Imported fossil fuel cars set to become costlier

Imported fossil fuel-powered cars, popular among middle-income buyers, are likely to become more expensive as the government moves to discourage their use and promote electric vehicles (EVs).

In the proposed budget for fiscal year 2026-27, the finance minister has suggested raising the total tax on imported petrol and diesel cars with engine capacities between 1,200cc and 1,600cc to 155.88 percent, up from 132.36 percent.

Taxes on mid-range internal combustion engine (ICE) vehicles will increase, while tax rates for other vehicle categories will stay the same.

At the same time, the government has proposed cutting duties on electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) as part of its push to encourage cleaner transport and reduce fossil fuel use.