Government plans to cut hybrid vehicle sales tax to 18% from 25%

The federal government is considering reducing sales tax on imported and locally supplied hybrid electric vehicles to 18% from the current 25%, with a summary submitted to the Finance Division for approval, Business Recorder reported. 

The proposed reduction is aimed at lowering costs for consumers and promoting hybrid and electric vehicles. It will require approval from the federal cabinet.

A concessional sales tax rate of 8.5% remained available until June 30, 2026, but expired after no extension was granted through the Finance Act, 2026. 

Following the expiry of the concession, hybrid vehicles were shifted to Schedule-II of SRO 297(I)/2023 for the imposition of the 25% sales tax.

The Finance Act increased the rate to 25%, which became applicable to imports and local supplies of hybrid vehicles from July 1.

The government has since reviewed the impact of the higher rate and is expected to lower it to 18% after completing the approval process.