GST uncertainty impacts hybrid vehicle market

KARACHI: Uncertainty persists over the sales tax treatment of hybrid vehicles after the FY27 budget, with questions remaining over whether the current concessional general sales tax regime will end when the existing auto policy lapses on June 30.

Finance Minister Muhammad Aurangzeb did not spell out the hybrid vehicle GST position in his budget speech, while most auto assemblers did not respond to queries on the issue. One local assembler, speaking on condition of anonymity, said stakeholders had been in regular contact with policymakers over the matter. He said it remained unclear whether the government would raise the tax modestly or keep the current structure in place amid pressure from assemblers.

The same assembler said there were reports that the International Monetary Fund was pushing for a higher GST on hybrid vehicles, but added that he could not confirm that development.

Topline Securities Ltd said hybrid vehicles would now face GST of 18 per cent for models up to 1,800cc and 25pc for those between 1,801cc and 2,500cc. These compare with earlier rates of 8.5pc and 12.75pc, respectively. The brokerage also noted that the concessional tax treatment had already been scheduled to expire in FY26 under the Auto Industry Development and Export Policy.

Hybrid vehicles have drawn strong buyer interest over the past two years. Demand rose as petrol and diesel prices climbed sharply following higher crude oil prices after the start of the US-Israeli war on Iran on Feb 28. If the higher GST slabs are applied, hybrid buyers are likely to face a significant increase in vehicle prices, though the final outcome will depend on the government’s decision as it seeks to meet a larger revenue target.

EV kit relief extended

Topline Securities said the reduced 1pc GST on the import of completely knocked down kits for electric cars and light commercial vehicles would continue until June 30, 2027. The extension applies to locally assembled electric small cars and SUVs of up to 50 kWh and LCVs of up to 150 kWh.

According to the brokerage, the measure will continue to lower production costs for EV assemblers and support price competitiveness. The extension could help broader EV adoption and the launch of new models in entry-level passenger and commercial categories, while also improving visibility for investment in local assembly and related infrastructure.

FED on imported vehicles

Imported vehicles with engine capacities above 2,000cc and below 3,000cc will be subject to 40pc federal excise duty, while vehicles exceeding 3,000cc will face 41pc FED.

Imported electric vehicles priced above Rs20 million and below Rs30m will be charged 30pc FED, while those costing more than Rs30m will be subject to 40pc FED.