Hybrid cars face new tax in Pakistan

Pakistan has imposed a 25 percent sales tax on the import and local supply of hybrid cars, which came into effect on 1 July 2026, following a previous tax exemption that expired at the end of the 2025-26 fiscal year.

Officials said the exemption expired on 30 June 2026, after which hybrid cars were shifted to Schedule II of SRO 297(I)/2023, making them subject to the higher sales tax rate.

The move follows the expiry of a series of tax concessions for the electric vehicle (EV) sector, including exemptions on the import of completely knocked down (CKD) kits by local electric vehicle manufacturers.

The concession had covered small cars and sport utility vehicles with battery capacities of up to 50 kilowatt-hours, as well as light commercial vehicles with batteries of up to 150 kilowatt-hours.

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Until June 30, locally manufactured or assembled four-wheel EVs in these categories were subject to a reduced sales tax rate of 1 percent.

Earlier, government sources had indicated that several EV-related tax concessions would expire at the start of the new fiscal year 2026-27.

At the time, they had also said that locally manufactured hybrid cars were expected to retain their existing concessional tax treatment, while taxation on imported EVs would increase.

The final tax measures were incorporated into the Finance Bill for 2026-27 and took effect from 1 July 2026.