Small Car Prices in Pakistan Set to Increase After Budget

ISLAMABAD: Small car prices in Pakistan for locally manufactured or assembled vehicles up to 850cc engine capacity are expected to rise following the announcement of the federal budget for 2025-26.

Small car prices in Pakistan are likely to climb as the government plans to raise the sales tax rate from the current 12.5 percent to between 15 and 18 percent. This revised tax rate will apply specifically to locally assembled or manufactured vehicles with engine capacities up to 850cc.

At present, a concessional 12.5 percent sales tax is applied to this segment. However, the upcoming Finance Bill 2025-26 proposes removing this relief, which could significantly raise the prices of entry-level cars.

FBR Plans to End Concession

According to reports, the Federal Board of Revenue (FBR) intends to delete entry number 72 of the Eighth Schedule of the Sales Tax Act, 1990. This move will formally end the reduced tax regime for smaller vehicles.

Popular models such as the Suzuki Alto, known for their affordability, are expected to be directly affected by this policy shift.

Small car prices in Pakistan have already been impacted by inflation, production challenges, and currency fluctuations. The proposed tax increase is likely to place additional financial pressure on consumers, especially those in lower- and middle-income groups.

While the government aims to boost revenue through this measure, industry experts warn that higher prices could lead to reduced demand in the small car market.