ISLAMABAD: Prime Minister Shehbaz Sharif has approved a significant reduction in import duties on over 7,000 tariff lines, focusing mainly on raw materials, intermediate, and capital goods.
This move aims to lower input costs for industries and stimulate economic growth across Pakistan.
The plan, set for formal announcement in the upcoming budget speech, includes abolishing a 2% additional customs duty (ACD) on more than 4,200 tariff lines.
Further cuts will reduce ACD rates from 4% to 2% on 545 items, 6% to 4% on over 2,200 products, and from 7% to 6% on goods with customs duties above 20%. Key sectors like chemicals, pharmaceuticals, plastics, information technology, polyester filament yarn, and steel will benefit directly from these adjustments.
Simplified Customs Duty Structure and Long-term Tariff Reform
Alongside these cuts, the government will introduce a streamlined customs duty framework featuring five slabs: 0%, 5%, 10%, 15%, and 20%.
The current 16% and 11% slabs will be adjusted to 15% and 10%, respectively, while the 3% slab will be eliminated, reallocating those products into zero or 5% duty categories.
Regulatory duties, which currently range as high as 90%, will be drastically reduced, with a phased elimination plan over five years aiming to cap the maximum duty at 30%.
This comprehensive tariff overhaul also includes dissolving the 5th Schedule of Customs, merging those products into the main schedule to simplify trade regulations.
Engagement with Industry and Export-Led Growth Focus
Prime Minister Shehbaz Sharif has directed consultations with major industries, including auto, steel, textiles, chemicals, and plastics, to plan a phased reduction in their high tariff protections, currently between 100% and 150%.
The government’s broader strategy is to shift from import substitution towards export-led growth, aiming to reduce the average tariff from 19% to 9.5% within five years.
This reform will level the playing field by removing excessive tariff peaks, particularly benefiting sectors like the automobile industry.
Additional customs duties will be gradually phased out within three to four years to further ease import costs and promote market access.
