Govt to Increase Sales Tax on Small Cars

The prices of locally manufactured or assembled cars with an engine capacity of up to 850cc will increase from July 1, 2025. The government has agreed in principle to raise the sales tax rate from 12.5 percent to 15-18 percent in the upcoming budget. Presently, a lower rate of 12.5 percent sales tax is applicable on locally manufactured or assembled motorcars of cylinder capacity upto 850cc. Under the proposed Finance Bill 2025-26, the FBR is expected to delete entry number 72 of the Eighth Schedule of the Sales Tax Act 1990 to end the concessionary sales tax regime on the locally manufactured or assembled motorcars.