Karachi, August 4, 2025 – The Federal Board of Revenue (FBR) has officially announced the withdrawal of the sales tax exemption previously available on imported solar panels, marking a significant shift in Pakistan’s solar energy policy.
In its newly issued Sales Tax Circular No. 2 of 2025-26, the FBR explained the amendments made to the Sales Tax Act, 1990, under the Finance Act, 2025. The circular clarified that solar panels, whether standalone or assembled into modules, were earlier exempt from sales tax under serial number 164 of Table-1 of the Sixth Schedule. However, the FBR stated that this exemption primarily benefitted commercial importers, while the local solar panel industry faced losses due to lack of relief on raw materials and component imports necessary for local assembly.
According to the FBR, this disparity undermined domestic manufacturers, who were forced to bear the burden of input tax without any compensatory exemptions, effectively discouraging local production of solar panels.
To ensure a level playing field and to enhance revenue collection, the government has eliminated the full exemption. Instead, imported solar panels will now be subject to a reduced sales tax rate of 10%, effective immediately.
The FBR emphasized that this move will promote local industry, encourage domestic assembly of solar panels, and establish fair market competition, while gradually building a more sustainable and self-reliant renewable energy sector in Pakistan.