In a significant development for Pakistan’s renewable energy sector, the federal government has agreed to reduce the proposed sales tax on imported solar panels from 18% to 10%. The move comes after intense negotiations with coalition partners and amid growing public concern over the rising cost of clean energy solutions.

The tax adjustment is a compromise between the government’s initial plan and lawmakers’ demand for a full exemption. Many coalition members had called for a complete rollback, arguing that any taxation on solar technology would undermine Pakistan’s progress toward sustainable energy and hurt both consumers and local installers.

However, Pakistan’s ongoing agreement with the International Monetary Fund (IMF) leaves little room for sweeping exemptions. Under the IMF program, the government is required to apply a minimum 10% sales tax on goods previously covered under the zero-rated regime, solar panels included.

Deputy Prime Minister Ishaq Dar confirmed the new rate during a speech in the National Assembly, noting that while full exemption was not possible, the government had pushed back against the originally proposed 18% rate to provide relief to the public and support the green energy transition.

Industry experts have welcomed the move but remain cautious. “This is a step in the right direction, but solar energy needs long-term protection from fluctuating tax policies,” said one solar supplier based in Lahore.

The revised rate is expected to be officially announced later today, as part of the ongoing budget deliberations.

With solar panel adoption steadily increasing in Pakistan, the new tax rate will directly impact thousands of households and businesses relying on solar energy to cope with load-shedding and rising electricity bills.