The federal government has officially imposed a 25% sales tax on both imported and locally supplied hybrid vehicles. This major policy shift took effect exactly a week ago on July 1, 2026. The new tax follows the expiration of the previous sales tax exemption, which ended alongside the 2025-26 fiscal year on June 30.
This change marks a significant turning point for Pakistan’s growing electrified vehicle market.
The Legal Shift & Hybrid Vehicles Policy Reversal
The government enacted this tax under the Finance Act 2026-27. To execute the measure, authorities formally shifted hybrid vehicles into Schedule II of SRO 297(I)/2023. This move places them squarely under the higher tax regime.
Interestingly, this final ruling contradicts earlier government indications. Previously, officials suggested that locally manufactured hybrids might retain their tax breaks while imported vehicles faced higher taxes. Instead, the final bill targets both local and imported units equally.
EV Sector Loses Major Relief
Hybrid cars are not the only vehicles taking a hit. The start of the 2026-27 fiscal year also eliminated several crucial tax incentives for the broader electric vehicle (EV) sector.
First, the government withdrew the tax exemptions on imported Completely Knocked Down (CKD) kits used by local EV manufacturers. Second, the era of the 1% sales tax has completely ended. Until June 30, locally assembled four-wheel EVs enjoyed a massive tax reduction.
That expired 1% sales tax relief previously covered specific categories:
| Vehicle Category | Battery Capacity Limit |
| Small EVs and Electric SUVs | Up to 50 kWh |
| Light Commercial EVs | Up to 150 kWh |
Imminent Market Impact
This decision will directly impact vehicle pricing across the country. Consumers will soon see higher showroom prices as manufacturers and importers pass the heavy 25% tax burden down the supply chain.
Consequently, the cost of vehicle ownership will rise. Recently, hybrid vehicles gained immense popularity in Pakistan. Buyers wanted better fuel efficiency but did not want to rely on the country’s limited charging infrastructure.
Now, this new tax drastically shrinks the price gap between hybrids and standard petrol vehicles. Ultimately, this sudden loss of affordability will likely slow down hybrid vehicle adoption and force consumers to rethink their purchasing decisions.
