The Federal Board of Revenue (FBR) is considering a proposal to increase the age limit for importing used vehicles from three years to five years in the upcoming 2025-26 budget.

Currently, the government permits the import of used cars up to three years old and SUVs up to five years under specific schemes. The proposed policy would standardize the age limit to five years for all vehicle types.

In the previous budget for 2024-25, a 15% regulatory duty was imposed on imported used cars exceeding 1,300cc.

The government is also exploring the gradual reduction of regulatory duties and tariffs on Completely Built-Up (CBU) vehicles to below 10%, with the long-term goal of lowering automotive tariffs to single digits within five years.

Furthermore, in the previous budget, the government decided to discontinue the customs duty concession on the import of hybrid vehicles.

A tax expert indicated that the FBR has implemented measures to prevent misuse of the import schemes for older vehicles.

There have been reports of misuse related to personnel baggage, transfer of residence, and gift schemes.

Under current regulations, overseas Pakistanis can import vehicles under these schemes if they have not imported, gifted, or received a vehicle in the past two years, as stated in the Import Policy Order (IPO) 2022.

The FBR clarified that the customs department will not impose an 18% sales tax on the auction of serviceable old and used vehicles if sales tax has already been paid at the local or import stage.

However, sales tax will apply to the auction of unserviceable or condemned vehicles, regardless of prior tax payments.

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Also, last year, the sale of cars during the first six months of the financial year 2023-24 dropped by 55.5% as 30,662 cars were sold during the months.

This year, the Federal Board of Revenue (FBR) stopped the procurement process for over 1,010 vehicles until a thorough review, referred to as “optional analysis.”