The federal government is contemplating the removal of sales tax exemptions on electric vehicles (EVs), hybrid cars, and solar panels in the forthcoming 2026–27 budget. This move comes as tax relief measures in these sectors undergo a thorough review.
There is a strong likelihood that a uniform 18 percent sales tax will be applied to both electric and hybrid vehicles, replacing the current reduced rates. Presently, electric vehicles benefit from a sales tax as low as 1 percent, while hybrid vehicles enjoy a concessionary rate of approximately 8 percent. The proposed change would align these with the standard tax regime.
In a significant development, the International Monetary Fund (IMF) has reportedly declined Pakistan’s request to continue the existing tax exemptions on EVs and hybrids. This decision could result in increased vehicle prices starting from the new fiscal year. Moreover, the government is expected to tighten tax concessions across various sectors as part of broader fiscal adjustments.
Solar panels and associated equipment are also likely to see their sales tax rise from the current 10 percent to 18 percent. This adjustment is part of the government’s efforts to rationalize tax exemptions in the upcoming budget.
Data indicates that approximately 45,000 vehicles were imported during the last fiscal year, with imports projected to decrease to around 40,000 units in the current year. Between July and April of fiscal year 2025–26, nearly 38,000 vehicles have already been imported.
Officials have noted that the government is reviewing all remaining tax exemptions and concessions, suggesting that further modifications could be included in the final budget proposal for 2026–27.
