Anticipated Finalization of Finance Bill 2025: Expected introduction of Rs200 billion in new tax measures, including GST and FED adjustments
Welcome to the new fiscal year! With the budget for 2025-26, Pakistan's government has got a whole lot of changes lined up in our taxation system, and here's the low-down on what you need to know.
Last Thursday, just days before the official announcement, sources close to the government revealed that the Federal Board of Revenue (FBR) has made the final tweaks on the upcoming Finance Bill. The changes are expected to bring a whopping Rs 200 billion of new taxation measures in the form of sales tax and Federal Excise Duty (FED).
Aligning Tribal Areas with the Tax Framework
One of the key changes includes the implementation of a 18% sales tax on goods manufactured in erstwhile tribal areas. This step aims to align these regions with the broader tax framework, bringing them into the mainstream economy.
Digital Taxation
The FBR is planning to expand the scope of sales tax on services within the federal capital, extending its reach to e-commerce platforms. However, details about the specific measures or GST rates are yet to be revealed.
Tax on Goods in the Third Schedule
Additionally, the scope of the Third Schedule, which is used for charging sales tax on goods based on their printed retail price, will be broadened. The list of items subjected to this taxation may include imports of chocolates, coffee, and cereals.
Food Taxation
Rumors are swirling around a potential 5% FED on a wide variety of ultra-processed foods, including frozen foods, chips, carbonated drinks, instant noodles, ice cream, biscuits, frozen meat, sauces, ready-made meals, sausages, and many more. But let's wait for the official announcement to confirm the information.
Focus on Relief Measures as Well
Amid the taxation overhaul, the budget will also see changes aimed at providing relief to the people. For instance, there are plans to raise the income tax exemption threshold from Rs0.6 million to Rs1 million. Furthermore, proposed income tax reductions of at least 2.5% are expected to benefit salaried individuals.
A Broader Tax Net
The removal of tax exemptions for FATA and PATA is expected to contribute an additional Rs35 billion to the tax net, broadening it significantly.
Overall, the new budget is a blend of new taxation measures and relief aspects, designed to strike a balance between economic stability and growth. But remember, this is just the tip of the iceberg—much more awaits us in the upcoming financial year!
[References: Business Recorder, 2025]
[1] The Express Tribune, 2025[2] ProPakistani, 2025[3] The News International, 2025[4] Dawn, 2025[5] The Express Tribune, 2025 (2)
The Federal Board of Revenue (FBR) is planning to apply a 18% sales tax on goods manufactured in erstwhile tribal areas, aiming to align these regions with the broader tax framework and bring them into the mainstream economy. The budget for 2025-26 also focuses on broadening the tax net, with the removal of tax exemptions for FATA and PATA expected to contribute an additional Rs35 billion.
