S.I.T.E. Association of Industry (SAI) has reviewed the Federal Budget 2026-27 with cautious appreciation for certain measures but deep disappointment that it falls far short of what the manufacturing sector urgently requires.
SAI President Abdul Rehman Fudda stated, “Our members welcome the intent but reject the pace. Tariff reforms spread over five years, a marginal Super Tax reduction without a legislated sunset, and complete silence on industrial energy pricing will not revive factories operating at half capacity today. Industry needed a breakthrough budget; it received an incremental one.”
The Association’s export-oriented members—including textiles, light engineering, chemicals, and processed goods—are particularly disappointed. The reduction in export withholding tax from 2% to 1.25% is a modest relief for a sector that carries an effective tax burden estimated by industry bodies to exceed 68%. The long-demanded restoration of the Final Tax Regime has not been addressed.
Most critically, the Finance Bill contains no mechanism to clear the billions of rupees in outstanding GST and income tax refunds owed to exporters. These funds remain trapped in the FBR system while manufacturers struggle to finance production and compete in international markets.
The SITE Association further highlighted three major unresolved issues: uncompetitive industrial electricity tariffs that place Pakistani manufacturers at a disadvantage against regional competitors; the expansion of the Third Schedule of Sales Tax, which forces manufacturers to pre-finance sales tax at consumer prices and further strains working capital; and a harsher penalty regime that disproportionately burdens compliant businesses while the informal economy remains largely unaffected.
“The formal industrial sector continues to bear the burden of higher taxes, costly energy, delayed refunds, and now steeper penalties, while being expected to compete globally. That is the real crisis, and this budget does little to address it,” Mr. Fudda added.
SAI urges the Government to address these critical gaps through amendments to the Finance Bill before its passage by the National Assembly and the commencement of the new fiscal year.
