Federal Excise Duty on Luxury Vehicles and EVs — Budget 2026-27
Luxury on wheels now carries federal excise
Budget 2026-27 brings Federal Excise Duty (FED) onto luxury vehicles — including luxury electric vehicles (EVs) and imported luxury vehicles — through a newly introduced Table 1A in the federal excise framework. It is a clear signal that high-end mobility, even when electric, is treated as discretionary consumption and taxed accordingly.
What the new Table 1A does
Table 1A is the vehicle through which the budget applies FED to luxury and luxury electric vehicles and imported luxury vehicles. Rather than amending an existing schedule line by line, the government creates a dedicated table to house this new category of excisable goods. The headline points are:
- Luxury vehicles now attract FED.
- Luxury EVs are explicitly included — being electric does not exempt a high-end vehicle.
- Imported luxury vehicles are covered.
Why luxury EVs are included
EV adoption is generally encouraged — and elsewhere in Budget 2026-27 the EV CKD (completely-knocked-down) sales-tax exemption is extended to 30 June 2027. But there is a difference between supporting affordable, mass-market electrification and subsidising luxury. By bringing luxury EVs under FED, the government keeps incentives focused on accessible models while ensuring premium electric vehicles contribute revenue like other luxury goods.
A note on the policy balance
| EV-related measure | Budget 2026-27 treatment |
|---|---|
| EV CKD sales-tax exemption | Extended to 30 June 2027 (supports affordable EVs) |
| Luxury EVs (FED) | Now subject to FED under Table 1A |
Read together, the two measures show a deliberate split: encourage everyday electrification, tax the luxury tier.
What buyers and dealers should expect
- Higher all-in cost for luxury and luxury electric vehicles once FED is applied.
- Repricing by dealers to reflect the new excise.
- Clearer documentation of which models fall inside the luxury definition.
- Modernised administration: FED now sits alongside faceless audits, e-invoicing and production monitoring.
Getting the accounting right
Dealers handling luxury vehicles must apply FED correctly on top of any sales tax and withholding, reflect it in invoices, and keep audit-ready records for faceless excise audits. Zaffre Axon centralises this: Zaffre Tech's platform configures excise, sales tax and withholding once and applies them consistently across invoices and finance. The Zaffre HRM module keeps payroll, EOBI and allowances correct for showroom and back-office staff — so the whole business stays compliant.
Bottom line
Budget 2026-27's new Table 1A brings FED onto luxury vehicles and luxury EVs, while everyday EVs keep their CKD exemption to mid-2027. Dealers and buyers of premium vehicles should expect a higher all-in cost and tighter documentation.
References: Finance Act 2026 (Federal Budget 2026-27); Federal Excise Act 2005; Sales Tax Act 1990; FBR.
Book a demo of Zaffre Axon to see how Zaffretech keeps excise, sales tax and withholding compliant across every vehicle transaction.