Finance Act 2026: What New Auto Taxes Mean for Car Buyers in Pakistan

Pakistan’s Finance Act 2026 has introduced a fresh round of auto-sector taxes from July 1, changing how imported cars, large-engine vehicles, luxury electric vehicles and Islamabad-registered vehicles are taxed.

For car buyers, the impact will not be the same across all segments. Smaller imported cars may benefit from lower customs duties, while large petrol SUVs, high-capacity imports and premium imported EVs could become more expensive due to higher excise duties and revised tax calculations.

Customs Duty Cut on Imported Cars

One of the major changes under the Finance Act 2026 is a revised customs duty structure for imported vehicles. Duties have been reduced across several engine-capacity categories, especially for smaller cars.

Under the new structure, imported cars up to 800cc now fall under a 30% customs duty rate. Cars from 801cc to 1,000cc are taxed at 35%, while 1,001cc to 1,300cc vehicles face 40% customs duty.

For mid-size imported vehicles, the duty rate moves higher. Cars from 1,301cc to 1,500cc fall under 40% customs duty, while vehicles from 1,501cc to 1,800cc are placed at 45%. Imported cars above 1,800cc move into the 50% customs duty category.

The lower customs duty may provide some relief for buyers looking at smaller imported vehicles. However, the final price will still depend on other taxes, exchange rates, freight costs, dealer margins and registration charges.

Large-Engine Cars Face Bigger Hit

The biggest pressure is expected on imported petrol cars and SUVs above 2,000cc.

While customs duty has been reduced in some categories, larger vehicles now face steep Special Excise Duty. Imported petrol cars and SUVs from 2,000cc to 3,000cc are subject to a high additional levy, while vehicles above 3,000cc face an even higher rate.

This means buyers considering large SUVs, premium imported sedans or high-displacement vehicles may not see much benefit from the customs duty reduction. In many cases, the additional excise duty could offset the relief and push the landed cost higher.

For the used-import market, this may also affect demand for larger Japanese and European models, especially those already carrying high maintenance and registration costs.

Imported Luxury EVs Lose Full Tax Protection

Electric vehicles remain part of Pakistan’s broader push toward cleaner mobility, but the Finance Act 2026 has narrowed the tax relief available to premium imported EVs.

Imported electric vehicles up to $75,000 remain exempt from Federal Excise Duty. However, EVs valued between $75,000 and $110,000 now face 30% FED. Imported EVs above $110,000 are subject to 40% FED.

The change mainly targets luxury imported EVs rather than mass-market electric cars. Buyers looking at premium electric SUVs and high-end imported EVs will now need to calculate taxes more carefully before booking or importing a vehicle.

Locally assembled EVs and more affordable electric mobility options are still expected to remain more attractive for buyers focused on lower running costs.

Islamabad Token Tax Now Linked to Invoice Value

The Finance Act 2026 has also changed the token tax structure for vehicles registered in Islamabad.

Previously, token tax was largely based on fixed engine-capacity slabs. Under the revised system, vehicles above 1,000cc are now taxed according to invoice value.

For vehicles from 1,001cc to 2,000cc, token tax is calculated at 0.25% of invoice value. Vehicles above 2,000cc are taxed at 0.35% of invoice value. Cars up to 1,000cc carry a fixed token tax amount.

This change means owners of expensive vehicles will pay more in annual token tax, even if two cars fall in the same engine-capacity range. The system now links recurring ownership cost more closely with the vehicle’s actual price.

What It Means for Buyers

The new auto taxes create a mixed picture for Pakistan’s car market.

Small imported cars may become relatively more attractive due to lower customs duty. Buyers looking at compact vehicles could benefit if importers pass on the duty relief.

Large petrol SUVs and luxury imported cars are likely to remain expensive because of higher excise duties. Buyers in this segment should calculate total landed cost instead of looking only at the customs duty rate.

Luxury imported EVs will also become costlier if they fall above the new value thresholds. The change may push some buyers toward locally assembled EVs, hybrids or lower-priced imported electric models.

For Islamabad buyers, the annual ownership cost has become more important. The shift to invoice-value-based token tax means expensive vehicles will carry a higher recurring tax burden.

The Finance Act 2026 has therefore made vehicle pricing more segment-specific. For buyers, the key step now is to compare not just showroom prices, but also import duties, excise duty, registration cost, token tax and long-term running expenses before making a purchase.

 

Read More

Pakistan Car Import Policies: Duty Dramas & Market Impact

Electric Cars in Pakistan – Worth It or Not?

Best Fuel Average Cars in Pakistan – Budget to Premium