The government has announced a new Federal Excise Duty on imported vehicles as part of the budget for FY27-2026. The decision was revealed by Finance Minister Muhammad Aurangzeb during his budget speech in the National Assembly. The move targets higher-end imported vehicles, including luxury SUVs and electric cars. It is aimed at restructuring the auto taxation framework.
According to the finance minister, Federal Excise Duty will be applied on SUVs ranging from 2,000cc to 3,000cc. He added that duties on vehicles above 3,000cc will also be increased. Moreover, electric vehicles priced above Rs20 million will also come under the new tax regime. Therefore, luxury imports are expected to face higher costs.
The minister also said that the government is reviewing a new auto policy through a special committee formed by the prime minister. In addition, incentives for electric motorcycles, rickshaws, and buses will remain unchanged. However, imported electric trucks will benefit from a reduced one percent sales tax.
Meanwhile, the budget also introduced a relief measure by abolishing Federal Excise Duty on business class air travel. This reflects a mixed approach of taxation and targeted incentives. Furthermore, officials said the policy aims to balance revenue needs with sectoral support. Consequently, multiple industries will see both increases and exemptions.
Overall, the new taxation measures are part of broader fiscal reforms in the federal budget. The proposals will now move to parliamentary review for approval. As a result, final implementation will depend on legislative passage.