Pakistan, June 18 -- The federal government has withdrawn its plan to raise the sales tax on hybrid cars up to 1800cc. It will keep the current 12.5% rate instead of increasing it to 18%, as originally suggested in the finance bill. Officials say this change could cost the government about Rs7 billion in revenue.

This is the second time in a year the government has reversed a decision on hybrid vehicle taxes. According to the FBR chairman, the hike was mentioned during the budget speech, but the policy won't allow a tax increase before June 2026. He confirmed the sales tax on hybrid vehicles would stay unchanged as per the auto policy.

However, the government has decided to go ahead with a tax increase on small cars up to 850cc. These c...