Govt to Remove Rs. 120 Billion Import Taxes in FY26 Budget, Excludes Any Relief for Automobile Sector

Prime Minister Shehbaz Sharif has approved a Rs. 120 billion cut in import taxes in the upcoming budget, but has decided to keep import duties on the automobile sector unchanged. This cut is to simplify the customs structure and open the economy to greater foreign competition over the next 5 years. This relief comes despite objections from the commerce and industries ministries, reported Express Tribune. The reform will reduce the number of customs duty slabs from five to four: 0 percent, 5 percent, 10 percent, and 15 percent. The 3 percent slab (972 items) will be eliminated. The 11 percent slab (1,121 items) will drop to 10 percent, the 16 percent slab (545 items) to 15 percent, and the 20 percent slab (2,227 items) will be phased out over time. Additional customs duties will be abolished over four years, and regulatory duties will be removed within five years. No changes will apply to automobile imports. The finance ministry and Federal Board of Revenue have supported the plan. However, the commerce ministry warned that the reduction in import duties contradicts tariff principles and may not lower production costs due to high energy and input prices. Meanwhile, the Prime Minister also rejected a proposal for six duty slabs and opted instead for a flatter structure for improving export competitiveness.