Govt Set to Increase Sales Tax on Locally Assembled 850cc Vehicles from July 2025

In a move that may lead to a significant hike in local car prices, the government of Pakistan is planning to increase the sales tax on locally manufactured or assembled vehicles up to 850cc, effective from July 1, 2025. According to media reports, the current sales tax rate of 12.5% is proposed to be raised to between 15% and 18% under the upcoming federal budget for the fiscal year 2025-26.

Additionally, the Federal Board of Revenue (FBR) is considering the removal of Statement No. 72 from the Eighth Schedule of the Sales Tax Act, 1990. This would eliminate the existing concessional tax regime for smaller, locally assembled cars.

Industry experts warn that this step could lead to a substantial rise in vehicle prices, directly impacting consumers—especially those from middle- and lower-income groups who rely on affordable transport options.

The move is expected to help boost government revenues, but may also slow down auto sales and strain Pakistan’s local automobile industry.