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The government has announced a new carbon tax on fuel-based vehicles to encourage the shift towards electric vehicles (EVs) in Pakistan under the Finance Act 2025.
According to the Federal Board of Revenue (FBR), the tax applies to all petrol and diesel cars and is now effective.
As per FBR, the tax will be collected from local manufacturers for locally-made vehicles. However, buyers of imported fuel cars will pay the tax at customs during import clearance.
The tax rates are based on engine size: 1 percent for small cars (under 1300cc), 2 percent for mid-size (1300–1800cc), and 3 percent for larger vehicles (above 1800cc). Trucks and buses will pay 1 percent.
Officials said the carbon tax on fuel-based vehicles is part of Pakistan’s broader climate efforts, aiming to reduce pollution and push citizens to choose electric over petrol or diesel.
The government said the policy supports international clean energy goals. It also ensures local compliance with upcoming environmental standards and climate agreements adopted by other developing countries.
Dealers estimate car prices may rise significantly. Small cars may become costlier by Rs 20,000–50,000, while luxury vehicles could see a price hike of over Rs 100,000 due to tax.
The FBR is planning additional EV incentives, including duty cuts and subsidies. Officials believe this package will help accelerate Pakistan’s transition to more sustainable transportation in coming years.
“This is a bold first step toward greener mobility,” said an FBR spokesperson. “We hope people will make the switch to electric vehicles sooner than expected.”
