Which Cars will get Cheaper after Budget 2026-27 as Govt plans Tax Relief?
Why this matters: local context for readers following news across Pakistan and the region.
ISLAMABAD – Pakistan’s auto sector could be heading for one of biggest policy shifts in years as the federal government prepares to roll out sweeping incentives for electric vehicles (EVs) while imposing fresh financial burdens on conventional petrol and diesel-powered cars in the 2026-27 budget. According to proposals, electric vehicles are set cheaper after upcoming budget, with authorities planning deep tax cuts and duty exemptions to accelerate the country’s transition towards cleaner transportation. Customs duty on motors, batteries and other EV components used in local manufacturing may be slashed to just 1%, while sales tax on these parts could also be reduced to 1%. The government is further considering a complete exemption from Federal Excise Duty (FED), Capital Value Tax (CVT) and Withholding Tax for electric vehicles. However, the incentives remain subject to approval by the International Monetary Fund (IMF), which continues to play a key role in Pakistan’s fiscal policy framework. While EVs are being positioned for rapid growth, conventional fuel-powered vehicles could face a significantly tougher environment. The government is finalising plans to discourage the use of petrol and diesel vehicles through a new carbon levy, expanding its climate-focused taxation strategy beyond fuels and directly onto vehicles. Under fresh proposals, vehicles with engine capacities above 2,000cc may be subjected to additional levies ranging from 10% to 19.5%, a move that could substantially increase the cost of larger and luxury vehicles. Authorities are also considering a phased tariff regime for imported petrol and diesel vehicles as part of broader efforts to promote cleaner alternatives. Officials estimate suggest proposed levies could generate more than Rs142 billion in revenue over the next five years, highlighting the scale of the planned policy overhaul. Hybrid vehicles are unlikely to receive the same level of support as fully electric models. Wh