The Shehbaz Sharif government plans to impose an 18% General Sales Tax on imported solar panels and photovoltaic cells in the upcoming fiscal year, projecting Rs20 billion in additional revenue. This move comes as Pakistan’s solar energy sector experiences explosive growth, with net-metered capacity soaring from 1.3GW in 2023 to 4.9GW by March 2025. Finance Minister Muhammad Aurangzeb defended the tax as necessary to support domestic manufacturers who struggle to compete with cheaper imports, while FBR Chairman Rashid Langrial emphasized it would create fair market conditions.
The decision follows massive increases in electricity tariffs under IMF-mandated reforms, which drove many Pakistanis to adopt solar power as an affordable alternative. Solar energy now accounts for over 14% of Pakistan’s power supply, displacing coal as the third-largest energy source. However, the new tax risks slowing this transition, particularly for households and small businesses that have been installing solar systems to escape chronic power outages and high utility bills.
Policymakers argue the solar sector’s strong growth momentum will withstand the tax increase, citing continued demand as energy inflation persists. The measure forms part of broader fiscal reforms aimed at expanding Pakistan’s tax base and reducing energy subsidies in line with IMF requirements. Officials maintain the tax will ultimately strengthen the domestic solar industry by reducing reliance on imports.
Energy experts warn the policy could backfire by making solar systems unaffordable for many consumers, potentially stalling Pakistan’s renewable energy progress. As the country faces mounting climate challenges and energy insecurity, the solar tax decision highlights the difficult balance between fiscal consolidation and sustainable development goals. The coming months will reveal whether the government’s revenue calculations prove accurate or if the tax indeed dampens Pakistan’s solar revolution.