Every year, the budget rolls in with a fresh batch of taxes and duties, and for people already struggling with soaring living costs, it’s another blow. What really hits hardest is the constant wave of new taxes. This time around, it’s car owners feeling the heat. Petrol and diesel vehicles are back under the government’s radar, meaning a new additional tax.
Govt Considers New Additional Tax on Petrol/Diesel Cars
New Additional Tax
The government is considering a new tax on petrol and diesel cars. The idea? To collect money for Pakistan’s next big push: Electric Vehicles (EVs). The proposed plan includes an extra 3% to 5% tax on all petrol and diesel-powered vehicles—whether imported or made locally.
This tax isn’t just about raising money—it’s about reshaping the future. The revenue, expected to be around Rs25–30 billion a year, will feed into a brand-new Electric Vehicle Fund. Over five years, this could total a whopping Rs125–150 billion. The fund will help offer subsidies, build charging stations, and support research—all to encourage people to switch to EVs.
More Taxes on the Horizon
But that’s not the only hit car buyers might face. The government also plans to bump up the sales tax on smaller cars (up to 850cc) from 12.5% to 18%. Bigger cars? They’ll face higher withholding taxes.
Currently, the withholding tax on vehicles is structured based on engine capacity. For cars with engine sizes ranging from 1,300cc to 1,600cc, the tax is 2% of the total value. Vehicles between 1,601cc and 1,800cc are taxed at 3%, while those in the 1,801cc to 2,000cc range are taxed at 5%. For vehicles with engine sizes between 2,001cc and 2,500cc, the tax rate is 7%. Cars with engine capacities from 2,501cc to 3,000cc face a 9% tax, and those with engines above 3,000cc are taxed at the highest rate of 12%.
Soon, these rates could go even higher. That means owning a mid-sized or luxury car will cost significantly more.
The government wants to increase its revenue while cutting down on tax exemptions. They’re trying to streamline the tax system and ensure everyone pays their fair share. In fact, in 2024, the Federal Board of Revenue (FBR) already collected over Rs4 billion from vehicle taxes. Now, they’re aiming for even more in 2025–26.
For everyday car owners, it means higher costs ahead. For the country, it’s a step toward cleaner, greener transportation. The road to EVs might be paved with taxes, but the goal is a future with less pollution and more sustainability.