Islamabad: The federal government has opted against its earlier plan to increase the sales tax on hybrid vehicles with engine capacities up to 1800cc. This decision follows a review by the National Assembly Standing Committee on Finance.

Initially, the government had aimed to raise the sales tax on these hybrid cars from 12.5 percent to 18 percent, a move projected to generate an additional Rupees. 7 billion in revenue. However, this proposal has now been withdrawn, and the current reduced rate of 12.5 percent will remain unchanged.

This marks the second instance within the current fiscal year that a proposed sales tax increase on hybrid vehicles has been put forward and subsequently pulled back. This aligns with the existing automobile policy, which specifically prohibits any tax increases on hybrid cars until June 2026.

While the government has decided against heavier taxation for hybrid vehicles, its proposal to increase the sales tax on small cars (up to 850cc) from 12.5 percent to 18 percent remains on the table as part of ongoing budget discussions. This selective adjustment in policy highlights a continued push for eco-friendly vehicle options while simultaneously exploring increased revenue opportunities from the lower-end car market.