Budget 2025-26: Roadmap for liberalised vehicle imports unveiled

• Restrictions on used vehicles up to five years old to be lifted from Sept
• Age limit to be fully removed from July 2026; quality standards to remain mandatory
• 40pc regulatory duty to end by 2029 • Panel sends its proposals to Senate

ISLAMABAD: Finance Minister Muhammad Aurangzeb informed a parliamentary committee on Friday that restrictions on commercial imports of used vehicles up to five years old will be lifted from September, in line with an International Monetary Fund condition and as part of a tariff strategy to gradually phase out overprotected sectors.

As of July 1, 2026, the age limit for importing used cars and vehicles will be lifted entirely. However, while age restrictions will end, strict compliance with quality standards will remain mandatory.

Although the matter was not listed on the Senate Standing Committee on Finance and Revenue’s agenda, the minister disclosed the government’s four-year roadmap for used vehicle imports, which aims to align tax treatment for used and new vehicles.

The committee meeting was chaired by Senator Saleem Mandviwalla.

The committee concluded its morning session by addressing pending agenda items, while the evening session focused on finalising recommendations to be presented in the Senate on Saturday.

Used vehicle imports

The finance minister announced that Pakistan will resume commercial imports of used vehicles up to five years old, signalling a major shift in trade policy. He noted that the move could enhance the competitiveness of the auto sector and increase access to imported vehicles for the middle class, as the country fulfils its global fiscal obligations and adapts to evolving domestic demand.

Currently, commercial imports are restricted, even for cars that are just a month old. Under the Baggage Rules, only vehicles up to three years old — and up to five years for categories other than cars — are permitted for import by overseas Pakistanis under certain conditions.

Commerce ministry officials briefed the Senate committee that by the first quarter (July-September) of the new fiscal year, the government will issue a notification allowing commercial imports of used vehicles up to five years old.

These imports will be subject to a 40 per cent regulatory duty in addition to existing duties and taxes on new vehicles. From July 1, 2026, this duty will be gradually reduced: to 30pc in 2026, 20pc in 2027, 10pc in 2028, and fully eliminated by July 1, 2029. There will be no restrictions on importing any type of used vehicles, including heavy bikes.

It remains unclear whether the additional regulatory duty will apply to cars and other vehicles up to five years old imported under the Baggage Rules — specifically the Transfer of Residence and Gift schemes. Currently, the Baggage Rules permit the import of cars up to three years old and other vehicles up to five years old, subject to certain conditions.

It was clarified that vehicles brought in under the baggage scheme will require a minimum overseas residency of 700 days to qualify for exemptions.

According to the Ministry of Commerce, imports of used vehicles will continue to be subject to environmental and quality standards. However, from July 2026, while the age limit will be lifted for commercial imports, quality requirements will remain in force.

Currently, new car imports attract high duties and taxes. As part of ongoing tariff reforms, these levies will be reduced over the next five years, eventually capping at a maximum of 15pc. By the end of this period, the phased reduction of duties on new vehicles and the gradual removal of additional regulatory duties on used vehicles will be aligned.

Public Finance Management Act

Meanwhile, the parliamentary committee rejected the finance ministry’s proposed amendments to the Public Finance Management Act (PFMA), arguing that existing legislation already empowers institutions through parliament.

The ministry was directed to return with a formal draft of the revisions.

Finance ministry officials disclosed that when funds were requested from the Port Qasim Authority, the request was denied and the ministry was advised to contact the relevant department. A follow-up letter received no reply.

During proceedings, Senator Anusha Rahman sought clarification on the terms “surplus profit” and “idle cash”. Officials explained that surplus profit refers to annual financial gains, while idle cash denotes unutilised funds held in accounts during the fiscal year.

Senator Rahman recommended that companies be included within the scope of the PFMA alongside autonomous bodies — a suggestion the ministry accepted.

Meanwhile, the FBR provided an update on ongoing customs reforms to the committee.

The Member Customs Operations rep­orted that customs duties have been red­u­ced on 35pc of tariff lines, while new duty slabs of 5pc, 10pc and 15pc are being proposed to replace the existing 3pc, 11pc and 16pc tiers.

Additionally, duties will be eliminated on 916 more tariff lines, raising the total number of zero-rated lines to 3,117.

Published in Dawn, June 21st, 2025