Web Desk: Federal government is considering reducing the sales tax on hybrid electric vehicles (HEVs) to 18% from the current 25% in a move aimed at reviving demand and supporting the country’s transition toward cleaner transportation, according to official sources.
The proposal has been forwarded to the Finance Division for review and will require approval from the federal cabinet before any reduction can take effect.
The proposed cut follows concerns over the impact of higher taxation on Pakistan’s hybrid vehicle market after a previous tax concession expired.
Until June 30, 2026, hybrid vehicles benefited from a lower sales tax rate. However, the concession lapsed automatically after the government chose not to extend it through the Finance Act 2026.
As a result, hybrid vehicles became subject to the standard 25% sales tax under Schedule II of SRO 297(I)/2023, replacing the earlier concessional regime that had imposed an 8.5% sales tax.
Officials familiar with the matter said the government has since evaluated the effect of the tax increase on vehicle sales and broader market activity.
Based on that assessment, authorities are now considering restoring a lower sales tax rate of 18% to stimulate consumer demand while encouraging wider adoption of hybrid and electric vehicles.
The proposed tax reduction reflects the government’s broader efforts to promote fuel-efficient and lower-emission vehicles as Pakistan seeks to diversify its transport sector and reduce reliance on conventional fossil-fuel-powered automobiles.
If approved by the federal cabinet, the revised tax rate would partially restore incentives for hybrid vehicle buyers while remaining higher than the previous 8.5% concession that expired at the end of June.
