Business Desk 
Jun 18, 2025
An undated image. — Depositphotos
As a frenzy was caused in the automotive landscape by the proposal in the budget 2025-26 to increase taxes on hybrid vehicles of up to 1800cc engine capacity, the government has withdrawn the tax increment applied to all hybrid vehicles powered by a variety of internal combustion engines (ICEs).
It's worth noting that these taxes were meant for nearly all ICE vehicles with varied engine sizes. Had these taxes come into effect, the government would have raised an additional Rs7 billion in revenue.
As part of the original budget for the fiscal year 2025-26, an uptick between 12.5% and 18% in the sales tax rate was proposed on the aforementioned hybrid vehicles, ProPakistani reported.
While the massive hike has been dismissed after a thorough review by the National Assembly Standing Committee on Finance, the curtailed 12.5% sales tax rate will remain intact.
It's worth mentioning that for the second time this year, the government has withdrawn a proposed sales tax increase on hybrid vehicles before budget approval.
As of now, tax rates on hybrid vehicles cannot be raised until June 2026, however, the proposal to raise the sales tax on small cars of up to 850cc from 12.5% to 18% remains.
