Import of up to 5-year-old used vehicles allowed with 40% extra tariff
During review of Finance Bill (2025-26) on Friday, Ministry of Commerce Secretary Jawad Paul informed Senate Standing Committee on Finance that the time period for the import of old/used vehicles under the baggage scheme has not been changed and overseas Pakistanis would continue to import three-year-old vehicles under baggage scheme.
The facility of five years has only been extended on the commercial import of old and used vehicles. From September 1, 2025, the commercial import of five years old vehicles would be allowed.
Tariff rationalisation: Rs500bn revenue loss estimated
However, there would be an additional tariff protection of 40 percent on such vehicles in 2025-26. In the next four years, the 40 percent additional import tariff would be zero on the import of used and old vehicles. The 40 percent additional import duties during 2025-26 would be reduced to 30 percent in subsequent fiscal year and finally zero-percent duty in coming years.
In future, the import of 6-7 years old vehicles would also be allowed.
The quantity and standards would be maintained to ensure that old and used vehicles should not create environment related problems in the country.
Chairman of the Senate Standing Committee on Finance Saleem Mandviwalla stated that the same time period of five years should apply on the import of vehicles under the baggage scheme as well as commercial import of vehicles. The government should give same treatment on the import of vehicles by overseas Pakistanis and commercial importers.
However, the government must ensure that 40 percent additional tariff should not be applicable on the import of five years old vehicles under the baggage scheme.
There should be no distinction between the vehicles imported under the baggage scheme and commercial imports, Mandviwalla maintained.
The commerce secretary stated that the gift scheme is being misused on the import of old and used vehicles.
The tariff reductions would be applicable on new auto sector policy after June 30, 2026, he said.
Finance Minister Muhammad Aurangzeb said that we have given enough tariff protection to domestic sectors/industries.
The FBR Member Customs Policy stated that the government has not touched auto sector during tariff rationalisation during 2025-26.
The government has reportedly received No Objection from International Monetary Fund (IMF) for import of five-year old used cars in the country, sources in Commerce Ministry told Business Recorder.
The import of used cars will commence from September 2025 on commercial basis as current regime of import of three-year old used cars by overseas Pakistan will be discontinued.
The decision has been taken in light of proposals prepared by the Federal Board of Revenue (FBR) which was making hectic efforts to allow import of five-year used cars aimed at increasing its revenue through imports.
However, the issue of arrangement of foreign exchange will be a gigantic task as State Bank of Pakistan (SBP) will not remit forex for import of five-year used cars due to difficulties.
Local auto industry, mainly dominated by the Japanese companies had opposed the proposal at every level but FBR did not agree citing different reasons.
The government will gradually phase out regulatory duties and slash tariffs on Completely Built-Up (CBU) vehicles to below 10 percent, with a broader goal of bringing auto-sector tariffs down to single digits within five years.
The personnel baggage scheme, transfer of residence and gift scheme were reportedly misused on the import of old and used vehicles.
Under the law, overseas Pakistanis are entitled to import vehicles under personnel baggage scheme, transfer of residence and gift scheme who have not imported, gifted or received a vehicle during the last two years under Import Policy Order (IPO), 2022.
The Customs department will not charge 18 percent sales tax on auction of serviceable old and used vehicles in case sales tax was paid at the time of local or import stage.
Copyright Business Recorder, 2025
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