ISLAMABAD: The federal government is preparing to introduce a major tariff reduction package in the Budget 2026-27 aimed at lowering production costs, supporting local manufacturers, and enhancing Pakistan’s export competitiveness.
The proposed relief measures, formulated under the National Tariff Policy 2025-30, are expected to provide industries with an estimated Rs. 200 billion in tariff relief through significant reductions in customs-related duties on imported raw materials and industrial inputs.
Major Reduction in Additional Customs Duty (ACD)
According to official proposals, the government plans to substantially reduce or eliminate Additional Customs Duty (ACD) on thousands of tariff lines used by domestic industries.
Under the proposed framework:
The existing 2% ACD will be completely abolished on 518 tariff lines currently subject to a 15% customs duty.
The 4% ACD imposed on 2,166 tariff lines carrying a 20% customs duty will be reduced to 2%.
The 6% ACD applicable to 465 tariff lines with customs duties exceeding 20% will be lowered to 4%.
In total, 3,149 tariff lines covering industrial raw materials, intermediate goods, and manufacturing inputs will benefit from the proposed ACD reductions.
Regulatory Duties Also Set for Major Cuts
The government is also planning significant reductions in Regulatory Duties (RD) as part of its broader tariff reform agenda.
Under the proposal, the maximum RD rate will be reduced from 50% to 20% on approximately 1,948 tariff lines, while average regulatory duty rates are expected to decline by nearly 20 percent.
Key Industries to Benefit
The tariff relief package is expected to benefit several major sectors of the economy, including:
Textile industry
Engineering sector
Chemicals and petrochemicals
Plastics manufacturing
Iron and steel industry
Pharmaceutical sector
Auto parts manufacturers
Battery producers
Export-oriented industries
Industry stakeholders believe the proposed reductions will help lower the cost of imported inputs, reduce manufacturing expenses, and improve productivity across various sectors.
Part of Long-Term Tariff Reform Strategy
The proposed measures form part of the government’s long-term plan under the National Tariff Policy 2025-30, which seeks to gradually phase out Additional Customs Duties over four years and Regulatory Duties over five years.
The policy aims to simplify Pakistan’s tariff regime, reduce excessive protection for inefficient industries, strengthen industrial competitiveness, and integrate local businesses into global value chains.
Boosting Exports and Industrial Growth
Officials say the tariff reforms are designed to make imported raw materials more affordable for manufacturers, enabling businesses to produce goods at lower costs and compete more effectively in international markets.
If approved in the upcoming Budget 2026-27, the package is expected to provide significant relief to Pakistan’s industrial sector, particularly at a time when manufacturers are facing rising production costs and increasing competitive pressures in both domestic and export markets.
