The federal government has announced new tax measures on the automobile sector, including the imposition of Federal Excise Duty (FED) on imported vehicles as part of the Budget 2026–27, aimed at broadening the tax base and regulating luxury imports.
Finance Minister Muhammad Aurangzeb made the announcement during his budget speech in the National Assembly, outlining revised duties on SUVs, high-capacity engines, and premium electric vehicles.
FED Imposed on Imported SUVs and High-Engine Vehicles
According to the budget measures, SUVs with engine capacities between 2,000cc and 3,000cc will now be subject to Federal Excise Duty.
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In addition, the government has decided to increase FED on vehicles above 3,000cc, targeting high-end and luxury automobile imports in the country.
Officials say the move is intended to reduce pressure on foreign exchange reserves while encouraging more balanced automotive consumption patterns.
New Tax on High-Priced Electric Vehicles
The finance minister also announced that electric vehicles priced above Rs20 million will be subject to FED under the new policy framework.
This marks the first time premium electric vehicles will face excise duty, as the government continues to refine its taxation structure for emerging automobile technologies.
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A committee formed by the Prime Minister is currently reviewing the broader auto policy, which is expected to provide further clarity on long-term regulations.
Incentives for Green Transport Continue
Despite new duties on luxury vehicles, the government confirmed that incentives for electric motorcycles, rickshaws, and buses will remain unchanged.
Additionally, a 1% sales tax concession on imported electric trucks has been proposed to support clean transportation and logistics modernization.
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Officials stated that the policy aims to balance environmental goals with fiscal responsibility.
FED on International Air Travel Adjusted
In a separate measure, the finance minister announced the abolition of Federal Excise Duty on international business-class air travel, offering relief to frequent business travelers and corporate passengers.
