Islamabad, May 18, 2025 — In a major policy shift aimed at liberalizing trade and boosting industrial efficiency, Pakistan has announced plans to phase out additional duties and taxes on raw materials used in the auto sector.
The move is part of the broader National Tariff Policy 2025–2030 and reflects the government’s commitment to reforming its tariff regime in line with international best practices.
According to the latest country report released by the International Monetary Fund (IMF), Pakistan has pledged to eliminate all additional duties—including import and sales taxes—that are currently imposed on “localized” components and inputs used in the auto sector. The government also plans to dismantle the system of special duties applied to imports designated for this sector. These reforms will affect tariff lines covered under the 5th Schedule to the Customs Act as well as SRO 655(I)/2006, which has historically governed incentives for local auto manufacturers.
The reform process will be carried out gradually to avoid disruptions in the auto sector and to allow businesses time to adjust. The IMF report notes that this approach is consistent with the phased implementation strategy outlined in the National Tariff Policy, which seeks to enhance competitiveness and reduce cost inefficiencies across industries.
Importantly, the policy will also apply to new electric vehicle (EV) production. In this context, tariffs and preferential tax treatments for certain EV-related inputs will be reviewed and regularized to ensure a level playing field across the auto sector.
By July 2026, the government aims to extend this principle—removing preferential treatment of domestic production—to other sectors of the economy. This wider application will be rolled out gradually through fiscal year 2030, in consultation with relevant ministries and industry stakeholders.
The reform is expected to improve transparency, promote fair competition, and enhance investment prospects in the auto sector, which has long been protected through special duties and tax incentives. With these changes, Pakistan hopes to position its auto sector for sustainable growth, technological advancement, and increased integration into global supply chains.