Staff Correspondent
Islamabad, June 3, 2026: The federal government is considering ending tax exemptions for the former Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) in the upcoming 2026–27 budget, following demands from the International Monetary Fund (IMF).
No more tax exemption for any area: minister
According to official sources, the government has decided not to extend existing tax relief beyond June 30, 2026, which could bring residents and businesses in these areas, including Chitral, under the standard national tax regime from July 1, 2026.
The move is part of ongoing budget negotiations with the IMF, which has called for a reduction in tax exemptions and concessions to increase revenue collection.
Shutter-down strike against govt plan to impose taxes
Officials estimate that removing these tax breaks could generate approximately Rs40 billion in additional revenue.
Under the proposed changes, income tax and withholding tax exemptions for FATA and PATA are likely to end, while sales tax in these regions may be gradually increased.
There is also a proposal to raise the sales tax rate for industries from 10% to 12%, and imported industrial raw materials could also be subjected to a 12% sales tax.
In addition, several other tax relief measures are expected to expire. Tax exemptions on electric vehicle (EV) kits may be withdrawn from July 2026, while reduced sales tax rates on hybrid vehicles are also unlikely to continue.
Furthermore, a climate support levy on petroleum products may be doubled from Rs2.5 to Rs5 per liter, with projected revenue exceeding Rs90 billion.
Imposition of sales tax in Chitral
Sources say the policy shift reflects the government’s broader plan to expand the tax base and meet fiscal targets agreed with international lenders.
The proposed measures, however, may face resistance from stakeholders in the tribal regions, where tax exemptions have historically been used to support economic development and integration into the national economy.