The National Assembly Standing Committee on Finance on Monday approved the Finance Bill 2026 after introducing around 30 major amendments that significantly altered key tax provisions through changes in rates, enforcement measures, deletions and new additions.
The amended bill will now be presented before the National Assembly for final approval, where lawmakers will vote on each clause before its passage. Earlier, the Senate Standing Committee on Finance had submitted 123 recommendations on the bill.
The committee finalized its report and forwarded it to the National Assembly ahead of the final budget vote.
Among the key recommendations was a facility allowing taxpayers to pay taxes on imported mobile phones in installments through the Pakistan Telecommunication Authority’s device identification system. The committee also proposed easing penalties, expanding tax exemptions, reducing tax rates for wholesalers and revising the import regime for electric vehicles.
Some proposals, including changes related to the petroleum levy, were dropped. However, several new enforcement measures were introduced to improve tax compliance, including digital production monitoring, faceless tax assessments and an algorithm-based dispute resolution mechanism aimed at reducing direct interaction between taxpayers and tax officials.
The committee also proposed amendments to customs laws by introducing stricter administrative controls. Under the proposed changes, board-level decisions would require ministerial approval, while procurement would be conducted under public procurement rules. The limitation period was reduced from 10 years to five years, and safeguards were added to ensure affected parties are heard before orders are issued, except in urgent situations involving the risk of asset disposal.
Individuals affected by customs actions would also have the right to present their case before any confiscation of assets. The inclusion of chartered accountants as non-voting members in customs and tax proceedings was also approved.
A major amendment makes digital production monitoring mandatory. Manufacturers will not be allowed to remove or sell taxable goods without tax stamps, barcodes or integration with production monitoring systems, including video analytics.
For the steel industry, sales tax collection would be linked to electricity consumption, including captive power usage. The collected tax would remain adjustable, while compliant units could benefit from reduced rates to limit refund accumulation.
Special concessions were also proposed for footwear businesses integrated with digital systems and point-of-sale networks. Confiscated goods would be required to be auctioned through transparent procedures, including electronic platforms.
The committee approved exempting Pakistani-registered airlines from duties on imported aircraft and spare parts from July 1. It also endorsed the installment-based tax payment facility for imported mobile phones, provided the tax is paid within the same financial year.
Additional recommendations include a 3 percent value-added tax on imported goods sold without processing and a reduced 1 percent tax rate on coal imports used by independent power producers.
Under income tax proposals, businesses with annual turnover of up to Rs200 million would be allowed to opt out of the final tax regime from tax year 2027. Definitions were revised, timelines shortened and inheritance and property transfer rules updated.
A significant structural amendment would allow the State Bank of Pakistan to establish a centralized digital repository of banking data for tax purposes, enabling access to financial transaction records through unique identifiers.
Penalties for violations were tightened, with some fines linked to business turnover and stricter penalties for repeat offenders. Taxpayers were also granted the right to challenge the appointment of auditors.
The committee proposed a 5 percent withholding tax on income earned through social media platforms and revised tax rates for financial services and port operators. Tax exemptions were recommended for private equity and venture capital funds, subject to conditions including the distribution of 90 percent of income.
The exemption list was expanded to include provincial social security institutions, the Workers Welfare Fund, the Make-A-Wish Foundation and the Quaid-i-Azam Mazar Management Board.
The committee also reduced the minimum tax rate to 0.5 percent for 14 categories of distributors, including pharmaceuticals, fertilizers, sugar, cigarettes, locally manufactured mobile phones, packaged foods, beverages, dairy products and household consumer goods.
Export-oriented businesses generating more than 80 percent of their turnover from exports were recommended for exemption from the super tax.
In the federal excise regime, stricter provisions were introduced to address deliberate violations, while procedural rules were aligned with other tax laws. Tax deducted on social media payments to non-residents would be adjustable, and registered taxpayers would have the right to object to nominated auditors within 15 days.
For the automotive sector, revised federal excise duties were proposed for imported electric vehicles. EVs valued up to $75,000 would remain exempt from FED, vehicles priced between $75,000 and $110,000 would face a 30 percent duty, while those valued above $110,000 would be subject to a 40 percent duty.
Separate duty revisions were proposed for imported vehicles, including cars and SUVs. Vehicles with engine capacities between 2,000cc and 3,000cc would face an 86 percent FED, while those above 3,000cc would be taxed at 92 percent.
The committee’s report was accompanied by dissenting notes from members Javed Hanif Khan and Sharmila Faruqi.
