The federal government has proposed approximately 53 percent cut in duties and taxes on 850-1800cc vehicles in the new five-year auto policy. All duties and taxes on vehicles up to 1800cc will be brought down to 74 percent from the existing 156 percent, according to the Secretary Commerce, who briefed the National Assembly’s Standing Committee on Finance and Revenue on Sunday.
Committee Reviews Finance Bill 2026
The Standing Committee on Finance and Revenue, chaired by Naveed Qamar, conducted a comprehensive clause-by-clause examination of the Finance Bill, 2026. The committee approved several significant legislative refinements aimed at strengthening transparency, protecting taxpayers’ rights, improving accountability, and enhancing the effective implementation of tax laws.
Amendments were approved that enable the Independent Case Scrutiny Committee to co-opt a Chartered Accountant as a non-voting member in technically complex matters. Provisions excluding the approval period while computing statutory limitation were endorsed, and several redundant sub-clauses were omitted to improve legislative clarity and streamline the law.
Aviation Sector Challenges Discussed
The committee discussed challenges confronting Pakistan’s aviation sector, particularly the operational and financial difficulties faced by all airline operators. Members observed that proposed fiscal concessions for PIA were intended to support the national carrier, but similar structural challenges were also being experienced by other domestic airlines operating in an increasingly competitive environment.
The committee recommended that the government adopt a sector-neutral approach by extending equivalent fiscal concessions and incentives to all eligible airline operators with effect from 1st July, 2027, thereby ensuring a level playing field across the aviation industry.
Taxation on Mobile Phones
On the proposed taxation of mobile phones, the committee strongly objected to the imposition of additional taxes on selected smartphone brands and expressed concern over the existing taxation regime on imported smartphones. An FBR official informed the committee that the tax rate on mobile phones worth up to $30 is 25 percent, on phones worth $31 to $100 it is 36 percent, and on imported phones worth $101 to $200 it is 40 percent. The effective tax rate on phones worth $201 to $350 is 38 percent, smartphones worth $351 to $500 are taxed at 40 percent, and phones worth more than $500 face a 41 percent tax rate. The official noted that 44 percent of imported phones fall in the low-tax category of $31 to $100, and the average effective tax rate across all imported phone categories is 39.6 percent.
Committee members said millions of non-PTA mobile phones are currently in the market and suggested introducing an installment system for taxes on mobile phones. They noted that installments are available on even small items worldwide. The committee chairman directed the FBR to devise a plan in collaboration with the PTA for installments.
The FBR chairman said tax could be reduced on mobile phones worth up to $200. He further stated that Rs37 billion in taxes comes from imported mobile phones, with Rs21 billion from Apple alone. A reduction in the slab for low-priced phones would create a shortfall of Rs1 billion. The finance secretary said this Rs1 billion would then have to be arranged from elsewhere. Parliament is not bound by anything; tell them Parliament does not agree, Javed Hanif said.
Steel Sector Taxation
The committee held an in-depth discussion on the proposed taxation mechanism for the steel sector. Government representatives informed the committee that prescribed electricity consumption benchmarks—700 units per metric ton for steel melting and 110 units per metric ton for steel re-rolling—are explicitly prescribed in law and linked to data published by the PBS, thereby eliminating administrative discretion.
The committee emphasized that taxation mechanisms should remain firmly anchored in law, operate with complete transparency, and avoid excessive administrative discretion. Members sought detailed clarification regarding the proposed electricity consumption benchmarks and taxpayer compliance ratios to ensure the methodology is scientifically determined, objective, and consistently applicable.
The committee cautioned against introducing legislative amendments without adequate technical examination and parliamentary scrutiny, observing that last-minute changes could compromise legislative quality, create legal ambiguities, and lead to implementation challenges. Members stressed that all proposed amendments should undergo comprehensive review to uphold the principles of sound legislation, transparency, and effective parliamentary oversight.
New Five-Year Auto Policy Details
The committee also discussed the new five-year auto policy. Minister of State for Finance Bilal Kayani said the existing auto policy expires on June 30th. The commerce secretary stated that all duties and taxes on vehicles up to 1800cc will be brought down to 74 percent. Currently, customs duty, additional customs duty, and regulatory duty on these vehicles stand at 156 percent. There is a plan to reduce all duties on 1500cc to 1800cc vehicles from 91 percent to 57 percent, and on 1000cc to 1500cc vehicles from 76 percent to 52 percent. A reduction of duties from 66 percent to 42 percent on 850cc vehicles was also proposed.
Additionally, customs duty on vehicles above 1800cc is proposed to be reduced from 100 percent to 50 percent. On 1500cc to 1800cc vehicles, customs duty would drop from 75 percent to 45 percent; on 1000cc to 1500cc vehicles, from 60 percent to 40 percent; and on 850cc to 1000cc vehicles, from 55 percent to 35 percent. For vehicles up to 850cc and motorcycles, a reduction from 50 percent to 30 percent in customs duty is under consideration. Customs duty on auto parts would be reduced from 35 percent to 25 percent, while customs duty on specialized vehicles will be maintained at the current 30 percent.
An FBR official informed that currently there is no federal excise duty (FED) on electric vehicles priced up to $75,000 or below Rs20 million. This tax will apply to electric vehicles above Rs20 million.
