To protect local industry and ensure fair competition, the Federal Government of Pakistan is empowered to impose Special Customs Duty (SCD) on certain imported goods. This authority is granted under Section 18A of the Customs Act, 1969, as updated for tax year 2026.
Special customs duty is a policy tool, not a routine tax, and is applied in specific situations where imported goods directly compete with domestically produced items.
What Is Special Customs Duty?
Special Customs Duty (SCD) is an additional import duty imposed on selected goods to:
• Protect local manufacturers
• Prevent market distortion due to cheap imports
• Maintain parity between imported and locally produced goods
It applies only to specified goods listed in the First Schedule of the Customs Act.
Legal Basis: Section 18A of Customs Act, 1969
Under Section 18A, the Federal Government may:
📜 Levy special customs duty by Gazette notification on:
• Imported goods
• That are of the same kind as goods produced or manufactured in Pakistan
How Is the Rate of Special Customs Duty Determined?
Maximum Rate Cap
The rate of special customs duty:
• Cannot exceed the rate of federal excise duty
• As leviable under the Federal Excise Act, 2005
• On similar goods produced or manufactured in Pakistan
📌 This ensures parity between domestic and imported goods.
Does Excise Duty Exemption Stop Special Customs Duty?
❌ No. Important Clarification
Even if:
• Locally produced goods are fully or partially exempt from excise duty
The Federal Government may still impose special customs duty on imported goods of the same kind.
📌 This allows policy flexibility to support domestic industries when needed.
Special Customs Duty & Sales Tax – Key Clarification
⚖ Sales Tax Treatment
For the purposes of the Sales Tax Act, 1990:
• Special customs duty is NOT included in the value of supply
• Sales tax is calculated excluding special customs duty
📌 This prevents cascading tax effects.
When Does Pakistan Use Special Customs Duty?
✔ To protect infant or strategic industries
✔ To discourage dumping of cheap imports
✔ To stabilize local prices and production
✔ To align import policy with industrial policy
Snapshot: Special Customs Duty Explained
| Aspect | Explanation |
| Applicable Law | Section 18A, Customs Act 1969 |
| Applies To | Imported goods listed in First Schedule |
| Condition | Goods similar to locally manufactured goods |
| Rate Cap | Up to FED rate under Federal Excise Act 2005 |
| Excise Exemption Impact | No restriction on imposing SCD |
| Sales Tax Impact | Not part of value of supply |
Frequently Asked Questions (FAQs)
Is special customs duty applied to all imports?
No. It applies only to specified goods that compete with domestic production.
Is special customs duty permanent?
No. It is imposed through Gazette notifications and may be revised or withdrawn.
Is special customs duty different from regulatory duty?
Yes. Regulatory duty is broader, while special customs duty focuses on domestic industry protection.
Why Section 18A Matters in 2026
✔ Strengthens local manufacturing
✔ Ensures fair competition
✔ Supports industrial growth
✔ Provides policy flexibility to the government
Conclusion
Section 18A of the Customs Act, 1969, as applicable for tax year 2026, empowers the Federal Government to impose special customs duty as a targeted trade and industrial policy measure. By aligning import duties with domestic excise levels, Pakistan ensures balanced competition while safeguarding local industries.
📌 Stay informed about Pakistan’s customs and trade policy changes for 2026 with our expert explainers.
Disclaimer: This article is for general informational purposes only and does not constitute legal, tax, or professional advice. Although it is based on Section 18A of the Customs Act, 1969 as updated for tax year 2026, laws, rates, and government notifications may change. Importers, manufacturers, and traders should consult official Gazette notifications, FBR guidance, or a qualified tax or legal professional before making decisions. The publisher assumes no liability for reliance on this information.