Govt Reverses Proposed Sales Tax Hike on Hybrid Cars

The federal government has decided not to go ahead with its earlier proposal to increase the sales tax on hybrid vehicles with engine capacities of up to 1800cc. The decision came after a review by the National Assembly Standing Committee on Finance.

Initially, the government had planned to raise the sales tax on these vehicles from 12.5 percent to 18 percent. It is a move that was expected to generate Rs. 7 billion in additional revenue. However, this proposal has now been scrapped, and the existing reduced rate of 12.5 percent will continue.

This is the second time this fiscal year that a sales tax hike on hybrid vehicles was proposed and then withdrawn. The move follows the current automobile policy. It prevents any tax increase on hybrid cars until June 2026.

The government has backed off from taxing hybrid vehicles more heavily. However, it has not reversed its plan to raise the sales tax on small cars (up to 850cc) from 12.5 percent to 18 percent. That proposal remains intact as part of the budget discussions.

This selective policy adjustment shows a continued focus on promoting environmentally friendly vehicle options. It also reflects an effort to explore higher revenue streams from the lower-end car segment.