FBR Finally Cuts Sales Tax on Locally Manufactured Hybrid Vehicles

For context, the Federal Board of Revenue (FBR) has reduced sales tax from 25 to 18 percent on locally manufactured hybrid electric vehicles with engine capacity up to 2000cc.

Key points

• How to Obtain Discounted Petrol for Bikes, Rickshaws, Qingis and Cars Sep 13, 2026 9: 26 pm.
• Pakistan's New Auto Policy Approval Tied to IMF Consultations Sep 14, 2026 9: 59 am.
• As previously amended vide Notification No, 297(I)/2023, dated March 8, 2023.
• Quaid-e-Azam Lookalike Injured in Road Accident Sep 13, 2026 5: 49 pm.
• After the expiry of the exemption, hybrid vehicles were shifted to Schedule II of SRO 297(I)/2023, making them subject to the standard 25 percent sales tax.

In practice, the reduced rate of sales tax will be applicable from September 13, 2026. In this regard, the FBR issued a notification on Monday.

Notably, the notification, S.R.O. 1525(I)/2026, was issued under the powers conferred by clause (b) of sub-section (2) of section 3 of the Sales Tax Act, 1990, read with the first proviso to clause (a) of the remarked sub-section. It amends the FBR's earlier Notification No. S.R.O. As previously amended vide Notification No, 297(I)/2023, dated March 8, 2023. S.R.O. 370(I)/2024, dated March 8, 2024.

Under the amendment, a new proviso has been continued after Table-II of the earlier notification, stating that the provisions of Table-II "shall not apply to locally manufactured hybrid electric vehicles with engine capacity up to 2000 cc." The notification came into force with immediate effect.

According to It is to be, the higher rate replaced the previous concessional regime under which hybrid vehicles were subject to a reduced sales tax of 8.5 percent. After the expiry of the exemption, hybrid vehicles were shifted to Schedule II of SRO 297(I)/2023, making them subject to the standard 25 percent sales tax.

Meanwhile, the reduction in sales tax on hybrids is projected to lower costs for locally assembled hybrid models and could bring their tax treatment closer in line with the government's push toward New Energy Vehicles (NEVs), even as authorities continue to finalize the auto policy against the backdrop of ongoing consultations with the International Monetary Fund.

While offering substantially higher tax relief to Battery Electric Vehicles (BEVs) compared with hybrids, pakistan's new five-year Auto Policy (2026-31) draft, lately approved by Prime Minister Shehbaz Sharif, had already directed that hybrid electric vehicles and conventional Internal Combustion Engine (ICE) vehicles be treated equally in terms of duties and taxes. Stay Connected with ProPakistani.

Obtain the latest automobile news, car launches, bike reviews, videos and analysis wherever you prefer. Follow on Google Discover.

Add as a preferredSource on Google Follow on Google News Join WhatsApp.

Add ProPakistani to Preferred Sources and see more of our stories in Google Search and Top Stories.

For now, FBR Finally Cuts Sales Tax on Locally Manufactured Hybrid Vehicles remains the part of the story worth watching, and further updates are likely as more details are confirmed.