Just days ago, Finance Minister Muhammad Aurangzeb took the floor in the National Assembly to unveil Pakistan’s Budget 2025-26. As expected, the announcement included a wave of new taxes, adjusted duties, and policy changes—many of which directly affect the automotive sector. Among the headline-grabbers was the proposed Green Tax on petrol and diesel vehicles and a rumored increase in General Sales Tax (GST) on hybrid electric vehicles (HEVs).
But shortly after the announcement, confusion started to spread.
What Was Announced?
During his budget speech, the Finance Minister explicitly stated that GST on HEVs would rise from 8.5% to 18%. That announcement sent ripples through the auto industry and potential car buyers alike.
However, when the official Finance Bill 2025 was released, the increase was nowhere to be found.
So What’s Actually in the Finance Bill?
After combing through the official Finance Bill 2025 and the Sales Tax Act 1990, here’s what we know for sure:
- Clause 72 (which previously allowed a 12.5% GST on locally assembled vehicles under 850cc) has been removed, meaning that segment will now fall under the standard 18% GST rate.
- Clause 73, which governs hybrid vehicles, remains unchanged. As per this clause:
- HEVs up to 1800cc are taxed at 8.5% GST
- HEVs between 1801cc and 2500cc are taxed at 12.75% GST
- These rates remain valid until June 30, 2026
What Does This Mean for Buyers?
Despite the Finance Minister’s remarks, the legally binding Finance Bill does not raise GST on hybrid vehicles. That means, for now, HEVs are safe from any immediate tax hikes.
That said, industry insiders believe this might be a trial balloon, and a GST increase could be introduced in next year’s 2026-27 budget. So if you’re considering buying a hybrid, it might be wise to act before June 2026, just in case changes do take effect then.
Final Thoughts
For now, hybrid vehicle buyers can breathe a sigh of relief. There’s no immediate increase in GST as part of Budget 2025-26—despite what was said during the speech. But the window of opportunity may not stay open for long. Stay informed, plan ahead, and as always, Pulse Pakistan will keep you updated on all the latest developments in the automotive and economic landscape.
