Budget 2025–26: No GST Hike on Hybrid Cars

In the wake of the federal Budget 2025–26, the automotive industry was hit with a wave of confusion when Finance Minister Muhammad Aurangzeb’s budget speech appeared to suggest a General Sales Tax (GST) hike on hybrid electric vehicles (HEVs) — from the current 8.5% to a hefty 18%. The announcement sparked concern among consumers and stakeholders, casting uncertainty over hybrid car pricing.

However, a thorough examination of the official Finance Bill 2025–26 brings clarity — and relief — to the market. Contrary to what was implied in the speech, no such GST increase has been proposed for HEVs in the legal documentation governing fiscal policy.

Hybrid GST Rates Remain Unchanged

According to Clause 73 of the Sales Tax Act, 1990, the GST structure for hybrid vehicles remains unchanged and valid until 30th June 2026:

• Up to 1800cc: 8.5% GST
• 1801cc to 2500cc: 12.75% GST

This clarification provides a much-needed boost for hybrid vehicle buyers, who feared steep price hikes. Industry analysts now speculate that the mention of a GST increase may have been a forward-looking remark, possibly hinting at a revision in the 2026–27 fiscal cycle.

What Has Changed?

While hybrids have retained their tax advantage, the government has eliminated Clause 72, which previously allowed a reduced 12.5% GST rate on locally assembled vehicles under 850cc. These now fall under the standard 18% GST category — adding a layer of confusion to the auto tax narrative.

Strategic Timing for Hybrid Buyers

If you’re considering purchasing a hybrid car in Pakistan, now may be the ideal time. With no tax hike in the current fiscal year and growing speculation about changes next year, buying before June 2026 could help you lock in current tax savings.

While Budget 2025–26 initially raised alarms with talk of increased taxes on hybrid cars, the official documents provide clarity: GST on HEVs remains unchanged for now. However, given the dynamic nature of fiscal planning, potential buyers should remain alert to developments ahead of the 2026–27 budget cycle.

Disclaimer:
This article is for informational purposes only. While based on the official Finance Bill 2025–26, future tax policy may change. Readers are advised to consult with tax professionals or the Federal Board of Revenue (FBR) for the most current and personalized guidance.

Afsheen Gohar

Afsheen Gohar is a seasoned writer with a wealth of experience in crafting authentic and well-researched articles. Her dedication to delivering high-quality content is evident in her work, where she combines a passion for storytelling with a commitment to accuracy and depth. Afsheen’s writing reflects her ability to engage readers with compelling narratives while providing valuable insights on a diverse range of topics.