Government Launches Second Phase Of Tariff Reforms

The federal government has announced the second phase of its tariff rationalisation initiative, proposing extensive reductions in customs-related duties and regulatory levies as part of a broader trade liberalisation strategy. The proposed measures are expected to reduce federal revenue by approximately Rs143.4 billion during FY2026-27 while advancing the government's objective of creating a more competitive and export-oriented economy.

Under the proposed reforms, Pakistan's average tariff rate is projected to decline from 16.56% to 13% during FY2026-27. The measures form part of the implementation framework of the National Tariff Commission-supported National Tariff Policy 2025-2030 and are aligned with commitments undertaken by Pakistan under its programme with the International Monetary Fund (IMF).

While the maximum customs duty rate will remain unchanged at 50%, the government has proposed substantial reductions in both Additional Customs Duties (ACD) and Regulatory Duties (RD) across a large number of tariff lines.

Under the revised ACD framework, duties currently imposed at 6% will be reduced to 4%, duties levied at 4% will be reduced to 2%, and duties imposed at 2% will generally be abolished, subject to limited sector-specific exceptions.

Similarly, the government has proposed a significant restructuring of Regulatory Duties. All RD rates exceeding 20% will be capped at 20%, while duties at or below 20% will generally be reduced by 20%. Lower RD slabs of 1%, 2%, and 2.5% are proposed to be abolished in most cases, except where protection is considered necessary for export-oriented industries or domestic manufacturing sectors.

The proposed reforms were presented before the Senate Standing Committee on Finance and Revenue, chaired by Saleem Mandviwalla, as part of the government's wider economic strategy aimed at reducing trade barriers, improving industrial competitiveness, and gradually exposing domestic industries to greater international competition.

Government officials informed the committee that the tariff reforms constitute a key component of the National Tariff Policy 2025-2030, which seeks to modernise Pakistan's trade framework and promote sustainable economic growth through increased efficiency and competitiveness.

During the briefing, the Secretary of Commerce explained that the policy is intended to simplify the tariff structure, lower the cost of imported industrial inputs, and create a more predictable and transparent business environment capable of attracting investment and supporting export growth.

According to officials, the reforms are specifically designed to reduce anti-export distortions within the tariff regime, lower production costs for industry, and enhance Pakistan's competitiveness in regional and international markets.

The committee was also briefed on proposed amendments relating to the commercial import of used motor vehicles.

Under the revised policy, the existing additional regulatory duty of 40% imposed on imported used vehicles will be reduced to 30%. Furthermore, the current five-year age restriction applicable to commercially imported used vehicles is proposed to be abolished.

Government representatives clarified that despite the relaxation of import restrictions, all imported vehicles will continue to be subject to applicable quality assurance, safety, and environmental compliance standards.

Officials described the automobile-related reforms as one of the most significant aspects of the latest tariff rationalisation package, reflecting the government's intention to progressively liberalise the automotive market while preserving appropriate regulatory safeguards and consumer protection requirements.

The broader reform package represents a continuation of Pakistan's efforts to restructure its tariff regime, reduce protectionist barriers, encourage industrial efficiency, and foster a more competitive economic environment conducive to exports, investment, and long-term growth.