Islamabad:
The National Assembly’s Standing Committee on Funding on Tuesday unanimously rejected the proposed VAT of 18% on the import of solar panels, while the government also announced the withdrawal of another controversial measure to increase VAT on hybrid cars, which turned both anti-environmental initiatives.
The committee at its meeting, chairman of Pakistan Peoples Parts (PPP) National Assembly Member (MNA) and former Finance Minister Syed Naveed Qamar, also raised questions about the proposed new bill, the Digital Presence Act 2025, but did not notify his judgment.
Rejection of VAT of 18% by importing solar panels and its parts, which advertised by Qamar, is the first such rejection of the committee after it began to discuss the financial proposal. Unlike the Senate, the National Assembly’s or its standing committee is binding in the event of the financial proposal.
The government had estimated RS20 billion in revenue from the 18% VAT by importing and supplying photovoltaic cells, whether collected or not. Since the IMF had not approved the proposal, the committee’s rejection will have no negative consequences for the IMF program.
During the committee meeting, the Federal Board of Revenue (FBR) stated chairman Rashid Langrial that a turnover fee had been charged at the local collection of the solar cell panels; Therefore, rejection of the import stage tax can put the local industry into a disadvantage.
However, he could not give fixed figures about the proportion of the local industry in total sales, but said that very few percentage was delivered locally. “If the government did not accept our rejection, the National Assembly will veto it,” Qamar said.
Qamar asked the government to find other ways to incentive the local industry. Finance Minister Muhammad Aurangzeb said the era of giving subsidies had ended. On it, Qamar reminded him that the government had just announced subsidies in the budget for electric vehicles.
In the budget, the government had imposed 1% to 3% car motor tax to raise RS10 billion to finance the electric vehicles. “It’s a cross supplement on electric vehicles,” Aurangzeb said. “It’s still a subsidy funded by another,” Retorted Qamar.
The government has long tried to discourage the use of solar panels-a source of cheaper electricity-over the government-shredded expensive web-based power. “No political party in the National Assembly has supported the tax of 18%and the government will have to withdraw it,” Qamar said. The Minister of Finance recognized feedback.
Hybrid cars
Meanwhile, the government announced on Tuesday the withdrawal of the proposed increase in revenue tax rate from 12.5% to 18% on hybrid cars of up to 1800 cc. This would result in a loss of RS7 billion potential revenue.
The reduced VAT of 12.5% on the hybrid cars would remain, FBR chairman Langrial said. Although he told the committee that the finance minister had announced it in the budget, the tax would not be increased.
This is the second time in the last year when the government announced to increase VAT on hybrid cars, but then withdrew it before the National Assembly’s approval. According to car policy, the government cannot increase the rate until June 2026.
However, the FBR chairman refused to draw the proposed increase in the turnover tax rate for the middle income group’s up to 850 cc cars. In the budget, the government has proposed to increase VAT of 850 cc cars from 12.5% to 18%.
Langrial said that if a person can buy an RS3 million small car, he can also pay 18% VAT. It seems that after the budget, small cars will be expensive, but the luxurious SUVs will be cheaper, noted MNA Usama Mela from Pakistan Tehreek-E-Insaf (PTI).
The committee had a heated discussion about the issue of giving police powers to FBR and fear of its abuse of taxmen. The entire financial bill is like declaring martial arts for businesses, noted PPP MNA Nafisa Shah.
However, the President FBR took an exception from feeling the bill as a piece of martial arts work. “The hard words like martial arts have been used, but I want to clarify that I work for the democratic government,” Langrial said, before he chose to leave the meeting room.
The standing committee also showed its discomfort of giving FBR’s authority to the local police to track the non-tax-paid cigarettes and confiscate them. Members observed that this would give another window to the police to extract money from the people. “Poor people are smoking to relieve stress, but the rich can afford dietary cooks,” noted Sharmila Faruqi.
The committee also questioned the government’s new bill, the law on digital presence. The bill has been introduced to charge 5% tax on the value of online payments made to foreign digital companies such as Netflix and Amazon.
FBR member Dr. Najeeb Memon said the quantity of foreign payments was much more than RS300 billion, and the government could easily get RS15 billion in revenue. He said credit card payments to companies like Netflix and Amazon stood at RS300 billion this year. The size of tax -free sales of TEMU was also RS4 billion.
The committee members called on to bring the bill as a separate law instead of making it part of the financial proposal.
