Govt cuts HEV sales tax from 25% to 18%

Business Recorder reported that the government has reduced sales tax on domestically assembled hybrid electric vehicles with engine capacity up to 2000cc, bringing the rate from 25% down to 18%. The change was introduced through S.R.O. 1525(1)/2026, dated September 13, 2026, which amends the earlier sales tax notification S.R.O. 297(1)/2023. The Finance Division's amendment added a proviso to the notification, and it took effect immediately.

Business Recorder's research head Ali Khizar confirmed the move in a social media post, noting the rate had been 8-12% before the budget and then 25%. He said the rate now stands at 18%. Hybrids had enjoyed a concessional 8.5% levy before June 13, 2025, and once the lower regime lapsed, certain segments moved to 25%.

A draft auto policy for 2026-31, prepared by an inter-ministerial committee on September 9, 2026, proposes a 1% sales tax on NEVs and would align hybrids with conventional cars. The draft also treats battery electric, range extended and plug-in hybrid vehicles equally under the New Energy Vehicles Policy.