Tax Expenditure Report 2026 shows automobile industry accounted for nearly 57% of total customs duty concessions in FY2024-25
ISLAMABAD: Pakistan’s automotive industry emerged as the largest beneficiary of customs duty exemptions during fiscal year 2024-25, receiving tax relief exceeding Rs258 billion, according to the Federal Board of Revenue’s (FBR) Tax Expenditure Report 2026.
The report revealed that total customs duty tax expenditure amounted to Rs499.136 billion, with the automotive sector accounting for nearly 57 percent of all customs duty concessions granted by the government during the fiscal year.
The tax incentives were distributed among original equipment manufacturers (OEMs), auto parts vendors, and importers of completely knocked down (CKD) kits and electric vehicle (EV) components, underscoring the government’s continued support for Pakistan’s automobile manufacturing and assembly industry.
According to the report, original equipment manufacturers (OEMs) received the largest share of customs duty exemptions, amounting to Rs219.604 billion under SRO 656(I)/2006 issued under Section 19 of the Customs Act.
Meanwhile, auto parts vendors benefited from customs duty concessions worth Rs41.699 billion under SRO 655(I)/2006, providing continued support to the domestic auto parts manufacturing sector and strengthening the industry’s local supply chain.
The report also showed that imports of CKD kits and electric vehicle-specific components received customs duty exemptions totalling Rs23.864 billion under the Fifth Schedule of the Customs Act, reflecting government efforts to promote local vehicle assembly and accelerate the transition towards electric mobility.
Outside the automotive industry, the second-largest category of customs duty concessions comprised exemptions available under Part III of the Fifth Schedule of the Customs Act, covering the poultry, textile and other sectors, with tax expenditure estimated at Rs76.118 billion.
Customs duty relief on the import of plant, machinery and capital goods reached Rs38.471 billion, supporting industrial expansion and investment across various sectors of the economy.
The pharmaceutical sector also received significant incentives, with customs duty exemptions on the import of active pharmaceutical ingredients (APIs) amounting to Rs32.350 billion.
In addition, customs duty concessions worth Rs26.627 billion were granted on essential edible items, edible oil and export-sector inputs, while a range of other exemptions collectively accounted for Rs40.404 billion in tax expenditure.
The Tax Expenditure Report 2026 highlights the substantial fiscal cost of customs duty incentives, with the automotive industry remaining the single largest recipient of such concessions during FY2024-25. The findings underscore the government’s continued reliance on targeted tax incentives to support industrial production, enhance manufacturing competitiveness and encourage investment in priority sectors.