Federal Budget 2026-27 introduces higher taxes on imported luxury vehicles with engine capacities above 2000cc.
Pakistan’s federal budget for 2026-27 has proposed significant tax measures for the automotive sector, with luxury vehicles expected to become considerably more expensive.
The government has introduced a new Special Excise Duty (SED) targeting imported vehicles with larger engine capacities, a move aimed at increasing revenue collection and regulating imports.
According to the budget 2026-27, the new duty will apply to imported motor cars, SUVs, station wagons, double-cabin 4×4 pickup vehicles, and racing cars designed primarily for passenger transport.
Special Excise Duty Rates:
The government has created two separate tax brackets based on engine displacement. Imported vehicles with engine capacities exceeding 2000cc but not exceeding 3000cc will be subject to a 40 percent ad valorem Special Excise Duty.
Meanwhile, vehicles with engine capacities above 3000cc will attract an even higher 41 percent ad valorem duty.
The proposed taxation is expected to substantially increase the prices of premium and luxury vehicles in Pakistan, potentially affecting consumer demand in the high-end automobile segment.
Industry stakeholders believe the move may discourage imports of expensive vehicles while generating additional revenue for the national exchequer.
In addition to imposing the new duty, the government has proposed granting the Federal Board of Revenue (FBR) authority to determine the time, mechanism, procedure, mode, and manner for collecting the Special Excise Duty. This would provide the tax authority with flexibility in implementing and enforcing the new levy.
The proposed measure forms part of the government’s broader fiscal strategy under Budget 2026-27 to strengthen revenue generation and manage external account pressures.
This new tax regime could significantly reshape Pakistan’s luxury automobile market and further raise the cost of owning high-end imported vehicles.
