Sales Tax hike likely on local hybrid vehicles from new FY

ISLAMABAD: The government is likely to enhance sales tax on the locally manufactured hybrid vehicles and motorbikes in the new fiscal year.

The International Monetary Fund (IMF) has demanded of Pakistan to remove the sales tax exemption on locally manufactured hybrid electric vehicles and motorbikes from July 1st in the new financial year, sources said.

The IMF has demanded to remove the tax relief and imposition of 18 per cent sales tax on the standard rate.

Hybrid vehicles produced locally benefit from tax exemptions under the Eighth Schedule of the Sales Tax Act. This tax relief on locally manufactured hybrid vehicles has been given up to June 30, 2026.

The IMF has urged removal of the exemption in discussions with the Ministry of Industries and Production.

As per existing rules, locally manufactured hybrid electric vehicles under 1800 cc are subject to a 8.5% sales tax, while vehicles ranging from 1801 cc to 2500 cc are taxed at 12.75 per cent.

The IMF has proposed that hybrid vehicles and bikes be removed from the Eighth Schedule and brought under the normal tax regime.

The move is expected to hike the prices of hybrid vehicles and motorbikes with an impact on consumers and the sales.