Urdu Report Desk
The federal government has reduced the sales tax on locally manufactured hybrid electric vehicles with engine capacities of up to 2000cc from 25% to 18%.
According to a notification issued by the Ministry of Finance, the revised tax rate took effect on September 13, 2026.
New Tax Rate Announced
The Federal Board of Revenue (FBR) reduced the tax rate under powers granted by the Sales Tax Act, 1990.
The Ministry of Finance issued Notification No. S.R.O. 1525(I)/2026, amending the FBR’s earlier Notification No. S.R.O. 297(I)/2023, issued on March 8, 2023. The earlier notification was subsequently amended through Notification No. S.R.O. 370(I)/2024 on March 8, 2024.
Under the latest notification, the provisions of Table-II of the earlier notification will not apply to locally manufactured hybrid electric vehicles with engine capacities of up to 2000cc.
Background to the Tax Reduction
Hybrid vehicles were previously subject to a concessional sales tax rate of 8.5%. However, after the concession expired, they were included in Table-II of S.R.O. 297(I)/2023, resulting in the imposition of a 25% sales tax.
Following the latest decision, the sales tax rate on locally manufactured hybrid vehicles has been reduced to 18%.
Potential Impact on Vehicle Prices
The reduction in sales tax is expected to lower the prices of locally manufactured hybrid vehicles.
The move may also help bring the tax treatment of hybrid vehicles closer to the government’s emerging policy for new-energy vehicles.
The draft Auto Policy 2026–31 calls for hybrid electric vehicles and conventional internal combustion engine vehicles to be treated equally in terms of duties and taxes. At the same time, it proposes greater tax incentives for battery electric vehicles compared with hybrid vehicles.
