ISLAMABAD – June 18: In a rare display of bipartisan consensus, parliamentary committees from both the Senate and National Assembly on Tuesday unanimously rejected the proposed 18% sales tax on imported solar panels, while also calling for tax relief on small vehicles to ease financial pressure on low-income citizens.
Parallel sessions of the Senate and National Assembly Standing Committees on Finance and Revenue were held at Parliament House to scrutinise the Finance Bill 2025-26. Chaired by Senator Saleem Mandviwalla and MNA Naveed Qamar respectively, the committees proposed key amendments and strongly opposed several controversial measures.
Solar Panel Tax Proposal Scrapped
The Federal Board of Revenue (FBR) had argued that the proposed tax on solar imports was meant to protect domestic manufacturers. However, lawmakers across party lines questioned the rationale, pointing out that solar panels are not currently produced in Pakistan.
“The imposition of tax on an industry that doesn’t yet exist domestically is counterproductive,” said MNA Qamar. Members warned that the measure would hinder access to affordable renewable energy and lead to higher electricity costs. Mirza Ikhtiar Baig further asked why the government would penalise citizens who are turning to cheaper, sustainable power solutions.
Committee members also alleged that a surge in solar panel imports occurred prior to the budget announcement, suggesting that certain stakeholders may have hoarded inventory anticipating the tax hike.
Following deliberations, both committees agreed to reject the proposal, citing the importance of solar energy for Pakistan’s energy transition. Pakistan has recently emerged as one of the world’s top adopters of solar power, with utility-supplied solar electricity accounting for 25% of the national grid in 2025, according to energy think tank Ember.
Concerns Over Increased Tax on Small Cars
The committees also raised concerns over the proposed increase in General Sales Tax (GST) from 12% to 18% on small vehicles, including 850cc cars. Senator Mandviwalla described the 18% tax on a Rs3 million car as “unfair,” with several other members calling for the rate to be brought down to 14% or 15%.
Senator Shibli Faraz criticised the disparity in taxation, highlighting that while certain regions benefit from tax relief, middle- and lower-income car buyers are being disproportionately burdened.
Other Approvals and Revisions
The Senate committee did approve a sales tax exemption on aircraft imports as part of the ongoing privatisation of Pakistan International Airlines (PIA).
Proposed changes to tax fraud regulations were also reviewed. The definition of tax fraud has now been categorised based on severity, with provisions for arresting individuals who are deemed flight risks, tamper with records, or fail to respond to three official notices. A three-member board will assess each case before approving arrests, which will only be allowed for amounts exceeding Rs50 million.
IMF Pressure and Enforcement Powers Disputed
During the proceedings, MNA Omar Ayub stated that several changes in the tariff structure were made under pressure from the International Monetary Fund (IMF), a claim that echoed broader concerns about external influence on domestic fiscal policy.
A proposal to authorise law enforcement and district administration to curb the illegal sale of cigarettes sparked a heated debate. FBR Chairman Rashid Mahmood Langrial defended the move, asserting that local authorities must be empowered to combat widespread tax evasion in the tobacco sector. However, lawmakers warned that granting such powers to the police could lead to increased corruption and bribery.
A tense exchange occurred between MNA Nafisa Shah and the FBR chairman. Ms Shah likened the FBR’s proposed enforcement measures to “martial law-style regulations,” arguing that such aggressive tactics were undemocratic. Mr Langrial responded, stating he served a democratic government and found the use of “martial law” terminology inappropriate. Ms Shah countered by defending her right to free speech as a parliamentarian.
Digital Services and Scrap Trade
The federal government also seeks to impose sales tax on digital services, but provincial authorities have raised objections, citing their own existing 15% service tax on online businesses. FBR officials contend that taxation on online sales falls under federal jurisdiction.
Another proposed measure will require iron scrap importers to sell only to registered manufacturers, aimed at curbing the misuse of flying invoices and trade manipulation.
As discussions on the budget continue, the government faces mounting pressure to align fiscal policy with public welfare and avoid measures that may further burden already strained households.
