The measure was approved by the Federal Cabinet and later the Federal Board of Revenue (FBR) has issued the notification.

The new rule provides that the 40% duty will be applied on commercial imports of used cars in addition to other duties and taxes. The surcharge is supposed to continue until June 30, 2026, after which it will be lowered by 10 percentage points every year until eliminated completely by June 30, 2029.

The move is also part of a wider auto industry liberalization plan, the authorities say. Under budget planning documents, the duty will reduce to 30% in 2026, 20% in 2027, 10% in 2028, and will then be removed in 2029.

Industry opinion has responded vociferously. Car associations threaten that the additional burden will cripple the already struggling car import trade, threaten jobs, and drive more customers towards illegal "grey market" routes.

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In recent months, the government also took steps to authorize commercial import of five-year-old used cars on stricter standards and regulatory control. FBR and Commerce Ministry officials say the policy shift will strike a balance between consumer demand and industry protection.

As it stands, the new surcharge immediately presents a test for car importers and consumers who can expect to see a sudden spike in the prices of vehicles. The phased rollback brings some consolation, but the industry will observe keenly if the government will go through with the commitment to gradually reverse the duty in 2029.