ISLAMABAD: The federal government is considering major tax relief measures for Pakistan’s auto sector in the upcoming budget 2026-27, a move that could significantly reduce car prices and boost demand across the industry.
According to policy proposals, the government aims to lower import duties and introduce broader incentives for new energy vehicles as part of a revamped auto policy. The initiative is designed to support industry growth while accelerating the shift toward cleaner and more fuel-efficient transportation.
The proposed framework expands the scope beyond battery electric vehicles to include hybrid and other new energy vehicles. To streamline the tariff regime, authorities have suggested imposing a uniform 5 percent customs duty on hybrid vehicle parts.
In line with the National Tariff Policy, the government is also planning to abolish additional customs duties and gradually reduce regulatory duties on the auto sector, a step expected to ease cost pressures on manufacturers and importers.
Under the draft proposals, customs duty on auto parts may be capped at 5 percent, while completely built-up (CBU) vehicles could face a duty of around 10 percent. Meanwhile, Completely Knocked Down (CKD) kits are likely to be taxed within a range of 5 to 10 percent depending on vehicle category.
The policy also prioritizes green mobility, with electric bikes, rickshaws, and electric vehicles expected to receive exemptions from certain duties. These incentives aim to promote adoption of environmentally friendly transport and reduce reliance on fossil fuels.
The proposals are currently under review and will be finalized after consultations with key stakeholders, including international lending institutions.
If approved, these tax reforms could make vehicles more affordable for consumers while providing a much-needed boost to Pakistan’s struggling auto industry.
