The federal government has unveiled a major tax overhaul for the automobile sector in the Budget 2026-27, imposing higher duties on imported luxury vehicles, large-engine SUVs, and premium electric vehicles (EVs) as part of efforts to increase revenue, reduce non-essential imports, and ease pressure on the country’s foreign exchange reserves.
Presenting the budget in the National Assembly, Finance Minister Muhammad Aurangzeb announced a series of fiscal measures targeting high-end automobile imports, a move expected to significantly increase the cost of luxury vehicles in Pakistan.
Under the new taxation framework, imported SUVs with engine capacities between 2,000cc and 3,000cc will face higher duties, while vehicles exceeding 3,000cc will be subject to even steeper taxation.
The government says the measures are designed to discourage the import of expensive vehicles and promote a more balanced use of foreign exchange resources.
Premium Electric Vehicles Brought Into Tax Net
In a significant policy shift, the government has also introduced taxes on luxury electric vehicles valued above Rs20 million. The move marks a departure from previous incentives aimed at encouraging EV adoption and signals a focus on taxing high-end consumption regardless of vehicle type.
The new tax regime is expected to affect premium international EV brands and wealthy consumers who import luxury electric cars, while lower-priced EVs remain central to Pakistan’s broader clean-energy and transport objectives.
Industry observers believe the decision reflects the government’s attempt to strike a balance between promoting green mobility and ensuring affluent consumers contribute a larger share of tax revenues.
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