FATA, PATA sales tax remains below standard 18pc rate: Senate told

ISLAMABAD, Aug 18 (APP):Minister of State for Finance  Bilal Azhar Kayani on Tuesday informed the Senate that the sales tax rate applicable to the erstwhile FATA and PATA had been increased from 10 per cent to 12 per cent under a gradual taxation plan, but remained well below the standard 18 per cent rate applicable elsewhere.

Responding to a Calling Attention Notice raised by Atta Ur Rehman about the withdrawal of exemption of taxes for the merged districts of erstwhile FATA and PATA in the Federal Budget 2026-2027, the minister said that the taxation arrangement had been introduced after extensive political consultations with representatives and stakeholders of the areas concerned.

He said the process began ahead of the June 2025 budget when detailed consultations were held with representatives from FATA, PATA and other parts of Khyber Pakhtunkhwa.

The consultation process, he said, was led by Adviser to the Prime Minister on Political and Public Affairs Rana Sanaullah Khan and also involved Federal Minister Engineer Amir Muqam and senior officials of the Federal Board of Revenue (FBR).

Kayani said following the consultations, it was decided last year to introduce sales tax at 10 per cent, with an understanding that the rate would subsequently be increased by two percentage points annually.

Accordingly, he said, the rate had enhanced to 12 per cent following the current year’s budget, while still remaining preferential compared with the standard 18 per cent rate.

The minister said business community operating in other parts of the country had raised concerns about misuse of exemptions, adding that in certain cases production and business activities originating outside the eligible areas had been shown as originating from FATA and PATA to obtain tax benefits.

He said such practices amounted to abuse of the exemption regime and, in certain cases, fraud, creating an uneven playing field for businesses elsewhere in the country.

Kayani reaffirmed that the welfare, prosperity and development of the people of the erstwhile FATA and PATA remained a priority for the government.

Speaking on occasion, Adviser to the Prime Minister on Political and Public Affairs Rana Sanaullah Khan said representatives and prominent business figures from FATA and PATA, as well as representatives of the Peshawar Chamber and other business bodies, had participated in the consultation process.

He said business representatives from other areas had strongly objected to the continuation of complete exemptions, arguing that the disparity made it difficult for them to compete.

Rana Sanaullah said the exemption period had previously been extended repeatedly, including through successive one-year extensions, with the final one-year extension ending this year.

Under that arrangement, he said, sales tax was initially set at 10 per cent with an understanding that it would rise by two percentage points each year.