Luxury cars in Pakistan is set to become significantly more expensive after the government introduced a major increase in taxes on imported high-engine-capacity vehicles under the 2026-27 federal budget.
The government has imposed a new Special Excise Duty (SED) on imported Completely Built-Up (CBU) vehicles, adding it to the existing Federal Excise Duty (FED). As a result, the total excise tax on some premium vehicles will now reach as high as 132 percent.
The revised tax policy is expected to cause a sharp rise in the prices of luxury cars, making many imported sedans, SUVs, and premium vehicles unaffordable for a large number of buyers. Car dealerships are also expected to revise vehicle prices once the new duties come into effect.
Under the new tax structure, imported vehicles with engine capacities ranging from 2,000cc to 3,000cc will now be subject to an 86 percent Special Excise Duty. Since these vehicles are already charged a 30 percent Federal Excise Duty, the combined excise burden will increase to 116 percent.
The highest tax has been imposed on imported vehicles with engines above 3,000cc. These luxury cars will face a 92 percent Special Excise Duty in addition to the existing 40 percent Federal Excise Duty, resulting in a total excise tax of 132 percent.
The new taxation applies to imported passenger cars, sport utility vehicles (SUVs), station wagons, four-wheel-drive double-cabin pickups, and racing vehicles.
Government officials said the policy is part of a broader strategy to increase revenue while discouraging the import of expensive, high-displacement vehicles. Authorities believe the higher taxes will help reduce imports of luxury automobiles and support economic objectives.
However, industry experts believe the decision will have a major impact on the premium automobile market. Higher import duties are expected to reduce demand for luxury cars, while buyers interested in imported vehicles may have to pay substantially higher prices. The revised tax regime is likely to reshape Pakistan’s luxury vehicle market in the coming months.
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