PM Shehbaz Approves Raw Material Duty Cut for Industrial Growth

ISLAMABAD: Prime Minister Shehbaz Sharif has approved a significant raw material duty cut on more than 7,066 tariff lines, targeting raw materials, intermediate goods, and capital equipment to support industrial growth ahead of the 2025-26 federal budget.

The prime minister endorsed proposals cleared earlier by the Tariff Policy Board and Steering Committee for formal inclusion in the budget announcement. He also instructed the implementation committee to identify any remaining issues before the official declaration.

According to reports, the government plans to eliminate the 2% additional customs duty (ACD) on 4,294 tariff lines, mainly covering raw materials, which will help reduce input costs for industries. Additionally, the ACD will be brought down from 4% to 2% on 545 lines, from 6% to 4% on 2,227 lines, and from 7% to 6% for goods currently facing over 20% customs duty.

Officials noted that the impact of the raw material duty cut will be particularly visible in chapters 28 to 38 of the Pakistan Customs Tariff, which includes items from the chemicals, pharmaceuticals, and plastics sectors. The reduction will also benefit IT-related products under chapters 84 and 85, along with key imports like Polyester Filament Yarn and HRC in the steel sector.

Streamlined Duty Slabs

To simplify the customs structure, the government plans to adopt streamlined duty slabs of 0%, 5%, 10%, 15%, and 20%. The current 16% slab will be lowered to 15%, the 11% to 10%, and the 3% slab will be removed entirely—shifting items either to 0% or the new 5% category.

Regulatory duties, which now range from 5% to 90%, will be gradually reduced and capped at 30%, with full elimination planned over five years. The industry-specific 5th Schedule of Customs will also be phased out, with items shifting to the 1st Schedule to standardize tariffs.

To protect key sectors, PM Shehbaz directed the steering committee to engage with stakeholders from industries such as auto, steel, textiles, chemicals, and plastics. The goal is to achieve a consensus-based tariff reduction, with a strategic shift from import substitution to export-driven growth.

The long-term plan includes lowering the average tariff rate from 19% to 9.5% within five years, with a uniform maximum duty slab of 15%, eliminating high tariffs primarily affecting the automotive sector. Additional duties from 2% to 7% will also be gradually phased out over the next few years.