Hybrid vehicles are now subject to 25% sales tax

The federal government has imposed a 25% sales tax on the import and local supply of hybrid vehicles from July 1, following the expiry of the previous sales tax exemption at the end of the 2025-26 fiscal year.

Officials said the exemption expired on June 30, after which hybrid vehicles were shifted to Schedule II of SRO 297(I)/2023, making them subject to the higher sales tax rate.

The move follows the expiry of a series of tax concessions for the electric vehicle sector, including exemptions on the import of completely knocked down (CKD) kits by local electric vehicle manufacturers.

The concession had covered small cars and sport utility vehicles with battery capacities of up to 50 kilowatt-hours, as well as light commercial vehicles with batteries of up to 150 kilowatt-hours.

Until June 30, locally manufactured or assembled four-wheel electric vehicles in these categories were subject to a reduced sales tax rate of 1%.

Earlier, government sources had indicated that several EV-related tax concessions would lapse with the start of the 2026-27 fiscal year. At the time, officials had said locally manufactured hybrid vehicles were expected to retain their existing concessional tax treatment, while taxation on imported electric vehicles would increase.

The final tax measures were incorporated into the Finance Bill for 2026-27 and took effect from July 1.