Business leader and former president of Islamabad Chamber of Commerce and Industry (ICCI) Shahid Rasheed Butt said on Monday that the government’s decision to impose an 18 percent sales tax on goods manufactured in the erstwhile FATA and PATA is a crucial and forward-thinking move.
He argued compellingly that we must consider withdrawing import discounts and income tax concessions to foster a more equitable economic environment as it will help the government raise billions of rupees.
Shahid Rasheed Butt lauded the policy shift, calling it a long-overdue move toward tax uniformity and fiscal discipline. He stressed that this is a necessary step to discourage elements from misusing the exemptions and ensure a level playing field for all businesses.
In a statement issued here today, he said that the withdrawal of the sales tax exemption is expected to generate over Rs45 billion in revenue during the upcoming fiscal year. This amount could increase significantly if income tax exemptions are also withdrawn.
The FBR is currently drafting the necessary legal amendments to the Sales Tax Act and other relevant laws to implement the measure in the 2025-26 federal budget. The move is aligned with broader efforts to reduce fiscal deficits and expand the national tax base.
Until now, goods manufactured in the tribal regions were exempted from sales tax under the Finance Act 2024, with exemptions set to expire on June 30, 2025. These exemptions had been retained after the 2018 merger of FATA with Khyber Pakhtunkhwa as part of an economic support package for the conflict-affected region.
This package was designed to boost the region’s economy, which was severely affected by years of conflict and instability.
“While the intention behind the tax breaks was to stimulate growth, over time, these concessions have been misused by certain businesses operating outside the tribal areas,” Shahid Rasheed Butt said. “Such distortions harm fair competition across the country.”
He added that the exemption on import into these areas would remain, but under stricter regulations aimed at ensuring imported goods are actually used within the region for legitimate industrial purposes. These regulations will be designed to prevent the misuse of the system, ensuring that the tax benefits are directed toward the intended economic development of the tribal areas.
Influential business groups based outside tribal areas argue that the region still lacks adequate infrastructure, energy access, and financial services, making it challenging to sustain full taxation.
Despite such criticism, the government views the policy as necessary for achieving parity in the national tax system. Pakistan cannot afford to maintain uneven tax privileges while negotiating with the International Monetary Fund (IMF) and struggling with a mounting fiscal deficit.
The business leader observed that this is not about burdening any region; it is about strengthening the economy and ensuring transparency and accountability in the tax system.
He urged the government to take the next step by also withdrawing income and import tax exemptions. He emphasized that this is crucial for national revenue mobilization and the continued improvement of the tax system.
