Just a few days ago, Finance Minister Muhammad Aurangzeb took to the National Assembly floor to unveil the budget 2025-26. As expected, it came packed with a mix of new taxes, duty tweaks, and policy shifts — with the auto sector once again in the spotlight. A lot of the attention this year was on local and imported cars, with one of the major highlights being the proposed “Green Tax” on petrol and diesel vehicles. Alongside that, the budget also hinted at revisions in the General Sales Tax (GST).
Now, here’s where things got a bit confusing.
During his budget speech, the Finance Minister clearly mentioned that the GST on hybrid vehicles (HEVs) would be increased — from the current 8.5% all the way up to 18%. But here’s where things get interesting… once the official Finance Bill 2025 was released, it didn’t actually mention this GST increase for hybrids at all.
So what gives? Did the Minister make a mistake in the speech? Or is the government testing the waters before making it official later? Let’s break down what we found.
What’s Actually in the Finance Bill 2025?
After the speech, when the Finance Bill 2025 was released — the official document that outlines the proposed laws and changes — there was no mention of this GST hike on hybrids. Wait, what? Yep. No mention of raising GST on HEVs to 18% in the bill. And since the Finance Bill is the more official and legally binding document (compared to the speech), this created quite a bit of confusion. So, we decided to dig in.
What We Found?
Going through the nitty-gritty of the Finance Bill 2025-26 and Sales Tax Act 1990, here’s what stood out:
- Clause 72, which previously applied 12.5% GST on locally assembled cars under 850cc, has been removed. With this clause gone, that segment will now fall under the general 18% GST rate.
- However, Clause 73, which specifically talks about hybrid vehicles, is still there. According to this clause:
- Up to 1800cc hybrids are taxed at 8.5% GST
- 1801cc to 2500cc hybrids are taxed at 12.75% GST
- This clause is valid until 30th June 2026
So, bottom line: There is no GST hike on hybrid cars in Budget 2025-26 — despite what was said in the budget speech.
Some insider sources suggest that the government might be planning to raise the GST on hybrids next year, possibly in the 2026-27 budget. So, while HEV buyers are safe for now, there could be a hike coming after June 2026. So, if you’re thinking about buying a hybrid, it might be a smart move to do it before next year — just in case.
We’ll keep an eye out for any updates and let you know as soon as something changes. Stay tuned!
