Govt to Impose 18% Sales Tax on Goods from Former FATA/PATA in Budget 2025–26
In a major fiscal development, the **federal government of Pakistan** has decided to **withdraw the sales tax exemption** on goods produced in the **former tribal areas (FATA/PATA)**. The decision, aimed at increasing revenue, will be included in the upcoming **Federal Budget 2025–26**, according to sources cited by *Business Recorder*.
This move will see an **18% sales tax** applied to locally produced items from these regions, which have so far enjoyed tax relief following their merger into **Khyber Pakhtunkhwa**. The **Federal Board of Revenue (FBR)** has already begun drafting the necessary **legal amendments**, based on **judicial directives** and **applicable statutes**.
### **Estimated Revenue Impact:**
* The government anticipates **over Rs. 45 billion** in additional revenue during the 2025–26 fiscal year by ending this exemption.
* If **income tax relaxations** for these areas are also withdrawn, revenues could further increase.
### **Changes to Import Tax Exemptions:**
While the **Finance Act 2024** had extended **sales tax exemptions on imports, supplies, and electricity** to these areas until **June 30, 2025**, the new policy introduces **stricter conditions**:
* Exempted imports must now be backed by a **pay order** (instead of post-dated cheques).
* A **utilization or installation certificate** must be submitted within **six months**, issued by the relevant **commissioner**.
* Upon verification, the **pay order will be released**.
This policy shift is seen as part of the broader efforts to **integrate FATA/PATA into the national tax framework**, a process that has faced both economic and political challenges. However, critics warn that such changes could **burden local industries** and **widen regional disparities**, unless accompanied by **development incentives**.
Further details are expected to be unveiled with the full presentation of the **Budget 2025–26** in June.
