In a significant move under the Finance Bill 2025, the federal government has launched an extensive customs reform and tariff rationalization initiative aimed at simplifying the tax regime, reducing import costs, and aligning Pakistan’s trade practices with international standards. Central to these reforms is the introduction of new tariff slabs and the overhaul of existing duties, reflecting a policy shift toward greater efficiency and transparency in customs procedures.
As part of the tariff rationalization plan, the government has revised the existing tariff slabs, introducing new standard rates of 5%, 10%, and 15% to replace the older rates of 3%, 11%, and 16%. These restructured tariff slabs are intended to create a more predictable and business-friendly trade environment, while also encouraging legal imports and discouraging under-invoicing and misdeclaration.
To further incentivize the import of essential goods, the government has extended the zero-percent tariff slab, which previously applied to 2,201 tariff lines, to an additional 916 Pakistan Customs Tariff (PCT) codes. This expansion is designed to promote the inflow of critical items such as food, medical supplies, and industrial raw materials by minimizing tax burdens.
Alongside new tariff slabs, the Finance Bill introduces a wide-ranging reduction in regulatory and additional customs duties. Regulatory duties (RD) have been abolished on 554 PCT codes and reduced on 595 items. The maximum RD rate has also been brought down from 90% to 50%, easing the cost pressures on industries dependent on imported inputs.
Additional customs duties (ACDs) have been rationalized as well. For items falling under the zero, 5%, and 10% tariff slabs, the ACD has been eliminated entirely—reduced from 2% to 0%—covering 4,383 tariff lines. However, 95 specific items under these slabs will continue to attract a 2% ACD. Items falling under the 15% tariff slab will now be subject to a 2% ACD, down from 4%, while those in the 20% slab will see a reduction from 6% to 4%. Goods with tariffs exceeding 20% will have their ACDs cut from 7% to 6%.
The customs reform package also includes a strategic review of the exemption regime. A total of 479 entries from Parts I, III, and VII of the Fifth Schedule have been removed to limit unjustified exemptions, prevent tax distortions, and mitigate revenue losses.
In a bid to modernize the institutional framework, the government is introducing a range of administrative and legislative changes. Centralized Assessment Units (CAUs) and Centralized Examination Units (CEUs) will be established to bring uniformity and efficiency to the customs evaluation process. Digital Enforcement Units (DEUs) equipped with cutting-edge surveillance tools will be deployed to strengthen anti-smuggling efforts at key checkpoints.
To further enhance monitoring and prevent illegal trade, a nationwide Cargo Tracking System (CTS) will be introduced. Additionally, importers will now have the facility to file Goods Declarations without advance payment of duties and taxes, promoting faster clearance through pre-arrival processing.
The threshold for initiating contravention proceedings has been raised from Rs20,000 to Rs100,000, provided the duty amount is settled. This measure aims to reduce unnecessary litigation and streamline enforcement actions. Unclaimed or uncleared cargo left at ports beyond stipulated periods will now attract penalties, aiding in the decongestion of port facilities.
Dispute resolution timelines have also been adjusted to ensure speedier adjudication and appellate processes. Meanwhile, several customs departments are being merged and restructured to boost efficiency. Notably, the Directorate General of Intelligence and Investigation (Customs) and the Directorate General of Risk Management System will now function as a unified body.
New directorates are being introduced as well. The Directorate General of Customs Auction will oversee the transparent auctioning of seized goods, while the Directorate General of Communications and Public Relations will handle public awareness, stakeholder engagement, and information dissemination.
To enhance technical capabilities, customs authorities will now be empowered to recruit specialists—including auditors, accountants, and IT experts—on short-term contracts. A new Customs Command Fund will also be established to reward personnel for effective enforcement, especially in anti-smuggling operations.
Further tightening control over small parcel imports, the de-minimis value for courier and postal items has been slashed to PKR 500, closing loopholes often exploited to evade duties. Ports will also now strictly limit the scrapping and mutilation of goods to 10% of total cargo, and only on valid grounds.
To combat vehicle smuggling, a new rule has been introduced whereby any vehicle with a tampered chassis will be presumed smuggled, even if registered with a Motor Registration Authority.
These sweeping reforms—centered around rationalized tariff slabs, reduced duty burdens, and modernization of customs systems—reflect the government’s commitment to improving trade facilitation, enhancing transparency, and fostering economic growth through a more balanced and efficient customs framework.