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Budget Adds New Burden on Petrol, Diesel Car Buyers

Budget Adds New Burden on Petrol, Diesel Car Buyers

In a move that could further strain Pakistan’s auto sector and consumers alike, the federal government has introduced a new tax on petrol and diesel vehicles under the Budget 2025–26. The levy, targeting all internal combustion engine (ICE) vehicles, will be imposed at varying rates depending on engine size and will apply to both locally assembled and imported cars.

According to the Finance Bill 2025–26, ICE vehicles with engines under 1300cc will be taxed at 1% of the vehicle’s price, those between 1300cc and 1800cc at 2%, and vehicles above 1800cc at 3%. In addition, an across-the-board 1% levy will be added to all categories, further raising the cost of ownership.

Also Read: KP Govt Expected to Hike Salaries by 10% in Budget 2025-26

The tax will be collected at the manufacturing or import stage, but auto industry analysts say it will inevitably be passed on to consumers. The policy is expected to hit high-end and imported vehicles the hardest, with a potential surge in retail prices for these segments.

Industry insiders warn that the added cost comes at a time when the sector is already struggling with low demand, high input costs, and import limitations. “For larger vehicles, the combined impact of these levies will be far from negligible,” said a senior auto executive.

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