Business Desk 
Jun 13, 2025
The recent rollout of the budget for the next fiscal year 2025-26 seems to have caused a frenzy across sectors by introducing huge taxes, and it now appears that the by-far booming automotive sector is not immune to the brunt of levies, as the federal government has introduced a new tax on petrol and diesel vehicles.
No matter if they're manufactured locally or imported, these vehicle-centric levies are applied to all internal combustion engine (ICE) vehicles.
The Finance Bill 2025-26 outlined that a fixed levy will be imposed on ICE vehicles based on engine capacity, which will be calculated as a percentage of the vehicle’s total price.
Although these levies will initially be collected from manufacturers and importers, they're expected to eventually be passed on to consumers.
Budget 2025-26: Taxes on 1300cc, 1800cc vehicles and above
The government has classified the levies as follows:
- Tax on vehicles below 1300cc: 1% levy
- Tax on 1300cc to 1800cc vehicles: 2% levy
- Tax on vechicles above 1800cc: 3% levy
It's worth noting that a uniform 1% levy will be applied on vehicles of all engine sizes, something which has stirred a wave of worries about price upticks for car buyers.
Given the auto sector's existing woes around high production costs and restricted imports, experts warned that the absolute cost for mid- to high-end vehicles, after adding these modest-looking levies, will become even more difficult for consumers to afford.
