ISLAMABAD: The Federal Board of Revenue (FBR) has reportedly finalized the Finance Bill for the fiscal year 2025-26, with expectations to announce new taxation measures totaling nearly Rs 200 billion. These significant revenue generation efforts are primarily focused on adjustments to sales tax (GST) and Federal Excise Duty (FED) in the upcoming federal budget.
Sources indicate that the comprehensive working on the new Finance Bill was given its final touches on Thursday, signaling the government’s readiness for the budget presentation.
Key Sales Tax Proposals
The FBR’s revenue generation measures include several key proposals impacting sales tax:
Solar Panels: An 18 percent sales tax is expected to be imposed on the import of solar panels, a move that could affect the cost of renewable energy installations.
E-commerce: The burgeoning e-commerce sector is also slated to face an 18 percent sales tax, bringing it further into the tax net.
Abolition of ‘Further Sales Tax’: The 4 percent ‘further sales tax’ currently levied on unregistered taxpayers is expected to be abolished, potentially simplifying the tax structure for certain transactions.
Exemption Schedule Deletions: The FBR has finalized a list of items that would be deleted from the Sixth Schedule (Exemption Schedule) and the Eighth Schedule (lower rate of sales tax) of the Sales Tax Act, indicating a move to broaden the sales tax base.
Rate Increases on Concessionary Items: The government may increase the sales tax rate on a large number of items currently subject to lower or concessionary sales tax rates. The FBR is currently compiling a detailed list of these items.
Relief for Medical Sector: In a measure to provide relief, some cancer-related medical equipment and life-saving drugs are expected to be added to the sales tax exemption schedule of the Sales Tax Act.
Expanding the scope of sales tax
The FBR is also planning to expand the scope of sales tax in several areas:
Federal Capital Services: The scope of sales tax on services within the territorial jurisdiction of the federal capital (Islamabad) may be expanded in the upcoming budget.
Erstwhile Tribal Areas: An 18 percent sales tax is set to be imposed on goods manufactured in the erstwhile tribal areas, bringing them under the standard tax regime.
Third Schedule Expansion: The scope of the Third Schedule, which mandates sales tax collection on the basis of printed retail price, would be expanded. Imported items such as chocolates, coffee, and cereals are expected to be included in this schedule.
Federal Excise Duty (FED) on ultra-processed foods
A significant proposal for Federal Excise Duty involves imposing a 5 percent FED on a wide range of ultra-processed foods. This category would cover items such as frozen foods, chips, carbonated drinks, instant noodles, ice cream, biscuits, frozen meat, sauces, ready-made meals, sausages, and many other kinds of ultra-processed foods. This move aims to generate revenue while potentially discouraging the consumption of less healthy food options.
These proposed measures underscore the government’s intensified efforts to boost revenue collection and improve fiscal stability in the upcoming fiscal year.
