FBR Faces Rs102 Billion Revenue Shortfall Due to Solar Panel Tax Exemptions

The Federal Board of Revenue (FBR) experienced a revenue shortfall of Rs102 billion during the fiscal year 2023-24. This deficit is attributed to the sales tax exemption on imported photovoltaic cells, which are integral components in solar panels used by both the manufacturing sector and the general public.

According to the most recent Tax Expenditure Report-2025, published by the FBR, this sales tax waiver, provided under the Sixth Schedule of the Sales Tax Act (2023-24), resulted in a significant revenue loss. The exemption applied to photovoltaic cells, regardless of whether they were assembled into modules or panels, intended for use by the manufacturing sector and the general population.

In the preceding budget for 2025-26, the government had initially introduced an 18 percent sales tax on the import of solar panels, a proposition that triggered considerable discussion.

A subsequent review indicated that 54 percent of the components utilized in solar energy systems were already subject to taxation under existing regulations. The newly proposed 18 percent tax would only affect the remaining 46 percent of components. Following deliberations, the government revised the GST rate downward from the initial 18 percent to a reduced rate of 10 percent.

The Directorate General of Customs Valuation in Karachi has also adjusted the customs value downward, setting it between USD0.08/Watt and $0.09/Watt for imported solar panels from all countries of origin.