The federal government has decided to keep existing tax relief for small cars and locally assembled hybrid and electric vehicles in the budget for fiscal year 2026-27, according to reports today. However, higher taxes have been proposed on expensive imported vehicles and luxury electric cars.
Finance Minister Muhammad Aurangzeb announced that the government plans to increase Federal Excise Duty on imported vehicles with engine capacities above 2,000cc.
Under the proposal, the duty on vehicles with engines between 2,000cc and 3,000cc will increase from 30 per cent to 70 per cent. For vehicles with engines above 3,000cc, the rate is proposed to rise from 40 per cent to 81 per cent.
Which cars are expected to get expensive in Pakistan
If it gets approved, the move is expected to increase the prices of imported large vehicles such as Toyota Fortuner, Toyota Hilux, Toyota Land Cruiser Prado, Toyota Land Cruiser, Kia Sorento, Hyundai Palisade and Isuzu D-Max.
The budget also states that no new tax will be imposed on electric vehicles priced below Rs20 million. The government says this step is aimed at continuing support for environmentally friendly transport.
However, a 30 per cent duty has been proposed on luxury electric vehicles priced between Rs20 million and Rs30 million. This could lead to higher prices for vehicles such as Audi e-tron, Zeekr, Kia EV5 and BMW iX.
The finance minister also said that the concessional tax regime for electric motorcycles, rickshaws, cars and buses will continue next year. A proposal to maintain the one per cent sales tax on imported electric trucks is also under consideration.
Government officials said the new taxes will apply only to vehicles imported in the future. Vehicles that have already been imported will not be affected by the proposed changes.
The finance minister further revealed that a new automotive policy is being reviewed by a committee formed by the Prime Minister.
After approval, the policy will be presented to the cabinet and then parliament. More decisions regarding the future of the auto sector are expected after the policy is finalised.
