ISLAMABAD: The Federal Board of Revenue (FBR) is actively reviewing proposals to withdraw sales tax exemptions on various sectors, including solar panel imports, as part of its broader tax reforms in the upcoming budget 2025-26.
This significant shift was confirmed by FBR Chairman Rashid Mahmood Langrial during a session of the Senate Standing Committee on Finance held at the Parliament House on Thursday.
Responding to lawmakers’ queries, Chairman FBR explained that the department is evaluating options to eliminate all forms of tax exemption, particularly those no longer contributing to national revenue growth. He highlighted that the exemption currently available on imported solar panels is under scrutiny due to its fiscal impact.
In a parallel meeting of the National Assembly Standing Committee on Finance, refinery representatives highlighted a long-standing issue: while their input is taxed, their output remains exempt from General Sales Tax (GST). This lack of balance in the tax structure, they argued, has hindered planned investments worth $6 billion. Chairman FBR acknowledged this discrepancy and admitted that their operations technically fall outside the Value Added Tax (VAT) regime because of the exemption on their output. He stated that proposals are under discussion to either impose GST on refinery outputs or explore alternative long-term solutions.
Chairman Langrial also assured the committee that he would personally investigate the controversial recovery of over Rs 80 million from KababJee restaurant in Karachi. The matter, raised by MNA Mirza Ikhtiar Baig, involved alleged FBR overreach without due process, leaving the restaurant owner financially distressed.
Baig said, “The FBR took action without providing a fair hearing. The restaurant’s owner now faces financial ruin and has even made alarming statements regarding his mental state.” Chairman FBR responded that he was unaware of the case but promised a full inquiry.
In legislative matters, the committee reviewed “The Income Tax (Second Amendment) Bill, 2025,” expressing concerns over a clause that could limit benefits beyond tax year 2025. Revenue Secretary assured members that the contentious wording would be revised.
With a clear emphasis on broadening the tax base, the FBR’s intent to phase out sector-specific exemptions signals a strategic fiscal shift. If implemented, these changes in budget 2025-26 could reshape Pakistan’s indirect tax landscape significantly.