ISLAMABAD – Prices of several vehicles and motorcycles are likely to see an increase in Pakistan in upcoming year of 2026 as the International Monetary Fund (IMF) has made a major demand.
Reports said IMF has called on Pakistan to revoke the sales tax exemption currently granted to locally manufactured hybrid electric vehicles and motorcycles.
The IMF has urged the government to impose the standard 18% sales tax on these vehicles, beginning with the upcoming fiscal year 2026-27.
If applied, the prices of hybrid electric vehicles and motorcycles would increase from July 2026 when the new budget measures are executed.
At present, hybrid electric vehicles produced domestically are eligible for tax exemptions under the Eighth Schedule of the Sales Tax Act.
However, the IMF has suggested that these vehicles be removed from the exemption list in discussions with the Ministry of Industries and Production, and placed under the regular tax system.
Current Sales Tax Rate
Under current laws, hybrid vehicles with engine capacities under 1800 cc are subject to a sales tax of 8.5%, while those between 1801 cc and 2500 cc are taxed at 12.75%.
The government had earlier extended the tax exemption on hybrid vehicles and motorcycles until June 30, 2026, but the IMF’s new recommendation would eliminate these exemptions in the next fiscal year.
