Govt plans sweeping cuts in auto import duties

June 21, 2026 (MLN): The government is preparing to slash import duties and taxes on vehicles across various engine categories under a new five-year Auto Industry Development Policy, in a move aimed at opening up the automotive sector, boosting competition and making vehicles more affordable for consumers.

The proposed framework came under discussion during a meeting of the National Assembly Standing Committee on Finance, chaired by MNA Syed Naveed Qamar, where lawmakers were briefed on the contours of the new policy set to replace the existing auto framework expiring on June 30.

Minister of State for Finance Bilal Azhar Kayani informed the committee that the government was in the final stages of formulating the new five-year roadmap for the automotive sector.

Major duty cuts on the anvil

Secretary Commerce Jawad Paul told the committee that the government intends to significantly lower duties and taxes on imported vehicles over the coming years as part of a gradual liberalization of the auto market.

Under the proposed plan, the cumulative duty and tax incidence on vehicles with engine capacities of 1,800cc and above will be reduced to 74% from the current level of as much as 156%.

For vehicles above 1,500cc, duties are proposed to be slashed to 57% from 91%, while taxes on cars ranging from 1,000cc to 1,500cc are expected to decline to 52% from the existing 76%.

Likewise, duties on small cars with engine capacities of up to 850cc are proposed to fall to 42% from the current 66%.

Officials said the proposed reductions are intended to gradually throw open the doors of the automotive market while aligning Pakistan's policies with its international trade commitments.

EV taxation sparks debate

The committee also examined the taxation framework for electric vehicles (EVs), with lawmakers raising eyebrows over proposed levies and the lack of adequate charging infrastructure.

Officials from the Federal Board of Revenue (FBR) informed the committee that electric vehicles priced up to $75,000, or roughly below PKR20 million, currently do not attract Federal Excise Duty (FED).

However, EVs valued above PKR20 million would be subject to the proposed excise duty under the Finance Bill.

Committee member Shahida Akhtar Ali questioned the government's push towards electric mobility without first laying the groundwork for charging infrastructure.

“If there are no charging stations, how will these vehicles operate?” she asked, adding that the country's power sector challenges must also be factored into the policy equation.

Lawmakers seek a coherent EV strategy

Several lawmakers urged the government to adopt a consistent and forward-looking approach towards electric vehicles.

MNA Sharmila Faruqui argued that the government should either wholeheartedly support the transition to electric mobility or refrain from introducing measures that could put the brakes on adoption.

She opposed the proposed taxes on EVs, calling them a policy contradiction at a time when countries around the world are rolling out incentives to promote cleaner transportation.

Committee member Hina Rabbani Khar noted that electric vehicles remain costlier than conventional internal combustion engine vehicles and said policymakers should remain mindful of the rapid pace of technological change in the sector.

“Automotive technology is evolving at breakneck speed, with new developments emerging every six months,” she observed.

Bilal Azhar Kayani acknowledged that even luxury electric vehicles currently enjoy a comparatively lighter tax burden than conventional vehicles, reflecting the government's broader objective of steering the country towards cleaner and greener mobility.

The committee directed relevant authorities to fine-tune the proposed framework and address concerns related to taxation, infrastructure and market competitiveness before the new auto policy is finalized.

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