Proposed GST Increase Likely to Drive Up Car Prices

With the Pakistan Budget 2025-26 announcement, many automobile enthusiasts are searching for its impact on the auto industry. Well, the news is not pleasing as the GST has been raised on certain cars to 18%. Especially the hybrid electric vehicles (HEVs) that enjoyed a lower  8.5% tax rate. Not only this, the tax rate has also been increased for the cars below 850cc. Let’s see the impact of this budget on the automobiles and expected car prices after the proposed increase in the taxes.

HEVs Expected Price Increase

Here are the expected prices of Hybrid vehicles after the proposed increase in the GST to 18%:

Moreover, a new levy on internal combustion engine (ICE) motor vehicles has been proposed in the budget 2025-26. It will not only impact the imported vehicles  but also the locally assembled vehicles. This policy is structured into different categories:

• Under 1300cc: 1%
• 1300cc to 1800cc: 2%
• Over 1800cc: 3%
• Commercial Vehicles: 1%

Impact on Under 850cc Cars

I we see the under 850cc car category, Alto is the name that immediately strikes our minds. The government has proposed to increase the GST on this category of cars from 12.5% to 18%. So, not only the Suzuki Alto, but the Suzuki Every is also going to see a price hike soon. Moreover, 1% Green Tax has also been proposed for the internal combustion cars making the price even higher.

Now, let’s see the expected prices of both cars here:

Talking about the positive side, the raw materials and CKD parts will face lower duties (from 20% previously to 15% now).

Another major thing is the government’s working on the New Energy Vehicle Policy that will promote electric vehicles, especially the 2 and 3-wheelers. This policy aims to shift a notable segment of low to medium income people to electric vehicles.

In the end, the budget doesn’t look too promising for the automobile sector as the already inflated prices of HEVs and small cars are expected to increase further due to increased taxes. Moreover, the non-filers will not be able to buy cars that will impact the car sales even more.

Are you planning to buy any of these cars? Do you think the taxes on the HEVs are justified keeping in mind these vehicles are somewhat environment-friendly compared to the internal combustion cars? Do you think the low to medium income people will afford to buy the cars after the budget approval? Share with us in the comment section below.