ISLAMABAD: Pakistan’s sales tax expenditure for the fiscal year 2023-24 has been estimated at Rs. 1,237.11 billion, reflecting a notable decline of 18.61% compared to the previous fiscal year, according to data released by Federal Board of Revenue (FBR).
The figure accounts for 1.18% of GDP, underscoring its significant impact on the country’s tax framework. According to official data, sales tax remains the single largest component of overall tax expenditure, constituting 50.81% of the total.
A detailed breakdown reveals major shifts across exemption heads. Under the Fifth Schedule, zero-rated sectors accounted for Rs. 81.1 billion in foregone revenue, a steep 60.64% decline from last year. Similarly, exemptions under the Sixth Schedule for local supplies dropped to Rs. 330.5 billion, while exemptions on imports surged by 73.53% to Rs. 372.5 billion. The Eighth Schedule, which covers reduced rates, posted a slight increase of 4.50% to Rs. 374.1 billion, maintaining its share of over 30% in total expenditure.
One of the most significant reductions was seen in the Ninth Schedule, related to cellular mobile phones, where the tax expenditure plummeted by nearly 96%. Likewise, the Twelfth Schedule covering additional tax also contracted by over 76%. Several Statutory Regulatory Orders (SROs) that previously provided exemptions on both imports and local supplies were completely phased out during FY 2023-24.
Experts note that part of the decline is due to the treatment of petroleum products. In FY 2022-23, the sales tax exemption on petroleum products was included in the expenditure estimates. However, with the imposition of the Petroleum Development Levy (PDL), the levy replaced sales tax on fuel, thereby reducing the overall reported sales tax expenditure.
Economists argue that while the reduction in expenditure may support fiscal consolidation, it also highlights the need for a careful balance between revenue generation and economic relief measures. Maintaining transparency in exemptions and ensuring targeted relief for essential sectors will remain crucial for sustaining economic growth and protecting vulnerable consumers.
