The draft Auto Policy 2026–31 is reported to propose FED removal on 1000cc cars in Pakistan, which would take federal excise duty off the country's smallest and best-selling models.
It is a proposal in an unapproved draft, so nothing has changed at any showroom. And when it does change, the saving will be slightly smaller than the headline percentage suggests for a reason worth understanding before you budget around it.
The parts side of the same policy is covered in our car parts duty cut piece, and the policy's overall status in our Auto Policy 2026–31 approval update.
What Federal Excise Duty Is, and What Is Proposed
Federal Excise Duty on cars is a tax charged on the vehicle itself, levied on locally assembled cars by engine capacity. It is separate from sales tax, from customs duty on imported parts and from registration charges.
Reporting on the draft says the policy would remove the duty entirely for cars up to 1,000cc, with the current rate on that band put at 2.5 per cent.
One honest caveat on that figure. We could not confirm the 2.5 per cent against the Federal Excise Act or the Finance Act 2026 the official gazette document would not open for us so treat the rate as reported rather than as verified law.
The arithmetic in the next section holds whatever the rate turns out to be. Only the rupee figures would move.
The Arithmetic Almost Everyone Gets Wrong
If a 2.5 per cent duty is removed, the obvious move is to subtract 2.5 per cent from the price on the window. That overstates the saving every time.
The reason is that the duty is charged on the value before duty, and the price you see already includes it. So the retail price is the pre-duty value multiplied by 1.025.
Take the duty away and the price falls to the retail figure divided by 1.025. The saving is therefore 2.439 per cent of the retail price, not 2.5 per cent.
| Step | Working |
|---|---|
| Listed ex-factory price | Rs 5,499,000 (Kia Stonic 1.0 Turbo X) |
| Price without the duty | Rs 5,499,000 ÷ 1.025 = Rs 5,364,878 |
| Actual saving | Rs 134,122, which is 2.439% |
| What a flat 2.5% would suggest | Rs 137,475 — about Rs 3,350 too high |
Ex-factory booking price reported by Business Recorder on 1 October 2026, excluding freight and insurance. The calculation assumes the duty is removed in full and passed on in full, neither of which is settled.
To work out your own variant, divide the listed price by 1.025. On a car around Rs 3 million the gap between the two methods is roughly Rs 1,800; on one near Rs 6 million it is about Rs 3,600. Not ruinous, but worth knowing before you treat a figure as banked.
Which Cars Would Actually Qualify
The threshold is up to 1,000cc, and it is a hard line rather than a band. That makes exact displacement decisive, and two of the four cars in this conversation sit within a whisker of it.
The Suzuki Alto and Suzuki Every are 660cc-class vehicles. They clear the threshold comfortably and their eligibility is not in doubt, which makes Suzuki Alto price in Pakistan the most likely of these to move.
The Suzuki Cultus is commonly listed at 998cc inside the limit, but by about two cubic centimetres.
The Kia Stonic Turbo is the interesting case. Lucky Motor's launch reporting describes a 1.0-litre turbocharged GDi engine, and no source publishes an exact cc figure. A nominal one-litre engine is usually just under 1,000cc, but "usually" is doing a lot of work at a hard cut-off.
So for the costliest car here, and the one with the largest potential saving, eligibility rests on a number nobody has published. Check the brochure or the registration book rather than trusting a rounded badge. If you already own one of these, our Alto accessories and Cultus accessories are fitted in-house in Multan.
Will Removing the Duty Automatically Lower Prices?
No, and this is the part that decides whether any of it reaches you. Removing a tax reduces the manufacturer's cost of putting the car on sale. It does not oblige anyone to reprint the price list.
Three things sit between the two. The assembler decides whether to pass the relief on, keep it, or absorb it against other cost increases. Dealers set their own premiums where demand is strong. And prices here move with the exchange rate and input costs anyway.
A duty cut arriving in the same quarter as a rupee slide can leave the sticker exactly where it was. Published savings assume the duty goes in full and is passed on in full, and neither is guaranteed.
What Buyers Would Still Pay
Excise duty is one line among several, and the rest are untouched by this proposal.
| Charge | Position under the proposal |
|---|---|
| Federal excise duty, up to 1,000cc | Removal proposed, not enacted |
| Sales tax | Unchanged by this measure |
| Withholding tax at registration | Unchanged |
| Provincial registration and number plate | Unchanged, and provincial |
| Freight, insurance, dealer premium | Unchanged |
Ex-factory prices quoted by assemblers typically exclude freight and insurance, so the figure you pay is higher than the one in a price announcement.
Has the Government Approved It?
Not in any sense that would change a price. The Prime Minister approved the draft policy on 20 October 2026. It still needs the federal cabinet and then legislation.
An excise exemption also needs a legal instrument of its own. Until the Federal Excise Act's schedule of rates for motor cars is amended, or a notification issues, the duty remains payable.
If you want to check it yourself, look for the First Schedule entry for motor cars by engine capacity in the Federal Excise Act, or an FBR notification referring to vehicles up to 1,000cc. A budget document or a general tariff page does not settle it.
The EV parts duty proposals in the same draft sit in exactly the same position, and so do most of the numbers now circulating about 1000cc car prices in Pakistan.
Final Thoughts
Taking excise duty off the 1,000cc class would be real car tax relief, and it lands on the models most Pakistani households actually buy. Worth about Rs 73,000 on an Alto and Rs 106,000 on a Cultus if it arrives in full.
Just hold two things in mind: the saving is 2.439 per cent of the listed price rather than 2.5, and none of it exists until the law changes. If you are waiting on a booking, ask your dealer in writing how a duty change would be treated.
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