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By Waleed Mirza | June 16, 2025
In the Federal Budget 2025–26 presented on June 9, the government announced a new 18% general sales tax (GST) on imported solar panels. Finance Minister Muhammad Aurangzeb emphasized that this move is aimed at supporting local manufacturers by establishing a fair competitive environmentbrecorder.com+11geo.tv+11pv-magazine.com+11. Analysts project that this measure could generate approximately Rs20 billion in revenues.
The Rationale
Leveling the playing field: The tax aims to bring parity between domestic and imported solar panels, boosting local industry competitivenessdunyanews.tv+1brecorder.com+1geo.tv.
Market correction: It addresses pricing discrepancies in the sales tax regime, where imported panels previously had an advantage.
Surge in Solar Adoption
Skyrocketing electricity tariffs—up about 25% under IMF-backed tariff hikes—have accelerated solar adoption.
Solar contributed over 14% of Pakistan’s energy mix last year (up from 4% in 2021), overtaking coal as the third-largest energy sourcecustomkghuplay.com+11geo.tv+11thenews.com.pk+11.
Industry Response
⚠️ Concerns from Solar Advocates
The Pakistan Solar Association (PSA) warned that the tax might derail progress in solar deployment, cautioning it could slow down clean energy adoption, raise costs for consumers, and diminish investor confidencepv-tech.org+4pv-magazine.com+4energyupdate.com.pk+4.
The PC sector lacks high-efficiency local production: PSA stresses there’s no large-scale manufacturing capacity in Pakistan; local units produce only low-wattage panels that can’t compete with importscustomkghuplay.com+4energyupdate.com.pk+4pv-tech.org+4.
Suggested Mitigations
Experts, including PSA and CEOs from Inverex and Growatt, propose a more nuanced strategy:
Introduce exemptions on raw material and machinery imports.
Offer tax-free zones and incentives for R&D.
Phase the tax—possibly starting with a 5% protective duty on finished panels.
Facilitate foreign investment and scale up local manufacturing infrastructureenergyupdate.com.pk+10customkghuplay.com+10energyupdate.com.pk+10.
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Final Thoughts
The proposed 18% GST is intended to bolster the domestic solar sector and yield an estimated Rs20 billion in tax revenue. However, without robust policy support—such as incentives, investment in manufacturing, and phased implementation—the tax may instead slow solar adoption, raise energy costs, and undermine climate goals.
