The National Assembly approved a federal budget of Rs18,771 billion for the fiscal year 2026-27 on Tuesday, decisively dismissing opposition amendments to the Finance Bill 2026. The session was marked by a partial walkout from opposition members, intense constitutional debates between the speaker and lawmakers, and significant reforms to customs, sales tax, and corporate tax structures.
During the legislative process, the parliamentary committee removed Clause 3 of the Finance Bill, which dealt with the implementation of the Petroleum Levy and Climate Support Levy.
The Finance Bill introduces substantial operational and legal changes to Pakistan’s tax and customs systems, aiming to balance stricter enforcement with targeted relief for industries. Notably, an amendment to the Customs Act now ensures that individuals have the right to defend themselves before asset seizures by state authorities. Chartered accountants are also permitted to serve as non-voting members on customs and tax dispute resolution committees.
In the aviation sector, the assembly expanded an 18 percent sales tax exemption on aircraft and spare parts imports, previously limited to the national carrier, to include all commercial airlines operating in Pakistan, effective from July 1, 2027.
Corporate and SME provisions were adjusted, allowing businesses with annual turnovers up to Rs200 million to opt out of the Final Tax Regime. Additionally, economic losses due to financial distress will now be formally considered in state economic viability assessments to support struggling enterprises.
Regarding automotive duties, the Federal Excise Duty (FED) on imported electric vehicles (EVs) valued up to $75,000 has been set at zero percent. EVs priced between $75,000 and $110,000 will incur a 30 percent excise duty, while premium EVs over $110,000 will face a 40 percent FED. Conventional imported fuel vehicles will be subject to an 86 percent FED for engine capacities between 2000cc and 3000cc, and 92 percent for those exceeding 3001cc.
Sector-specific tax rates include a minimum tax rate cap of 0.5 percent for distributors in the pharmaceutical, fertilizer, sugar, and electronics industries. For major exporters, the Super Tax Clause C4 will be waived if export revenues exceed 80 percent of total corporate turnover.
Special tax incentives were approved for businesses and footwear manufacturers integrated with the Federal Board of Revenue’s digital invoicing and Point of Sale systems. Private equity and venture capital funds also received conditional tax exemptions.
The State Bank of Pakistan has been authorized to create a centralized virtual repository for banking data. Furthermore, a new facility allows consumers to pay taxes on imported mobile phones through flexible installment plans.
A 5 percent withholding tax on earnings from social media platforms was finalized, with taxes deducted from non-resident individuals classified as adjustable. Meanwhile, penalties and surcharges on tax non-filers were significantly increased, although an amendment to the Federal Excise Act now requires the state to prove “intentional violation” before imposing fines.
The budget session saw a major political divide as Pakistan Tehreek-e-Insaf (PTI) lawmakers and their allies staged a full walkout, refusing to participate in amendment discussions. However, members of Jamiat Ulema-e-Islam-Fazl (JUI-F) remained present, with lawmaker Aliya Kamran submitting a limited number of amendments. Speaker Sardar Ayaz Sadiq repeatedly called absent opposition members, including PTI Chairman Barrister Gohar Ali Khan, to present their motions.
The walkout followed sharp criticism from opposition figures. Barrister Gohar condemned the government’s fiscal policy, highlighting a lack of concrete measures to boost investment and accusing the Finance Bill of favoring the wealthy while burdening the poor and domestic businesses.
Opposition Leader Mahmood Khan Achakzai delivered a broad critique of the political environment, accusing both the ruling coalition and the Pakistan People’s Party (PPP) of constitutional violations. He questioned judicial and political accountability, citing unprecedented cumulative prison sentences for opposition members and criticizing state actions in Azad Kashmir and the detention of PTI leaders and workers.
Achakzai emphasized that genuine cooperation requires full constitutional supremacy and urged the military to remain subordinate to civilian government, as practiced in other democracies.
Opposition member Malik Amir Dogar challenged the rationale behind granting a 15-year tax holiday to Pakistan International Airlines (PIA) after privatization, arguing that mid-tier commercial airlines should receive similar relief rather than concentrating benefits on elite travel.
PTI lawmaker Asad Qaiser demanded the continuation of tax exemptions for former FATA and PATA regions and called for direct diplomatic engagement with Afghanistan to resolve cross-border issues and maintain economic stability along the western border.
In response to accusations of constitutional breaches, Speaker Ayaz Sadiq defended his conduct, stating he had not violated any constitutional provisions. He asserted that he would not tolerate declarations of allegiance to Afghanistan over Pakistan or criticism of the military and judiciary within the assembly, affirming his commitment to uphold the constitution.
Outside the assembly, Defence Minister Khawaja Asif linked the budget’s passage to significant regional diplomatic achievements. He announced the upcoming visit of Iranian President Masoud Pezeshkian to Pakistan, highlighting strengthening bilateral ties.
Asif credited Prime Minister Shehbaz Sharif and military leadership for facilitating a historic regional peace agreement signed two days earlier, which halted escalating conflict and established stability in the Gulf region.
Turning to security concerns, Asif sharply criticized India and Afghanistan, accusing New Delhi of ongoing hostility and collusion with Afghan elements to destabilize Pakistan’s western border due to India’s inability to accept Pakistan’s growing diplomatic influence. He warned that any further aggression from India would be met with a response far more powerful than before.
