The federal government has decided, in the upcoming budget for the fiscal year 2025–26, to impose an 18% sales tax on goods produced in the former tribal areas (FATA/PATA). The objective behind this move is to increase revenue and expand the tax net.
Sources reveal that with the removal of the sales tax exemption, it is expected that more than Rs. 45 billion in revenue will be generated from this sector during the fiscal year 2025–26. If income tax exemptions for these regions are also withdrawn, the impact on revenue will be even greater.
Officials from the Federal Board of Revenue (FBR) stated that, in light of court rulings and legal provisions, necessary legal amendments are being prepared to implement this tax effectively.
It is worth noting that, according to the Finance Act 2024, the sales tax exemption for import, supply, and electricity services in the former FATA/PATA regions had been extended until June 30, 2025. However, this exemption on imports will only be granted if, instead of a prior cheque, an official payment order is submitted, and the benefit will be issued only after the submission of a utilization or installation certificate by the relevant commissioner within six months.
It is expected that this step will not only enhance the tax framework, but also help integrate the economy of the former tribal regions with the national tax system.
It is noteworthy that last year, similar efforts to extend the tax regime to these areas sparked protests in tribal districts and PATA regions under provincial administration, leading the federal government to postpone the tax implementation for one year.