The Prime Minister Shehbaz Sharif-led government is projected to generate Rs20 billion in tax revenue in Fiscal Year 2025-26 through the imposition of an 18% General Sales Tax (GST) on imported solar panels and photovoltaic cells, as per official documents reported by The News on Sunday.
This projected tax collection implies that the government anticipates solar imports to exceed Rs110 billion in the next fiscal year. This expectation comes despite concerns from the industry that the new levy might impede the momentum of the country’s solar adoption drive.
The imposition of GST on imported solar panels—which have become a vital source of alternative and affordable electricity for the country’s inflation-weary populace, grappling with soaring power bills—was announced by Finance Minister Muhammad Aurangzeb during his budget speech. He stated that the move aims to support local manufacturers and address market imbalances.
Emphasizing that this measure would significantly contribute to promoting Pakistan’s domestic solar industry, which has historically struggled to compete with cheaper foreign alternatives, the finance czar explained that the proposed GST is part of a broader effort to rectify long-standing issues within the country’s sales tax system and foster fairness across various sectors.
The government’s proposed tax is to be understood in the context of the International Monetary Fund (IMF) loan deal. Under this agreement, Pakistan sharply increased power and gas tariffs last year to bolster struggling suppliers in the heavily indebted energy sector. Consequently, Pakistanis now pay, on average, over a quarter more for electricity, triggering a rapid increase in the installation of solar modules.
According to UK energy think-tank Ember, solar power constituted over 14% of Pakistan’s power supply last year, a significant increase from 4% in 2021, and has displaced coal as the third-largest energy source.
Meanwhile, Federal Board of Revenue (FBR) Chairman Rashid Langrial informed a parliamentary panel that locally assembled solar panels were already subject to the same tax, whereas imported panels had previously been tax-free. This disparity, he argued, created a disadvantage for local manufacturers. He asserted that the new tax on imports would help establish a level playing field for the domestic industry.
This policy shift comes as Pakistan’s net-metered solar capacity has more than tripled in less than two years, escalating from 1.3 gigawatts in FY2023 to 4.9 GW by March 2025, according to Renewables First, an Islamabad-based energy think tank. This explosive growth has primarily been driven by households and businesses seeking relief from chronic power outages and escalating grid electricity tariffs.
While the government views the GST as a crucial revenue-generating tool amidst fiscal tightening, industry stakeholders caution that it could deter new investments in solar infrastructure, particularly for small-scale consumers. Nevertheless, policymakers contend that the demand for solar power—now perceived as a hedge against energy inflation—remains robust enough to sustain high import volumes despite increased costs. The measure also aligns with Pakistan’s broader fiscal objectives under IMF-guided reforms, which advocate for expanded tax bases and reduced subsidies across energy sectors.
