In a move that could directly impact millions of households and businesses, the Pakistani government is weighing new tax measures on solar panels and internet services as part of its latest fiscal discussions with the International Monetary Fund (IMF).
These proposals are part of a contingency plan, a financial backup to be used only if the country’s revenue falls short in the first half of the fiscal year or if planned expenditure cuts aren’t achieved.
Solar Power in the Spotlight
One of the key measures under consideration is an increase in General Sales Tax (GST) on imported solar panels, jumping from 10% to 18%, potentially effective from January 2026.
The government’s reasoning is tied to the country’s growing shift toward renewable energy. Over the past few years, rooftop solar installations have surged, reducing reliance on the national grid. While this shift is good for clean energy goals, it’s creating a fiscal headache; the government still has to make hefty capacity payments to power producers even when electricity consumption from the grid declines.
This year alone, those payments could reach Rs 1.7 trillion.
According to Federal Board of Revenue (FBR) estimates, Pakistan currently generates around 6,000 MW from rooftop solar setups, a figure that could double soon. With continued imports, the potential capacity from solar panels is expected to reach 25,000 to 30,000 MW in the coming years.
By raising the GST to 18%, the FBR hopes to collect an additional Rs 20–30 billion in tax revenue.
Internet Services May Also See Higher Taxes
Another proposal being floated involves a hike in withholding tax on internet services, possibly from the current 15% to 18–20%.
This would directly affect telecom operators and, ultimately, end users, especially small businesses and households already struggling with rising costs. Experts caution that higher taxes on connectivity could disproportionately hurt low-income and rural communities, for whom online access has become a lifeline for education, work, and communication.
The Fiscal Context Behind the Move
The IMF recently revised Pakistan’s GDP growth forecast for the year down from 4.2% to around 3.25–3.5%. This slower growth means less tax collection than originally planned, prompting talks about how to plug the gap.
While the IMF has agreed to a slightly lower overall revenue target, it expects Pakistan to maintain its tax-to-GDP ratio at around 11%.
The FBR already faces a Rs 198 billion shortfall from its first-quarter target of Rs 3.08 trillion. To meet its annual goal, it now needs to collect roughly Rs 6.7 trillion in the remaining months.
What the IMF Said “No” To
Some earlier tax proposals were rejected outright. The IMF opposed Pakistan’s plan to impose a “flood levy” on imported luxury items, while the government pushed back against the IMF’s suggestion to raise taxes on fertiliser and pesticides.
As a result, the focus has now shifted toward sectors like solar and internet, both high-growth and revenue-generating, as softer alternatives that can still help bridge fiscal gaps.
Striking the Right Balance
For Pakistan, the challenge lies in balancing fiscal discipline with economic sustainability.
While these proposed taxes could help meet IMF targets and stabilise the budget, they also risk slowing down the adoption of renewable energy and digital connectivity, two areas vital for long-term development.
The government and IMF are still in talks, and no final decision has been made yet. But if implemented, these tax changes could reshape the country’s clean-energy and digital landscape in the coming year.
Raising taxes on solar panels and internet services might seem like a quick fix for the government’s revenue woes, but it’s a double-edged sword.
On one hand, it strengthens the fiscal position and aligns with IMF benchmarks; on the other, it could discourage progress in renewable energy and limit digital access for ordinary citizens.
As always, the real test will be finding a middle ground that keeps the economy stable without dimming the light of progress.
by PK Tax Calculator