Government Cuts Sales Tax on Locally Made Hybrids From 25 Percent to 18 Percent

The federal government has reduced the sales tax on locally manufactured hybrid electric vehicles with engine capacities of up to 2,000cc from 25 percent to the standard 18 percent rate. The change was introduced through SRO 1525(I)/2026, issued on September 13, 2026, and takes effect immediately. The notification amends the earlier sales tax framework under SRO 297(I)/2023. Under the amendment, locally made hybrid vehicles with engines up to 2,000cc will no longer fall under Table II of the earlier notification, which had placed certain locally manufactured vehicles under a 25 percent sales tax rate. The decision brings relief to hybrid car buyers after the previous concessional tax system expired on June 30, 2026. Before that expiry, locally manufactured hybrids had benefited from lower rates, including 8.5 percent for vehicles up to 1,800cc and 12.75 percent for those between 1,801cc and 2,500cc. The lower rate could reduce the tax burden on eligible locally assembled hybrid cars. However, the actual reduction in showroom prices will depend on how much of the tax saving manufacturers pass on to customers.