Govt to launch tariff cut phase in FY2025–26 under new policy

May 20, 2025 (MLN): The federal government is set to launch the first phase of its tariff reduction initiative in the fiscal year 2025–26 budget, as outlined in the National Tariff Policy 2025–30.

According to a circular issued by the Engineering Development Board (EDB) on May 17, 2025, this policy aims to gradually reduce import duties over the next five years to promote export-driven economic growth.

Under the reform plan, the number of customs duty slabs will be streamlined from five to four, with a maximum duty cap of 15% by the end of the policy period, down from the current top rate of 20%.

The updated duty structure will include rates of 0%, 5%, 10%, and 15%, as per the press release issued today.

The circular notes that, in accordance with the Prime Minister’s vision for export-oriented development, several major changes will be introduced under the new policy.

These include a four-year phase-out of the Additional Customs Duty (ACD), a five-year elimination of Regulatory Duty (RD), the gradual discontinuation of the Fifth Schedule by 2030, and the simplification of the duty slab system.

Currently, Pakistan operates with five customs duty tiers: 0%, 3%, 11%, 16%, and 20%.

The upcoming changes will see the 3% slab removed, with relevant items shifted to either 0% or 5%.

The 11% and 16% slabs will be adjusted to 10% and 15%, respectively, while the 20% slab will be gradually eliminated throughout the reform period.

The Fifth Schedule of the Customs Act—which regulates imports of capital goods and raw materials for industry—will be completely phased out over the next five years.

The EDB has requested feedback from all stakeholders on the proposed policy’s impact on industrial development, product competitiveness, export potential, and overall economic performance.

Prime Minister Shehbaz Sharif, while introducing the policy framework during a high-level meeting last week, called it a pivotal move for Pakistan’s economic future.

He emphasized that the reforms aim to establish a transparent, predictable, and investment-friendly tariff regime.

This initiative is part of a broader government strategy to stimulate economic revival through enhanced industrial efficiency, increased investment, and deeper integration of local industries into global value chains.

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