ISLAMABAD: The Federal Board of Revenue (FBR) has reduced the sales tax on locally manufactured hybrid electric vehicles with engine capacity of up to 2,000cc from 25% to 18%.
The reduced sales tax rate took effect on September 13, 2026, following a notification issued by the Ministry of Finance under S.R.O. 1525(I)/2026.
The notification amends the earlier sales tax framework and states that the provisions imposing the 25% rate will not apply to locally manufactured hybrid electric vehicles with engine capacity up to 2,000cc.
The decision comes after the expiry of a previous concessional regime under which hybrid vehicles were subject to an 8.5% sales tax. Following the end of that concession, the vehicles were shifted to a higher 25% sales tax rate.
The latest reduction is expected to ease the tax burden on locally assembled hybrid vehicles and could help reduce their prices. The move also comes as the government works on its broader New Energy Vehicle (NEV) strategy and finalizes the Auto Policy 2026-31.
Under the draft five-year auto policy, hybrid electric vehicles and conventional internal combustion engine vehicles are to receive similar treatment in terms of duties and taxes, while battery electric vehicles are expected to receive greater tax incentives.
