Used car buyers to face 40% tax under new policy

Pakistan has announced strict new rules on used car imports, banning accidental and low-quality vehicles while imposing a 40% tariff on commercial imports from next month.

Officials say the step is aimed at protecting the local auto industry, but consumers are unlikely to see any drop in car prices soon. The decision was shared during a joint meeting of the Senate Committees on Finance and Industry. Trade Policy Joint Secretary Mohammad Ashfaq said that under IMF commitments, Pakistan must enforce tariff protection equal to 40% of new car prices. This additional duty will gradually be reduced to zero over four years.

From September, imports of used vehicles up to five years old will be allowed, with all restrictions on age and condition set to end by July next year. Currently, commercial imports are banned, and market demand is partly met through vehicles brought under gift, baggage, and transfer-of-residence schemes. Many of these cars are mildly accidental but still preferred by buyers compared to costly local options.

As part of the $7 billion IMF programme, Pakistan is also bound to cut overall tariffs from the current average of 20.2% to 9.7% within five years. Customs duties, regulatory charges, and exemptions will all be gradually phased out, leaving only four tariff slabs with a maximum rate of 15%. The auto sector, however, has raised strong objections. Industry groups PAMA and PAAPAM warned lawmakers that opening the market could damage local production and jobs. Analysts believe the policy shows the government’s struggle to balance IMF demands with local industry pressure. For now, the new ban on accidental cars and the 40% import tariff mean car buyers will continue to face high prices.