Come on. It’s time _________ packing. We have to leave in two hours.

We can use the expression it’s time + subject + past verb form to refer to the present moment:
Correct: Gosh! It’s almost midnight. It’s time we went home.
Incorrect: It’s time we go home.
It’s time with a verb in the to-infinitive form can refer to the speaker and the listener together:
Come on. It’s time to start packing. We have to leave in two hours. (or It’s time we started packing.)