Budget 2026-27: Proposed Tax Hike on Solar Panels, Electric and Hybrid Vehicles May Increase Prices

The federal government is considering significant tax increases on solar panels, electric vehicles (EVs), and hybrid vehicles in the upcoming Budget 2026-27, a move that could lead to higher prices for consumers.

According to sources, the proposed budget includes raising the General Sales Tax (GST) on solar panels from 10 percent to 18 percent. The government is also considering increasing GST on electric vehicles from 1 percent to 18 percent, while the tax rate on hybrid vehicles may be raised from 8 percent to 18 percent.

If approved, the measures are expected to increase the prices of electric cars, motorcycles, rickshaws, trucks, buses, electric pickups, tractors, and double-cabin vehicles.

Sources say the International Monetary Fund (IMF) is opposing sector-specific tax exemptions and has urged Pakistan to broaden its tax base. However, the government is reportedly trying to convince the IMF to allow certain incentives for environmentally friendly energy and transportation sectors.

The IMF has reportedly maintained that any tax relief provided to a sector should be accompanied by alternative revenue-generating measures to offset potential losses.

Meanwhile, Pakistan’s textile industry has demanded the immediate release of Rs327 billion in pending refunds and called for reductions in electricity, gas, and taxation costs. Industry representatives believe that potential relief measures could provide up to Rs100 billion in support to exporters.

Despite these demands, the likelihood of a major relief package for the export sector in the upcoming budget remains uncertain.