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In a significant policy shift aimed at liberalizing the auto sector and enhancing competition, the International Monetary Fund (IMF) has approved the Government of Pakistan’s proposal to allow the commercial import of five-year-old vehicles starting from September 2025. The decision, revealed during a briefing by the Ministry of Commerce to the Senate Standing Committee on Finance, marks a departure from previous restrictions that limited imports to only three-year-old vehicles.
The new policy will impose an additional 40% duty on such vehicles initially. However, this duty will be reduced by 10% each fiscal year, starting from FY 2026-27, and is expected to be completely abolished in the following years, leaving only standard import tariffs in place. This phased reduction is seen as a strategy to gradually ease the domestic market into more competitive pricing without causing a sudden disruption.
Older Vehicles to Be Eligible from FY 2026-27
An even more notable expansion will occur from fiscal year 2026-27, when vehicles up to seven years old will become eligible for import. This broadens access for consumers to a wider range of used vehicles, potentially lowering prices and increasing availability in a market often criticized for limited choices and high prices of new cars.
Baggage Scheme Imports Get Special Treatment
The 40% additional duty will not apply to vehicles imported under the baggage scheme—a program designed for overseas Pakistanis bringing cars home. However, a condition of 700 days of overseas stay must be met to qualify for this exemption. This clause ensures that only genuine expatriates benefit from the relaxed duty structure and discourages misuse of the scheme.
Finance Ministry’s PFMA Amendments Rejected by Senate Committee
In parallel discussions, the Senate Standing Committee on Finance rejected proposed amendments by the Ministry of Finance to the Public Finance Management Act (PFMA). Ministry officials argued that the current legislation grants financial authority to institutions through parliamentary delegation. However, the committee insisted that the draft amendments needed to be revised to ensure better governance and transparency.
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Senator Anusha Rehman raised strong concerns about the management of surplus profits and idle cash held by public and autonomous entities. She emphasized that these entities must fall within the audit jurisdiction of the Auditor General of Pakistan, advocating for stricter oversight and accountability in the use of public funds.
The Ministry acknowledged these concerns and agreed to revise the language in the proposed law, replacing the term “business entities” with “public entities”, aligning the legal terminology with the intended scope of the legislation.
Port Qasim Authority Withholds Surplus Funds
In a related development, the Ministry of Finance revealed that the Port Qasim Authority (PQA) had refused to transfer its surplus funds when requested. The Ministry was advised to consult the relevant division, but reportedly received no response, highlighting ongoing governance issues between federal entities and oversight bodies.
Customs Reforms Announced by FBR
On the taxation front, the Federal Board of Revenue (FBR) updated the committee on its ongoing customs reforms. The Member of Customs Operations noted that customs duties have been reduced on 35% of tariff lines as part of a broader strategy to ease import costs and boost trade.
A new duty slab structure is being proposed, which would replace the existing rates of 3%, 11%, and 16% with more simplified rates of 5%, 10%, and 15%. This change is expected to improve compliance and simplify the customs valuation process.
In addition, duty on 916 more tariff lines will be brought down to zero, increasing the total number of zero-rated items to 3,117. This move is expected to support both consumers and businesses by lowering the cost of imported goods and raw materials.
