KARACHI: The government of Pakistan is reportedly planning to significantly broaden the list of luxury items that will be subjected to a 25 percent sales tax on both imports and local sales.
This expansion is slated for inclusion in the upcoming federal budget for the fiscal year 2025-26, as reported by Business Recorder.
The proposed measure will likely involve either an amendment to the existing Statutory Regulatory Order (SRO) 297(I)/2023 or the introduction of a new schedule under the Sales Tax Act, which would be facilitated through the Finance Bill 2026.
New items to face higher tax rate
The expanded list of goods expected to fall under this increased sales tax regime will include a range of additional home appliances, various types of tiles, wallpapers, high-end wristwatches, and other items deemed to be luxury commodities. This strategic move is primarily aimed at generating increased revenue for the national exchequer.
It also seeks to offset potential losses that are anticipated from planned reductions in customs duties, regulatory duties, and Additional Customs Duties (ADCs) that are expected to be part of the new budget.
Current framework for luxury goods taxation
Currently, under SRO 297(I)/2023, the Federal Board of Revenue (FBR) already imposes a 25% sales tax on a defined list of luxury goods. This existing list encompasses items such as aircraft, ships, various forms of jewelry, cosmetics, cigarettes, premium mobile phones, certain imported food items, a variety of decorative articles, select categories of vehicles, and other high-end products. This rate represents an increase from the previous 17% sales tax rate and covers 33 distinct categories of goods, spanning across 860 customs tariff lines.
The current regulation stipulates that sales tax on these specified goods must be charged and paid at 25 percent of either the import value or the retail price, both at the point of import and during any subsequent supply stages. The upcoming budget’s proposed expansion signals a continued government focus on taxing high-value consumption to bolster public finances.
