Federal Budget Announces Higher Taxes on Luxury Vehicles
The federal budget unveiled in the National Assembly this week includes new tax measures targeting luxury vehicles and certain petroleum products. Finance Minister Muhammad Aurangzeb presented these proposals during his presentation of the budget for fiscal year 2026-27.
A Federal Excise Duty (FED) will be imposed on all petrol and diesel vehicles, particularly sports utility vehicles (SUVs), with engine capacities ranging from 2,000cc to 3,000cc. The minister also announced an increase in the existing excise duty for vehicles with engine capacities exceeding 3,000cc.
The measures aim to create a more balanced taxation framework for the automobile sector and curb luxury vehicle imports that place additional strain on Pakistan’s foreign exchange reserves. Additionally, electric vehicles valued above Rs20 million will be brought into the Federal Excise Duty regime, subjecting high-end EVs’ import to further taxation.
However, incentives for environmentally friendly transport will continue. Existing concessions for electric motorcycles, rickshaws, and buses remain in place. The finance minister also mentioned that a committee formed by Prime Minister Shehaz Sharif is reviewing a new auto policy, which may lead to further reforms in the automobile sector.
Separately, the government has proposed imposing a Federal Excise Duty of Rs80 per litre on white spirit and mineral turpentine oil, products often used in illegal adulteration of petrol and other petroleum products. The new duty aims to discourage fuel adulteration and improve fuel quality for consumers across the country.