Business Recorder
ISLAMABAD: Ministry of Commerce (MoC) and Ministry of Industries and Production (MoI&P) have reportedly locked horns over the new proposed tariff for industry as massive reduction is under consideration on tariff on imported vehicles and alcohol, sources in Commerce Ministry told Business Recorder . In this regard, Tariff Policy Board (TPB), headed by the Commerce Minister, is about to finalise its recommendations for the federal budget 2026-27 in accordance with tariff rationalisation plan under National Tariff Policy (NTP) 2025-30 already cleared by the International Monetary Fund (IMF). Commerce Ministry gave a detailed briefing to the TPB on Option- II for achieving the targets of NTP for FY 2026-27. It explained that as per NTP, maximum CD slab for 2nd year will be 50percent. Therefore, all CD rates above 50 percent are required to be adjusted between 20 percent to 50percent. Currently, only auto and alcohol are above 50percent CD slab. READ MORE: NTP panel’s decision: All auto & future policies will be placed before TPB Similarly, maximum ACD in 2nd year will be 4percent in line with NTP. To achieve this target, he proposed that ACD rates might be reduced from 6percent to 4 percent, from 4 percent to 2percent, and from 2 percent to 0 percent. However, in case of Tariff Lines where the CD rates are specific instead of Ad Valorem (14 TLs), a minimum ACD rate of 2percent might be retained instead of reducing it to 0percent due to revenue implications of approx. PKR 26-27 billion. In line with NTP, RDS are required to be eliminated by 2030 and maximum RD in second year of the implementation will be 20percent. Therefore, existing RDS of 1percent, 2 percent, and 2.5 percent might be eliminated while RDs above 20percent might be reduced to a maximum cap of 20percent. He further proposed that 20 percent or below 20 percent RDS might be reduced by 20 percent from current rates. Based on above calculation, proposed tariffs on auto sector (both CKD and CBU) with the highest CD slab of 100 percent (31 tariff lines including vehicles above 1800 cc) might be reduced from 106-156 percent to 54-74 percent (including reductions in ACD and RD). Similarly, the 90 percent CD slab (17 TLs) might be reduced to 50 percent, while the 75percent slab (14 TLs) is proposed to be lowered to 45 percent bringing the duty on CKD and CBU to 49-57 percent. Likewise, CD slabs such as 60 percent (25 TLS), 55 percent (16 TLs) and 50percent (47 TLs) are proposed to be reduced to 40percent, 35percent and 30percent. He also apprised that because of tariff rationalization, the weighted average tariff will be reduced from 8.64 percent in FY 2025-26 to 7.42 percent in FY 2026-26. Similarly, the simple average tariff against the Year-II targets of 13 percent, will be reduced from 16.56 percent in FY 2025-26 to 13.71 percent in FY 2026-27. SAPM on Industries and Production, Haroon Akhtar Khan stated that in previous meeting of the TPB, it was agreed that flexibility would be available to TPB in adjusting RD and ACD rates without deviating from the spirit of NTP. In this context, he noted that if any sector/ individual industry submits a representation for tariff rationalization, ACD/RDS might be retained within the available slabs instead of across-the-board reduction. On the auto sector, he directed the EDB team to coordinate with the Commerce team so that tariff structure of auto sector could be finalized at the earliest. The SAPM also suggested that tariff structure of Auto Policy might be shared with the Steering Committee. Secretary, Ministry of Commerce stated that tariff structure first needs to be discussed in the TPB being the relevant forum. In case of difference of opinion, matter might be referred to Steering Committee by TPB or submitted to the Prime Minister/Cabinet for decision. He further stated that, given the paucity of time, the Ministry of Industries and Production needs to finalize the Auto Policy at the earliest so that the same may be presented before TPB to timely complete the budget exercise. A private member of the TPB, while commenting on the tariff rationalization path presented by the Ministry of Commerce, stated that deviation from the targets of NTP for a given year, while adhering with the spirit of the NTP, should be substantiated with strong reasoning. Secretary, MoC, supported this view and stated that consistency should be the key in implementing the NTP. An alternate proposal was presented for implementing the Year-II targets of the NTP. The Private Member of TPB supported the reduction path of CD and ACD as proposed by the Commerce Division; however, with respect to RD, it was proposed a simplified structure whereby existing RD rates ranging from 1percent to 8percent, affecting 561 tariff lines, might be reduced to 0 percent. Simultaneously, it was proposed that existing 10 percent RD might be reduced to 5percent and RDs between 12 percent to 20percent might be reduced to 10 percent. She further proposed that rates between 24 percent to 30 percent be reduced to 15 percent; and all RDS in the range of 32 percent to 50 percent be reduced to 20percent. SAPM on Industries and Production rejected the proposal presented by Private Member of TPB, as the proposed deeper reductions in RDS would adversely affect domestic industries. He noted that NTP envisages a gradual reduction in RDs over a period of four to five years; however, the proposed scheme would expose the domestic industry to foreign goods without providing them any time for adjustment. He reiterated that flexibility should be available to the TPB in adjusting RDs keeping in view the impact of reduction of RDS on domestic industry. Secretary, Ministry of Commerce, concurred with the observations and stated that mere simplification of RDs slabs without giving due consideration to the domestic industry might not be beneficial for industry. He stressed the need for consistency while undertaking reductions under NTP. In response, the Private Member of TPB stated that primarily RDs were levied by FBR for restricting imports. Joint Secretary (Tariff Policy) shared HS code-wise details of all tariff lines where reductions in CD, ACD, and RD rates are proposed. Secretary, Ministry of Commerce, while highlighting the proposed reduction in CD from 90percent to 50percent on 17 tariff lines, covering alcohol and liquor items, observed that such reductions may be negatively highlighted in the media despite the fact revenue impact is insignificant He proposed that tariff reduction on alcohol may be presented in the next meeting of the Steering Committee. Member (Customs Policy), FBR stated that, for the upcoming meeting of Steering Committee, the Ministry of Industries and Production may be requested to highlight deviations in their policies from the NTP. Regarding individual proposals, he noted that the Board should first finalize the overall direction of tariff reductions in year-II, after which individual cases may be examined. The Minister for Commerce proposed that a list of industries likely to be affected by the tariff reductions be prepared, and that a set of basic guiding principles be developed to address their grievances. He further suggested that, for press briefings, a separate list may be compiled highlighting key products or sectors that will benefit from the reduction in tariffs. After detailed deliberations, the following decisions were taken ;(i) all members of the TPB, in principle, agreed on the reduction path proposed by the Ministry of Commerce for meeting the target of NTP for FY 2026-27; (ii) deviations from the NTP 2025-30, in the policies of the MoIP, will be presented to the Steering Committee for decision/guidance ;(iii) the proposed reduction in CD rate from 90 percent to 50 percent for alcohol and liquor items covered under 17 tariff lines will be placed before the Steering Committee and; (iv) list of industries likely to be impacted by tariff rationalization exercise for FY 2026-27 will be prepared by NTC. Copyright Business Recorder, 2026
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