Hybrid Car Prices in Pakistan May Fall as Government Plans to Reduce Sales Tax from 25% to 18%

Hybrid car prices in Pakistan could witness a significant reduction as the federal government is considering lowering the sales tax on hybrid vehicles from 25% to 18%. The proposed tax cut expected to make hybrid vehicles more affordable for buyers while supporting the government’s goal of promoting fuel-efficient and environmentally friendly transportation.

The Ministry of Finance has sent a formal summary recommending to cut the sales tax on both imported and locally made hybrid cars, sources said. The proposal is under consideration and the final verdict is likely to made following approval from the federal cabinet.

This lower tax rate was once in effect until 30 June 2026 but ended due to the lack of extension in the Finance Act 2026. It ultimately resulted in the imposition of a sales taxation rate of 25% from 1st July 2026 which caused the prices of Hybrid vehicles in Pakistan to skyrocket.

Previously, the sales tax for hybrid vehicles increased from 8.5% to 25% in the Finance Act 2026, which criticized by consumers and the automotive industry. The government is now considering lowering the policy to 18% amid fears of inflation and failure to meet demand.

The tax cut, once approved, may bring down the cost of hybrid cars in Pakistan by several hundred thousand rupees, contingent on the car’s model and engine classification. The proposed relief hoped to push more consumers toward hybrid technology and contribute towards decreasing fuel consumption and carbon emissions in Pakistan.

Following the expiration of the prevailing tax break on 1 July, car sales tax for hybrid vehicles will continue at a rate of 25%. However, the tax exemption has ended as of June and hybrid vehicles transferred to the Schedule II of SRO 297(I)/2023, where they subjected to the higher tax rate.

Experts feel that a reduction in the sales tax will help to reignite demand in the hybrid car market in Pakistan and give much needed respite to the car buyers who have impacted by the surge in automobile prices.