Effective From:

September 2025

What’s Changing?

  • Used car import limit extended:
    From 3 years → to 5 years old for commercial imports.

  • Flat 40% additional customs duty:
    Imposed on all imported vehicles, regardless of quantity.

  • Baggage scheme:
    Expected to align with the 5-year limit but will also carry the 40% duty.

  • Gift scheme:
    Remains unchanged.

Why This Matters

  • Aims to:

    • Expand consumer choices.

    • Increase government revenue.

    • Pressure local automakers to improve quality and pricing.

  • Part of broader IMF-aligned reforms.

Tariff Reform: A 4-Year Plan

  • 10% reduction in import duties per year (starting 2025).

  • Target: 0% duty by 2029 (if fully implemented).

  • Designed to open markets gradually, aligning with WTO norms.

Recent Tax Adjustments

  • Sales tax on small cars (up to 850cc) increased:

    • From 12.5% → 18%

    • Hits low-income buyers hardest.

  • Combined with the 40% customs duty, this reduces affordability, even for used cars.

Implications

Potential Benefits:

  • Greater vehicle variety.

  • Competitive pressure on local manufacturers.

  • Clarity in policy could attract long-term investment.

Potential Concerns:

  • High customs and sales taxes dampen affordability.

  • May benefit importers more than consumers unless local pricing adjusts.

  • Risk to domestic auto industry if reforms aren’t phased carefully.

What to Watch For

  • Will the 5-year import limit extend to baggage imports officially?

  • Will duty cuts continue annually as promised?

  • Could older vehicles (6–7 years) be allowed in future phases?

Final Thought

This policy marks a strategic shift toward liberalizing auto trade and modernizing tariff structures. Whether it delivers value to the average Pakistani will depend on:

  • Implementation consistency,

  • Balance between taxation and access, and

  • The domestic industry’s response to increased competition.