In a rare display of parliamentary unity, Pakistani lawmakers have strongly rejected the proposed 18 percent sales tax on imported solar panels within the Finance Bill 2025-26. Simultaneously, they have advocated for reduced tax rates on smaller cars, aiming to alleviate financial pressure on low-income segments of the population.

During parallel sessions, both the Senate and National Assembly Standing Committees on Finance and Revenue unanimously voted against the solar tax proposal. Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial defended the tax, citing the protection of domestic manufacturers. However, committee members countered that solar panels are not locally produced, questioning the necessity of early protectionist measures. Lawmakers warned that taxing solar imports would restrict access to affordable renewable energy and escalate electricity costs, especially given Pakistan’s rapid emergence as a leader in solar power deployment. The country has more than tripled its solar electricity generation this year, significantly fueled by a five-fold rise in solar capacity imports since 2022. Solar power has become Pakistan’s largest electricity source in 2025, contributing to 25% of its utility-supplied electricity.

The Senate committee also voiced significant concern over the increase in General Sales Tax (GST) from 12% to 18% on small vehicles, including those with 850cc engines. Senators criticized the 18% sales tax on a Rs3 million vehicle as “unfair,” proposing a moderation to 14% or 15%. This comes amidst concerns that while tax relief is extended to some regions, small car owners continue to face high taxation. However, the committee did approve a sales tax exemption on aircraft imports as part of PIA’s privatization efforts.

Discussions also covered proposed changes in the tax fraud definition, now categorized to allow arrests for flight risks and individuals tampering with records or failing to respond to three official notices. A three-member FBR board will review cases for amounts above Rs50 million before approving arrests. Separately, lawmakers debated granting law enforcement agencies the authority to curb illegal cigarette sales, a move met with concerns over potential corruption. Additionally, while the federal government intends to levy sales tax on digital services, provincial authorities have expressed reservations due to existing service taxes. From the next fiscal year, iron scrap importers will be mandated to sell only to registered manufacturers to combat “flying invoices” and commercial manipulation.