NA panel rejects 18pc GST on solar panels
ISLAMABAD: The National Assembly Standing Committees on Finance and Revenue, unanimously, rejected the proposal of imposing 18 percent sales tax on solar panels import, terming it unacceptable amid rising energy costs and public concern, as it would be counterproductive.
The parliamentary panel met with Syed Naveed Qamar in the chair here on Tuesday, which gave its nod for Digital Present Proceeds Tax Act, 2025, proposing a new tax @ five percent on proceeds of digitally ordered goods, envisaging to safeguard taxing rights in the digital world.
The Federal Board of Revenue (FBR) admitted that the removal of less than 18 percent tax rate on motor vehicles will result in price escalation.
The FBR chairman hinted of taking additional measures if GST on solar is withdrawn to cover Rs40 billion i.e. Rs20 billion revenue loss and Rs20 billion subsidy.
The FBR chairman told the committee that both import and supply of photovoltaic cells whether or not assembled in modules or made up into panels is exempt from sales tax. This exemption disproportionality benefits commercial importers while the local industry is been rendered uncompetitive due to the absorption of input tax costs on purchase.
During the session, the committee, unanimously, opposed the FBR suggestion to impose a sales tax on solar panels, observing that since the budget proposal, solar panel prices in the country already skyrocketed.
The committee chairman stated that all political parties represented in Parliament were against the move to tax solar energy products, which are increasingly being adopted by households and businesses as an alternative to costly electricity.
Federal Finance Minister Muhammad Aurangzeb, responding to the objections, said that some of the committee's recommendations had been noted for review.
Qamar confirmed that the committee had unanimously rejected the FBR's proposal to levy 18 per cent sales tax on solar panels, while terming it counterproductive. 'Tax should not be slapped over solar panels if you talk about the renewable energy,' Mirza Ikhtiar said. 'Imported solar panels are cheaper than the locally manufacture, which are also sub-standard in quality,' he said.
Shahram Khan Taraki also termed the government policy confused and recommended for transfer of technology along with solar panels import.
The FBR chairman revealed that over invoicing Rs65 billion has been established which comes under money laundering and resulted in taking dollars out of the country in solar panel imports.
Under the Digital Presence Proceeds Tax Act, foreign vendors providing e-commerce goods will be taxed at five percent. Under this proposed Act, payment intermediaries including banks and financial institutions will collect tax on digital payment made to foreign vendors supplying goods into Pakistan. Services are not covered under this act.
The digital advertisement of offering vendors, ie, Temu in Pakistani market by platforms such as Google will also be taxed in consistency with Pakistan taxing rights. The committee was informed that Temu earned Rs4 billion from the Pakistani market but payed no income tax.
While briefing the committee on the removal of less than 18 percent tax rates on motor vehicles, the FBR informed the committee that it is not applicable on electrical vehicles.
The FBR informed that the committee under the International Monetary Fund (IMF)'s arrangement, they are bound to increase the reduced rates in sales tax. The current rate above five percent would increase to 10 percent, while the above 10 percent would be increased to 18 percent and this would result in increase of motor vehicles.
The committee rejected the proposal of the FBR to establish a separate Customs Command Fund (CCF) for the customs officials.
Copyright Business Recorder, 2025
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