The Federal Board of Revenue (FBR) has begun collecting the newly introduced Special Excise Duty (SED) on imported vehicles from July 1, marking the start of a new tax regime that is expected to lower import costs for some vehicles while making others significantly more expensive.
The changes stem from the Finance Act 2026 and accompanying customs notifications. While the government’s tariff rationalisation measures reduce customs duties on several imported vehicle categories, new Special Excise Duties target luxury electric vehicles and higher-engine-capacity imports.
The SED is being collected at the import stage under S.R.O. 1072(I)/2026 alongside customs duties.
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Under the notification, the Special Excise Duty is collected on imported goods listed in Table IA of the First Schedule in the same manner and at the same time as customs duty under the Customs Act, 1969. Importers are required to pay the levy during customs clearance, with the same assessment, collection and recovery procedures applicable to customs duties.
The overall impact on imported vehicle prices varies by category.
Many imported passenger vehicles are expected to benefit from the government’s tariff rationalisation plan, which reduced customs duties across several tariff lines. The applicable customs and Additional Customs Duty (ACD), however, depend on each vehicle’s Pakistan Customs Tariff (PCT) classification.
Imported electric cars and electric SUVs in completely built-up (CBU) condition valued at up to $75,000 remain exempt from the new Special Excise Duty, allowing them to benefit from lower import duties without incurring the additional levy.
The tax burden increases sharply for higher-value imports.
Imported electric cars and electric SUVs in CBU condition valued above $75,000 and up to $110,000 are now subject to a 30 percent ad valorem Special Excise Duty, while those valued above $110,000 attract a 40 percent ad valorem levy.
The Finance Act 2026 also imposes steep Special Excise Duties on larger-engine conventional vehicles. Imported motor cars, SUVs and other motor vehicles principally designed for the transport of passengers—including station wagons, double-cabin (4×4) pickup vehicles and racing cars, but excluding auto-rickshaws and vehicles classified under heading 87.02—with engine capacities of 2,000cc and above but not exceeding 3,000cc are now subject to an 86 percent ad valorem Special Excise Duty. Vehicles in the same category with engine capacities exceeding 3,000cc attract a 92 percent ad valorem levy.
Although customs duties have been reduced for several imported vehicle categories under the government’s tariff rationalisation programme, the newly imposed Special Excise Duty is expected to outweigh those reductions for luxury vehicles, resulting in substantially higher import costs.
How the New Tax Regime Affects Imported Vehicles
| Category | Special Excise Duty | Expected Impact |
|---|---|---|
| Imported electric cars & SUVs (CBU) valued up to $75,000 | 0% | Lower import tax burden due to customs duty reductions |
| Imported electric cars & SUVs (CBU) valued $75,001–110,000 | 30% ad valorem | Higher import costs despite lower customs duties |
| Imported electric cars & SUVs (CBU) valued above $110,000 | 40% ad valorem | Significantly higher import costs |
| Many imported passenger vehicles covered under tariff rationalisation measures | No new engine-capacity-based SED | Lower import tax burden, subject to tariff classification |
| Imported passenger vehicles, including SUVs and double-cabin pickups, 2,000cc–3,000cc | 86% ad valorem | Higher import costs |
| Same category with engines above 3,000cc | 92% ad valorem | Significantly higher import costs |
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The vehicle tax changes form part of a broader package introduced under the Finance Act 2026, which took effect on July 1. The legislation also revised customs duties, income tax, sales tax and federal excise measures, while expanding digital invoicing, faceless audits, algorithm-based tax administration, stricter penalties for non-compliance and the use of electronic systems across the FBR’s tax administration.
