The federal government has reduced the sales tax on locally manufactured hybrid electric vehicles (HEVs) with engine capacities of up to 2,000cc from 25% to the standard 18% rate.
The change was introduced through S.R.O. 1525(I)/2026, issued on September 13, 2026. The notification amends the earlier sales tax framework under S.R.O. 297(I)/2023 and takes effect immediately.
Under the amendment, locally made hybrid vehicles with engines up to 2,000cc will no longer fall under Table II of the earlier notification. That table had placed certain locally manufactured vehicles, including higher-engine-capacity models, under a 25% sales tax rate.
The decision provides relief to hybrid car buyers after the previous concessional tax system expired on June 30, 2026. Before that, locally manufactured hybrids had benefited from lower rates, including 8.5% for vehicles up to 1,800cc and 12.75% for those between 1,801cc and 2,500cc.
The lower rate could reduce the tax burden on eligible locally assembled hybrid cars. However, the actual reduction in showroom prices will depend on how much of the tax saving manufacturers pass on to customers.
