Big changes ahead: Pakistan to gradually cut taxes on imported goods & cars

Pakistan’s government is planning a big change in how it taxes imported goods, especially vehicles. If you’re interested in cars or follow the auto industry, here’s what you need to know.

What’s changing?

The government wants to gradually phase out two types of import taxes:

1. Additional Customs Duty (ACD) – to be reduced over the next 4 years
2. Regulatory Duty (RD) – to be reduced over the next 5 years

These duties currently apply to many imported items, including cars and auto parts.

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Let’s talk cars

Right now, the taxes on imported vehicles are high:

• ACD on imported cars: about 7%
• RD: ranges from 15% to as high as 90%, especially for luxury cars

In the last budget, the government also added a 15% RD on used cars with engine sizes between 1300cc to 1800cc. This move made used imported cars more expensive, and the impact was clear:

• In 9MFY24: used cars made up 40% of local car sales
• In 9MFY25: that number dropped to 29%

Clearly, people bought fewer used imports because of the higher duties.

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What does this mean for the auto industry?

If the government starts reducing these taxes, imported vehicles could become cheaper in the coming years.

But there’s a catch: this could be a challenge for local car manufacturers and assemblers, as they may face more competition from cheaper imports.

At the same time, there’s good news for local assemblers too.

Under the new National Tariff Policy, the government plans to simplify the customs duty (CD) system. Currently, there are many tax brackets. The new plan will introduce just four simple slabs:

➡️ 0%
➡️ 5%
➡️ 10%
➡️ 15%

This change will make it easier to understand duties and reduce the cost of importing Completely Knocked Down (CKD) kits — the parts used by local carmakers to assemble vehicles.

Why it matters?

• For car buyers: If duties are cut, imported cars (especially used ones) could get cheaper in the future.
• For local carmakers: More competition from imports could mean a tougher market — but lower duties on parts may help reduce manufacturing costs.
• For the economy: A simpler, fairer tax system encourages better trade and investment.

Pakistan’s auto policy is moving toward gradual liberalization, which means more choices for consumers and hopefully more efficient local production.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →