Amid the buzz surrounding Budget 2025-26, confusion gripped the auto sector after Finance Minister Muhammad Aurangzeb’s speech hinted at a possible hike in GST on hybrid vehicles. The announcement sparked immediate concern among potential buyers and industry insiders, as it suggested an increase in General Sales Tax from 8.5% to a staggering 18% on hybrid electric vehicles (HEVs). But was this claim actually true?
It turns out, the official Finance Bill 2025-26 tells a different story — and it’s one that hybrid car buyers will be relieved to hear.
Finance Bill 2025-26 Leaves Hybrid GST Rates Unchanged
Despite the Finance Minister’s statement during the budget speech, a close review of the Finance Bill 2025 shows no proposed increase in GST for hybrid vehicles. The document — which serves as the legally binding guideline — makes no mention of raising the tax rate on HEVs to 18%.
This contradiction immediately raised questions: Was it a misstatement, or a policy under consideration but not yet finalized?
What’s Still in Place for Hybrids?
According to the Sales Tax Act 1990, particularly Clause 73, the GST structure for hybrids remains unchanged:
- Up to 1800cc: 8.5% GST
- 1801cc to 2500cc: 12.75% GST
- Validity: Until 30th June 2026
Meanwhile, Clause 72 — which provided a lower 12.5% GST rate for locally assembled cars under 850cc — has been removed, meaning that segment now falls under the standard 18% GST rate. This adjustment further adds to the confusion, but it does not affect HEVs.
Why the Confusion?
It appears the GST hike announcement during the speech may have been premature or speculative. Insiders suggest that a GST revision for hybrids could be in the pipeline for the next fiscal cycle, i.e., Budget 2026-27. If that happens, the current rates may be revised after June 2026.
Final Word for Buyers
If you’re considering purchasing a hybrid car, this might be the ideal time. The government hasn’t increased GST on hybrids in Budget 2025-26 — but changes could be on the horizon next year. Acting now could save you significantly in future tax costs.
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