Additional Custom Duty (ACD) continues to play a key role in Pakistan’s import policy, but Budget 2025–26 marks a major shift toward lower duties and a simpler tax structure. The government’s latest reforms aim to reduce business costs, support local industries, and move toward long-term tariff rationalization.
What Is Additional Custom Duty (ACD)?
Additional Custom Duty is a surcharge imposed under Section 18(3) of the Customs Act, 1969, charged on top of regular customs duty. Its core purpose is to protect domestic manufacturing and discourage non-essential imports, while generating revenue for the state.
How ACD Worked in 2024–25
In FY 2024–25, ACD rates were linked to customs duty slabs:
0%–10% tariff: 2% ACD
11%–15% tariff: 4% ACD
16%–20% tariff: 6% ACD
Above 20% tariff: 7% ACD
Essential items such as agricultural seeds, electric vehicles, and industrial machinery were largely exempt to support growth-focused sectors.
Major ACD Changes in Budget 2025–26
The 2025–26 budget significantly reduced ACD rates across most tariff slabs:
2% reduced to 0% on over 4,300 tariff lines
4% cut to 2% for goods under the 15% slab
6% lowered to 4% for goods under the 20% slab
7% reduced to 6% for items above 20%
These changes are designed to improve transparency and ease the cost of doing business in Pakistan.
Items Exempt from ACD in 2025
Key sectors continue to enjoy exemptions, including:
Seeds and spores for agriculture
Plant and machinery (Chapters 84 & 85)
Electric vehicles (2-, 3-, and 4-wheelers)
Vehicles under 850cc (CKD/CBU)
D-8 Preferential Trade Agreement imports
Petroleum products such as LNG
Industrial polymers
Used Car Imports: A Special Case
From September 2025, Pakistan will allow used car imports up to five years old, subject to a 40% ACD. This rate will decline by 10% annually, balancing consumer demand with protection for the local auto industry.
Long-Term Plan: Phasing Out ACD
Under a five-year tariff reform roadmap, the government plans to:
Eliminate ACD and Regulatory Duties
Introduce a uniform customs duty capped at 15%
Remove sector-specific exemptions
Promote export-led industrialization
Final Thoughts
The revised Additional Custom Duty framework for 2025–26 signals a clear move toward economic modernization. Lower rates, broader exemptions, and a roadmap for complete elimination make Pakistan’s import regime more predictable and business-friendly—especially for manufacturers and investors planning ahead.
