Government weighs fixed sales tax regime for steel, 18% tax on solar panels in budget

Finance Bill 2026 is expected to introduce tax policy and enforcement measures worth nearly Rs1 trillion in the federal budget for fiscal year 2026-27, including an 18% sales tax on solar panels, a fixed regime for the steel sector, and expanded penalties for taxpayers who fail to integrate with Federal Board of Revenue systems, Business Recorder reported. 

Around half of the estimated revenue would come from policy measures, while the remaining half would be generated through stronger enforcement. Among the proposed revenue measures is the imposition of federal excise duty on naphtha petroleum products.

The government is also considering a fixed sales tax regime for the steel sector and an 18% sales tax on solar panels, subject to approval by the federal cabinet.

Finance Bill 2026 may also add more products to the printed retail price regime under the Third Schedule of Sales Tax Act. Manufacturers could be required from July 1 to print retail prices and the applicable 18% sales tax on the packaging of a range of consumer products.

According to the report, the proposed requirement may cover fast-moving consumer goods and home appliances, including refrigerators, air conditioners and washing machines.

The bill is expected to amend Inland Revenue laws to support the transition towards a faceless FBR system from July 1, 2026. The operational launch of the faceless Inland Revenue system and its dedicated centre is planned for October 1, 2026.

The proposed arrangement will require taxpayers, particularly manufacturers in major sectors, to connect with FBR’s digital systems and install production-monitoring equipment.

Implementation of point-of-sale systems and other digital integration requirements will also form part of the enforcement plan.

Sources said higher penalties were being proposed for taxpayers who fail to comply with digital integration, production monitoring and point-of-sale requirements from July 1.

The government considers digital monitoring necessary for eliminating officer discretion and operating the planned faceless tax administration system.

Finance Bill 2026 may also strengthen provisions of Sales Tax Act against businesses involved in producing or selling illicit goods, including cigarettes.

Sources said sales tax and income tax exemptions scheduled to expire on June 30, 2026, would not be extended in the FY27 budget.

Final inclusion of the proposed measures will remain subject to approval by the federal cabinet.