Budget 2026-27 Car Taxes in Pakistan: FED on Big Engines, Luxury EVs & What Stays Cheap

In short: Budget 2026-27, presented 12 June 2026, proposes a new Federal Excise Duty on imported cars over 2,000cc (40%) and over 3,000cc (41%), and on luxury imported electric vehicles above Rs 2 crore (30% to Rs 3 crore, 40% beyond). It proposes doubling the fuel carbon levy to Rs 5 per litre, but keeps the 1% sales tax on locally assembled EVs (extended to June 2027) and leaves hybrids, e-bikes, registration advance tax and token tax unchanged — proposed to take effect 1 July 2026, pending the Finance Act.

Every June, the budget speech turns into a quiet referendum on what kind of car Pakistan wants you to drive. This year the answer was blunter than usual: a small, locally built, preferably electric one. When Finance Minister Muhammad Aurangzeb presented Budget 2026-27 on 12 June 2026, the auto-sector measures pulled in two directions at once — a fresh Federal Excise Duty aimed squarely at imported big-engine cars and expensive imported EVs, paired with extended relief for the locally assembled electric and hybrid vehicles the state is trying to nudge people toward. This post is the plain-English map of who pays more, who was spared, and which scary numbers from the pre-budget rumour mill never actually made it into law.

One caveat up front, and it matters more than usual this year because the headlines moved fast: a budget is a proposal. The figures below are as reported from the Finance Bill 2026, several confirmed against the bill text itself. They take effect from 1 July 2026 only once the National Assembly passes the Finance Act, and items can be amended or dropped before then. Treat the enacted position on fbr.gov.pk as the final word, and read this as the shape of the change, not a price list.

The Big Picture: Punish the Imported and the Thirsty

Strip away the detail and the budget's logic for cars is simple. The state wants three things at once: to protect its foreign reserves by discouraging expensive imports, to push the fleet toward electric, and to keep raising revenue from fuel. So the heavier taxes landed where all three goals overlap — imported vehicles with large engines, and imported electric vehicles expensive enough to count as luxury. Meanwhile the things the government wants more of on Pakistani roads — locally assembled EVs, hybrids, and electric two-wheelers — had their existing concessions extended rather than withdrawn.

That is a meaningful shift in tone. For years the auto file was mostly about protecting local assemblers from imports. This budget keeps that protection but layers an explicit engine-size and powertrain judgement on top: a 1,300cc locally built sedan and a 3,500cc imported SUV are now taxed as if they belong to two different moral categories. Here is how each piece works.

New FED on Imported Cars, by Engine Size

The centrepiece is a Federal Excise Duty (FED) on imported vehicles, scaled to engine capacity. FED is a duty charged as a percentage of value, and the Finance Bill 2026 adds a new schedule of it for large imported cars and SUVs. As drafted in the bill, the slabs are:

FED rates as reported from the Finance Bill 2026 (amendments to the First Schedule of the Federal Excise Act 2005). "Ad valorem" means the rate is applied to the vehicle's assessed value, so the rupee amount grows with price. These slabs are drafted under an "imported" heading.

A practical point worth dwelling on: the new 40% and 41% slabs are written in the bill under a heading describing imported cars, SUVs and other motor vehicles. So on the face of the text, this excise targets vehicles brought in completely built up (CBU) — the large imported SUVs and pickups, not the locally assembled fleet. Some post-budget coverage suggested the heavy excise would also catch locally assembled vehicles above 2,000cc, and that is a question worth confirming if you are eyeing a big locally built SUV, because the bill's literal wording and the secondary reporting don't fully agree. As always, the enacted Finance Act and FBR's notifications settle it. What is not in dispute is the direction: a 3,000cc-plus imported vehicle now carries one of the heaviest excise loads in the tax code, on top of the customs duty and sales tax it already pays.

The New Tax on Luxury Imported EVs

For a few years, importing an electric car was the rare corner of the auto market with almost no excise on it — part of the green-energy push. Budget 2026-27 moves to close that door at the top end. The bill introduces a value-based FED on electric cars, SUVs and pickups imported CBU for personal use, tiered by the import value (including customs duty):

Value-based FED on imported CBU electric vehicles for personal use, as reported from the Finance Bill 2026 (new entry in the First Schedule of the Federal Excise Act 2005). Previously these imported EVs carried 0% FED, so the 30% and 40% tiers are entirely new.

The design is deliberately a luxury tax. A mass-market imported EV under the Rs 2 crore line is untouched — the 0% band is preserved precisely so affordable electric imports keep flowing. It is the Rs 2 crore-plus imports, the high-end European and premium Chinese electric SUVs, that now carry 30% or 40% excise. And remember this FED is not the whole bill: an imported electric four-wheeler also faces customs duty (reported around 25% for vehicles valued up to US$50,000, a concession valid to 30 June 2027) and sales tax, which for imported EVs was reported as climbing toward the standard rate as the older exemptions expire. Stack those together and a luxury imported EV is now taxed much like any other luxury import — the green discount at the top has effectively gone.

What Was Kept Cheap: Local EVs, Hybrids & E-Bikes

The mirror image of the import crackdown is the relief that was extended rather than withdrawn. Several concessions were due to expire on 30 June 2026, and the pre-budget fear in the trade was that they would lapse and snap back to standard rates. They didn't:

• Locally assembled EVs keep the 1% sales tax. The concessional 1% sales tax on locally manufactured electric vehicles, and the duty exemptions on EV CKD (completely knocked down) kits and parts, were extended to 30 June 2027 — instead of jumping to the standard 18%. The CKD framework covers small electric cars and SUVs with batteries up to 50 kWh and light commercial EVs up to 150 kWh.
• Hybrids held their reduced rates. The lower sales tax on locally manufactured hybrid vehicles — reported at roughly 8.5% up to 1,800cc and 12.75% up to 2,500cc — was left unchanged into the new year rather than expiring.
• Two-wheelers were the clear winners. Electric bikes and e-scooters kept their concessions untouched, and the duty relief on the parts that go into locally made e-bikes and e-rickshaws continued. Electric buses (25 seats and above) and electric trucks imported CBU also keep a 1% sales tax to 30 June 2027.

The Levies You Don't See on the Windscreen

Two charges sit outside the FED story but change what a car costs to buy and to run, so they belong here.

The NEV Adoption Levy — a charge introduced in the 2025-26 financial year to nudge buyers away from combustion engines — carried into FY27 unchanged. It applies to internal-combustion vehicles by engine size, as a percentage of value:

NEV Adoption Levy as in force from 2025-26, on locally assembled and imported combustion vehicles; reported unchanged in Budget 2026-27. Charged on invoice value (local) or assessed value (imported).

The fuel carbon levy is set to double. The per-litre Climate Support Levy on petrol and high-speed diesel — Rs 2.5 per litre when it was introduced last year — is proposed to double to Rs 5 per litre for FY27, from 1 July 2026, as part of the country's commitments under its IMF programme. That does not touch the sticker price of the car, but it raises the cost of every kilometre you drive a petrol or diesel vehicle, which is exactly the point: it quietly tilts the lifetime maths toward electric. (A parliamentary committee questioned the levy during the budget debate, so confirm the final per-litre figure once the Finance Act passes.)

What Did Not Change — Including a Scary Rumour

Two things are worth flagging precisely because the pre-budget noise suggested otherwise.

The registration and token taxes held. The advance income tax collected when you register or transfer a vehicle (section 231B of the Income Tax Ordinance) and the annual token tax (section 234) were left at their existing rates, with only minor procedural tweaks in the bill. The value-based registration structure brought in by the Finance Act 2025 continues — broadly a percentage of the vehicle's value that rises with engine size for filers, with non-filers paying a multiple of the filer rate, and electric vehicles charged on value where engine capacity doesn't apply. The lesson there is the same as everywhere else in the tax code: being on the Active Taxpayer List materially lowers what you pay, a point our guide to becoming a filer walks through.

The 10–19.5% "carbon levy on big cars" never happened. In the run-up to the budget, reports circulated of an environmental or carbon levy of roughly 10% to 19.5% on vehicles above 2,000cc, complete with worked examples of lakhs added to popular SUVs. It is important to be clear: that vehicle levy did not make it into the Finance Bill 2026. What the bill actually does to large vehicles is the FED described above (40% and 41% on imported engines over 2,000cc and 3,000cc). The carbon levy that did rise is the per-litre one on fuel. If you saw a viral table of model-by-model price hikes tied to a 19.5% car levy, treat it as a proposal that was floated and not adopted — and check the enacted list before you let it change a buying decision.

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