The Pakistani government has decided to remove restrictions on the commercial import of used vehicles as part of the second phase of the National Tariff Policy (2025-30), while also extending customs duty concessions for electric vehicle (EV) imports.

Federal Secretary for Commerce Jawad Paul informed the National Assembly Standing Committee on Finance that the government would abolish the existing five-year age limit on commercially imported used vehicles during the 2026-2027 financial year. The measure will be implemented under the second year of the National Tariff Policy and will remain subject to compliance with quality and environmental standards.

As part of the same policy framework, the government will reduce the additional Regulatory Duty (RD) imposed on commercial imports of used vehicles from 40% to 30% in 2026-27. According to officials, the additional duty will be phased out completely over the following three years.

To ensure that imported vehicles meet the required safety and environmental standards, the government plans to authorise selected Japanese inspection firms to conduct pre-shipment inspections before vehicles are shipped to Pakistan.

Tariff reforms and revenue impact

While briefing the committee on the Year-II budget exercise under the National Tariff Policy, Paul stated that the second phase of tariff reforms would result in an estimated revenue impact of PKR 143.4 billion (US$ 515.5 million) from July 1st, 2026. During 2025-26, reductions in customs duties, regulatory duties, and additional customs duties had already resulted in a revenue impact of PKR 125 billion.

According to the commerce secretary, customs duty slabs are being rationalised, with most tariff categories capped at 50%. However, the existing 90% duty on alcoholic beverages will remain unchanged. Tariffs applicable to the automobile sector will be aligned with the forthcoming Auto Policy 2026-2030.

The proposed reforms include reductions in customs duties, additional customs duties, regulatory duties, and exemptions under the Fifth Schedule. Thousands of tariff lines will be revised, while outdated exemption entries will be removed to reduce the average tariff structure.

During the meeting, members of the committee emphasised that tariff liberalisation should be introduced gradually to protect domestic industries while improving competitiveness and increasing exports. They stated that lower tariffs should ultimately reduce production costs and benefit consumers rather than solely favouring importers.

The committee recommended the phased implementation of reforms, periodic impact reviews, and safeguards for strategic industries. Separately, lawmakers reviewed proposed amendments to the Petroleum Products (Petroleum Levy) Ordinance, 1961, focusing on stricter action against defaulting Oil Marketing Companies (OMCs). The committee proposed the immediate suspension of fuel supplies to OMCs that fail to deposit petroleum levies within 30 days and called for the elimination of discretionary instalment facilities to strengthen revenue collection.

Revised customs duties for electric vehicles

Alongside broader tariff reforms, the Federal Board of Revenue (FBR) has notified revised customs duty rates for electric vehicle imports, effective from July 1st, 2026, following amendments introduced through the Finance Bill 2026.

Under the notification, a concessional customs duty rate of 25% will apply to imported four-wheeler electric vehicles, excluding vehicles valued above US$ 50,000. The concession will remain available until June 30th, 2027. Officials stated that the continuation of customs duty concessions forms part of the government's policy regarding electric vehicle imports.

Additional incentives for local EV assembly

The FBR has also introduced an additional incentive for manufacturers planning to assemble electric vehicles locally. Under the notified framework, imports of completely built-up (CBU) four-wheeler electric vehicles intended for local assembly and manufacturing will qualify for customs duty at 50% of the applicable concessional rate. This facility will remain available until June 30th, 2027.

However, the concession will be limited to a maximum of 100 units per company for each vehicle variant that is subsequently assembled or manufactured locally.

EDB certification and compliance monitoring

The concessionary duty treatment will only be available to companies that obtain approval and certification from the Engineering Development Board (EDB). The EDB will be responsible for verifying eligibility and ensuring that imported vehicles comply with the government's electric vehicle manufacturing and localisation requirements. Companies seeking to benefit from the reduced duty structure must fulfil all conditions prescribed under the applicable EV policy framework.

The board has also been tasked with monitoring compliance with the government's EV Policy 2020. According to the FBR, the EDB will immediately notify tax authorities if any manufacturer is found to be in violation of policy conditions or localisation requirements. In such cases, the FBR may suspend further imports by the company at the concessional customs duty rate, preventing additional vehicle clearances under the incentive scheme.

Pakistan's EV sector

Officials stated that the incentive framework is intended to encourage automakers to introduce new electric vehicle models and expand local production capabilities. The measures are also expected to facilitate technology transfer and attract investment into the automotive sector. The revised customs duty rates will come into force on July 1st, 2026, and will remain applicable until June 30th, 2027, unless revised through future financial measures.