FBR Cuts Sales Tax on Locally Manufactured Hybrid Vehicles to 18%

The FBR has reduced sales tax from 25% to 18% on locally manufactured hybrid electric vehicles with engine capacity up to 2000cc effective September 13, 2026.

The Federal Board of Revenue (FBR) issued S.R.O. 1525(I)/2026 to reduce the sales tax on eligible hybrid vehicles

The notification amends the earlier S.R.O. 297(I)/2023 which was later amended through S.R.O. 370(I)/2024. The new amendment excludes locally manufactured hybrid electric vehicles with engine capacity up to 2000cc from the higher sales tax rate under Table-II.

The change reduces the applicable sales tax by 7 percentage points.

Why Hybrid Vehicle Tax Was Increased

Hybrid vehicles previously received a concessional sales tax rate of 8.5%. The concession later expired.

The vehicles then moved under the applicable provisions of S.R.O. 297(I)/2023. This resulted in a 25% sales tax.

The latest decision brings the rate down to 18% for locally manufactured hybrid vehicles with engine capacity up to 2000cc.

The decision comes as Pakistan works on its Auto Policy 2026-31. The draft policy proposes equal duty and tax treatment for hybrid electric vehicles and conventional internal combustion engine vehicles.

The policy also proposes higher tax incentives for Battery Electric Vehicles (BEVs). This places fully electric vehicles in a more favorable tax position than hybrids.

The new FBR rate applies specifically to locally manufactured hybrid electric vehicles up to 2000cc. Imported hybrids and vehicles outside these criteria remain subject to their applicable tax and duty structure.