Federal Excise Duty is one of those taxes most people only notice when a price jumps, a car import quote doubles, or a line item appears on an invoice. For manufacturers, importers and traders, though, getting an FED rate wrong can mean a penalty, a blocked clearance, or a pricing mistake that eats the margin.
This guide explains how FED works in Pakistan, what changed under the Finance Act 2026, and which rates apply from 1 July 2026. You will also find worked calculation examples, a verification routine, and the compliance basics. Every rate is traced to the enacted law or official budget material, and the ones we could not fully confirm are flagged.
Federal Excise Duty (FED) is a federal tax charged under the Federal Excise Act, 2005 on specified goods and services, such as cigarettes, cement, certain beverages, vehicles, petroleum-related products and air travel. Rates are listed in the First Schedule and revised through annual Finance Acts. The Finance Act 2026, effective 1 July 2026, added a Special Excise Duty of 86% to 92% on large imported vehicles and set new rates for e-liquids, acetate tow and premium air tickets.
What Is Federal Excise Duty in Pakistan?
FED is an indirect tax. It is built into the price of selected products rather than charged on everything you buy. The government uses it for two reasons: to raise revenue from a narrow set of goods and services, and to discourage consumption of items such as tobacco and sugary drinks.
The legal base is the Federal Excise Act, 2005, administered by the Federal Board of Revenue (FBR). The Act's charging provision is section 3, and the rates sit in the First Schedule. Table I covers goods and Table II covers services. The Second Schedule lists items taxed in "sales tax mode", and the Third Schedule lists conditional exemptions. You can read the consolidated text on the Pakistan Code portal.
Who actually pays FED?
The legal liability sits with the manufacturer, importer or service provider. In practice the cost is passed down, so the consumer pays it inside the retail price. That is why a packet of cigarettes or a bag of cement carries FED even though the shopper never sees a separate line.
FED vs sales tax vs customs duty
These three taxes often hit the same product, which is why people mix them up.
| Feature | Federal Excise Duty | Sales tax | Customs duty |
|---|---|---|---|
| Scope | Specified goods and services only | Most goods and many services | Imported goods |
| Legal source | Federal Excise Act, 2005 | Sales Tax Act, 1990 | Customs Act, 1969 |
| Rate form | Fixed per unit, or a percentage | Mostly percentage of value | Percentage of customs value |
| Main purpose | Revenue and discouraging certain consumption | Broad consumption tax | Revenue and trade policy |
| Collected at | Manufacture, import or supply | Supply or import | Import |
Our guides on direct versus indirect tax, income tax versus sales tax in Pakistan and FBR versus provincial sales tax give the wider picture.
What Changed in the Finance Act 2026
The Finance Bill 2026 was presented on 12 June 2026. After debate and approval, it became the Finance Act 2026, effective 1 July 2026. A few features are worth knowing before you look at rates.
A new Special Excise Duty. The Act inserts section 3(3B), which allows a Special Excise Duty (SED) on goods listed in the new Table IA, in addition to ordinary FED. FBR can prescribe how and when it is collected.
Digital compliance is now part of the Act. The amendments introduce electronic invoicing, production monitoring systems, faceless audits and an algorithmic settlement mechanism. These mirror the changes made to the Sales Tax Act. Goods that should be monitored but are not can be seized, together with the vehicle carrying them.
Several proposals were changed before enactment. The bill proposed a flat 20% FED on all mineral waters, aerated waters and hydration drinks. Dawn reported that this was dropped for low-sugar drinks. Imported electric car duties were also reworked to be based on US dollar values.
Some FED items were reduced or exempted. Acetate tow fell sharply, certain strategic vehicle imports were exempted, and the exemption on CKD kits for electric vehicles was extended to 30 June 2027, according to FBR's salient features.
This matters because many articles online still show budget-stage proposals as if they were final. Always separate "proposed" from "enacted".
Federal Excise Duty Rates 2026-27: Goods
The table below shows the rates for items amended or confirmed in the Finance Act 2026. It draws on a commentary on the enacted Finance Act and the FBR salient features. Rates for items not changed this year come from earlier Finance Acts and are marked.
| Goods | Rate of duty | Notes |
|---|---|---|
| E-liquids for electric cigarette kits | Rs 16,500 per kg | Raised from Rs 10,000 per kg |
| Acetate tow | Rs 10,000 per kg | Reduced from Rs 44,000 per kg |
| Imported cars and SUVs up to 1,000cc | 2.5% ad valorem | Heading 87.03 |
| Imported 1,001cc to 1,799cc | 10% ad valorem | |
| Imported above 3,000cc | 40% ad valorem | |
| Local cars up to 1,300cc | 2.5% ad valorem | Locally manufactured or assembled |
| Local 1,301cc to 2,000cc | 5% ad valorem | |
| Local 2,001cc and above | 10% ad valorem | |
| Imported electric cars/SUVs (CBU) up to USD 75,000 | 0% | Value determined under section 25 of the Customs Act |
| Imported electric cars/SUVs USD 75,000 to 110,000 | 30% ad valorem | |
| Imported electric cars/SUVs above USD 110,000 | 40% ad valorem | |
| Sugary juices, syrups, squashes and sweetened waters | 20% of retail price | Specified low-sugar hydration drinks are carved out |
Cigarettes and tobacco
Cigarettes remain the largest single source of FED revenue. ProPakistani's analysis of FBR data shows total FED collection of Rs 840.02 billion in FY2025-26, with cigarettes contributing Rs 251.26 billion.
The structure is tiered by the printed retail price per 1,000 sticks. Under earlier law, the higher tier was Rs 16,500 per 1,000 sticks and the lower tier Rs 5,050, with the dividing price threshold raised to Rs 12,500 through the Finance Act 2024, as an SPDC analysis explains.
What is new in 2026: the Finance Act tightens the rule on new brand variants. No manufacturer or importer may introduce a new variant of an existing brand at a price below the lowest actual price of that brand. The definition of "brand variant" is also narrowed to identical, not merely similar, names and marks.
What to verify: reports before the budget discussed a possible third tier. We could not confirm it in the enacted amendments we reviewed, so check the current First Schedule before quoting any cigarette rate.
Cement
Cement is the second-largest FED contributor, with collections of Rs 160.35 billion in FY2025-26 according to the same ProPakistani report. The duty is charged per kilogram, so it does not move with the selling price.
Press coverage has reported the rate rising from Rs 3 to Rs 4 per kg in the previous year. The Finance Act 2026 amendments we reviewed did not list a cement change, but confirm the figure in the schedule before using it in a contract.
Beverages
FED on sugary juices, syrups and squashes is set at 20% of retail price. Mineral waters, aerated waters and hydration or electrolyte drinks are covered by a carve-out for products with sugar not exceeding 5 g per 100 ml and no artificial sweetener.
Aerated drinks were raised from 13% to 20% in 2023. During the review of the Finance Bill, the Senate Finance Committee chairman endorsed a proposal to cut this to 15%. The enacted amendments we reviewed did not show that change, so treat 20% as the figure to confirm.
Vehicles: ordinary FED and the new Special Excise Duty
Vehicles are where the 2026 changes bite hardest. The Special Excise Duty applies to imported motor cars, SUVs, station wagons, 4x4 double-cabin pickups and racing cars, and sits on top of the ordinary FED in the table above.
| Imported vehicle category | Ordinary FED | Special Excise Duty | Combined excise |
|---|---|---|---|
| 2,000cc to 3,000cc | 30% | 86% | 116% |
| Above 3,000cc | 40% | 92% | 132% |
ProPakistani reported that FBR began collecting SED on 1 July at the import stage, in the same way as customs duty. The exact duty depends on the vehicle's Pakistan Customs Tariff classification.
PakWheels' summary of the auto sector after the budget shows how this stacks with customs duty (50%), regulatory duty (20%) and additional customs duty (4%) for the 2,001cc to 3,000cc band. If you are importing or advising an importer, always model the full stack, not FED alone. Our guide to import duty in Pakistan covers the customs side.
Local assembly pays far less. A locally manufactured 1,300cc car attracts 2.5%, against 30% for an imported 1,800cc to 3,000cc vehicle. That gap is the policy signal.
Petroleum-related products
New entries impose Rs 80 per litre on petroleum top naphtha, white spirit (mineral turpentine oil) and solvent oil. These are placed in the Second Schedule, so they are collected in sales tax mode.
A conditional exemption applies to import and supply of white spirit and solvent oil bought only for in-house use by holders of a valid Form-L licence from the Department of Explosives. The exemption depends on conditions about sales tax status and integration with FBR's invoicing system, and it is subject to an approved quota.
E-liquids and acetate tow
E-liquid duty rose to Rs 16,500 per kg. Before the change, a very high percentage of retail price was the headline rate; a per-kilogram figure is simpler to administer. Acetate tow, used in cigarette filters, was cut from Rs 44,000 to Rs 10,000 per kg.
Federal Excise Duty Rates 2026-27: Services
Services are listed in Table II of the First Schedule. The best-documented change this year is on premium air travel.
| Service | Rate (tickets issued on or after 1 July 2026) |
|---|---|
| Club, business and first class: Americas | Rs 50,000 per ticket |
| Club, business and first class: Middle East and Africa | Rs 25,000 per ticket |
| Club, business and first class: Europe | Rs 40,000 per ticket |
| Club, business and first class: Far East, Australia, New Zealand and Pacific | Rs 40,000 per ticket |
Economy class and domestic air travel have separate entries. ProPakistani's data shows inland air travel contributing Rs 57.68 billion and other air travel Rs 44.12 billion in FY2025-26, so aviation is a major FED line.
Other services on Table II depend on the service and, in some cases, on whether a provincial sales tax on services already applies. Our articles on sales tax on services in Pakistan and FBR versus provincial sales tax explain the boundary.
If you see "FED" on a bank statement, read the bank's notice for the exact basis. We could not confirm a current federal charge on general banking services in the enacted amendments we reviewed, so do not assume the rate quoted in older articles still applies.
How to Calculate Federal Excise Duty
FED is calculated in one of three ways, and the rate column tells you which. Mixing them up is the most common source of error.
Specific duty is a fixed amount per unit: Rs per kg, per litre, per ticket or per 1,000 sticks.
Ad valorem duty is a percentage of a value, such as the assessable value of an import.
Retail price-based duty is a percentage of the printed retail price, used for items like sweetened beverages.
Worked examples
These are illustrations of the arithmetic, not tax advice. Use your own figures and confirm the current schedule.
Example 1: Cement (specific duty).
A 50 kg bag at Rs 4 per kg carries Rs 200 of FED (50 × 4). One tonne carries Rs 4,000. Because the duty is per kilogram, a price rise does not change it.
Example 2: Sweetened juice (retail price based).
A juice with a printed retail price of Rs 200 and a 20% duty carries Rs 40 of FED (200 × 0.20). Sales tax and other charges are separate and depend on how the value is determined.
Example 3: Imported car (ad valorem plus SED).
Suppose the assessable value is Rs 10,000,000 for a 2,500cc petrol SUV. Ordinary FED at 30% is Rs 3,000,000. SED at 86% is Rs 8,600,000. Combined excise is Rs 11,600,000 before customs duty, regulatory duty, additional customs duty and sales tax.
In real clearances the assessable value is set by Customs and can include other duties, so the actual base may differ. Treat this as a model for understanding the stack.
Example 4: Petroleum naphtha (specific duty).
A supply of 10,000 litres at Rs 80 per litre carries Rs 800,000 of FED (10,000 × 80).
Example 5: Business class ticket to Europe.
A club, business or first class ticket to Europe issued after 1 July 2026 carries a fixed Rs 40,000 FED, regardless of the fare.
Three habits that prevent calculation mistakes
- Identify the tariff heading first. Rates attach to headings and descriptions, not product names.
- Check which base applies: unit, retail price or assessable value.
- Confirm the effective date, since many measures apply from a date notified by FBR.
Who Must Register and File?
Manufacturers and importers of excisable goods, and providers of excisable services, are generally required to register with FBR. Registration and returns run through FBR's online system. Our guides to the FBR IRIS portal and the IRIS 2.0 filing process walk through the portal, and IRIS itself is where filings are made.
FED returns are filed periodically, and payment is due by the date notified for that period. Because deadlines can change, check the current date on IRIS rather than relying on an article. Businesses already registered for sales tax should also read our explainer on the STRN sales tax registration number, since many excisable goods carry both taxes.
Digital invoicing is becoming mandatory
The Finance Act 2026 introduces electronic invoicing for excisable goods. Verifiable, unique FBR invoice numbers become mandatory from a date FBR will notify. Advance receipt invoices are also introduced.
Plan for this now. Check that your accounting or ERP system can integrate with FBR's invoicing, and confirm whether your sector is covered by production monitoring or tax stamps.
Exemptions, Input Adjustment and Refunds
Conditional exemptions are in the Third Schedule. A new entry this year exempts import of bullet-proof vehicles by the Federal Government for the SCO summit logistics, and by federal or provincial governments for threats against public functionaries, subject to approvals.
Conditions matter. An exemption on paper can be lost if you miss a condition, such as a licence, quota or integration requirement. The white spirit exemption above is a good example.
Input adjustment and refunds are governed by the Act and its rules. The conditions differ by product and sector, so confirm them against the current rules and keep invoices, clearance documents and monitoring records ready for an audit.
Exports are generally treated favourably, but conditions apply, so confirm the position for your product rather than assuming zero liability.
Penalties and Enforcement
The enforcement side has become stricter. The Finance Act 2026 broadens seizure and confiscation, so goods that should have been tracked or monitored can be seized along with the vehicle carrying them.
Tampering with electronic monitoring equipment is an offence under section 19(4). The penalty is a fine of up to Rs 75,000 or ten times the duty involved, whichever is higher, imprisonment up to five years, or both.
FBR also gains faceless audit and assessment powers, and an algorithmic settlement mechanism that lets taxpayers settle proceedings on a digitally generated proposal. If you receive a notice, our guide on how to respond to an FBR tax notice covers the first steps.
How to Verify a Current FED Rate
Rates change, and online articles age quickly. This routine takes a few minutes and protects you from using a stale figure.
- Find the tariff heading for the product in the Pakistan Customs Tariff, available through Pakistan Customs.
- Open the First Schedule of the Federal Excise Act, 2005 on the FBR website or on Pakistan Code, and find your heading in Table I or Table II.
- Check the Second and Third Schedules for sales tax mode treatment and conditional exemptions.
- Read the Finance Act 2026 amendments and the FBR circulars explaining them.
- Search FBR's SRO list for notifications that change rates or collection mechanics, and note effective dates.
- Record the date and source next to every rate you use in a quote or costing.
For budget context, the Finance Division publishes the federal budget documents.
Using Free Calculators for the Tax Around FED
FED rarely arrives alone. Most excisable goods also carry sales tax, and imports add customs duty. We do not run an FED calculator, but our tools handle the related layers:
- The Pakistan sales tax calculator for the sales tax layer
- The FBR tax calculator for income tax planning
- The Islamabad token tax calculator for vehicle owners; our Islamabad token tax rates guide explains the invoice-value change
If you are new to the vocabulary, our tax terms glossary for beginners is a good starting point, and you can browse everything on our tools page.
Frequently Asked Questions
What is Federal Excise Duty in Pakistan?
FED is a federal tax charged under the Federal Excise Act, 2005 on specified goods and services. It is collected by FBR and built into the price of items like cigarettes, cement, certain beverages, vehicles and air travel.
Who pays FED in Pakistan?
The manufacturer, importer or service provider is legally liable, but the cost is usually passed on to the buyer through the price.
Is FED the same as sales tax?
No. Sales tax applies to most goods and many services, while FED applies only to items listed in the First Schedule. Many products carry both.
What is the new Special Excise Duty on imported cars?
Under the Finance Act 2026, imported cars and SUVs of 2,000cc to 3,000cc face an 86% ad valorem SED, and those above 3,000cc face 92%. It is charged in addition to ordinary FED of 30% and 40% respectively.
What is the FED rate on e-liquids in 2026-27?
Rs 16,500 per kg, up from Rs 10,000 per kg.
Does FED apply to imported electric vehicles?
Imported CBU electric cars and SUVs valued up to USD 75,000 attract 0%. Those above USD 75,000 and up to USD 110,000 attract 30%, and those above USD 110,000 attract 40%.
When did the Finance Act 2026 take effect?
It took effect on 1 July 2026, after the President's assent.
Where can I find the official FED rate schedule?
The First Schedule of the Federal Excise Act, 2005 is available on the FBR website and on Pakistan Code. Check the Finance Act 2026 amendments and current notifications alongside it.
Your Next Steps
FED looks complicated because it is a patchwork: fixed amounts per kilogram, percentages of retail price, and percentages of assessable value, all revised every budget. The practical answer is a routine, not a memorised table.
Identify the tariff heading, confirm the rate and its base in the First Schedule, check the effective date, and model the full tax stack including sales tax and, for imports, customs duty. If you are importing a vehicle above 2,000cc, run those numbers before you commit to a purchase, because the 2026 SED changes the economics.
Then bookmark the official sources, set a reminder to re-check rates after every budget, and use our tax guides and calculators for the pieces that sit around FED.