For those who wanted to purchase a hybrid vehicle in Pakistan, the prices have skyrocketed. The sales tax exemption on hybrid vehicles, which was part of the Automotive Industry Development and Export Policy 2021-26, ceased to be applicable from June 30, 2026. There was no extension made. No replacement policy has been put in place as of yet. From July 1, 2026, hybrid vehicles, both locally assembled and imported, are now subject to Pakistan’s standard 25% sales tax rate.
If you’ve been looking for a Toyota Corolla Cross, Honda HR-V, Haval H6, and more, this is a big change that will impact your showroom pricing.
What Changed and Why
In the past, hybrid vehicles were eligible for special sales tax incentives to promote the use of fuel-efficient cars:
- 8.5% GST for hybrid models having engines of up to 1,800cc
- 12.75% Hybrid vehicle duty (for models that have engine sizes of 1800cc and above)
The rates were all terminated upon expiry on June 30, 2026, with the onset of the sunset clause in AIDEP 2021-26. According to the Pakistan Sales Tax Act, if a concession period is not renewed, vehicles automatically shift to the normal tax regime.
With combustion engine vehicles costing more than Rs. 4 million or with engine capacities of 1,400cc or more, the standard rate is 25%. This is because practically all hybrid vehicles in Pakistan are in this category, which is why they are now taxed at that rate too.
The GST Comparison
| Vehicle Category | Previous GST | Current GST (from July 1, 2026) |
| Hybrids up to 1,800cc | 8.5% | 25% |
| Hybrids above 1,800cc | 12.75% | 25% |
Add 16.5 percentage points to the price of smaller Hybrid Vehicles, and 12.25 points to that of larger hybrids, and that’s a jump on top of high vehicle prices already. Most models: 4 million.
What will the actual increase in prices be?
The price hike may be as high as Rs. 25% if the manufacturers impose the entire 25% GST. Depending on the model, this price is possible at 25 lakhs per vehicle. This would dramatically jack up the price of widely used hybrid models overnight.
But some manufacturers have yet to begin sending out invoices at the new rate. Some automotive manufacturers are withholding invoices until the government offers a new auto policy or a new tax incentive. Some customers may encounter booking delays or revised quotations when they were expecting delivery, until an official notification is given.
The brands directly impacted include Toyota, Honda, Hyundai, Kia, Haval, MG, Jaecoo and GWM, which account for almost the entire hybrid segment in Pakistan.
What were the reasons for this?
The hybrid tax concession was always conceived as a temporary measure, within the confines of the 5-year AIDEP policy (2021-2026). The government did not renew it for the following reasons: fiscal pressure to increase tax revenues, the requirements of the IMF programme, the transition to a new auto policy framework from 2026–31, and a potential policy change to more targeted incentives that promote localisation.
The reduced rates were not extended in the Finance Act 2026-27, which came into effect from July 1. The news surprised some in the industry as they were hoping that hybrid fuel would remain available through the new fiscal year and that only the EV tax would be raised.
If you are in the market to purchase a hybrid now, here is what you should know about the purchase.
The situation continues to be dynamic. The government is likely to release a new car policy that could feature new incentives for hybrids, especially in the wake of the fast growth of the segment. Any failure to deal with this price increase is likely to decrease hybrid demand dramatically and bring consumers back to smaller petrol cars or the used car market, experts believe.
There are two choices at this time for a hybrid purchase
- Wait for clarity of policy: Another new auto policy announcement may bring down rates again, possibly in weeks or months. Waits are dangerous because they may be without relief until they do happen.
- Before official price changes, please purchase now: A few dealers have not yet updated their invoices. Before the manufacturers release the new GST-inclusive pricing, you can lock in at the old price if you can confirm the price and delivery.
Re-think about the used hybrid market. Existing used hybrid stock will not be subject to new GST on new supply, and the 25% tax on new vehicles should help boost demand for existing used hybrid stock in the short term.
Conclusion
The new 25% sales tax on Hybrid Vehicles comes as one of the largest price changes for hybrid vehicle in Pakistan. The incentive was a good deal for middle-income consumers, but it came to an end, and the market is stuck in limbo until the government updates its auto policy. Manufacturers are waiting, buyers are unsure, and hybrid is one of the fastest-growing segments in Pakistan’s automotive industry, taking its first serious hit. Be sure to closely monitor the auto policy announcement. It will be the deciding factor if it’s a temporary problem or a permanent reset.
