The Federal Board of Revenue (FBR) has announced Rs36 billion in new taxation measures to bridge the fiscal gap emerging from recent policy decisions, including a reduction in sales tax on solar panels and proposed salary increases for government employees. This announcement was made by FBR Chairman Rashid Mahmood Langrial during a session of the National Assembly Standing Committee on Finance held on Sunday.
Chairman Langrial explained that the new tax measures are designed to recover revenue losses in the upcoming fiscal year 2025-26. A significant portion of the gap stems from the government’s decision to reduce the sales tax on solar panels from 18% to 10%, which alone accounts for an estimated Rs8.5 billion in lost revenue. Additionally, the proposed salary hike for public sector employees will require around Rs12 billion. Combined with other adjustments, the overall shortfall stands at approximately Rs36 billion.
To address this, the National Assembly Standing Committee on Finance approved three key tax changes. First, a 10% Federal Excise Duty (FED) will now apply to day-old chicks (DOC) in the poultry sector, a move expected to impact poultry production costs. Second, the tax rate on dividends earned by companies from mutual funds that generate income from debt instruments has been increased from 25% to 29%. Third, a withholding tax increase from 15% to 20% will be levied on profits from government securities paid to institutional investors, excluding individuals. These amendments will be included in the final Finance Bill for 2025-26.
Overall, the FBR has introduced Rs312 billion in new taxes and Rs389 billion in enforcement-related measures for the 2025-26 fiscal year. After deducting the Rs8.5 billion impact of the reduced sales tax on solar panels, the net revenue impact of the new taxation plan stands at Rs339.5 billion.
Chairman Langrial also informed the committee that some funds have been added to accommodate increased revenue distribution to provinces under the National Finance Commission (NFC) Award. He further revealed that the federal government had shared six new tax measures with the International Monetary Fund (IMF), of which three have received formal approval.
In another important development, the finance committee was briefed about a policy shift that aims to bring parity between imported and local cotton. A uniform tax rate of 10% will now apply to both types, removing previous disparities in tax treatment between domestic and imported raw cotton.
The National Assembly Standing Committee on Finance also passed the Finance Bill 2025-26, incorporating several recommendations from the Senate Finance Committee and its own internal proposals. These measures are part of the government’s broader fiscal strategy to manage debt obligations, fulfill IMF conditions, and meet increasing public expenditure demands.
While the newly imposed taxes are expected to help plug revenue shortfalls, they could also place additional burdens on the agriculture, poultry, and financial sectors. Policymakers now face the challenge of maintaining a delicate balance between fiscal discipline and economic growth in the face of rising domestic needs and global economic pressures.
