes broader tax reforms and efforts to increase the country’s tax base.

In a related development, President Asif Ali Zardari has called the parliamentary budget session for fiscal year 2026-27 on June 5. The National Assembly will meet at 5 pm, followed by the Senate session at 6 pm under Article 54(1) of the Constitution.

Meanwhile, budget discussions are ongoing in parliamentary committees. The National Assembly Standing Committee on Finance and Revenue has urged authorities to focus on long-term reforms, better transparency, and inclusive economic growth.

For the upcoming fiscal year, Pakistan’s GDP growth is expected to remain between 3.5% and 4.5%, while inflation has risen again to 10.9% in April 2026.