Pakistan Hybrid and EV Taxes in 2026: What Is Law Now and What Is Still Draft

Pakistan Hybrid and EV Taxes in 2026: What Is Law Now and What Is Still Draft

Pakistan’s hybrid and electric-vehicle tax rules have become unusually difficult to follow in 2026. The reason is simple: several different policy layers are being discussed at the same time. Some measures are already part of Pakistan’s tax law. Others expired on 30 June 2026. Some were changed again through an FBR notification in September. And many of the headline incentives being discussed under the proposed Auto and Auto Parts Manufacturing Policy 2026–31 are still only draft proposals. For Pakistani buyers, the most important distinction is this: a draft automotive policy is not the same thing as tax law currently chargeable on a vehicle invoice. As of 24 September 2026, qualifying locally manufactured hybrid electric vehicles with engines up to 2,000 a draft. CC falls under an effective 18% sales-tax treatment, while specified locally assembled EVs and qualifying EV CKD imports continue to receive relief through 30 June 2027. The new Auto Policy 2026–31, however, is still being finalised.

The Short Version: What Is Law Today?

Here is the current position in simple terms.

The practical rule is straightforward:

Buyers should rely on the Finance Act, current tax schedules and operative FBR notifications—not draft Auto Policy headlines.

What Happened to Hybrid Tax After 30 June 2026?

Before July 2026, locally manufactured hybrids benefited from concessional sales-tax treatment.

The earlier framework provided reduced rates, including:

• 8.5% for HEVs up to 1,800 cc

• 12.75% for HEVs from 1,801 cc to cc

Those concessions were tied to the previous tax and automotive-policy framework.

When that treatment expired at the end of June 2026, qualifying hybrids temporarily moved into a much higher tax environment.

During July and August, the local market widely treated affected vehicles under the higher 25% Table-II sales-tax structure.

That led to concerns about higher prices for locally assembled hybrids.

But the position changed again in September.

September 2026 Changed the Hybrid Tax Again

On 13 September 2026, the federal government issued S.R.O. 1525(I)/2026.

The notification excluded locally manufactured hybrid electric vehicles with engine capacity up to 2,000cc from the special Table-II vehicle treatment.

The practical result is that qualifying vehicles fall back to the standard sales-tax framework.

That means the effective rate for those qualifying locally manufactured HEVs is now 18%.

The simplified timeline is:

This matters because articles published in July saying that local hybrids were permanently moving to 25% are no longer fully current.

Does Every Hybrid Now Pay 18%?

No.

This is one of the most important points for buyers.

The September SRO specifically refers to:

locally manufactured hybrid electric vehicles with engine capacity up to 2,000 cc.

That means the 18% position should not automatically be applied to:

• imported hybrids;

• HEVs above 2,000 cc;

• every PHEV;

• every REEV;

• or every vehicle marketed with the word “hybrid”.

Tax treatment depends on the exact legal classification of the vehicle.

The drivetrain name used in marketing material is not always enough.

PHEVs and REEVs Need Extra Care

Plug-in hybrids and range-extended EVs can create classification questions.

A PHEV combines a rechargeable battery with an internal-combustion engine.

A REEV typically drives the wheels using electric motors, while the petrol engine acts primarily as a generator.

But tax law depends on tariff classification and statutory wording—not only engineering definitions.

Pakistan Customs has already considered the classification of range-extended electric vehicles in 2026.

That is why AutoWheels.pk would not automatically tell readers that:

REEV = BEV tax treatment

or:

PHEV = HEV tax treatment

without checking the exact customs and sales-tax classification.

Imported Used Hybrids Follow Different Rules

Pakistan also has separate tax concessions for certain used hybrid vehicles imported through:

• baggage schemes;

• gift schemes;

• transfer-of-residence schemes.

FBR guidance provides separate duty-and-tax concessions for qualifying Asian-make hybrids under those import routes.

That treatment should not be confused with the sales tax charged on a new locally assembled hybrid bought from a Pakistani dealer.

These are completely different legal situations.

A buyer should distinguish between:

• locally assembled new HEVs;

• commercial CBU imports;

• used-car imports under baggage or gift schemes;

• PHEVs;

• REEVs;

• and BEVs.

What EV Relief Was Actually Extended?

The FY2026–27 tax framework extended several important EV concessions.

FBR’s official Budget 2026–27 material confirms extension of the relevant EV relief to 30 June 2027.

This includes relief affecting:

• specified locally assembled four-wheel EVs;

• and qualifying EV CKD imports.

The underlying categories include defined battery-capacity thresholds.

For example, the earlier sales-tax schedule covered specified locally manufactured or assembled:

• small cars and SUVs with battery capacity up to 50 kWh;

• and certain light commercial vehicles with battery capacity up to 150 kWh.

The concessional treatment for these categories was extended rather than allowed to expire completely on 30 June 2026.

This is important because several pre-budget articles expected the EV concession to end.

The final enacted tax position was more favourable than those earlier forecasts.

Does That Mean Every EV Pays 1%?

No.

Saying “EVs are taxed at 1% in Pakistan” is too broad.

The concession applies to specific categories and conditions.

The exact treatment can depend on:

• battery capacity;

• whether the vehicle is locally assembled;

• whether it is CBU or CKD;

• tariff classification;

• and whether another tax, such as the FED, applies.

Larger or luxury electric vehicles may face different treatment.

That means buyers should always check the exact model and variant rather than relying on a generic statement about “EV tax”.

Luxury EVs Can Face Different Taxes

Pakistan’s FY2026–27 tax framework also introduced or retained Federal Excise Duty treatment affecting certain luxury vehicles, including some EV categories.

This is another reason why the tax burden on a premium imported EV may look very different from the tax burden on a locally assembled small EV.

So two vehicles can both be fully electric while still having very different effective tax treatment.

What About Electric Buses and Trucks?

Pakistan’s EV incentives are also category-specific for commercial vehicles.

Qualifying electric buses and trucks can receive different concessional treatment from passenger EVs.

The important takeaway is that Pakistan does not have one universal “EV tax rate”.

Different vehicle classes can sit under different entries in the sales tax and customs schedules.

Is Pakistan’s New Energy Vehicles Policy 2025–30 Already Official?

Yes.

Pakistan’s New Energy Vehicles Policy 2025–30 is an official government policy.

But a policy document and a tax law are not the same thing.

A policy may say the government wants to encourage:

• EV adoption;

• local battery manufacturing;

• charging infrastructure;

• subsidies;

• or domestic production.

But a tax exemption normally needs to be implemented through an appropriate legal instrument.

That could include:

• a Finance Act;

• an SRO;

• a customs notification;

• a sales-tax schedule;

• or another legally operative instrument.

Therefore, a policy target does not automatically determine the amount on a buyer’s invoice.

AIDP 2026–31 Is Still Draft

This is the biggest source of confusion.

Several media reports have described the new automotive framework as “approved”.

But official government statements published in September show that the Auto and Auto Parts Manufacturing Policy 2026–31 was still being reviewed clause by clause.

The government continued meetings to examine:

• legal issues;

• financial implications;

• administrative provisions;

• localisation;

• exports;

• and industry concerns.

The Ministry of Industries and Production said the new policy would be unveiled “shortly”.

That confirms that it was not yet a final notified policy at the time of this fact-check.

What Is the Draft Auto Policy Reportedly Proposing?

Several reported drafts have included proposals covering:

• an 18% general GST structure;

• direct EV subsidies;

• localisation thresholds;

• export obligations;

• future tariff reductions;

• expanded EV financing;

• consumer-protection measures;

• and incentives linked to new-energy vehicle manufacturing.

But these proposals have changed during the drafting process.

That matters.

A proposal mentioned in one newspaper today can be changed before final approval.

This is exactly why AutoWheels.pk will not present a draft policy incentive as current law.

Is the Proposed Rs10 Million EV Financing Limit Active?

No confirmed nationwide rule should be assumed simply because the proposal has been reported.

Recent draft-policy reporting has discussed:

• EV financing of up to Rs10 million;

• and financing tenures of up to seven years.

But for such a financing rule to become operational, the relevant banking and regulatory framework must also be updated.

Until an operative State Bank or other competent-authority instruction is issued, buyers should not assume that every bank is required to offer Rs10 million in EV financing.

Can Dealers Use Draft AIDP Incentives Today?

No.

Dealers must invoice vehicles using the tax law actually in force.

A proposed policy cannot override:

• the Sales Tax Act;

• Customs Act;

• Federal Excise Act;

• Income Tax Ordinance;

• or current SROs.

If a salesperson says:

"This tax will fall when the new policy comes."

That may be a future expectation.

It is not automatically part of the legally payable price today.

Which Pakistani Cars Could Be Affected?

The current hybrid rules matter most for locally assembled HEVs that meet the required engine and classification conditions.

AutoWheels.pk currently lists Pakistan-market electrified vehicles. This includes:

• Toyota Corolla Cross

• Honda HR-V e

• Haval H6 HEV

• Haval H6 PHEV

• Tank 500 HEV

• Tank 500 PHEV

Readers can compare these and other electrified vehicles through the AutoWheels.pk New Cars in Pakistan directory.

However, the presence of “HEV”, “PHEV” or “hybrid” in a vehicle name does not by itself establish the applicable tax.

The exact legal classification still matters.

Why the Haval H6 and Tank 500 Need Variant-Level Checking

The Haval H6 range in Pakistan includes different powertrains.

Likewise, the Tank 500 is offered in electrified forms.

A petrol H6, HEV H6 and PHEV H6 should not automatically be assumed to carry identical tax treatment.

The same principle applies to Tank 500.

This is why AutoWheels.pk’s vehicle content should distinguish exact variants rather than describing the entire model range under one tax label.

Do AutoWheels Prices Automatically Reflect Tax Changes?

Vehicle manufacturers can change prices after:

• tax notifications;

• exchange-rate movements;

• duty changes;

• logistics changes;

• or internal commercial decisions.

AutoWheels.pk’s new-car listings are therefore useful for current comparison, but buyers should confirm the latest ex-factory invoice with the authorised manufacturer or dealer before booking.

The AutoWheels.pk New Cars in Pakistan directory can be used to compare current models and listed prices.

The Best Way to Check What Is Legally Payable

Pakistani buyers can avoid most confusion by following a simple hierarchy.

First: Check the Finance Act

The Finance Act contains enacted tax changes.

These are law.

Second: Check FBR Notifications and SROs

An SRO can materially change the treatment of a specific vehicle category.

The September HEV notification is a good example.

Third: Check Customs Classification

This matters especially for unusual powertrains such as:

• PHEVs;

• REEVs;

• and extended-range EVs.

Fourth: Check Final Notified Policies

Industrial policies influence the long-term framework.

Fifth: Treat Draft-Policy News as Draft

Draft proposals are useful for understanding where government policy may be heading.

But they are not enough to determine the tax payable today.

Law Now vs Draft: Buyer Checklist

Why This Matters for Car Prices

Tax changes can quickly affect ex-factory prices.

Pakistan’s 2026 hybrid market showed exactly that.

First, earlier concessions expired.

Then qualifying hybrids faced higher taxation.

Then the government changed the treatment again through the September SRO.

Manufacturers may respond to such changes by:

• increasing prices;

• reducing prices;

• adjusting margins;

• temporarily holding invoices;

• or revising variant positioning.

That is why buyers should focus on the legally operative tax position rather than yesterday’s headline.

Could Hybrid Prices Fall Again?

Possibly, but there is no universal answer.

The move from a 25% treatment to an effective 18% rate reduces the tax burden for qualifying vehicles.

But manufacturers are not required to pass every rupee of tax relief directly to buyers in the same way.

Final ex-factory pricing can also be influenced by:

• exchange rates;

• imported component costs;

• freight;

• localisation;

• margins;

• and competitive strategy.

So any price change must be verified model by model.

Could EV Prices Change Again Under AIDP 2026–31?

Yes.

The final policy could potentially affect:

• tariffs;

• local assembly incentives;

• EV financing;

• localisation;

• subsidies;

• and manufacturing economics.

But none of those future effects should be assumed until the policy and its implementing measures are issued.

What Happens When AIDP 2026–31 Is Final?

Once the final policy is notified, AutoWheels.pk will need to re-check every important fiscal claim.

That includes:

• GST treatment;

• CKD duties;

• CBU duties;

• localisation requirements;

• export conditions;

• EV incentives;

• financing limits;

• and any special treatment for HEVs, PHEVs or REEVs.

Even then, the policy itself may not be enough.

If a tax change requires amendments to the tax laws or an FBR notification, those legal instruments must also be issued.

What Is Law Now?

As of 24 September 2026, the clearest current position is:

Hybrid electric vehicles

Qualifying locally manufactured HEVs up to 2,000 cc are effectively under an 18% sales-tax framework after S.R.O. 1525(I)/2026.

Electric vehicles

Specified locally assembled EV relief remains available through 30 June 2027.

EV CKD kits

Specified CKD-related EV sales-tax relief has also been extended through 30 June 2027.

Luxury EVs

Certain luxury EVs can face different FED treatment.

PHEVs and REEVs

Classification needs to be checked carefully rather than assumed.

Auto Policy 2026–31

Still draft.

Final Takeaway

Pakistan’s current hybrid and EV tax picture is not the same thing as the proposed Auto Policy 2026–31.

Some measures are already law.

Others are still ideas.

The most important current-law changes are:

• Qualifying locally manufactured HEVs up to 2,000 cc are effectively back at 18% sales tax from 13 September 2026;

• specified EV sales-tax relief continues until 30 June 2027;

• The specified EV CKD relief also continues until 30 June 2027.

By contrast, the following remain subject to the final Auto Policy and implementing regulations:

• the final long-term GST structure;

• proposed EV financing limits;

• future tariff reductions;

• localisation requirements;

• export-linked incentives;

• and other draft AIDP measures.

For Pakistani buyers, the safest rule is simple:

Check the current Finance Act, FBR notifications and exact vehicle classification first. Treat Auto Policy 2026–31 headlines as proposals until the final policy and required legal instruments are officially issued.

AutoWheels.pk will update this guide when the final Auto and Auto Parts Manufacturing Policy 2026–31 is notified.