Government Likely to Reduce Taxes on Raw Materials for Locally Manufactured Vehicles in Upcoming Budget

Islamabad: The government is likely to reduce taxes on raw materials used in locally manufactured vehicles in the upcoming federal budget for fiscal year 2026-27 as part of efforts to support the domestic auto industry.
According to sources, a proposal has been prepared to keep the national average tariff for locally produced vehicles below 6 percent.
The proposed measures are expected to be introduced from July 1 under the new budget and revised auto policy aimed at promoting the local automobile sector.
Sources said the government is also considering expanding the Electric Vehicle (EV) Policy to cover all New Energy Vehicles (NEVs). Under the proposal, electric vehicles, plug-in hybrid vehicles, and fuel cell vehicles may also be included in the concessional tariff regime.
In addition, the National Tariff Policy includes proposals to abolish additional customs duties and reduce regulatory duties on the sector.
The government is also reviewing a proposal to provide preferential protection to locally assembled EVs over imported and completely built-up (CBU) vehicles.
Sources further stated that the concessional customs duty on Completely Knocked Down (CKD) parts is likely to remain in place until June 30, 2028.
The government is also considering gradually shifting incentives for the auto sector toward a normal tariff regime over time.