ISLAMABAD: The federal government has reduced the sales tax on locally manufactured hybrid electric vehicles (HEVs) with engine capacities of up to 2,000cc, providing tax relief for domestically assembled hybrid cars.
Under the revised tax regime, the sales tax rate for locally assembled hybrid electric vehicles of up to 2,000cc has been reduced from 25% to 18%.
The change is expected to lower the tax burden associated with eligible hybrid vehicles and could support demand for fuel-efficient cars in the local market.
According to sources, the government introduced the change through amendments to the existing sales tax framework governing locally produced hybrid electric vehicles.
A notification issued by the Ministry of Finance states that amendments have been made to SRO 297(I)/2023, issued on March 8, 2023, and SRO 370(I)/2024, issued on March 8, 2024. The latest amendment adds a new provision to SRO 370(I)/2024 concerning the applicable sales tax rate.
The revised rate specifically covers locally manufactured hybrid electric vehicles with engine capacities of up to 2,000cc. Vehicles falling within this category will now be subject to an 18% sales tax instead of the previous 25%.
The tax reduction could make eligible locally assembled hybrid vehicles more affordable for consumers, although the actual impact on retail prices will depend on manufacturers and other applicable taxes and charges.
Hybrid electric vehicles combine a conventional internal combustion engine with an electric motor. Their ability to use both power sources can result in improved fuel efficiency compared with conventional petrol-powered vehicles.
The decision comes amid broader efforts to support the domestic automobile industry and encourage the production and adoption of more fuel-efficient vehicle technologies.
Automotive industry stakeholders are expected to assess the impact of the revised sales tax rate on vehicle prices, production and consumer demand in the coming weeks.
