Mohsin Siddiqui (Chief Reporter)
The Federal Board of Revenue (FBR) has issued a clarification regarding the sales tax exemption on solar panels and related accessories. The FBR clarified that the exemption, which was previously available on the import and supply of solar panels and accessories, was withdrawn and subsequently restored specifically for photovoltaic cells.
According to the FBR Policy Wing’s legal clarification, the exemption on sales tax for solar panels and accessories was in place until January 15, 2022. However, changes introduced through the Finance (Supplementary) Act, 2022, as part of the GST reforms during the 6th review of the IMF’s Extended Fund Facility (EFF) program, led to the withdrawal of this exemption.
As a result, solar panels and their accessories became subject to the standard sales tax rate, applying uniformly without any discriminatory treatment. However, through the Finance Act 2022, the exemption on sales tax for the import and supply of photovoltaic cells was reinstated, while other accessories and related items of solar panels remained taxable at the standard rate.
The FBR emphasized that there is no sales tax chargeability on photovoltaic cells, whether produced locally or imported. This clarification addresses concerns about the violation of Article 25 of the Constitution, asserting that there is no discriminatory treatment within the same class of goods.
Furthermore, the FBR stated that the restoration of the exemption for photovoltaic cells is a facilitation measure and does not impede lawful business activities. Therefore, the FBR dismissed claims of a violation of constitutional rights under Article 9 and 18, asserting that the legislative measures taken by the empowered legislature are legal and lawful.
In conclusion, the FBR clarified that the legislature, duly empowered by Article 77 and Entry No. 49 of Part-1 of the Federal Legislative List of the Constitution of Pakistan, has the authority to levy taxes on the import, production, or consumption of goods. The clarification aims to address concerns and affirm that no fundamental rights have been violated.
