The Pakistani government has decided to withdraw the proposed increase in sales tax on entry-level and hybrid vehicles following strong opposition from the Senate Standing Committee on Finance and Revenue during Budget 2025 discussions.
The Finance Bill had recommended raising GST on various cars, including a proposal to hike sales tax on hybrid vehicles up to 1800cc from 12.5% to 18%. The plan sparked backlash from lawmakers, environmental groups, and consumers.
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Senators voiced concerns over the 18% tax on affordable cars like the Alto, suggesting that if an increase was necessary, it should be capped at 14-15%.
Lawmakers also criticized the move as unfair, noting that while certain sectors were receiving tax breaks, middle-class buyers of small cars were being disproportionately affected.
Facing unified resistance, the government reversed its stance, confirming that sales tax on small and hybrid vehicles will remain unchanged. This decision is also in line with Pakistan’s current auto policy, which prohibits any tax hikes on hybrid vehicles before June 2026
