Government Imposes 25% Sales Tax on Hybrid Vehicles

The federal government has imposed a 25% sales tax on the import and local supply of hybrid vehicles with effect from July 1, 2026, following the expiry of the sales tax exemption that remained available until the close of the FY2025-26 fiscal year.

According to officials, the concession expired on June 30, 2026, after which hybrid vehicles were placed under Schedule II of SRO 297(I)/2023, making their import and domestic supply subject to the standard 25% sales tax regime.

The revised tax treatment follows the discontinuation of several fiscal incentives previously available to Pakistan’s electric vehicle (EV) sector, including sales tax exemptions on the import of Completely Knocked Down (CKD) kits by local electric vehicle manufacturers.

The expired concession applied to small passenger vehicles and sport utility vehicles (SUVs) equipped with battery capacities of up to 50 kilowatt-hours (kWh), as well as light commercial vehicles fitted with batteries of up to 150 kWh.

Prior to July 1, locally manufactured or assembled four-wheel electric vehicles falling within these categories benefited from a concessionary sales tax rate of 1%, significantly reducing their tax burden.

Earlier government sources had indicated that multiple EV-related tax incentives would expire with the commencement of the FY2026-27 fiscal year. At that stage, officials had suggested that locally manufactured hybrid vehicles were likely to continue receiving concessional tax treatment, whereas imported electric vehicles would face higher taxation.

However, the final taxation framework approved through the Finance Bill 2026-27 introduced the revised sales tax measures, which officially came into effect from July 1, 2026.