Govt exempts locally made hybrid vehicles up to 2000cc from 25% sales tax

September 14, 2026 (MLN): The Federal Government has exempted locally manufactured or assembled hybrid electric vehicles with engine capacity up to 2000cc from the 25% sales tax levied on the supply of locally manufactured vehicles which brings it  to the standard sales tax rate of 18%, through a notification issued by the Finance Division.

The Ministry of Finance and Revenue, through SRO 1525(I)/2026 dated September 13, 2026, amended SRO 297(I)/2023 (as previously amended by SRO 370(I)/2024) by inserting a new proviso after Table-II, stating that the provisions of Table-II shall not apply to locally manufactured hybrid electric vehicles with engine capacity up to 2000cc.

The notification, issued under clause (b) of sub-section (2) of Section 3 of the Sales Tax Act, 1990, read with the first proviso to clause (a) of the said sub-section, comes into force with immediate effect.

The original SRO 297(I)/2023, issued on March 8, 2023, had fixed sales tax at 25 percent on the value of both imported goods (Table-I) and the supply of locally manufactured goods (Table-II).

Table-II at the time covered locally manufactured or assembled SUVs and CUVs, vehicles with engine capacity of 1,400cc and above, and double cabin (4x4) pick-up vehicles, all falling under PCT headings 87.03 and 87.04.

The scope of Table-II was subsequently revised through SRO 370(I)/2024, dated March 8, 2024, which replaced the earlier three-category structure with locally manufactured or assembled vehicles having engine capacity of 1,400cc and above, locally manufactured or assembled vehicles with an invoice price (excluding sales tax) exceeding Rs4mn, and locally manufactured or assembled double cabin (4x4) pick-up vehicles.

With the latest amendment, locally manufactured hybrid vehicles up to 2000cc will now fall outside the 25 percent sales tax net under Table-II, irrespective of whether they would otherwise have been captured under the engine-capacity or invoice-price criteria introduced in 2024.

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