In a significant policy shift, the Government of Pakistan has approved the commercial import of used cars up to five years old, with the change set to take effect in September 2025. The decision was revealed during a Senate Standing Committee on Finance meeting, where Federal Board of Revenue (FBR) officials presented key customs and tariff reform plans.

Policy Overview
Currently, only three-year-old vehicles can be imported under the baggage scheme. The revised policy extends this limit, aiming to offer more choices to consumers, boost tax revenues, and align with international trade practices.

Key Updates:

• Commercial import of cars up to 5 years old will be allowed starting September 2025.
• A flat 40% additional customs duty will apply to all imported vehicles, regardless of quantity.
• The goal is to expand consumer options while maintaining protective duties for local manufacturers.

This development is likely to generate interest among car importers and cost-conscious buyers, particularly amid rising domestic car prices.

Tariff Reforms and IMF Agreement
The import policy is part of a broader four-year tariff reform plan linked to Pakistan’s agreement with the International Monetary Fund (IMF). As per the plan:

• Vehicle import duties will be reduced by 10% annually.
• Duties may drop to 0% by 2029 if the roadmap continues as planned.

The gradual reduction could intensify competition for local car manufacturers, prompting them to improve vehicle quality and pricing.

Officials also suggested that, based on how this policy phase performs, imports of six- or seven-year-old vehicles may be considered in the future.

Tax and Affordability Considerations
Despite the broader import window, affordability challenges remain:

• The 40% additional customs duty adds a substantial cost.
• Sales tax on vehicles up to 850cc has increased from 12.5% to 18%, disproportionately impacting lower-income buyers.

The Senate committee recommended extending the five-year age limit to both the baggage and commercial import schemes. While under review, officials confirmed the 40% duty will apply to baggage imports as well.

The personal-use gift scheme for overseas Pakistanis will remain unchanged, preserving that import channel for now.

Finance Minister Muhammad Aurangzeb emphasized the importance of a clear and stable tariff structure, stating that inconsistent policies have historically hindered trade and investment. These reforms aim to bring greater transparency and promote long-term economic growth.

The true impact of this policy on consumers and the local industry will become clearer as further reforms are implemented and monitored.