Government Expands 25% Luxury Sales Tax List

The government is set to expand the scope of luxury items facing a 25 percent sales tax on imports and local sales in the 2025-26 federal budget, according to Business Recorder. This strategic move will either amend SRO 297(I)/2023 or introduce a new schedule under the Sales Tax Act via the Finance Bill 2026, aiming to boost revenue and offset losses from reduced customs duties, regulatory duties, and Additional Customs Duties (ADCs) in the upcoming budget.

The expanded list will now encompass additional home appliances, tiles, wallpapers, high-end wristwatches, and other luxury goods, targeting affluent consumers. Currently, under SRO 297(I)/2023, the Federal Board of Revenue (FBR) levies a 25 percent sales tax—up from 17 percent—on items like aircraft, ships, jewelry, cosmetics, cigarettes, premium mobile phones, imported food, decorative items, select vehicles, and other high-end products, spanning 33 categories and 860 customs tariff lines. The tax applies to the import value or retail price at both import and supply stages.

Web context reveals past debates over luxury taxes as a revenue tool, while posts found on X reflect mixed reactions—some see it as a fair revenue strategy, others criticize it as inflationary for the middle class. Critically, the narrative of “revenue generation” may downplay economic fallout—web sources note luxury tax evasion risks, and X sentiment suggests public frustration over price hikes, hinting at potential economic strain and enforcement challenges.