The Government of Pakistan and the International Monetary Fund (IMF) are discussing possible tax increases on solar panels and internet services. These proposed hikes are part of “emergency tax measures” tied to the IMF’s second review of Pakistan’s economic reform program. Sources say these steps are aimed at securing extra revenue if the government fails to meet its mid-year fiscal targets.
Earlier, the IMF had suggested raising taxes on fertilizers and agricultural pesticides, but the government rejected that proposal due to its potential impact on farmers. As an alternative, authorities are now considering taxing fast-growing sectors like solar energy and digital connectivity. These measures would only be triggered if revenue from July to December 2025 falls significantly below projections or if the finance ministry is unable to cut expenditures.
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One key proposal is to increase the General Sales Tax (GST) on imported solar panels from the current 10% to 18%. If approved, this change would take effect in January 2026. Additionally, officials are reviewing a plan to raise the withholding tax on internet services from 15% to either 18% or 20%, impacting millions of users across the country.
According to the Federal Board of Revenue (FBR), solar power has the potential to generate 25,000 to 30,000 megawatts of electricity in the coming years. At present, rooftop solar systems contribute around 6,000 megawatts to the national supply, and this number could double soon due to rising adoption. However, this trend is causing concern within the government, as it reduces reliance on the national power grid, threatening the financial viability of the existing electricity infrastructure.
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The government is especially worried about ballooning capacity payments—fees paid to power producers regardless of usage—which are expected to hit Rs. 1.7 trillion this fiscal year. By slowing down the rapid spread of solar energy through higher taxation, officials aim to protect the grid system while also increasing revenue. These proposed steps will be outlined in the IMF’s second review report, to be released after approval of the $1 billion third loan tranche by the IMF Executive Board.