Tax Exemptions Decline to Rs2.4 Trillion
The federal government of Pakistan granted tax exemptions totaling Rs2.4 trillion in the outgoing financial year 2025-26, according to the latest Economic Survey of Pakistan 2025-26 released on Thursday. This marks a significant reduction from Rs5.8 trillion in the preceding fiscal year.
Breakdown of Exemptions
The survey revealed that income tax exemptions amounted to Rs579.7 billion in FY26, down from Rs800.8 billion in FY25. Sales tax exemptions were estimated at Rs1.23 trillion, compared to Rs4.25 trillion in the previous year. Customs exemptions stood at Rs499.4 billion, down from Rs785.9 billion.
Within income tax, exemptions included Rs4.01 billion on deductible allowances, Rs75.9 billion on tax credits, Rs438 billion on total income, Rs50.7 billion as reduction in tax rates, Rs10.9 billion as reduction in tax liability, and Rs125 million from specific provisions.
Sales Tax and Customs Details
Sales tax exemptions totaled Rs1.27 trillion, comprising Rs8.8 billion under the Fifth Schedule (Zero Rating), Rs305.6 billion under the Sixth Schedule (Local supplies), Rs261.3 billion under Sixth Schedule (Imports), Rs635.8 billion under Eighth Schedule (Reduced Rates), Rs57.9 billion under Twelfth Schedule (Additional Tax), and Rs3.8 billion on SRO Local supplies, along with Rs729 million on SRO Imports.
Customs exemptions were projected at Rs499.5 billion, including Rs17.7 billion under Chapter-99, Rs205.7 billion under the Fifth Schedule, and Rs275.8 billion as General Concessions covering sectors like automobiles, E&Ps, and CPEC.
FBR Revenue Collection
The Economic Survey noted that FBR’s revenue collection during the first ten months of FY2026 was encouraging, supported by tax policy measures from Budget 2025-26, improved enforcement, and enhanced compliance. Rationalization of exemptions also contributed. The government advanced reforms to modernize tax administration with digital tools and technology-based enforcement.
Net tax collection increased by 10.3% to Rs10,262.6 billion during July-April FY2026, compared to Rs9,300.2 billion last year. Against a target of Rs10,947.0 billion, collection was 93.7%, with a shortfall of Rs684.4 billion. Refunds paid amounted to Rs500.1 billion, up from Rs427.5 billion.
Domestic taxes drove overall collection, with net collection rising 11.2% to Rs9,182.8 billion. Direct taxes grew 13.5% to Rs5,084.1 billion. Sales tax collection increased 7.9% to Rs3,425.8 billion, with sales tax on imports up 17.0% to Rs2,208.2 billion, while domestic sales tax declined 5.3% to Rs1,217.6 billion.
Federal Excise Duty net collection rose 11.5% to Rs672.9 billion, with import collection surging 52.2% to Rs173.0 billion. Customs duty grew 3.5% to Rs1,079.8 billion. FBR taxes comprise direct taxes (Income Tax, Capital Value Tax, Workers Welfare Fund, Workers Profit Participation Fund) and indirect taxes (Customs Duties, Sales Tax, Federal Excise). Overall growth was supported by Income Tax and Sales Tax.
