Deputy Prime Minister Ishaq Dar announced Wednesday that the government has decided to impose a 10% tax on solar panels, stepping back from the previously proposed 18% General Sales Tax (GST).
Speaking during a National Assembly session, Dar confirmed that the final decision came after mutual consultations and strong opposition from lawmakers and industry stakeholders. “We have agreed on 10% tax on solar this year instead of 18%,” he said, highlighting that the government took into account the concerns raised by the public and parliamentarians alike.
The original proposal, part of the Fiscal Year 2025-26 budget, aimed to introduce an 18% GST on imported solar panels to boost local manufacturing and address market imbalances. However, this sparked fears of slowing down the country’s rapidly growing shift towards renewable energy.
Read More: Govt proposes 18% tax on imported solar panels in budget 2025-26
Just a day earlier, the National Assembly’s finance committee had unanimously rejected the 18% GST plan, reflecting widespread resistance to the move. The revised 10% tax on solar panels is seen as a compromise that allows the government to pursue its revenue goals without severely hindering solar adoption.
Despite the reduced tax rate, the government is still eyeing significant revenue from the sector. With solar imports expected to cross Rs110 billion in the coming fiscal year, authorities estimate Rs20 billion (around $71 million) in additional tax revenue from the revised levy.
This tax adjustment also comes under the broader context of Pakistan’s ongoing commitments to the International Monetary Fund (IMF), which include aggressive fiscal reforms and sharp hikes in electricity and gas tariffs. These price increases have led many households and businesses to turn to solar power as a way to cut down on rising utility bills.
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In fact, solar power now contributes more than 14% to Pakistan’s energy mix — up from just 4% in 2021 — making it the country’s third-largest energy source. This shift has been largely driven by a surge in net-metered solar capacity, which grew from 1.3 gigawatts in FY2023 to an impressive 4.9GW by March 2025, according to local energy think tank Renewables First.
FBR Chairman Rashid Langrial, while addressing the finance committee earlier this week, cited massive solar imports of 32,000 megawatts over the last five years. Shockingly, he revealed that 13,000 MW remain unutilised and pointed to issues like over-invoicing in the sector. He also noted that locally assembled solar panels were already being taxed, while imported ones enjoyed a tax-free status — an imbalance the new policy aims to correct.
