The government of Pakistan has officially allowed the commercial imports of used cars up to five years old starting from September 2025. However, to protect the local auto sector, an additional 40% duty (import tariff) surcharge will apply on top of existing customs duties and taxes.
This marks a major shift in Pakistan’s automobile import policy under the National Tariff Policy and AIDEP 2021–26, as the government balances liberalisation commitments under the IMF with the need for protectionism to safeguard the domestic production base.
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Timeline & Adjustment of Duty
To ensure a gradual transition, the government has announced a tariff reduction plan for the 40% duty surcharge. Here’s how it will work:
| Fiscal Year | Allowed Age of Imported Used Cars | Additional Duty Surcharge |
|---|---|---|
| FY 2025-26 | Up to 5 years old | 40% |
| FY 2026-27 | Up to 5 years old | 30% |
| FY 2027-28 | Older vehicles allowed post-2026 | 20% |
| FY 2028-29 | No longer capped at 5 years | 10% |
| By July 2029 | No age limit | 0% |
This schedule ensures that while consumers gradually gain access to older and more affordable used car imports, the Pakistan auto industry receives breathing space to adjust without immediate market share decline.
Key Policy Highlights
- Age Limit: Cars up to five-year-old models allowed immediately; the restriction will be lifted from fiscal year 2026 for older vehicles.
- Compliance Requirements: Only vehicles meeting safety, emission, and environmental standards will be permitted.
- Ban on Accidental Cars: Imported vehicles involved in accidents or classified as low quality will not be eligible.
- Exemptions: Special schemes such as gift, baggage, or residence transfer may follow different rules and may not be subject to the 40% duty.
Industry Reaction
Local manufacturers and vendors warn that this shift may cause job losses, sales drops, and a market share decline in the domestic production sector. They argue that instead of opening borders to large-scale imports, the government should focus on strengthening the Pakistan auto industry.
However, the state views the 40% duty policy as a necessary reform to boost competition, reduce monopolies, and increase tax revenue through regulated imports. It also aligns with IMF commitments to open markets and phase out restrictive trade practices.
Conclusion
The new import tariff system introduces both liberalisation opportunities and protectionism challenges. While consumers will eventually benefit from more choices in used car imports, the government has designed a phased tariff reduction plan to avoid sudden disruption in the local auto sector.
By July 2029, Pakistan will fully open its market to used cars without any additional duty surcharge, provided vehicles meet quality standards. This delicate balance will determine whether the policy delivers growth in tax revenue or accelerates a sales drop in the domestic production industry.
