Sales tax cut on locally made hybrid cars Up to 2,000cc

Sales tax cut on locally made hybrid cars Up to 2,000cc

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 a tax relief for buyers of domestically produced hybrid cars.

Under the revised tax regime, the sales tax rate on locally assembled hybrid electric vehicles of up to 2,000cc has been brought down to 18% from the previous 25%. The reduction lowers the tax burden on manufacturers as well as consumers and is expected to support demand for hybrid vehicles in the local market.

Sources said the government introduced the change through amendments to the existing sales tax framework governing locally produced hybrid electric vehicles. The move forms part of broader adjustments to taxation policies affecting the automotive sector.

According to a notification issued by the Ministry of Finance, the government has amended 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 to revise the applicable sales tax rate.

The revised rate specifically applies to locally manufactured hybrid electric vehicles with engine capacities of up to 2,000cc. Vehicles falling within this category will now face an 18% sales tax instead of 25%.

The reduction could help make locally assembled hybrid vehicles more affordable and may encourage consumers to shift towards fuel-efficient vehicles. Hybrid cars combine an internal combustion engine with an electric motor, generally offering better fuel economy than conventional petrol-powered vehicles.

The decision also comes as the government seeks to encourage investment and production in the domestic automobile industry while promoting more efficient vehicle technologies. Industry stakeholders are expected to assess the impact of the tax cut on vehicle prices and market demand in the coming weeks.