ISLAMABAD: The federal government has proposed a substantial reduction in customs duties on industrial input goods under the Budget 2026-27, lowering existing customs duty rates on 92 tariff lines used by different industrial sectors.
Under the Finance Bill 2026, customs duty of 20 percent would be reduced to 15 percent and 10 percent, existing rates of 15 percent and 10 percent would be brought down to 10 percent and five percent, respectively, while customs duty currently levied at five percent would be abolished on selected tariff lines.
The federal government on Tuesday unveiled a comprehensive tariff rationalisation package under the National Tariff Policy (NTP) 2025-30, reducing customs duties, additional customs duties and regulatory duties on thousands of tariff lines in a move aimed at lowering production costs, facilitating trade and enhancing industrial competitiveness.
The measures, announced as part of the Budget 2026-27, constitute one of the most extensive tariff reforms undertaken in recent years and are expected to benefit multiple industrial sectors by reducing the cost of imported raw materials, intermediate goods and industrial inputs.
According to budget documents, the reforms are guided by three key objectives: strategic tariff rationalisation under the National Tariff Policy 2025-30, simplification of the tariff structure, and enhancement of trade facilitation and system efficiency.
The government has proposed a reduction in customs duty rates on 92 tariff lines covering input goods used by various industrial sectors.
Under the revised structure, existing customs duty of 20 percent will be reduced to 15 percent and 10 percent, while duties currently set at 15 percent and 10 percent will be reduced to 10 percent and 5 percent respectively. Customs duty currently levied at five percent will be abolished on selected tariff lines.
Officials said the measures are aimed at reducing input costs and improving the competitiveness of domestic manufacturing industries.
The government has also announced substantial reductions in Additional Customs Duty (ACD) rates across a large number of tariff lines.
The ACD rate has been reduced from six percent to four percent on 449 tariff lines.
Similarly, ACD has been reduced from four percent to two percent on 2,107 tariff lines, while the existing two percent ACD has been completely abolished on 569 tariff lines.
The reduction is expected to lower the tax burden on imports used by industry and contribute to a gradual simplification of the tariff regime.
The budget also provides for a major review of the Regulatory Duty (RD) structure.
According to budget documents, all RD rates exceeding 20 percent have been capped at 20 percent on 359 tariff lines. In addition, RD rates ranging between 2.5 percent and 20 percent have been reduced by 20 percent on 1,347 tariff lines. The government has also reduced or eliminated lower RD rates of 2.5 percent, two percent and one percent on 208 tariff lines.
Officials stated that the objective is to rationalise the tariff structure and reduce distortions created by multiple layers of import duties.
The government has reviewed the exemption regime under the Fifth Schedule of the Customs Act.
Budget documents propose deletion of concessionary customs duty entries where the concessional rate is equal to or higher than the general tariff rate applicable under the First Schedule. The government has also exempted customs duty on critical cancer-related Active Pharmaceutical Ingredients (APIs) to support the healthcare sector.
In another sector-specific measure, customs duty on specialised construction-related vehicles has been reduced from 20 percent to 10 percent to facilitate the construction industry.
Customs duty exemption has also been granted on defence imports.
The budget provides complete exemption of Customs Duty, Additional Customs Duty and Regulatory Duty on the import of agricultural machinery.
Officials said the measure is aimed at promoting mechanisation and improving productivity in the agriculture sector.
The government has created 15 new Pakistan Customs Tariff (PCT) codes and amended descriptions of two existing PCT codes for trade facilitation and statistical purposes.
State warehouses authorised by Collectors of Customs have also been formally defined under the law to provide legal clarity regarding the types of warehouses covered under customs regulations.
The budget further provides legal cover to cargo scanning under the Customs Act to facilitate non-intrusive examination of imported and exported consignments.
A number of measures have been introduced to strengthen customs enforcement and anti-smuggling efforts.
The law has been amended to clarify that the threshold for framing misdeclaration cases will be determined by the amount of revenue involved, irrespective of the number of goods declarations filed.
An explanation has also been inserted to clarify that the term “removal” includes carrying, transporting, depositing, harbouring, keeping, concealing, retailing or any other act facilitating movement or possession of smuggled goods.
The budget further requires all authorities to hand over confiscable goods to Customs authorities for proceedings under the Customs Act, regardless of any parallel proceedings under other laws.
A new penal provision has also been introduced to address unauthorised removal or misappropriation of goods from customs state warehouses.
In a major administrative reform, the government has introduced faceless adjudication under the Customs Act.
The system will allow virtual proceedings between adjudicating officers and respondents with the objective of reducing direct interaction, improving transparency and ensuring quicker disposal of cases.
The Federal Board of Revenue (FBR) has also been authorised to rationalise penalties relating to delayed filing of goods declarations and delayed clearance of goods at ports through rules.
Collectors of Customs will be empowered to reduce such penalties in specified cases.
The maximum penalty on terminal operators for failure to honour Delay Detention Certificates issued by Customs has been increased from Rs500,000 to Rs10 million.
The government has also introduced Independent Case Scrutiny Committees to examine and decide matters relating to filing of appeals before courts in an effort to discourage frivolous litigation.
Special Judges have been empowered to freeze assets of persons accused of illegal transfer of funds into or out of Pakistan to prevent dissipation of assets during trial.
Another amendment allows service of summons through newspaper publication in cases where an accused person cannot be traced.
The tariff measures announced in Budget 2026-27 form part of the government’s broader National Tariff Policy 2025-30, which seeks to gradually rationalise Pakistan’s tariff structure, facilitate trade, improve industrial competitiveness and enhance efficiency of the customs regime.
The package combines tariff reductions for industry with administrative and enforcement reforms aimed at improving transparency, compliance and trade facilitation under the Customs Act, 1969.
Copyright Business Recorder, 2026