What Changed in Pakistan’s Import Tax Policy for CBU Cars
The federal government has lowered several import taxes on completely built up, or CBU, passenger vehicles. This change took effect from July 1, 2026, once parliament approved the Finance Bill for the new fiscal year.
The biggest shift involves the Regulatory Duty and Additional Customs Duty that importers pay when a CBU car enters Pakistan. Both rates have come down for most mainstream imported vehicles.
Which Import Taxes Were Reduced
Regulatory Duty slabs that once reached as high as 50 percent have been brought down to as low as 20 percent for several vehicle categories. A lower slab that used to sit at 10 percent has also been trimmed to 8 percent.
Additional Customs Duty has been reduced across multiple tiers as well. At the same time, the budget introduces a fresh Federal Excise Duty on high value electric vehicles, which did not exist before.
| Tax Component | Previous Rate | New Rate |
|---|---|---|
| Regulatory Duty slab | Up to 50% | As low as 20% |
| Lower RD slab | 10% | 8% |
| Additional Customs Duty | Higher multi tier rates | Reduced across categories |
| Luxury EV Federal Excise Duty | Not applicable | 30% to 40% on high value EVs |
Why the Government Reduced Import Duties
Pakistan has long kept high tariffs on imported cars to protect local assembly plants and save foreign exchange. At the same time, buyers have often complained about limited choice, long delivery waits, and high prices in the local market.
According to official notifications published on the Federal Board of Revenue customs tariff portal, the FY2026-27 reforms aim to simplify import taxes and improve competition, while still protecting revenue through new charges on luxury imports.
Lower taxes on mainstream cars can boost market activity and consumer choice. New excise duties on premium electric vehicles help the government avoid a major revenue gap. For more background on how this budget is reshaping the wider car market, our earlier coverage of the budget’s impact on car prices explains the full picture.
Which Imported Cars Could Become Cheaper
The biggest winners are expected to be mainstream imported vehicles. Popular Japanese hybrids and compact SUVs are likely to become more affordable for everyday buyers.
Vehicles that could benefit include the Toyota Corolla import, Toyota Vezel, Honda Vezel Hybrid, Honda Civic import, Honda CR-V, and several Hyundai, Kia, MG, and BYD imported models. Chinese and Korean imports may also become more competitive against locally assembled alternatives.
How Much Prices May Fall
Industry estimates and early dealer expectations point to a wide range of savings, depending on the vehicle category and its value.
| Vehicle Category | Estimated Reduction |
|---|---|
| Mainstream imported cars | PKR 100,000 to PKR 600,000 |
| Compact SUVs | PKR 500,000 to PKR 1 million |
| Mid size SUVs | PKR 2.5 million to PKR 4 million |
| Luxury SUVs | PKR 5 million to PKR 10 million or more |
| Entry level EVs | PKR 400,000 to PKR 800,000 |
The Toyota Vezel remains one of the most popular imported hybrid crossovers in Pakistan. Dealer estimates suggest its price could drop between PKR 500,000 and PKR 800,000, depending on the import category and valuation method used.
Honda Vezel Hybrid variants could see reductions between PKR 600,000 and PKR 1 million. The final numbers will still depend on the import invoice and customs calculation for each unit.
Luxury SUVs May See Multi Million Rupee Savings
The impact grows larger as vehicle prices go up. Imported Toyota Prado models could become cheaper by PKR 2.5 million to PKR 4 million.
Even with these cuts, large engine taxes, registration charges, and other luxury levies will still reduce the final savings that reach the buyer.
Electric Vehicles Face a Different Tax Rule
The FY2026-27 budget treats electric vehicles differently from petrol and hybrid cars. Entry level imported EVs continue to get preferential tax treatment.
Premium EVs now face a new Federal Excise Duty. Imported EVs priced below roughly PKR 2 crore stay relatively protected. Those priced between PKR 2 crore and PKR 3 crore face a 30 percent duty, while EVs above PKR 3 crore face 40 percent.
This means costly electric models may stay expensive even after the customs duty cuts. Buyers looking at entry level EVs should also read our report on rising EV battery costs for Pakistani buyers, since battery pricing plays a big role in the final on road cost.
Cars that currently fall below the higher tax brackets include the BYD Atto 3, some MG electric models, and select compact Chinese EV imports. Dealer estimates suggest the BYD Atto 3 could become PKR 400,000 to PKR 800,000 cheaper under the revised rules.
Impact on Pakistani Buyers and Dealers
Pakistan’s imported car market reacts fast to tax changes. Even small duty cuts have historically pushed up demand, especially for hybrid and compact SUV imports brought in through personal baggage and transfer of residence schemes.
A lower tax bill does not always mean an instant price cut at the showroom. Some dealers have absorbed part of past tax savings to protect their margins, particularly when supply stays tight. Competition between dealers usually decides how much of the relief actually reaches buyers.
Import volumes will also depend on the State Bank of Pakistan and commercial banks, since importers still need access to foreign currency and banking channels. Past restrictions on letters of credit have slowed vehicle imports even when tax rates were favourable. This is separate from ongoing infrastructure work such as the Rawalpindi Ring Road project, which is also shaping transport and development priorities across the twin cities this year.
Pressure on Local Car Assemblers
Pakistan’s domestic auto industry has enjoyed tariff protection for years. Lower duties on imported cars could increase pressure on local assemblers, especially in the hybrid and crossover segments where imported models compete directly.
Industry observers expect local manufacturers to push for support through the upcoming Auto Policy 2026-31 discussions. Past governments have often balanced import tax cuts with incentives for local production and value addition.
Comparison With Previous Years
This year’s reforms mark one of the largest shifts in vehicle import taxation Pakistan has seen in recent memory.
| Fiscal Year | Policy Direction |
|---|---|
| FY2024-25 | Protection for local assembly |
| FY2025-26 | Limited tariff rationalisation |
| FY2026-27 | Major reductions in RD and ACD |
What Happens Next
The next step involves detailed customs notifications and valuation procedures. Importers and dealers are expected to release revised price lists over the coming weeks as they adjust to the new tax structure.
Further clarity may come through the Auto Policy 2026-31 framework. Market activity in the second half of 2026 will show how much of this tax relief actually reaches everyday buyers.
Frequently Asked Questions
Will imported cars definitely become cheaper in Pakistan?
Many imported vehicles are expected to become cheaper because of lower Regulatory Duty and Additional Customs Duty rates. Final prices still depend on exchange rates, customs valuation, and dealer pricing decisions.
Which vehicles may benefit the most from the tax cuts?
Mainstream imported hybrids and compact SUVs are likely to see the biggest benefit. Popular examples include the Toyota Vezel, Honda Vezel Hybrid, and several Chinese EV models.
Are luxury vehicles included in the tax reduction?
Yes. Luxury SUVs may also become cheaper, although the actual savings vary because of engine size taxes and other levies that still apply.
What changed for electric vehicles under the new budget?
Imported EVs priced below roughly PKR 2 crore remain relatively favourable. Premium EVs priced above that level now face new Federal Excise Duty charges of 30 to 40 percent.
When will buyers actually see lower prices?
Dealers and importers are expected to issue revised price lists over the coming weeks as customs departments finalise valuation under the new rules.
Why did the government cut import taxes on cars now?
The government wants to increase competition and consumer choice in the car market while still protecting revenue through new levies on premium and luxury imports.
