Govt To Cut Import Duties on 3,149 Tariff Lines in 2026-27 Budget
In a significant move to stimulate the industrial sector, Prime Minister Shehbaz Sharif has approved the second phase of the Tariff Reform Plan for 2025-2030, providing Rs200 billion in import-duty relief. The plan entails substantial reductions in customs and regulatory duties across various sectors, including automobiles, iron and steel, textiles, chemicals, and plastics.
The government will reduce the additional customs duty (ACD) on 3,149 tariff lines and lower regulatory duties (RD) to a maximum of 20 percent on more than 1,900 tariff lines in the upcoming Budget 2026-27. This will bring down effective tariff rates that currently range between 100 to 150 percent to approximately 50 to 70 percent.
Notably, the auto sector will see customs duties cut from 100 percent to 50 percent, with regulatory duties reduced from 50 percent to 20 percent. This adjustment will decrease the total import duty on vehicles from 150 percent to 70 percent, potentially reducing costs for consumers and businesses alike.
The planned reforms face opposition from some cabinet members and parliamentarians connected to the impacted sectors, but the Prime Minister has affirmed the government’s commitment to proceed.
Other details of the duty adjustments reveal that the remaining 2 percent ACD on 518 tariff lines will be eliminated. Additionally, the ACD will be reduced from 4 to 2 percent on 2,166 lines and from 6 to 4 percent on 465 lines. The government will also lower regulatory duties from the current ceiling of 50 percent to 20 percent across nearly 1,948 tariff lines in the 2026-27 fiscal year.
This marks the second phase of reforms, with the first phase having already delivered Rs200 to 250 billion in relief by eliminating various ACDs and decreasing the maximum RD from 90 percent to 50 percent. The simple average tariff rate has already dropped from 20.2 percent to 15.65 percent in the current fiscal year.
The roadmap targets further tariff reductions, aiming to bring the simple average tariff down to 13 percent in 2026-27. Projections show continued decreases to 11.5 percent in 2027-28, 10.25 percent in 2028-29, and 9.7 percent by the final implementation year of 2029-30. Customs duty slabs will be streamlined into a four-tier system with rates set at 0, 5, 10, and 15 percent.
The government will maintain customs duty exemptions on pharmaceutical products and medical instruments while withdrawing exemptions for items covered under the 5th Schedule of Customs.
Officials expect that these tariff rationalisations will enhance Pakistan’s export capacity by an estimated $5 billion over five years, bolstering the country’s competitiveness in global markets.