As the world races toward renewable energy, Pakistan has taken a step back, taxing solar panels just when they became a lifeline for the middle class. In light of the global push for sustainable energy methods, Pakistan had initially proposed an 18% GST on imported solar panels in its 2024-2025 federal budgets. This sparked widespread public backlash due to both the timing and implications of the proposal. The timing of this proposal was particularly ill-suited, as the world was actively shifting towards more sustainable and clean energy-promoting methods.
Up till now, the imported solar panels had been either zero-rated or exempt from sales tax, mainly due to special SROs issued by the Federal Board of Revenue (FBR). These exemptions were introduced to encourage renewable energy use under Pakistan’s Alternative and Renewable Energy Policy, 2019. Further, the exemptions were also introduced to promote affordability, so that the middle class could easily install solar panels. Thus, if this proposal is allowed to come into action, then the entire purpose behind the sale-purchase of majority solar panels in Pakistan would seem to be adversely affected, as the public would then be forced to bear the burden of paying hefty electricity bills, once again. Pakistan has also committed to increasing its renewable energy share to 60% by 2030 under its Nationally Determined Contributions (NDCs) as part of the Paris Agreement. Introducing an 18% GST on solar imports goes directly against these commitments and risks weakening the country’s own climate agenda.
This is one of the reasons why the public seems to vote against the proposition of 18% GST on solar panels in the country. The backlash is also flowing from Pakistan’s Paris agreement, in which Pakistan had agreed to convert 60% of its total energy into clean energy by 2030.
The public backlash was taken into consideration by the National Assembly and Senate Finance Committees, who unanimously agreed to reject this tax proposal. The reasoning behind this rejection was that it would not only discourage the growth of clean energy, but it would also force the public to give in to the drastically high electricity bills, from which they had previously found an escape by virtue of installing solar panels. The rejection was viewed as a win for middle-class and environmental activist groups.
But in an unexpected turnaround, the 2025–26 Federal Budget has now been tabled by the National Assembly and introduces a 10% sales tax on solar panels. While lower than the initially mooted 18%, this new tax sparks renewed public angst and questions the energy policy priorities of the government quite seriously.
With a 10% GST imposed on imported solar panels, the overall cost of installing solar systems will rise significantly This would simultaneously reduce the affordability of the solar panels, among the middle class families, who make up a reasonable percentage of the total population of the country, thus having an adverse impact on the public. Without affordable access to solar energy, households that were previously planning to shift to solar will now have no option but to return to using electricity from the national grid, such as WAPDA or KE.
Pakistan’s electricity grid is already experiencing a strain, and any reversal of solar use due to increased expense could push more individuals back onto the grid, pushing up demand for fossil fuel-based power and raising electricity prices. That burden will end up being borne by consumers, particularly those who are already facing a high cost of living. This has the potential to slow down the pace of clean energy adoption, when the world’s momentum is moving towards sustainability.
A comparison with other regions provides clarity on how counterproductive this tax proposal actually seems to be. India had initially applied GST on solar imports, but after strong opposition, revised it and adjusted to an average blended rate of just 8.9%. Bangladesh, on the other hand, continues to exempt renewable energy imports from such duties altogether, recognizing their importance in achieving rural electrification. These nations have clearly demonstrated that smart tax relief, rather than punitive measures, can be a far more effective way to promote clean energy adoption.
Although the lower tax rate of 10% seems less extreme than the original 18%, it is still a policy concern that risks the green energy momentum of Pakistan. The tax undermines the government’s own climate action plan and dilutes investor and public trust in the stability of renewable energy policy.
If taxation is considered indispensable, it must be implemented in phases in proportionate amounts that do not compromise affordability and support Pakistan’s long-term environmental objectives. Fiscal policies should not make clean energy a luxury item. Rather, access to solar energy must be safeguarded and hailed as a fundamental right of energy security, economic stability, and sustainability.
In the future, the government can seek other approaches, including taxation on a graduated scale, formalization of the solar market, compulsory vendor registration, and certification standards to remove low-quality imports, rather than a across-the-board tax. In addition, incentives must be given in order to encourage local production of solar equipment, job creation, along with minimization of dependence upon imports.
