Islamabad: The federal government has proposed imposing a uniform 18% sales tax on small vehicles up to 850cc as part of its 2025-26 budget, marking a significant change in the country’s auto taxation regime. Previously exempt or taxed at lower rates, petrol, diesel, and hybrid vehicles in this category will now be subject to the standard sales tax rate.
Finance Minister Muhammad Aurangzeb, while unveiling the Rs17.573 trillion federal budget on Tuesday, said the step aims to bring parity in taxation across various vehicle types and curb distortions in the auto market.
Additionally, the government announced a new carbon levy of Rs2.5 per litre on petrol, high-speed diesel, and furnace oil to discourage fossil fuel usage. The levy is expected to double to Rs5 per litre in FY2026-27, which may affect fuel prices and, indirectly, vehicle operating costs.
To promote local manufacturing, an 18% sales tax has also been levied on imported solar panels, which could impact electric vehicle (EV) infrastructure in the long run by making off-grid charging more expensive unless local production scales up.
These tax measures are part of broader efforts to expand the tax net and boost revenues, but industry experts warn they may put further pressure on vehicle affordability for middle- and lower-income groups in Pakistan.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
