ISLAMABAD: The federal government is likely to introduce significant tax measures targeting the renewable energy and automobile sectors in the upcoming Budget 2026-27, as it seeks to boost revenue while balancing industrial and energy policy objectives.
According to a budget preview released by Topline Securities, the government is considering increasing the General Sales Tax (GST) on solar panels from 10 percent to 18 percent. The proposed move could raise the cost of solar energy systems across Pakistan and potentially slow the growing shift of households and businesses from grid electricity to solar power.
Analysts believe that higher solar installation costs may indirectly benefit power producers and distribution companies by reducing the pace at which electricity consumers transition away from the national grid.
The automobile sector is also expected to face major tax changes. Under the proposed measures, GST on hybrid electric vehicles may be aligned with standard tax rates. Hybrid vehicles with engine capacities up to 1800cc could see GST rise from 8.5 percent to 18 percent, while vehicles above 1800cc may face an increase from 12.75 percent to 25 percent.
The expected tax hike could significantly increase the prices of hybrid vehicles, potentially affecting consumer demand for fuel-efficient and environmentally friendly transportation options.
Despite the proposed tax increases, the government is reportedly working on a New Energy Vehicle (NEV) framework aimed at promoting local assembly and manufacturing of green-energy vehicles in Pakistan. The policy is expected to support long-term development of the country’s sustainable transport sector.
The budget preview further indicates that the government may allocate around Rs. 830 billion in power-sector subsidies to address circular debt and finance tariff differential support. The allocation is expected to cover subsidies for power distribution companies as well as K-Electric.
The proposed measures suggest that the upcoming budget will focus on increasing revenue collection while maintaining support for key sectors. However, the changes could result in higher costs for consumers seeking to invest in renewable energy solutions and hybrid transportation.
While clean energy and environmentally friendly vehicles remain important policy priorities, the anticipated tax adjustments may make both sectors considerably more expensive in the short term.
