ISLAMABAD: Prime Minister Shehbaz Sharif has approved a reduction in duties on over 7,066 tariff lines, which include raw materials, intermediate and capital goods aimed at stimulating industrial growth in the country.
The premier green-lit the proposals for a formal announcement in the budget speech, which had received earlier approval from the Tariff Policy Board and Steering Committee. However, the premier asked that the implementation committee identify any irritants before the budget announcement.
Official sources told Dawn on Wednesday that the government will announce the abolishing of 2 per cent additional customs duty (ACD) on 4,294 tariff lines in the upcoming budget. These are mostly raw materials, which will reduce the industries’ input cost.
It was also decided that the ACD will be reduced from 4pc to 2pc on 545 tariff lines, from 6pc to 4pc on 2,227 tariff lines, and from 7pc to 6pc for all products currently subject to a customs duty above 20pc.
Orders committee to consult sectors enjoying 100-150pc tariff protection
According to officials, the major impact will be seen in products classified in chapters 28 to 38, which mostly cover products related to chemicals, pharmaceuticals, plastics, etc. The 2pc to 4pc duty cut will lower the cost of all these products.
The reduction will also cover information technology products, which fall under chapters 84 and 85 of the Pakistan Customs Tariff. Polyester Filament Yarn and HRC of steel sectors will also see a cut in import duties.
Simplified structure
In the budget, the government will also introduce a simplified customs duty structure with slabs of 0, 5, 10, 15, and 20pc. The existing 16pc slab will be reduced to 15pc, while the 11pc rate will drop to 10pc. The 3pc slab will be abolished, with products either moved to a zero-duty category or the new 5pc slab.
Regulatory duties, which range from 5pc to 90pc on various products, will also see a drastic reduction in the upcoming budget. However, it will be fully eliminated over five years, easing import costs and improving market accessibility.
The regulatory duties, which currently reach as high as 90pc on various products, would be reduced to a maximum of 30pc.
Moreover, the 5th Schedule of Customs, which provides industry-specific tariff concessions, will be dissolved, with all products covered under it transitioning to the 1st Schedule in a phased manner. There are no changes in the tariff structure in the upcoming budget which will hurt the interest of any specific industry, the official added.
Engaging stakeholders
PM Shehbaz Sharif has directed the steering committee to initiate formal engagement with leading sectors such as auto, iron and steel, textiles, chemicals and plastics — currently shielded by effective tariff rates ranging between 100pc and 150pc after the budget announcement.
The committee will propose an agreed-upon reduction in tariffs for all these sectors in consultation with all stakeholders, the officials said, adding that the premier stated his government’s priority is to shift away from import substitution to an export-led growth strategy.
The premier agreed on the overall plan of a phased reduction in overall tariff protections for select industries.
Under the approved plan, the government has set a target to slash the simple average tariff from the current 19pc to 9.5pc within five years. A key adjustment in the plan includes restructuring duty slabs, replacing the existing slabs of 0pc, 3pc, 11pc, 16pc and 20pc with a streamlined system of 0pc, 5pc, 10pc and 15pc.
By the end of the five-year implementation period, the tariff overhaul will establish a uniform maximum duty slab of 15pc, eliminating sector-specific peaks that previously exceeded 20pc — primarily affecting the auto industry.
The additional customs duties currently set at 2pc, 4pc, 6pc and 7pc across various slabs will be gradually phased out to zero within the next three to four years.
Published in Dawn, June 5th, 2025
