ISLAMABAD – Prices of electric and hybrid vehicles in Pakistan are likely to see a jump in new fiscal year as the federal government may increase tax in upcoming Budget 2026-27 in line with the recommendations of the International Monetary Fund
Reports said authorities are planning to reduce or eliminate existing tax exemptions and concessional rates offered to various sectors.
They suggested that the IMF has raised strong objections to what it describes as “elite-focused” tax relief, calling for an end to such incentives.
Under the proposed changes, the sales tax on electric vehicles could rise sharply from 1% to 18%.
Similarly, the current reduced tax rate of 8% on hybrid vehicles may also be withdrawn, bringing it up to the standard 18% rate.
The IMF’s position, according to officials familiar with the discussions, is that while hybrid and electric vehicles are environmentally friendly, their primary buyers belong to higher-income groups, and therefore do not justify preferential tax treatment.
Government efforts to maintain the existing low tax rate on electric vehicles have reportedly not succeeded.
Officials are now engaged in negotiations for a new, long-term financial program with the IMF, which is expected to require broader tax base expansion and the withdrawal of concessional regimes.
President Asif Ali Zardari has summoned the budget session of the Parliament for the fiscal year 2026–27 on June 5 (Friday).
According to the schedule, the National Assembly will meet at 5 pm, followed by the Senate session at 6 pm. The sittings have been called under Article 54(1) of the Constitution.
Meanwhile, discussions around the upcoming budget continue in parliamentary committees. Last week, the National Assembly Standing Committee on Finance and Revenue urged the Ministry of Finance’s Tax Policy Unit and the Federal Board of Revenue (FBR) to ensure that the federal budget moves beyond short-term stabilisation efforts and instead prioritises long-term structural reforms, improved fiscal governance, transparency, and inclusive economic growth.
For fiscal year 2026–27, GDP growth is projected to remain between 3.5% and 4.5%, while inflation has climbed back into double digits, reaching 10.9% year-on-year in April 2026.
