Hybrid and electric cars in Pakistan may become more expensive from July if the government removes or reduces existing tax concessions in the upcoming federal budget.

At the moment, hybrid and electric vehicles receive lower tax treatment than petrol vehicles. Electric vehicles currently enjoy 1% GST, while hybrid vehicles are taxed at 8.5% GST.

Both rates are lower than Pakistan's standard 18% GST, making them a key reason behind the growing popularity of electrified vehicles.

Why GST rates are under debate

According to reports, the International Monetary Fund (IMF) has proposed bringing GST rates on EVs and hybrids closer to the standard 18% rate as part of broader revenue measures being discussed with the government.

The government is pushing back against this demand. Officials are attempting to negotiate either no increase or a minimal change.

A middle ground, such as setting the GST at 12%-14%, is possible, but the final rate remains unconfirmed.

By how much can prices increase?

If the worst-case scenario plays out and GST on hybrid vehicles rises from 8.5% to 18%. The impact on prices could be substantial.

For context, vehicles such as the Hyundai Santa Fe Hybrid, Haval H6 HEV, and Toyota Corolla Cross HEV could face noticeable price increases if GST concessions are reduced.

For example:

A hybrid vehicle currently priced at PKR 12 million (US$ 43,100) will see a price increase of approximately PKR 1 million.
A hybrid vehicle currently priced at PKR 7.7 million will see a price increase of approximately PKR 600,000.
The impact on electric vehicles will be greater if the GST rate is raised from 1% to 18%.

Companies may not pass on full impact

The final increase for buyers will also depend on each company's pricing strategy.

Automakers do not always pass 100% tax increases to buyers. Companies with strong inventories or aggressive growth plans may choose to absorb part of the increase to remain competitive, while others may pass the full impact to customers.

This is why the price increase may vary from brand to brand and model to model.

What is known so far

Nothing is finalised yet. The confirmed GST rates will only be known on June 10th, when the budget is presented in the National Assembly, and take effect from July 1st.

Any projected price increase remains speculative until official rates are announced.