Pakistan’s 2026-27 Budget Passes with Tax Reforms, Excise Duty Cuts, and Digital Compliance Push

President Asif Ali Zardari assented to the Finance Bill, 2026 on Friday, finalizing the federal budget for the 2026-27 fiscal year with an outlay of Rs18.8 trillion, according to a statement from the Presidency’s X account. The bill, passed by the National Assembly after opposition members walked out, includes significant tax reforms and excise duty reductions.

What are the key tax reforms in the 2026-27 budget?

The budget introduces eased income tax slabs, rationalized super tax, and reduced excise duties on business-class international travel. For example, excise duty on tickets to North, Central, and South America has been cut to Rs50,000 from Rs350,000, while rates for the Middle East and Africa dropped to Rs25,000 from Rs105,000. The government also removed the proposed 20 per cent Federal Excise Duty on mineral waters, aerated waters, hydration drinks or electrolyte beverages with artificial sweetener or sugar content below 5g/100 ml, and eliminated levies on deemed income and the tampon tax.

How do the budget’s changes affect electric vehicles and imports?

The budget allows for sales tax exemptions on the import or lease of aircraft and their parts for airlines operating in the country starting July 1, 2027. Electric vehicles (EVs) will face excise duties based on their value in U.S. dollars, with no Federal Excise Duty (FED) applied to electric cars and electric SUVs imported in Completely Built-Up (CBU) condition with a value not exceeding $75,000. Vehicles priced between $75,000 and $110,000 will incur a 30pc duty, while those exceeding $110,000 face a 40pc levy, as outlined in the finance bill.

What changes are outlined for the steel industry and digital compliance?

The budget mandates tax collection for steel melters, re-rollers and composite units based on electricity consumption, including energy from captive power plants or other alternative sources. The tax will be adjustable input tax, claimable in the return of the month in which payment is made. Additionally, the Device Identification, Registration, and Blocking System (DIRBS) tax on imported phones will be paid in installments, with full payment required by the end of the financial year of import.

Why did the opposition walk out during the budget vote?

The opposition staged a walkout during the National Assembly’s vote on the budget. The House approved the budget after all seven amendments moved by opposition members were rejected by a majority vote; the finance bill included amendments suggested by the National Assembly Standing Committee on Finance.

What are the implications for private equity and venture capital funds?

The budget exempts income derived by private equity and venture capital funds registered under the Private Funds Regulations, 2015, provided 90pc of their annual accounting income is distributed to unit or certificate holders or shareholders. This exemption does not apply if the fund acquires a public-listed company without converting it to a private limited entity, as specified in the finance bill.

How does the budget address coal imports and value-added tax?

A minimum value-added tax of one per cent will apply to coal imports exclusively and directly supplied to independent power producers.

The 2026-27 budget reflects a shift toward digital compliance and targeted tax relief, with provisions designed to attract investment and streamline regulatory processes. As the fiscal year approaches, the implementation of these measures will be closely monitored by businesses and policymakers alike.