Budget 2026–27: tax relief on EVs, hybrids and solar panels likely to end

ISLAMABAD: The federal government is considering ending sales tax exemptions on electric vehicles, hybrid cars and solar panels in the upcoming 2026–27 budget, according to sources.

Officials said there is a strong possibility that a standard 18 per cent sales tax could be imposed on electric and hybrid vehicles, as tax relief measures in the sector come under review. Sources added that the International Monetary Fund (IMF) has reportedly rejected Pakistan’s request to maintain existing tax exemptions on EVs and hybrid vehicles.

If approved, the move could lead to a rise in vehicle prices in the new fiscal year, with further tightening of tax concessions also expected across multiple sectors.

Sources indicated that the sales tax on electric vehicles, currently as low as 1 per cent, may be increased to 18 per cent, while hybrid vehicles, previously enjoying a reduced rate of around 8 per cent, could also be brought under the standard tax regime.

In addition, solar panels and related equipment may also face an increase in sales tax from 10 per cent to 18 per cent, as part of broader efforts to rationalise tax exemptions in the upcoming budget.

Data shared by sources shows that around 45,000 vehicles were imported in the last fiscal year, while imports are estimated to decline to about 40,000 units in the current year. Between July and April of the ongoing fiscal year 2025–26, nearly 38,000 vehicles have already been imported.

Sources further noted that the government is reviewing all remaining exemptions and concessions, and additional changes could be introduced in the final budget proposal for fiscal year 2026–27.