Tariff reforms to cut import revenue by Rs148 billion

The federal government's tariff rationalization policy is expected to significantly reduce revenue collected from imports

The federal government’s tariff rationalization policy is expected to significantly reduce revenue collected from imports, according to official documents that outline the financial impact of the latest customs duty reforms.

The documents indicate that the government’s decision to lower customs duties and other import-related taxes across several sectors will result in a substantial decline in revenue, as part of broader efforts to simplify Pakistan’s tariff structure, promote industrial growth and improve trade competitiveness.

One of the largest impacts will come from the automobile sector. The reduction in customs duties on imported vehicles and auto parts is projected to lower government revenue by approximately Rs35 billion.

Under the revised tariff structure, customs duty on imported vehicles with engine capacities ranging from 850cc to 1,800cc has been cut by 35 to 50 percent. In addition, customs duty on imported auto parts has been reduced by 10 percent, while duties on imported motorcycles have been lowered by 20 percent.

The official documents further reveal that the government has also reduced the additional customs duty on products including auto sector imports, vegetable oil, gold, silver and mobile phones by 2.2 percent. The elimination of certain additional customs duties, along with lower duty rates, is expected to reduce government revenue by around Rs47.6 billion.

Meanwhile, changes to the regulatory duty regime will have an additional fiscal impact. According to the documents, lowering regulatory duty rates across various imported goods is expected to reduce revenue by another Rs65.57 billion.

Overall, the tariff reforms are projected to reduce import-related revenue by more than Rs148 billion. However, the government believes the measures will help create a more business-friendly trade environment, lower production costs for industries that rely on imported raw materials and components, and enhance Pakistan’s long-term export competitiveness.