The federal government is reportedly reviewing a proposal to raise the General Sales Tax (GST) on small, locally assembled cars in the upcoming budget for the fiscal year 2025-26. The increase would apply to vehicles with engine capacities of up to 850cc.
Currently, the GST on these cars stands at 12.5 percent, but officials are considering raising it to 18 percent as part of broader efforts to enhance revenue collection. If implemented, the tax hike would lead to a notable increase in the prices of popular entry-level vehicles.
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One of the most affected models would be the Suzuki Alto, widely regarded as one of Pakistan’s best-selling cars. As of June 2025, the Suzuki Alto VXR is priced at Rs2,827,000, while the VXR AGS and VXL AGS models cost Rs2,989,000 and Rs3,045,000 respectively.
In addition to the GST revision, another suggestion being reviewed involves raising levies on all petrol and diesel-powered vehicles to encourage the use of electric cars.
The federal budget for 2025-26 is expected to be presented on June 10. Alongside vehicle-related changes, the Federal Board of Revenue (FBR) has also proposed adjusting tax rates on interest income from bank deposits and savings schemes.
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Currently, interest income is taxed at 15 percent for tax filers and 35 percent for non-filers. Under the new proposal, these rates would increase to 17 percent and 37 percent respectively. However, final approval from the International Monetary Fund (IMF) is still pending.
The IMF has asked for detailed tax plans as the government works to balance tax relief measures for salaried individuals with the need to address revenue gaps caused by a slowing formal economy and various exemptions.