Islamabad, June 21, 2025 – In a major policy shift, Pakistan is set to open its borders for the commercial import of five-year-old used and old vehicles starting from September 1, 2025, aiming to liberalize the auto market and boost customs revenue.
The announcement was made during the ongoing review of the Finance Bill 2025-26. Secretary Ministry of Commerce, Jawad Paul, informed the Senate Standing Committee on Finance that while the baggage scheme for overseas Pakistanis will continue to allow the import of up to three-year-old used vehicles, a new policy is being introduced for commercial importers. Under this new regime, imported vehicles up to five years old will be allowed into Pakistan for the first time in over a decade.
This policy adjustment marks a significant departure from earlier restrictions and is expected to impact the domestic auto industry as well as consumers. Initially, the commercial import of such vehicles will attract an additional 40% import tariff during the fiscal year 2025-26. However, this protection will be gradually reduced to 30% the following year, and fully eliminated over a four-year period. By 2029, the imported vehicle market in Pakistan will be virtually free of the additional duties.
Chairman of the Senate Committee, Saleem Mandviwalla, emphasized that the government should ensure equal treatment for overseas Pakistanis and commercial importers. He urged that the same five-year allowance be extended to the baggage scheme and that the 40% additional duty not apply to such vehicles.
The Ministry of Commerce also clarified that misuse of the gift scheme and other special import channels such as transfer of residence will be closely monitored. The government has reportedly received a No Objection Certificate (NOC) from the International Monetary Fund (IMF) for this liberalization move, which is seen as part of broader efforts to increase revenue and stabilize the economy.
Sources within the Commerce Ministry revealed that the Federal Board of Revenue (FBR) had strongly advocated for this change to boost revenue through increased imports. However, the State Bank of Pakistan (SBP) is expected to face challenges arranging foreign exchange for these transactions, as it will not remit forex for the import of five-year-old used cars.
The local auto industry, largely dominated by Japanese manufacturers, has voiced opposition to this policy change, citing concerns over market saturation and environmental standards. Despite resistance, the government remains committed to implementing this policy as part of a long-term vision to rationalize tariffs in the auto sector.
The new framework also outlines that standards and quantity caps will be enforced to prevent environmental degradation due to excessive influx of imported vehicles. Pakistan’s auto policy aims to bring import duties on Completely Built-Up (CBU) vehicles down to below 10% within five years, encouraging market competition and consumer choice.
This move signals a transformative step for Pakistan’s auto sector and could reshape vehicle affordability and availability for years to come.