The federal government has effectively increased the overall indirect tax burden on imported hybrid vehicles to 25 percent after allowing a key sales tax concession to expire under the Finance Act for FY2026-27.

Industry sources told ProPakistani that the reduced 1-2 percent sales tax available on hybrid vehicles under the previous fiscal year’s sunset clause has not been extended beyond June 30, 2026. Although there had been expectations ahead of the budget that the concession would continue, the final Finance Act contains no such provision.

With the withdrawal of the reduced sales tax and the imposition of the applicable Federal Excise Duty (FED) on imported vehicles, the cumulative indirect tax incidence on imported hybrid cars now stands at 25 percent, according to sources familiar with the matter.

The higher tax burden is expected to increase the cost of imported hybrid vehicles, reducing one of the key incentives that had encouraged consumers to opt for fuel-efficient alternatives to conventional petrol-powered cars.

The move forms part of the government’s broader revenue measures under the new fiscal year’s budget, which include the withdrawal of several tax concessions and the introduction of additional indirect taxes across multiple sectors.