ISLAMABAD: The Tariff Policy Board (TPB), an inter-ministerial body, headed by the Minister for Commerce, has reportedly decided to exempt defence imports from customs duty, well informed sources told Business Recorder.
The Board, sources said, has recently been apprised that the Ministry of Defence moved a summary on November 13, 2025 for the Prime Minister to exempt the current 15 percent customs duty on all defence imports.
“The proposed exemption was intended to provide financial relief and additional fiscal space to the defence services for meeting their critical operational requirements,” the sources said adding that the Prime Minister has approved the summary with the direction that the Finance Division and the Federal Board of Revenue (FBR) would meet all codal and procedural formalities for granting exemption from the Customs Duty on defence imports.
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Secretary, Ministry of Commerce, Jawad Paul added that in pursuance of the approval/directive of the Prime Minister, a meeting was held under the chairmanship of Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, which was also attended by Secretary Finance, Secretary Commerce, Secretary Defence and Chairman, FBR.
According to sources, during the meeting, it was decided that due to procedural technicalities, the exemption of Customs duty cannot be granted in the current financial year.
“To implement the directive of the Prime Minister, the exemption of customs duty on defence imports would be granted from July 1, 2026 through Finance Act 2026-27,” the sources said adding that in order to fulfill the necessary codal formalities, Secretary Commerce requested the TPB, being the competent forum, to recommend the exemption on defence imports so that the same could be incorporated in Finance Act 2026-27.
He also mentioned that seeking approval of IMF regarding exemption of Customs duty on defence imports, is the responsibility of Ministry of Finance.
After detailed discussion, all members of the Tariff Policy Board unanimously recommended exemption of customs duty currently imposed on defence imports from July 1, 2026 by making necessary amendments in the 5th Schedule of Customs Act, 1969.
An insider told this scribe that the proposal to lower duty on alcohol has been deferred due to negative media impression as was suggested by the Secretary Commerce.
“Yes, reduction on duty on alcohol has been deferred due to fear of negative propaganda in the media despite the fact it is a banned item and is being imported by diplomats,” said one the TPB members.
Responding to a question regarding reduction tariff on imported Electric Vehicles or Hybrid Vehicles, the final authority has been given to the Deputy Prime Minister and Foreign Minister, Ishaq Dar, who presided over the meeting on this matter on Monday (June 8, 2026).
The Board member further stated that Special Assistant to the Prime Minister on Industries and Production, Haroon Akhtar has suggested deviation from the National Tariff Policy (NTP) to support local industry.
However, the TPB argued that the government must implement the NTP in letter and spirit as per the agreement with the Fund. The final decision would be taken by the Prime Minister and subsequently by the federal cabinet, in its meeting to approve the federal budget.
Copyright Business Recorder, 2026
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