The federal government has proposed new taxation measures on imported vehicles, large-engine SUVs, and luxury electric vehicles (EVs) in the Federal Budget 2026-27, a move that could significantly increase prices for premium vehicle buyers from next month.
According to the budget proposals, a Federal Excise Duty (FED) will be imposed on imported vehicles as well as sport utility vehicles (SUVs) with engine capacities exceeding 2,000cc and up to 3,000cc. The government has also proposed higher duties on vehicles with engine capacities above 3,000cc, targeting the luxury automobile segment.
The new tax measures will also apply to electric vehicles valued above Rs. 20 million, bringing high-end EVs under the taxation framework. Officials said the objective is to ensure a fairer distribution of the tax burden while preventing luxury consumers from benefiting disproportionately from incentives designed to promote green transportation.
Despite the proposed taxes on premium vehicles, the government has decided to continue support for electric mobility. The existing concessional tax regime for electric motorcycles, rickshaws, cars, and buses will remain in place for another year, providing continued incentives for affordable and environmentally friendly transport options.
In addition, the budget proposes extending the 1 percent sales tax concession on imported electric trucks, reflecting the government’s intention to encourage the adoption of electric commercial vehicles and support sustainable transport solutions.
The government emphasized that the revised policy aims to strike a balance between promoting electric mobility and ensuring that tax incentives primarily benefit mass-market consumers rather than buyers of ultra-luxury vehicles.
The proposed measures are expected to affect the pricing of imported luxury cars, high-capacity SUVs, and premium electric vehicles if approved by Parliament as part of the Finance Bill 2026-27.
