The budget 2026-27 aims to lower federal excise duty on premium-class international travel from July 2026.
The federal government has proposed significant reductions in Federal Excise Duty (FED) on premium-class international air travel under the Pakistan Budget 2026-27.
The proposed relief applies to club, business, and first-class air tickets issued on or after July 1, 2026, aiming to reduce the tax burden on international travelers.
According to an analysis of the Budget 2026-27 by KPMG, the government plans to revise FED rates for passengers departing from Pakistan on international journeys.
The move is expected to make premium air travel more affordable while rationalizing the existing tax structure on international flights.
Reduced FED Rates:
For destinations falling under IATA Traffic Conference Area 1, which includes North America, Central America, South America, and surrounding regions, the government has proposed a substantial reduction in FED.
The tax on club, business, and first-class tickets is proposed to decline from Rs350,000 to Rs50,000, representing one of the largest cuts in the new budget.
Similarly, passengers traveling to countries within IATA Traffic Conference Area 2, covering the Middle East and Africa, may benefit from a significant decrease in FED. Under the proposal, the duty would be reduced from Rs105,000 to Rs25,000.
Travelers heading to European destinations are also expected to receive tax relief. The proposed budget suggests lowering the FED on premium-class tickets for Europe from Rs210,000 to Rs40,000, potentially reducing travel costs for frequent international passengers and business travelers.
Meanwhile, the government has also proposed identical reductions for destinations included in IATA Traffic Conference Area 3, which encompasses the Far East, Australia, New Zealand, and Pacific Islands. The FED for these regions is proposed to fall from Rs210,000 to Rs40,000.
If approved by Parliament, these revised FED rates will come into effect from July 1, 2026. The measure reflects the government’s broader efforts to streamline taxation and support international connectivity through a more balanced tax regime for air travel.
