Finance Minister Announces Tax Relief and GST Reduction in Senate Address

During his address to the Senate on Saturday, Finance Minister Muhammad Aurangzeb unveiled significant relief measures planned in the federal budget for FY2025-26. These measures include a notable reduction in income tax for salaried individuals and a decrease in the General Sales Tax (GST) on imported solar panels.

Income Tax Cut for Salaried Class

Aurangzeb highlighted that individuals with annual earnings ranging from Rs600,000 to Rs1.2 million will now be subject to a 1% tax rate. This is a considerable decrease from the previously proposed 2.5% in the FY2025-26 budget. This adjustment aims to alleviate financial strain on low- to middle-income earners.

Previous Budget Proposals

The initial budget proposals for FY26 had set the tax rate at 2.5% for those earning between Rs600,001 and Rs1.2 million, a reduction from the earlier rate of 5%. The latest announcement further lowers this rate to 1%.

The finance minister remarked that low- and middle-income individuals are crucial to the nation’s economy, acknowledging their vulnerability to inflation and their contribution through taxes.

He noted that the suggestion to lower income tax for this segment was already under consideration during the budget planning.

The government, under the Prime Minister’s guidance, has reduced the income tax rate from 2.5% to 1% for those earning between Rs600,000 and Rs1.2 million annually.

The minister stated that the 1% income tax rate is a tangible acknowledgement from the government that it aims to ease the burden on this specific class of taxpayers.

He voiced optimism that this step would enhance tax compliance and boost confidence in the tax framework.

Furthermore, Aurangzeb announced a 10% increase in salaries and a 7% rise in pensions for government employees.

The finance minister confirmed that no mini-budget was introduced during the current fiscal year, and fiscal responsibility was maintained.

He informed the upper house that the federal government’s expenditure for FY26 saw a marginal increase of 1.9%, which is significantly lower compared to previous years.

GST Reduction on Solar Panels

In addition, Aurangzeb communicated to the Senate that the proposed 18% GST on solar panel imports has been adjusted to 10% following discussions with legislators.

The initial proposal to impose an 18% GST on imported solar panels was intended to safeguard local industries, establish equitable competition, and encourage investment and advancements in solar technology within Pakistan.

However, after thorough budget assessments in both houses, the government decided to decrease the proposed tax to 10%. Aurangzeb clarified that this tax would only be applicable to 46% of imported components.

With this adjustment, the price of solar panels is expected to increase by 4.6%, he stated, while affirming the government’s dedication to promoting renewable energy sources.

Aurangzeb informed the house that the government had received reports concerning price manipulation and hoarding of solar panels by certain parties.

He condemned these opportunistic actors for artificially inflating prices even before the proposed measure took effect, issuing a stern warning that the government would take decisive action in the public interest. He added that legal measures would be pursued against those involved in such practices.