If you’re planning to buy a car in Pakistan, there’s a new tax that could impact the final price.
As part of the 2025–26 federal budget, the government has introduced a new tax on all petrol and diesel vehicles — whether locally made or imported. This tax applies to vehicles with internal combustion engines (ICE) and is based on engine size.
New Tax Rates
Here’s how the tax will be applied:
- Cars under 1300cc: 1% of the car’s total price
- Cars between 1300cc and 1800cc: 2%
- Cars above 1800cc: 3%
- An additional 1% tax will apply to all cars, regardless of engine size
Although this tax will be collected from manufacturers and importers, the added cost is expected to be passed on to buyers.
Impact on Buyers
Experts say this move could lead to noticeably higher car prices, especially for larger or imported vehicles. Even though the tax percentages seem small, the actual price increase could be significant for mid- and high-end cars.
Challenges for the Auto Industry
The auto industry in Pakistan is already struggling with:
- High production costs
- Limited imports
- Decreasing consumer demand
This new tax adds another challenge, and industry insiders believe it could reduce car sales in the near future.
Push Towards Electric Vehicles?
Some analysts believe the new tax signals a shift in government policy to promote hybrid and electric vehicles. By taxing petrol and diesel cars, the government may be encouraging greener alternatives.
However, experts warn that without investment in EV infrastructure — like charging stations and battery supply — the transition will be slow. Incentives and support systems are needed for electric vehicles to become a practical option for most buyers.
