ISLAMABAD (Kashmir English): The federal government has reduced the sales tax on locally manufactured hybrid electric vehicles (HEVs) with engine capacities of up to 2,000cc.
According to a notification issued by the Ministry of Finance and Revenue, the sales tax on eligible locally assembled hybrid vehicles has been reduced from 25% to 18%, marking a seven-percentage-point cut effective immediately.
The move is expected to reduce the cost of locally manufactured hybrid vehicles and encourage consumers to opt for more fuel-efficient cars. However, the actual impact on retail prices will depend on how manufacturers pass the tax savings on to buyers.
The decision is part of the government’s broader efforts to promote new-energy vehicles and revise the country’s automotive taxation and duty structure.
Proposed Hybrid Vehicle Tax Cuts
The government is also considering further reductions in duties and taxes on hybrid vehicles under the proposed Auto Policy 2026–31. The draft policy has reportedly been sent to Prime Minister Shehbaz Sharif for approval.
| Hybrid Vehicle Category | Existing Duty | Proposed Duty |
|---|---|---|
| Above 1,801cc | 50% | 30% |
| 1,501cc–1,800cc | 50% | 30% |
| 851cc–1,000cc | 50% | 30% |
| Up to 800cc | 50% | 30% |
The proposed policy also includes a phased reduction in import duties on hybrid vehicles over five years. For hybrid vehicles with engine capacities above 1,800cc, import taxes could be reduced by 20% during the policy period.
If approved, the Auto Policy 2026–31 will remain in effect for five years, from 2026 to 2031.
The proposed tax and duty reductions could benefit consumers and local automakers, while further details on revised vehicle prices are expected once manufacturers announce their updated rates.
