The Khyber Pakhtunkhwa provincial cabinet officially approved the draft budget and Finance Bill for the fiscal year 2026-27 on Friday, introducing targeted exemptions on property tax and implementing strict electronic sales taxes for the hospitality sector.
The cabinet meeting was led by Chief Minister Sohail Afridi, who, after the approval, proceeded to the provincial assembly to formally present the fiscal plan to lawmakers. These financial measures are set to take effect starting July 1, 2026.
In a significant development, the Finance Bill 2026 offers relief for low-income homeowners while enhancing enforcement against tax evasion. Properties measuring five marlas or less will be fully exempt from property tax, providing substantial relief to small residential property owners. Additionally, taxpayers who clear their outstanding property tax dues by December 31 will benefit from a 30 percent discount. To ensure compliance, authorities are now empowered to seal properties of habitual tax defaulters.
The provincial government has also revamped the taxation system for the hospitality industry, aiming to formalize this largely cash-based sector. Hotels integrating digital point-of-sale (POS) systems will be subject to a 5 percent service tax, whereas those not using POS will face a higher rate of 10 percent. This move is designed to encourage digital transactions and improve tax collection.
Meanwhile, opposition parties in the Khyber Pakhtunkhwa Assembly have convened a pre-budget consultative meeting in Peshawar. Chaired by Opposition Leader Dr. Abidullah, the meeting will gather representatives from all opposition factions to strategize their response ahead of the budget session.
Furthermore, the budget introduces a new standardized tax schedule for commercial vehicles, including an annual token tax of Rs1,000 on three-plus seater rickshaws. This measure broadens the transport tax base and updates the taxation framework for larger commercial vehicles operating throughout the province.
