The federal government is in talks with the IMF over a proposal to cut the sales tax on locally assembled cars up to 850cc from 18% to 12.5%, according to media reports. This category includes 660cc cars such as the Suzuki Alto and Suzuki Every.
The rate was actually 12.5% before 2025, but the government raised it to 18% in the 2025-26 budget. It is now looking to reverse that increase and bring the rate back down to 12.5% under the new auto policy.
The IMF had initially opposed the cut, but the government and the Fund are negotiating the matter as the new auto policy is finalized, with the policy expected to be unveiled in August.
Sales Tax on HEVs and PHEVs
Separately, according to PakWheels sources, sales tax on HEVs and PHEVs is expected to be revised to a flat 18%.
This follows the expiry of the previous concessionary rates on 30th June 2026, which stood at 8.5% for vehicles up to 1800cc and 12.75% for those above 1800cc.
With the auto policy still unannounced and the concession now expired. As a result, GST on HEVs and PHEVs currently stands at 25%.
However, under the upcoming auto policy, this is expected to be revised down to a flat 18% for both HEVs and PHEVs.
The draft is being reviewed with input from the FBR, the Ministry of Science and Technology, the Ministry of Commerce, and the Ministry of Law. Once inter-ministerial consultations wrap up, it will go before the Cabinet’s Economic Coordination Committee.
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