The government has announced a substantial Rs. 120 billion reduction in import taxes for the upcoming fiscal year, aiming to streamline the customs framework and encourage foreign competition. However, import duties for the automobile sector remain unchanged.

This tax reform will simplify the tariff structure by reducing the number of customs duty slabs from five to four—0%, 5%, 10%, and 15%. The existing 3% slab will be eliminated, while the 11% slab will drop to 10%, the 16% slab to 15%, and the 20% slab will gradually phase out. Additionally, regulatory duties will be abolished over five years, and extra customs duties will be removed within four years.

While the finance ministry and Federal Board of Revenue endorse the plan, the commerce ministry has raised concerns, arguing that lower import duties might not necessarily reduce production costs, given high energy and input prices.

Prime Minister Shehbaz Sharif has also dismissed a proposal for six duty slabs in favor of a streamlined four-tier structure, aimed at enhancing Pakistan’s export competitiveness.