Islamabad, June 3, 2025: The government is expected to introduce a standard rate of 18% sales tax on locally manufactured or assembled motorcars with engine capacity up to 850cc in the budget 2025-26.
As per reports the Federal Board of Revenue (FBR) is reviewing the budget proposal to amend the Eighth Schedule of the Sales Tax Act 1990 as part of the upcoming fiscal budget preparations.
Currently, vehicles with engine capacity up to 850cc that are assembled or manufactured in Pakistan have a sales tax of 12.5%. If the FBR’s proposal gets approved, Entry No. 72 of the Eighth Schedule will be removed.
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According to officials, this measure is part of the government revenue generation strategy for FY2025-26. The FBR is evaluating all sales tax exemptions and concessional rates with the intention of gradually aligning them with the standard 18% rate in the coming fiscal year.
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Under the Sales Tax Act of 1990, all items listed in the Eighth Schedule are subject to the rates, terms, and conditions specified within that schedule. Removal of an entry implies withdrawal of the concession, thereby making the standard sales tax rate applicable.
This proposed adjustment is likely to impact the affordability of small engine vehicles, which are popular among middle and lower-income buyers across Pakistan.
