After rejecting proposals to increase taxes on fertilizer and pesticides, Pakistan and the International Monetary Fund (IMF) are now considering alternative measures to boost revenue. According to reports, the two sides are discussing possible GST hikes on rooftop solar panels, internet services, and other sectors as backup options in case of a revenue shortfall in Pakistan.
These potential steps may include in the IMF’s second review report under the $7 billion Extended Fund Facility (EFF). The report will follow the approval of a $1 billion loan tranche.
The proposed tax measures would only come into effect if two conditions are met first, if the revenue shortfall for the first half of the fiscal year (July to December) exceeds expectations. Second, if the Finance Ministry fails to cut its expenditures as planned.
According to the Federal Board of Revenue (FBR), one of the proposed options is to raise the General Sales Tax (GST) on imported solar panels from 10% to 18%, starting January 2026, if needed. Another proposal suggests increasing the withholding tax on internet services from the current 15% to 18% or even 20%.
Government officials believe that the rapid growth in rooftop solar adoption has reduced dependency on grid electricity. This shift has caused “capacity payments” — fixed payments made to power producers — to rise significantly, estimated at Rs1.7 trillion this fiscal year.
The FBR estimates that imported solar panels could generate between 25,000 and 30,000 megawatts (MW) of electricity in the coming years. At present, rooftop installations produce around 6,000 MW, a figure that could double soon.
Adjusted Economic Targets
The IMF has revised Pakistan’s GDP growth projection downward from 4.2% to between 3.25% and 3.5%. As a result, the overall tax collection target has been adjusted, but the tax-to-GDP ratio of 11% remains unchanged.
In the first quarter (July–September), the FBR faced a revenue shortfall of Rs198 billion against a target of Rs3.08 trillion. To meet its annual goals, it must now collect Rs6.695 trillion by the end of December 2025.
Currently, the 10% GST on imported solar panels generates about Rs40–50 billion in revenue. If the rate increases to 18%, the FBR expects to collect an additional Rs20–30 billion.
Internet Tax Concerns
During earlier discussions, the IMF rejected Pakistan’s idea of imposing a flood levy on imported luxury goods, while Pakistan declined to increase taxes on fertilizer and pesticides. As a result, both sides agreed to explore these new tax options as backup measures.
Experts in the telecom sector, however, have warned that increasing taxes on internet services could make digital access more expensive, particularly for low-income users.
For many Pakistanis, especially in rural areas, internet access is vital for education, work, healthcare, and communication. Higher taxes could widen the digital divide, making it harder for vulnerable groups to stay connected and benefit from online opportunities.
If implemented, these new taxes could help the government raise revenue — but they also risk burdening consumers and slowing down Pakistan’s digital progress.
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