ISLAMABAD – Pakistani authorities slashed Federal Excise Duty on club, business and first-class international tickets, with North America-bound passengers set to see the biggest relief, up to Rs300,000 per ticket. At the same time, airlines are getting major tax breaks on aircraft and spare parts, marking a significant shift in Pakistan’s aviation tax regime.
Officials unveiled major tax shake-up for aviation and maritime sectors, with Federal Board of Revenue (FBR) cutting Federal Excise Duty (FED) on premium international air tickets while restoring sales tax exemptions on aircraft and ships. The move could deliver massive savings for premium air travellers and significantly reduce the cost of aircraft acquisition for airlines, while also giving Pakistan’s shipping and shipbuilding industry a fresh tax boost.
The biggest relief comes for passengers travelling to North America in club, business and first class. The fixed FED has been reduced from around Rs350,000 to Rs50,000 per ticket, a massive Rs300,000 reduction. For passengers travelling to the Middle East, the duty has been brought down from around Rs105,000 to Rs25,000, providing relief of approximately Rs80,000 per ticket.
For Europe, FED cuts from around Rs210,000 to Rs40,000, while the same Rs40,000 rate will apply to the Far East and Australia, down from approximately Rs210,000.
New FED
| Destination | NEW FED | ODL FED | RELIEF |
|---|---|---|---|
| North America | Rs50,000 | Rs350,000 | Rs300,000 |
| Middle East | Rs25,000 | Rs105,000 | Rs80,000 |
| Europe | Rs40,000 | Rs210,000 | Rs170,000 |
| Far East & Australia | Rs40,000 | Rs210,000 | Rs170,000 |
The revised rates apply to club, business and first-class tickets. The reduction is particularly significant for North American routes, where the tax burden has been cut by nearly 86% compared with the previous rate.
In another major development, the government has restored sales tax exemptions on aircraft imports and leasing. The relief will now be available to all registered airlines in Pakistan, rather than being largely associated with PIA. The exemption also covers aircraft spare parts imported by registered airlines.
Previously, the tax facility was largely linked to Pakistan International Airlines (PIA), particularly in connection with its privatization arrangements. The latest decision extends the benefit across the registered airline industry. The government expects the move to help airlines acquire and lease aircraft at lower cost, modernize their fleets and expand operations.
The original Finance Bill 2026 proposal had envisaged implementation from July 1, 2027, but the latest FBR directions have effectively brought the measure into implementation.
The tax relief package extends beyond aviation. The government has also restored sales tax exemption on the import of Pakistani-flagged ships, a facility that had been withdrawn in 2021. Additional exemptions have been granted on the import of plant, machinery and capital assets used for shipbuilding.
The objective is to lower the cost of investment in the maritime sector and encourage the development of Pakistan’s domestic shipbuilding capacity. The move comes after the government’s 2026–27 budget measures aimed at removing the 18% sales tax burden on the shipping industry.
The latest measures could have a significant impact across the transport sector. For airlines, lower taxes on aircraft imports and leasing could make fleet expansion and modernization easier. For passengers, the sharp reduction in FED could make business and first-class international travel substantially cheaper.
For the shipping industry, tax-free imports of vessels and shipbuilding machinery could encourage new investment, increase the number of Pakistani-flagged ships and strengthen local shipbuilding.
Federal Board of Revenue has issued instructions to its field formations regarding implementation of the sales tax exemptions. The measures are linked to the Finance Act 2026 and FBR Sales Tax Circular No. 1 of 2026.
15-year sales tax exemption on imports approved for PIA, other airlines
