The federal government plans to end the sales tax exemption for former tribal areas in the upcoming 2025-26 budget. This move could help the government raise over Rs45 billion in revenue. The decision will also impact electricity supplies to the ex-FATA and PATA regions, ending years of tax relief provided after their merger with Khyber Pakhtunkhwa.
According to officials, an 18% sales tax will be applied to goods made in the region. The Federal Board of Revenue (FBR) may also add a withholding tax on imports. If income tax concessions are removed as well, revenue could increase even more. The FBR is currently finalising changes to tax laws based on court rulings.
Previously, the Finance Act had extended tax relief until June 30, 2025. But now, importers must submit a pay order instead of a post-dated cheque. They must also provide verified certificates within six months to qualify for any exemption. These new rules make it harder to access tax relief.
Officials say the decision is due to rising financial pressure and international commitments, especially to the IMF. The government wants to expand its tax base and reduce fiscal gaps. However, this major policy shift may hit the already weak economy of the tribal areas.
Many people from ex-FATA and PATA are expected to oppose the move. Economic activity in the region is still recovering and remains fragile. Ending tax exemptions could slow down growth and create more financial stress for local businesses.