ISLAMABAD: The Federal Constitutional Court (FCC) on Tuesday dismissed all petitions challenging the super tax and upheld the constitutional validity of Section 4B of the Income Tax Ordinance, 2001, enabling the federal government to collect over Rs300 billion in additional revenue.
The ruling is being viewed as a major setback for the business and corporate sectors, which had contested the levy following its expansion in 2022. The court declared that Parliament holds full legislative authority to impose levy-based taxes and set aside earlier high court judgments that had termed the super tax discriminatory.
In its decision, the FCC confirmed that both Sections 4B and 4C of the Income Tax Ordinance are lawful and enforceable. However, the court clarified that the super tax will not apply to Mudarabas, mutual funds, and benevolent funds. Entities operating in the oil and gas sector were advised to individually approach the concerned tax commissioner for any relief or concessions.
During the proceedings, counsel for the Revenue Division informed the court that the judgment would generate approximately Rs310 billion for the national exchequer. The court acknowledged Parliament’s constitutional power to legislate fiscal measures.
Chief Justice Aminuddin Khan announced the reserved verdict. The case was heard by a three-member bench headed by the chief justice, while senior advocate Makhdoom Ali Khan represented various corporate entities challenging the tax.
The super tax was originally introduced in 2015 as a temporary levy to support the rehabilitation of people affected by terrorism in Khyber Pakhtunkhwa. At that time, individuals and companies earning annual profits exceeding Rs300 million were subject to an additional 5 percent tax.
In 2022, the government broadened the scope of the tax by reducing the profit threshold to Rs150 million and raising the tax rate to as high as 10 percent, prompting widespread legal challenges from businesses, banks, and corporate groups. Petitioners argued that the amendments amounted to retrospective and double taxation.
Despite these challenges, all high courts upheld the levy, ruling that the super tax fell within the government’s constitutional taxing powers.
The case followed a prolonged judicial path, initially reaching the Supreme Court in 2019 and being heard extensively during the tenure of former Chief Justice Umar Ata Bandial. Following the 26th and 27th Constitutional Amendments, jurisdiction was eventually transferred to the newly established Federal Constitutional Court.
In total, the FCC conducted 17 hearings before issuing its short order on Tuesday.
