Government to Reduce Solar Panel Tax Amid IMF Pressure

The federal government has decided to bring down the proposed sales tax on imported solar panels from 18 percent to 10 percent, following discussions with its coalition partners. While some lawmakers had called for a complete exemption, arguing that solar energy should remain fully tax-free, the government had to find middle ground due to its agreement with the International Monetary Fund.

Under the terms of that agreement, Pakistan is required to apply a 10 percent sales tax on goods that were previously zero-rated. The government, therefore, could not meet the coalition’s demand to scrap the tax entirely. However, it chose to scale back the originally proposed 18 percent rate to make solar technology more accessible while staying within IMF limits.

Sources say the International Monetary Fund agreement outlines two specific conditions. First, where zero-rating existed, a 10 percent tax must now apply. Second, where tax is already over 5 percent, it must be raised to 18 percent. The solar panel tax falls into the first category.

Deputy Prime Minister Ishaq Dar later confirmed during a session in the National Assembly that the reduced rate will be part of the new budget. An official announcement is expected soon.