Mazar tax exemption okayed
After 58 years, Pakistan has decided to exempt the income of the Quaid-e-Azam Mazar Management Board from tax and is also set to legally allow traders to exit the optional fixed income tax scheme just one year after opting in.
These amendments are part of the Finance Bill 2026, which Finance Minister Muhammad Aurangzeb will on Tuesday lay before the National Assembly for a vote, showed the report finalised by the National Assembly Standing Committee on Finance.
Headed by Syed Naveed Qamar of the Pakistan Peoples Party (PPP), the committee has also proposed new tariffs for the auto sector, which would make cars substantially cheaper, other than those with engine capacity of 2,000cc and above. The import taxes have been reduced in the range of 26% to 56%, bringing them in line with the government's National Tariff Policy aimed at trade liberalisation.
Unless the lower house of parliament rejects any of the host of amendments, the committee's report is expected to be adopted due to its binding nature for the government.
The committee has proposed to exempt the income of the Quaid-e-Azam Mazar Management Board from tax – a realisation that came after 58 years of the board's establishment. Pakistan's income tax law is full of exemptions for various entities, some of which are the nation's largest conglomerates. This year too, nine more entities will be added to the long list enjoying income tax exemption.
The government had proposed five organisations, while four have been added by the committee, including the Quaid-e-Azam Mazar income. The committee has also proposed adding Make-a-Wish Foundation, provincial employees' social security institutions and Workers Welfare Fund organisations to the list of exempted entities.
The committee has also proposed to allow traders to leave the fixed income tax regime from tax year 2027. The government had proposed an optional scheme for traders offering them the option to pay only 1% of sales in income tax and a minimum Rs25,000 per annum in return for exemption from audit and becoming part of the digital economy.
"Provided that a person having turnover up to Rs200 million may opt out of final tax regime at the time of filing of return for tax year 2027 and onwards," according to the budget proposal.
The committee had also proposed 1% sales tax on the import of coal, subject to the condition that such imported coal is exclusively and directly supplied to independent power producers. But it rejected a proposal to reduce the minimum income tax rate for terminal service providers to 12%.
The committee also linked Rs80 per litre excise duty on petrol solvents with the condition that the duty shall not be charged on the import or supply of white spirit and solvent oil purchased only for in-house consumption, if both the importer and recipient of supplies hold licences issued by the Department of Explosives. This has opened a back door for avoiding the new levy.
The committee has also rejected the proposal to impose late payment surcharges on oil marketing companies for not timely depositing the petroleum levy in the national kitty. The committee approved exempting sales tax on both wheat and rice bran.
Cheaper cars
The committee has proposed to reduce the maximum import taxes on cars from 156% to 74% for vehicles of up to 2,000cc, making these cars cheaper. The proposal is in line with the National Tariff Policy.
Under the proposal, the maximum tariff on vehicles above 1,800cc has been reduced from the existing 156% to 74%. On imported cars, SUVs and other vehicles with engine capacity of 2,000cc and above, 86% federal excise duty has been imposed. Likewise, on vehicles with engine capacity exceeding 3,000cc, a tax rate of 92% has been imposed.
For vehicles in the 1,500cc to 1,800cc category, the combined tariff has been proposed to be lowered from 91% to 57%. The import duties applicable on 1,000cc to 1,500cc vehicles have been proposed to be decreased from 76% to 52%.
For 850cc to 1,000cc vehicles, the maximum tariff has been proposed at 47% from 71%, and the maximum tariff on vehicles up to 850cc, bikes and vehicle bodies has been proposed to be reduced from 66% to 42%. For the auto-parts sector, the proposed maximum tariff has been reduced from 61% to 45%, including 25% customs duty.
The standing committee has rejected a proposal to impose up to Rs100,000 in fines on late filing of returns but added a condition that the late filer cannot register property for six months.
The National Assembly is also set to approve a list of sectors that will now be charged 0.5% minimum tax. These include pharmaceutical, fertiliser, cigarette, sugar, locally manufactured mobile phones, frozen food in canned or packaged form, electronics, beverages and dairy products, pasta, cereals, biscuits, nuts, snacks and similar packaged food items, condiments and baking items in bottled or packaged form, skincare and cosmetics, hair care, oral care, baby care, cleaning agents like laundry detergents, dishwashing soaps and floor cleaners, toilet paper, paper towels, facial tissues, napkins and similar products, and trash bags, aluminium foil, air freshener and insect sprays.
The committee excluded sales of plates, films, coils, tape and sheets from the list of goods that will be charged sales tax at market price.
The committee approved charging Rs30 per unit sales tax on the steel sector, whether production is made using national grid power or an alternate source of energy, including bagasse power plants.
To address discrimination against other private airlines, the National Assembly panel has extended tax exemptions to the entire aviation sector. But in the case of airlines other than Pakistan International Airlines (PIA), these exemptions will take effect from July 2027.
The NA panel also allowed individuals to pay tax on mobile phones in instalments within a year.