Federal Government Proposes Reduction in Duties on Vehicles, Auto Parts, and Industrial Raw Materials for FY 2025-26 Budget

Islamabad:The federal government has proposed a reduction in duties on vehicles, auto parts, and industrial raw materials in its budget for the fiscal year 2025-26. This proposal, submitted to the International Monetary Fund (IMF), aims to ease the financial burden on key sectors and promote industrial growth.

According to media reports, the government has suggested removing the current 2% additional customs duty on auto spare parts and is also considering a gradual reduction in customs duties across various slabs, from 4% to 7%. Additionally, a 20% reduction in the customs duty on vehicles is being discussed, which currently ranges from 15% to 90%.

To support exports, the government is exploring tax cuts on raw materials used in industries such as textiles, chemicals, plastics, auto parts, iron, and steel, with the goal of boosting exports to \$5 billion. This aligns with broader efforts to stimulate industrial development by reducing duties on semi-finished goods and industrial raw materials.

In the real estate sector, a potential 0.5% reduction in withholding tax on property transactions is also under consideration to encourage investment and market activity.

The proposed tax revenue target for the Federal Board of Revenue (FBR) for the upcoming fiscal year stands at PKR 14,305 billion. With improved enforcement of existing tax laws, the government anticipates an additional revenue of around PKR 600 billion, while new policy measures could generate up to PKR 400 billion.

The government is also planning to introduce agricultural income tax starting July 1, 2025, as part of its broader efforts to expand the tax base and increase revenues.

Meanwhile, the IMF has urged Pakistan to widen its tax base and further document its economy to improve fiscal stability and accountability.