Govt imposes 25% sales tax on hybrid vehicles after tax relief ends

The federal government has imposed a 25% sales tax on both imported and locally supplied hybrid vehicles. The new tax came into effect on July 1, 2026, after the previous tax exemption ended on June 30 with the close of the 2025-26 fiscal year.

The tax has been introduced under the Finance Act 2026-27. Under the new rules, hybrid vehicles have been placed under a higher tax category. Earlier, the government had indicated that locally made hybrid vehicles might continue to receive tax relief, but the final decision applies the same 25% tax to both local and imported hybrids.

The government has also ended several tax incentives for electric vehicles (EVs). Tax exemptions on imported CKD kits used by local EV manufacturers have been withdrawn. In addition, the 1% sales tax for locally assembled electric vehicles has also been removed.

The tax changes are expected to increase the prices of hybrid and electric vehicles across Pakistan. Manufacturers and importers are likely to pass the extra tax cost on to customers.

Hybrid vehicles have become popular because they offer better fuel efficiency without depending on charging stations. However, the new tax is expected to reduce their price advantage over petrol vehicles, which may slow demand and make buyers think twice before purchasing a hybrid.