ISLAMABAD: In a significant policy stance, both the National Assembly and Senate Standing Committees on Finance have rejected the proposal to slap a standard 18% General Sales Tax (GST) on imported solar panels.Â
The National Assembly’s Standing Committee on Finance, chaired by Syed Naveed Qamar, met to review various proposals related to the newly presented budget. During the session, the committee outright rejected the Federal Board of Revenue’s (FBR) proposal to levy sales tax on solar panels.
Committee members from across political parties unanimously opposed the tax, with the committee chairman stating that all parliamentary factions were united in their stance against taxing solar energy equipment.
The FBR argued that instances of money-laundering had been detected in solar panel imports and claimed that these panels are rarely utilised in the domestic market.Â
However, the committee members maintained that the public should continue to benefit from the import of solar panels and firmly rejected the proposal to impose General Sales Tax on these imports.
Finance Minister Muhammad Aurangzeb responded by acknowledging that some of the committee’s recommendations had been noted.
Meanwhile, the committee chairman Naveed Qamar reiterated that it had unanimously dismissed the FBR’s proposal to impose sales tax on solar panels.
The FBR had projected Rs20 billion in revenue from the 18% sales tax on the import and supply of photovoltaic cells, regardless of whether they were assembled. Since the IMF did not approve the proposal, the standing committee’s rejection will not negatively impact the IMF programme.
“If the government did not accept our rejection, the National Assembly would veto it,” the chairman of the committee said.
Separately, the Senate Standing Committee on Finance also rejected the same proposal, aligning with the National Assembly’s position.
A few days earlier, while briefing a parliamentary panel, the FBR chairman said that locally assembled solar panels were already subject to the same tax, while imported panels had been tax-free, creating a disadvantage for local manufacturers. He said the proposed tax on solar imports would help create a level playing field for the local industry.
Industry sources said that though the recommendations of the Senate Standing Committee are not binding for the government, implementation on the recommendations is necessary for the government and this feedback will be part of the finance bill. After the rejection from both the Senate and NA panels, it has become crystal clear that there will be no sales tax on imported solar panels and imported solar panels will be tax free, said sources.
It is pertinent to mention that the rejection of the proposed tax is being seen as a crucial step to support clean energy adoption in Pakistan, as solar energy continues to gain importance amid rising electricity costs and climate challenges.
