ISLAMABAD: The federal government is preparing to end tax exemptions for former tribal areas in the upcoming 2026‑27 budget. Officials confirmed that income tax and withholding tax relief for residents and companies in ex‑FATA and PATA will expire on 30 June 2026.
From 1 July 2026, standard tax laws are expected to apply across these regions.
Sources indicated that reducing exemptions could generate nearly Rs40 billion in additional revenue. Sales tax in ex‑FATA and PATA industries is proposed to rise from 10 to 12 percent, with the same rate applied to imported industrial raw materials. Withholding tax exemptions are also set to conclude on 1 July 2026.
Electric vehicle CKD kits will lose sales tax relief from 1 July 2026. Locally assembled electric vehicles will continue to face one percent sales tax until 30 June 2026, while hybrid vehicle concessions will also end on that date.
Sales tax exemptions on electricity supply and locally manufactured silos in tribal areas will remain valid until 30 June 2026.
The government is further considering doubling the climate support levy on petroleum products. The rate may increase from Rs2.5 per litre to Rs5 per litre starting 1 July 2026. Revenue from this levy is projected to exceed Rs90 billion during the next fiscal year.
