New GST raises hybrid vehicle prices

With the Auto Policy 2026-31 still awaiting approval after the previous policy expired on June 30, local car makers have started increasing the prices of hybrid vehicles. The price hike follows the government’s decision to raise the general sales tax (GST) on hybrid vehicles from 8.5 percent to 25 percent in the FY27 budget.

Indus Motor Company has increased the prices of its Toyota Corolla Cross hybrid models by Rs1.364 million and Rs1.314 million, raising their prices to Rs10.299 million and Rs9.849 million, respectively. Honda Atlas Cars Limited has also increased the price of its HR-Ve hybrid model by Rs1.370 million, taking it to Rs10.369 million.

Meanwhile, some other local assemblers have temporarily stopped invoicing and delivering hybrid vehicles to customers. They are reportedly waiting for the government to announce the new auto policy or revise the GST on hybrid vehicles.

According to a car dealer, the sharp increase in hybrid vehicle prices could reduce customer demand. Plug-in hybrid electric vehicles (PHEVs) are also expected to become more expensive because of the higher GST. He said the additional cost of Rs1.3 million to Rs1.9 million may discourage buyers and weaken the government’s efforts to promote fuel-efficient vehicles.

Car manufacturers have also remained silent on the status of the new auto policy, despite the government’s claim that the draft has already been prepared and shared with stakeholders. They say they have not received any information about the policy, which was expected to come into effect on July 1, 2026.

Topline Securities analyst Asad Ali said the revised auto policy, which is expected to introduce new incentives for the automobile industry, has not yet been officially notified.

During his budget speech on June 12, Finance Minister Muhammad Aurangzeb said the Auto Policy 2026-31 was under review by a committee formed by the prime minister. He said the policy would be presented to Parliament after approval from the prime minister and the federal cabinet.

The finance minister also announced that the concession on imports of completely knocked down (CKD) kits for electric vehicles, including motorcycles, three-wheelers, cars and buses, has been extended until June 30, 2027.

Asad Ali said the government issued SRO 1064(I)/2026 from July 1, 2026, replacing SRO 1152(I)/2025, as part of the second phase of tariff reforms under the National Tariff Policy (NTP) 2025-30.

Under the notification, regulatory duty (RD) has been reduced across almost all categories, with the maximum rate cut from 50 percent to 20 percent. Products that previously faced higher duties have received larger reductions.

Earlier, the highest regulatory duty of 50 percent applied to imported SUVs, 4×4 vehicles and other large-engine vehicles, while fruit and nut juices carried a maximum duty of 48 percent.

The government has also reduced customs duty and additional customs duty (ACD) on several products to simplify the tariff structure. Customs duty on CKD kits, auto parts and completely built-up (CBU) vehicles has been lowered from 50-100 percent to 30-50 percent.

However, Asad Ali said these reductions are unlikely to benefit local assemblers because they already import CKD kits and components under SRO 656, which allows concessional customs duty of up to 30 percent.

The government has also reduced customs duties on automotive components, CKD kits and CBU vehicles. Together with lower ACD and RD, the overall import duties on completely built-up vehicles have decreased.

In addition, regulatory duty on commercial imports of vehicles under PCT 8702, 8703 and 8704 has been reduced from 40 percent to 30 percent in line with the National Tariff Policy 2025-30. The government plans to eliminate regulatory duties completely by 2030.

Despite these tariff reductions, Asad Ali believes local assemblers are unlikely to gain any major advantage because they already import parts and manufacturer kits under separate concessionary schemes, where customs duty remains capped at 30 percent.