Budget 2026-27: Full Breakdown for Pakistan’s Auto Sector

Pakistan’s Budget 2026-27 has introduced major tax changes for the auto sector, with imported vehicles, luxury SUVs, electric vehicles and Islamabad-registered cars among the key areas affected.

The biggest impact is expected on high-end imported vehicles. Under the Finance Bill 2026-27, Federal Excise Duty has been proposed for imported vehicles above 2000cc. Vehicles between 2001cc and 3000cc will face 40% FED, while vehicles above 3000cc will face 41% FED.

This move is likely to push up the cost of premium imported cars and SUVs, especially for buyers already dealing with customs duties, sales tax, registration charges and rising exchange-rate pressure.

For regular buyers, smaller vehicles are relatively less exposed to the new FED structure. However, the overall market may still feel indirect pressure if import costs, dealer margins or supply-chain expenses rise.

A separate change affects token tax in Islamabad Capital Territory. The Finance Bill revises token tax on motor vehicles registered in ICT, with vehicles up to 1000cc placed under a fixed Rs. 20,000 category. Higher categories are linked to invoice value, meaning more expensive vehicles will carry a heavier annual tax burden.

Electric vehicles remain a key focus. Four-wheeler EVs are still included in the imported vehicle duty framework until June 30, 2027, while existing concessions for electric motorcycles, rickshaws and buses are expected to continue. This suggests the government is still encouraging mass-market electrification, but not necessarily giving the same protection to luxury imported EVs.

For Pakistan’s auto industry, the budget creates a clear split. Locally assembled and smaller vehicles may become more attractive for price-conscious buyers, while imported luxury vehicles could see demand soften due to higher taxation.

Auto dealers may also face slower movement in the premium import segment as buyers reassess total ownership costs. At the same time, local assemblers could benefit if consumers shift toward locally available options.

The budget’s overall direction appears focused on increasing revenue from expensive imported vehicles while keeping some space for smaller cars and practical electric mobility. However, final market impact will depend on implementation, exchange rates, dealer pricing and any further clarifications from tax authorities.

Key Changes at a Glance

 

 

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Federal Excise Duty Added on Imported Vehicles in Budget 2026-27