Govt Takes U-Turn From Imposing Higher Sales Tax on Hybrid Cars

The federal government has withdrawn a proposal to increase sales tax on hybrid cars with engine capacities of up to 1800cc. If this measure had been adopted, authorities would have generated Rs. 7 billion in additional revenue. Under the original budget proposal, the sales tax rate on these hybrid vehicles was to be raised from 12.5 percent to 18 percent. However, following review by the National Assembly Standing Committee on Finance, the increase has been canceled. The reduced 12.5 percent rate will remain in effect. This marks the second time in a year that a planned sales tax hike on hybrid vehicles has been withdrawn prior to formal budget approval. Under the current automobile policy, tax rates on hybrid cars cannot be raised until June 2026. However, the government has not withdrawn its proposal to increase the sales tax on small cars (up to 850cc) from 12.5 percent to 18 percent.