Budget 2025-26 Car Tax on Local and Imported Models Up to 3%

Jawad

10 Jun 2025

309

Budget 2025-26 Car Tax on Local and Imported Models Up to 3%

Just days after early reports hinted at a potential levy on petrol and diesel vehicles, Finance Minister Muhammad Aurangzeb has officially confirmed the development in the Federal Budget 2025-26. A new car tax has been introduced on internal combustion engine (ICE) vehicles, targeting both local car manufacturers and imported car dealers.

This latest policy is part of the government's broader plan to increase revenue while promoting eco-conscious alternatives in the auto industry. Here's a breakdown of how the new vehicle tax works and what it means for everyone involved.

How the New Vehicle Tax Works

The newly proposed tax on vehicles is simple to understand. It's based on a percentage of the vehicle’s value and varies depending on the engine size and whether the car is locally manufactured or imported. Best of all, this new car tax already includes other applicable duties, so buyers don’t need to calculate extra charges.

Tax Rates by Engine Category

The government has divided the auto tax proposal into several clear segments to cover various types of automobiles in Pakistan:

Local Cars Under 1300cc: Locally assembled cars with engines below 1300cc will now carry a 1% car tax, which will be paid by the manufacturer. The same rate applies to imported car models in this category.
1300cc to 1800cc Vehicles: Both local and imported cars in this mid-range category will see a 2% tax added to their value.
Cars Over 1800cc: Larger engine vehicles, whether made in Pakistan or brought in from abroad, will be subject to a 3% car tax increase.
Commercial Vehicles (Buses and Trucks): All commercial vehicles, regardless of origin, will have a 1% levy imposed.
This automobile tax Pakistan update is designed to bring uniformity in taxation while encouraging greener alternatives down the road.

What This Means for Buyers and Sellers

For consumers, the budget car policy will result in slightly higher car prices depending on the vehicle category. While a 1% or 2% tax may seem minor, it can significantly affect pricing for higher-end vehicles. For companies, it’s another cost to account for when setting retail prices.

This move is a clear indication that the government is looking to reshape the auto sector budget and nudge the industry toward more sustainable solutions. While petrol and diesel vehicles are directly impacted, it also opens the door for hybrid and electric models to become more attractive.

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