Key Points
- Pakistan launches second phase of tariff rationalisation for 2026-27
- Government to remove five-year age limit on commercial imports of used vehicles
- Average tariff rate targeted to fall from 16.56 per cent to 13 per cent under IMF-backed reforms
ISLAMABAD: Pakistan has unveiled the second phase of its tariff rationalisation programme, announcing massive reductions in customs and regulatory duties and removing the existing age limit on commercial imports of used vehicles.
The abolition of the used cars five-year age limit and tariff incentives are part of a strategy to increase competition, lower industrial costs and integrate the economy more deeply into global trade flows.
The proposed measures were presented to the Senate Standing Committee on Finance and Revenue, where government officials said the reforms would result in an estimated revenue shortfall of Rs 143.4 billion during fiscal year 2026-27.
The initiative forms part of Pakistan’s National Tariff Policy 2025-2030 and aligns with commitments made under the country’s economic reform programme supported by the International Monetary Fund.
According to officials who briefed the committee, the average tariff rate is expected to decline from 16.56 per cent to 13 per cent during 2026-27, marking a significant step in the government’s long-term objective of simplifying Pakistan’s tariff structure and reducing protectionist barriers.
Trade liberalisation drive
Briefing the committee chaired by Saleem Mandviwalla, the Secretary of Commerce outlined plans to streamline customs duties and regulatory levies across a range of imported products.
The government will retain the maximum customs duty rate at 50 per cent but will substantially reduce Additional Customs Duties (ACD) and Regulatory Duties (RD).
Under the new framework, ACD rates will be lowered from six per cent to four per cent, four per cent to two per cent, and two per cent to zero, with limited exceptions.
Several low-end regulatory duty slabs, including one per cent, two per cent and 2.5 percent rates, will largely be eliminated except in sectors considered important for exports or domestic manufacturing.
Officials said the reforms are intended to reduce anti-export bias, lower production costs, improve industrial efficiency and create a more predictable trade environment for investors.
Major shift for vehicle imports
One of the most notable changes concerns Pakistan’s automobile sector. The government has decided to abolish the existing five-year age restriction on commercial imports of used vehicles, subject to compliance with prescribed quality, safety and environmental standards.
In addition, the extra 40 per cent regulatory duty currently imposed on commercial imports of used vehicles will be reduced to 30 per cent.
The move is expected to increase competition in the domestic auto market, potentially broaden consumer choice and place pressure on local assemblers to improve quality and pricing.
Industry analysts, however, say the long-term impact will depend on the final regulatory framework governing vehicle standards and import procedures.
Background and economic context
Pakistan has maintained one of the more complex tariff structures in South Asia, relying on a combination of customs duties, additional customs duties and regulatory duties to protect domestic industries and generate fiscal revenues.
Successive governments have faced criticism from exporters and manufacturers who argue that high import tariffs raise production costs and undermine competitiveness in international markets.
The National Tariff Policy 2025-2030 seeks to gradually shift Pakistan towards a more open and export-oriented economic model by reducing tariff distortions, encouraging industrial upgrading and attracting investment.
The latest reforms represent the second year of implementation under the policy and are considered a key component of the government’s overall economic restructuring and reform agenda.
Economists note that the tariff reductions could support industrial productivity and export competitiveness over the medium term. However, they may also increase competitive pressure on sectors that have historically benefited from high levels of protection.
