ISLAMABAD: The government has decided to impose an 18 percent sales tax on goods manufactured in the erstwhile tribal areas starting from the federal budget for fiscal year 2025-26.
The withdrawal of the sales tax exemption in these areas is expected to generate over Rs45 billion in revenue during FY 2025-26. The revenue impact could increase further if income tax concessions for the former tribal regions are also withdrawn. The Federal Board of Revenue (FBR) is currently drafting the necessary legal amendments in line with recent court orders and applicable laws.
Previously, under the Finance Act 2024, sales tax exemptions on import, supply of goods, and supply of electricity were retained for the former FATA/PATA regions until June 30, 2025. However, the exemption on imports will now be subject to stricter conditions, including the submission of a pay order instead of a post-dated cheque. The pay order will be released upon presentation of consumption or installation certificates within six months, issued by the relevant Commissioner.
This move to end tax exemptions in the erstwhile tribal areas aligns with efforts to integrate these regions fully into the national taxation framework and expand the tax base, supporting the government’s broader fiscal consolidation goals.
