Senate Blocks 18% Tax on Solar Panels in Budget Review

The Senate of Pakistan has officially rejected the proposed 18% tax on solar panels, along with new taxes on homeopathic products, stationery, and increased tariffs on the steel sector. The decision came as the upper house of parliament approved its standing committee on finance’s report by majority vote.

The committee’s report, presented by Senator Saleem Mandviwalla, also recommended no tax increases on print media and IT services and urged reconsideration of taxes on services under provincial jurisdiction. It further opposed higher taxation on 800cc vehicles, suggesting a cap of 12.5% instead.

The committee pushed for improved economic conditions for salaried and low-income individuals. It proposed raising the minimum wage to Rs40,000 or Rs50,000 and suggested that monthly salaries up to Rs100,000 be exempted from income tax. The report also called for further increases in government salaries to ease the burden of inflation.

Opposition Raises Concerns Over Transparency

The session was chaired by Deputy Chairman Syedaal Khan Nasar. Opposition Leader Shibli Faraz raised objections. He said the 100-page budget report was not shared earlier. Also, he argued it was impossible to review it properly in just 10 minutes. He criticized the government for not cutting its own expenses and instead shifting the burden onto already-taxed citizens.

Senator Mandviwalla responded to the concerns. He said that members from all parties, PML-N, PPP, and PTI, took part in the discussions. He admitted the final draft may not have been shared on time. However, he stressed that the report was based on thorough deliberations. The committee staff, he added, worked late into the night to prepare it.

Government Eases Burden on Salaried Class

Finance Minister Muhammad Aurangzeb, wrapping up the budget debate, highlighted several relief measures. He announced a tax cut for individuals earning Rs600,000 to Rs1.2 million annually, reducing the income tax rate from 2.5% to 1%, calling it both a symbolic and practical gesture toward middle-class support.

He also confirmed a 10% salary increase for government employees and a 7% pension raise. In line with social protection goals, taxes on agricultural pesticides were removed, and the government announced a plan to send 1,000 graduates to China for development opportunities.

Solar Tax Reduced After Backlash

Aurangzeb explained the reason behind the solar panel tax. The original 18% tax on imported parts aimed to support local manufacturing and attract investment. After consultations, the government reduced the tax to 10%. It now applies to only 46% of imported components. Moreover, this will lead to a 4.6% increase in prices.

He cautioned against opportunistic price hikes by some sellers, warning of strict legal action against those exploiting consumers ahead of the tax’s implementation.

The finance minister emphasized that the 2025-26 budget includes long-term relief initiatives, not just short-term fixes. A key measure is the increase in the Benazir Income Support Programme (BISP) budget from Rs592 billion to Rs716 billion, a move aimed at expanding economic assistance for Pakistan’s most vulnerable populations.

Aurangzeb said these steps reflect the government’s commitment to fiscal responsibility, transparency, and inclusive growth, backed by balanced input from all political stakeholders.