ISLAMABAD:
The National Assembly and Senate finance committees have rejected the proposed imposition of an 18 per cent sales tax on solar panels, citing concerns over its potential negative impact on green energy adoption.
The decision came during deliberations on the Finance Bill for the fiscal year 2025-26 on Tuesday, which includes a wide range of reforms and amendments aimed at broadening the tax base and strengthening enforcement.
The National Assembly’s Standing Committee on Finance, chaired by Syed Naveed Qamar, discussed the proposed tax in detail. The committee expressed unanimous opposition, with Qamar noting that all political parties had already voiced their disapproval of any taxation on solar energy.
He warned that such a measure could discourage the shift to renewable energy and undermine environmental goals.
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Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial clarified during the meeting that the tax would not be applied to fully imported, ready-to-install solar panels but would instead target imported components used for local assembly. However, this clarification did little to assuage the committee’s concerns.
Finance Minister Muhammad Aurangzeb agreed with the committee’s position, observing that the price of solar panels had dropped significantly in recent years, making them more accessible. He assured members that the government would meet its revenue targets through alternative means, including taxing soft drinks and increasing carbon levies.
During the same session, the committee reviewed proposed amendments to Sections 37A and 37AA of the Finance Bill, aimed at curbing large-scale tax fraud.
Under the new provisions, individuals involved in fraud exceeding Rs50 million may be subject to arrest. FBR officials explained that the process would involve the issuance of three notices prior to any arrest, with the measure reserved for cases where there is a risk of flight.
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Aurangzeb underscored the need for safeguards to prevent abuse of these powers. He said arrest decisions would be reviewed by a three-member committee within the FBR and reaffirmed that the Prime Minister had directed that misuse of arrest provisions be strictly avoided.
The finance minister also confirmed plans to gradually reduce subsidies, including those benefiting the solar sector, as part of efforts to streamline fiscal policy.
Simultaneously, the FBR will pursue stricter enforcement against unregistered entities and may resort to freezing bank accounts or closing non-compliant businesses.
Members of the committee also raised concerns about illicit trade in the tobacco sector. While supporting stronger enforcement to curb tax evasion, several lawmakers cautioned against granting unchecked powers to enforcement agencies, warning that it could lead to corruption and harassment.
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Separately, the committee reviewed the government’s decision to withdraw the federal excise duty on immovable property in the upcoming fiscal year, noting its conflict with laws governing movable assets.
Debate also arose over increased taxation on small vehicles as part of Pakistan’s commitments to the International Monetary Fund (IMF).
The sales tax on cars under 850cc has been raised from 12.5 per cent to 18 per cent, drawing criticism from members who argued that the measure disproportionately impacts the middle class.
While no decision was taken to roll back the increase, the committee recommended a policy review to ease the burden on consumers.
The finance committees’ deliberations reflect the broader challenge facing the government as it attempts to enhance revenue without stalling economic activity or undermining public welfare.
