Prime Minister Shehbaz Sharif has approved a second phase of the five-year Tariff Reform Plan (2025–2030), providing Rs200 billion in import-duty relief to the industrial sector.

The plan will reduce additional customs duty (ACD) on 3,149 tariff lines and cut Regulatory Duties (RD) to 20 percent on more than 1,900 tariff lines in the Budget 2026–27.

Effective tariff rates in sectors such as automobiles, iron and steel, textiles, chemicals, and plastics will fall from a range of 100 to 150 percent to around 50 to 70 percent.

For vehicles specifically, customs duty will be reduced from 100 to 50 percent and RD will be cut from 50 to 20 percent, bringing total import duty down from 150 to 70 percent.

Officials said the prime minister confirmed reforms would proceed despite opposition from cabinet members and parliamentarians linked to sectors affected by the changes.

In the upcoming budget, the government will eliminate the remaining two percent ACD on 518 tariff lines, reduce it from 4 to 2 percent on 2,166 lines, and from 6 to 4 percent on 465 lines.

The government will also cut RD to a maximum of 20 percent on over 1,948 tariff lines in the 2026–27 budget, down sharply from the current ceiling of 50 percent.

In the first phase, Rs200–250 billion in relief was delivered by eliminating ACDs and reducing the maximum RD from 90 to 50 percent across a broad range of goods.

The simple average tariff target for 2026–27 has been set at 13 percent, following a reduction in the first phase from 20.2 to 15.65 percent in the current fiscal year.

Projections show the average tariff rate will decline further to 11.5 percent in 2027–28, then 10.25 percent in 2028–29, and reach 9.7 percent in 2029–30, the final implementation year.

Customs duty slabs will be restructured into a streamlined 4-tier system of 0 percent, 5 percent, 10 percent, and 15 percent by the conclusion of the five-year reform framework.

The government will exempt customs duty on pharmaceutical products and instruments and will withdraw exemptions on items currently covered under the 5th Schedule of Customs.

Tariff rationalisation is projected to increase exports by around $5 billion by the end of the five-year period, boosting the country’s global market competitiveness.