Massive GST Hike on Hybrid Vehicles in Pakistan’s 2025–26 Budget: Prices Set to Soar

In a controversial move under the proposed 2025–26 federal budget, the Government of Pakistan is set to remove existing tax incentives for hybrid vehicles by increasing the General Sales Tax (GST) from 8.5% to a flat 18% across all vehicle types—petrol, diesel, and hybrid. This proposal, aimed at simplifying the taxation structure and increasing revenue, has sparked immediate concern among automobile manufacturers, environmental advocates, and potential car buyers.

Hybrid Vehicles to Bear the Brunt

Until now, hybrid vehicles were subject to a reduced GST of 8.5% to promote fuel efficiency and eco-friendly alternatives. The removal of this concession will significantly raise the cost of ownership, making hybrid vehicles almost as expensive as their petrol or diesel counterparts.

Here’s a snapshot of expected price increases if the proposal is passed:

Industry Reactions and Environmental Concerns

Experts argue that the tax hike contradicts global trends where countries are incentivizing low-emission vehicles. The increased cost may deter consumers from purchasing hybrids, effectively slowing Pakistan’s shift toward cleaner transportation and worsening the nation’s already severe air pollution levels.

Automotive sector stakeholders, including dealers and manufacturers, are urging the government to reconsider, warning of a potential slump in hybrid sales that could hurt both the economy and environmental targets.

Broader Tax Reform Context

This GST revision is part of a larger fiscal reform agenda aimed at standardizing tax rates, boosting revenue, and meeting commitments to international lenders like the IMF. However, critics argue that blanket tax policies can have unintended socio-environmental consequences, especially in developing markets like Pakistan.

Disclaimer:
This article is based on currently proposed tax reforms and may be subject to change upon parliamentary approval. For the most accurate and personalized financial decisions, consult a tax advisor or automotive expert.

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.