ISLAMABAD: The Federal Board of Revenue (FBR) is considering a policy shift that would allow the import of used vehicles up to five years old—an increase from the current three-year limit—as part of the upcoming 2025–26 federal budget.
Under the existing framework, used cars up to three years old and SUVs up to five years are permitted for import under specific schemes. The proposed amendment would standardize the age limit to five years across all vehicle categories.
In the 2024–25 budget, the government imposed a 15% regulatory duty on imported used vehicles with engine capacities exceeding 1,300cc. Now, officials are reportedly evaluating a broader overhaul of the automotive import regime, including a gradual reduction of regulatory duties and tariffs on Completely Built-Up (CBU) vehicles to below 10%. The government aims to reduce automotive tariffs to single digits within five years.
The 2024–25 budget also saw the removal of customs duty concessions on hybrid vehicle imports, signaling a tightening of previously relaxed import incentives.
A tax expert noted that the FBR has introduced safeguards to curb the abuse of import schemes meant for older vehicles. Reports have highlighted misuse of schemes such as personnel baggage, transfer of residence, and gift allowances.
Under the Import Policy Order (IPO) 2022, overseas Pakistanis may import a vehicle only if they have not previously imported, gifted, or received one in the past two years.
The FBR has also clarified that an 18% sales tax will not be imposed on the auction of serviceable used vehicles if the tax was already paid at the time of local sale or import. However, this exemption does not apply to unserviceable or condemned vehicles, which remain subject to sales tax regardless of prior payments.
Meanwhile, Pakistan’s automotive sector continues to face challenges. Car sales during the first six months of the 2023–24 fiscal year plummeted by 55.5%, with only 30,662 units sold during that period.
In a related move this year, the FBR halted the procurement of over 1,010 government vehicles pending a detailed “optional analysis” to evaluate necessity and cost-effectiveness.
