As Pakistan prepares to unveil its Finance Bill 2025–26, the Federal Board of Revenue (FBR) has nearly finalized a sweeping set of new tax measures targeting diverse sectors to generate an estimated Rs. 200 billion in additional revenue, according to sources.
The key elements of the draft proposal indicate a policy shift toward expanding the sales and excise tax base, impacting both consumers and businesses.
Key Proposals in the Finance Bill 2025–26:
- 18% Sales Tax on Solar Panels and E-Commerce
A controversial proposal includes an 18% sales tax on imported solar panels—potentially slowing adoption of clean energy. The same rate is expected for e-commerce transactions, signaling the government’s intent to formalize the booming digital economy. - Withdrawal of Tax Exemptions and Concessionary Rates
FBR has reviewed the Sixth and Eighth Schedules of the Sales Tax Act, aiming to revoke multiple exemptions and reduced rates. This will likely raise consumer costs across various sectors. - Partial Relief for Health Sector
In contrast, certain lifesaving drugs and cancer-related medical equipment are expected to be exempted from taxation—a small but critical concession for public health. - Expansion of Sales Tax in Islamabad and Ex-Tribal Areas
FBR plans to broaden the tax net in Islamabad Capital Territory and impose an 18% sales tax on goods manufactured in the ex-FATA regions, integrating these areas more fully into the national tax structure. - Third Schedule Expansion for Imports
Items like chocolates, coffee, cereals, and other imports will be taxed under the Third Schedule, meaning taxation based on printed retail prices, increasing compliance pressure on importers and retailers. - 5% Excise Duty on Ultra-Processed Foods
Public health meets revenue generation as FBR considers a 5% federal excise duty on ultra-processed food products, including:- Frozen meals
- Packaged snacks and chips
- Instant noodles and biscuits
- Ice cream, carbonated drinks
- Processed meat and ready-to-eat items
What It Means for the Economy
While these measures aim to boost revenue amid IMF obligations and fiscal constraints, they may burden households, affect clean energy adoption, and raise costs across food and digital sectors. Businesses will face greater compliance needs, especially in retail and e-commerce.
At the same time, targeted health-related tax exemptions and a broader geographic tax base reflect attempts at progressive reforms.