The federal government is reviewing a proposal to reduce the sales tax on hybrid electric vehicles (HEVs) from 25 percent to 18 percent, according to sources.
Officials said a summary recommending the tax cut has been forwarded to the Finance Division for review. If approved, the proposal will be presented to the federal cabinet for final approval before it can be implemented.
The previous tax concession for hybrid vehicles remained in place until June 30, 2026, but expired after the government chose not to extend it through the Finance Act 2026.
Before the concession ended, hybrid vehicles benefited from a significantly lower 8.5 percent sales tax. However, after the exemption lapsed, HEVs were placed under Schedule II of SRO 297(I)/2023, making them subject to the standard 25 percent sales tax.
Sources said the government has reassessed the impact of the higher tax on Pakistan’s hybrid vehicle market. Officials believe the increase affected consumer demand, prompting discussions on restoring a reduced tax rate.
The proposed 18 percent sales tax is intended to encourage buyers to choose hybrid vehicles while supporting the country’s gradual transition toward cleaner and more fuel-efficient transportation. If approved, the move is expected to provide relief to consumers and help promote the adoption of hybrid and electric vehicles across Pakistan.
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