New federal excise duty rates target imported cars, SUVs, and luxury vehicles with engine capacities above 2,000cc under the updated tax framework.
The Federal Board of Revenue (FBR) has imposed a federal excise duty (FED) of up to 92 percent on imported vehicles in Pakistan for the fiscal year 2026-27, significantly increasing the tax burden on high-engine-capacity cars and sport utility vehicles (SUVs).
The revised rates have been incorporated into the Federal Excise Act, 2005, as amended up to June 30, 2026.
The updated taxation measures form part of the government’s broader strategy to regulate imports, enhance revenue collection, and discourage the influx of luxury vehicles into the country.
According to the revised provisions, imported motor cars, SUVs, and other passenger vehicles falling under Pakistan Customs Tariff heading 87.03 will be subject to higher excise duties based on engine displacement.
The measures apply to vehicles primarily designed for transporting passengers, including electric vehicles with four wheels, station wagons, double-cabin 4×4 pickup trucks, and racing cars. Auto rickshaws remain exempt from the new FED structure.
Under the latest schedule, imported vehicles with engine capacities of 2,000cc and above but not exceeding 3,000cc will attract an 86 percent ad valorem federal excise duty. Meanwhile, imported vehicles with engine capacities exceeding 3,000cc will be subject to an even steeper 92 percent ad valorem FED.
The move is expected to substantially increase the landed cost of imported luxury and premium vehicles, making them significantly more expensive for consumers.
Industry experts believe the enhanced duty rates could reduce demand for imported high-end vehicles while encouraging buyers to consider locally assembled alternatives and hybrid models available in Pakistan.
The government has increasingly relied on taxation measures to manage the country’s import bill and support domestic manufacturing. The latest FED revision aligns with these objectives by imposing higher taxes on imported vehicles that generally fall within the premium and luxury segments of the automotive market.
Automobile industry stakeholders are closely monitoring the impact of the new duty structure on vehicle imports, dealership operations, and consumer purchasing behavior. Analysts suggest the higher tax rates may reshape Pakistan’s imported vehicle market during FY2026-27, particularly for SUVs and luxury vehicles equipped with larger engines.