KARACHI: Indus Motor Company Limited, the assembler of Toyota vehicles in Pakistan, has disclosed a potential customs duty liability of more than Rs73 billion in its annual report for 2026.
The company is disputing amendments to SRO 656 with the Federal Board of Revenue (FBR), which introduced mandatory year-wise export targets for original equipment manufacturers (OEMs seeking concessionary customs duty on imports.
Indus Motor challenges amended SRO 656 rules
The export conditions were introduced by the Federal Government through SRO 2069(I)/2022, dated December 1, 2022, which amended the framework established under SRO 656 on June 22, 2006.
Under the amended rules, importers must export a specified percentage of their import quota under SRO 656 to remain eligible for concessionary customs duty rates.
Indus Motor has challenged the introduction of these export conditions through Constitutional Petition No. D-238 of 2024 before the Sindh High Court.
On January 19, 2024, the Sindh High Court granted interim relief to the company and directed the Engineering Development Board (EDB) to allow its imports at concessionary rates.
The petition and interim order remained in force as of June 30, 2026.
Company disputes export requirements
Indus Motor maintains that the amendments are inconsistent with the original purpose of SRO 656, which it says was introduced to incentivise local vehicle assembly and manufacturing rather than impose export requirements on manufacturers.
The company said it had also submitted evidence demonstrating compliance with the export conditions to the EDB. However, the submission had not yet been acknowledged.
Indus Motor added that automobile manufacturers were negotiating with the government to resolve the issue without disrupting their operations.
Potential customs duty exposure exceeds Rs73bn
Indus Motor has estimated the additional customs duty that could become payable if the matter is ultimately decided against the company.
According to its annual report, the potential exposure stood at:
Financial year Potential customs duty
Year ended June 30, 2023 Rs13.7 billion
Year ended June 30, 2024 Rs12 billion
Year ended June 30, 2025 Rs19.7 billion
Year ended June 30, 2026 Rs27.9 billion
Total Rs73.3 billion
Despite the potential liability, Indus Motor has not recognised a provision for the amount in its financial statements.
Indus Motor expects favourable outcome
The company said its management, based on advice from legal counsel, believes it has a good and reasonable case and expects the matter to ultimately be decided in its favour.
The dispute highlights the potentially significant financial impact of the export conditions on Pakistan’s automobile industry and underscores the uncertainty surrounding concessionary customs duty arrangements for vehicle manufacturers.
