Supreme Court Reinstates Sales Tax in Tribal Areas

The Supreme Court of Pakistan’s Constitutional Bench on Wednesday, May 14, 2025, temporarily reinstated the Sales Tax Amendment Act in the former Federally Administered Tribal Areas and Provincially Administered Tribal Areas, suspending the Peshawar High Court’s verdict that had deemed the Act unconstitutional, a significant move impacting taxation in these regions. The five-member bench, led by Justice Aminuddin Khan, issued an interim stay order during appeals by the Ghee and Steel Mills Association, agreeing that the Peshawar High Court had exceeded its jurisdiction by nullifying the law, thus restoring the sales tax regime temporarily.

The Peshawar High Court had previously annulled the Act’s implementation, but the Supreme Court’s ruling allows the Federal Board of Revenue to collect sales tax in these previously exempted tribal regions until a final adjudication. Advocate Hafiz Ehsaan, representing the Association, argued the Peshawar High Court overstepped by acting as a substitute for Parliament, stressing the billions in tax revenue at stake. In a related development, the government plans to review Rs45 billion in tax exemptions for these areas in the 2025-26 budget, with the Federal Board of Revenue unlikely to extend exemptions beyond June 30, 2024. Senate Standing Committee on Finance and Revenue members, led by Saleem Mandviwalla, highlighted disadvantages to formal sector industries like steel and ghee, pushing for stricter import conditions requiring pay orders.

Web context shows the Supreme Court’s history of reversing Peshawar High Court tax rulings in these regions, while posts found on X reflect mixed sentiment—some support the revenue push, others see it as unfair to tribal businesses. Critically, the narrative of “temporary reinstatement” may mask broader tensions—web sources suggest ongoing legal battles over tribal tax exemptions, and X sentiment hints at potential unrest if exemptions end, indicating complex economic impacts ahead.