Govt expects to get Rs20bn from 18% GST on imported solar panels

ISLAMABAD: Pakistan’s government is banking on increased solar equipment imports to rake in Rs20 billion in tax revenue in FY2025-26, following the imposition of a standard 18 percent General Sales Tax (GST) on imported solar panels and photovoltaic cells, official documents revealed.

The projected tax take implies the government expects solar imports to over Rs110 billion next fiscal year — despite industry concerns that the new levy may slow momentum in the country’s solar adoption drive.

Federal Board of Revenue (FBR) Chairman Rashid Langrial told a parliamentary panel that locally assembled solar panels were already subject to the same tax, while imported panels had been tax-free, creating a disadvantage for local manufacturers. He said the new tax on imports would help create a level playing field for the domestic industry.

The move comes as Pakistan’s net-metered solar capacity has more than tripled in less than two years, rising from 1.3 gigawatts in FY2023 to 4.9GW by March 2025, according to Islamabad-based energy think tank Renewables First.

This explosive growth has been largely fueled by households and businesses seeking relief from chronic power outages and soaring grid electricity tariffs.

While the government sees the GST as a revenue-generating tool amid fiscal tightening, industry players warn it could deter new investments in solar infrastructure, particularly for small-scale consumers. Still, policymakers argue that the demand for solar power — now seen as a hedge against energy inflation — remains strong enough to sustain high import volumes despite higher costs. The move also aligns with Pakistan’s broader fiscal goals under IMF-guided reforms, which push for expanded tax bases and reduced subsidies across energy sectors.