18% Sales Tax on Ex-FATA Goods in FY26

Islamabad, May 31 — The government plans to scrap the long-standing sales tax exemption on goods manufactured in the former tribal areas, targeting over Rs45 billion in revenue for the next fiscal year, The News reports. The proposed 18% sales tax, set for the 2025-26 federal budget, will extend to electricity in ex-FATA and PATA regions, ending tax relief post their merger into Khyber Pakhtunkhwa.

The Federal Board of Revenue (FBR) is also weighing a withholding tax on imports to the region, marking a sharp pivot from post-merger leniency, with potential income tax concession cuts to further boost revenue. The FBR is finalizing legal amendments to align with court rulings and tax laws. Last year’s Finance Act extended exemptions on imports, goods, and electricity until June 30, 2025, but now demands a pay order over a post-dated cheque, requiring verified consumption certificates within six months.

Driven by fiscal pressures and International Monetary Fund (IMF) commitments, the government aims to widen the tax base, yet this risks backlash in the tribal belt, where economic recovery remains fragile. Web context highlights FATA’s economic lag (e.g., 38% poverty rate, web ID: 0), while X posts show anger—some label it a betrayal, others predict unrest. Critically, the narrative of “revenue gain” may mask social costs—web sources note infrastructure gaps, and X sentiment suggests distrust, hinting at potential instability.