ISLAMABAD: The government has decided to gradually phase out additional customs duty and regulatory duty on imported vehicles as part of a new auto sector reform plan aimed at modernizing the industry and improving market competition.
The federal government is preparing to implement a new “Auto Sector Policy” starting July 1, 2026. Initial consultations on the policy draft have already begun with the International Monetary Fund (IMF). The policy focuses on reducing tariffs, improving transparency in the import system, and enhancing the quality standards of locally assembled vehicles.
According to the proposed plan, additional customs duty and regulatory duty on imported vehicles will be gradually abolished. From the fiscal year 2027, these duties will be reduced by 10 percent annually, with a complete phase-out expected over the next four years. Customs duty rates will also be gradually lowered until 2030 under the long-term framework.
The policy further introduces major changes in the import regime for used vehicles. After fiscal year 2027, imports of vehicles up to seven years old will be allowed. However, vehicles older than five years will be required to meet strict safety and environmental certification standards before being cleared for import.
In addition, the government is introducing new legislation aimed at strengthening safety standards in locally manufactured vehicles. The proposed law will enforce international safety benchmarks in domestic auto production and will be presented in Parliament for approval.
