Sales tax on hybrid vehicles likely to be reduced from 25% to 18%

The government is planning to reduce the sales tax on the import and local supply of hybrid vehicles from 25% to 18%.

Under the Finance Act 2026, the sales tax on hybrid vehicles was increased from 8.5% to 25%. However, the government has since concluded that the sharp increase adversely affected both the prices and demand for hybrid vehicles.

According to local media reports, a summary proposing the reduction has been forwarded to the Ministry of Finance.

The reduced sales tax regime for hybrid vehicles remained in force until June 30, 2026. However, the concession automatically lapsed after it was not extended under the Finance Act 2026.

Reports said the government has decided to lower the sales tax rate to provide relief to consumers and encourage the adoption of hybrid electric vehicles (HEVs) and electric vehicles (EVs).

At present, a 25% sales tax has been in effect on the import and local supply of hybrid vehicles since July 1, 2026.

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