The Pakistan government has proposed an 18% general sales tax (GST) on imported solar panels in its Federal Budget 2025-2026, presented to the National Assembly on June 9.

Finance Minister Muhammad Aurangzeb argued the move would help domestic PV manufacturing to grow, according to local media reports, however the Pakistan Solar Association (PSA) has urged the government to reconsider.

In a statement, the PSA said the policy threatens to reverse the “significant progress” Pakistan has made in solar deployment. Pakistan’s net-metered solar capacity has grown from 1.3 GW in financial year 2023, to 2.5 GW in 2024, reaching 4.9 GW in March 2025, according to analysis from Islamabad-based think tank Renewables First.

The PSA added the government’s claim that a GST would protect local manufacturing is “fundamentally flawed” due to a lack of large-scale, high-efficiency solar manufacturing capacity in Pakistan.

“At a time when the world is accelerating toward clean and renewable energy, this tax will discourage solar adoption and harm our climate goals,” said PSA Chairman Waqas Moosa.

Accelerated growth in Pakistan’s net metering capacity coincided with a flood of panels entering the country. In August 2024, BloombergNEF revealed Pakistan had imported 13 GW of Chinese modules in the first six months of the year. The pace of PV growth has raised concerns among policymakers and utilities over the potential for unrestricted solar generation to disrupt Pakistan’s electricity market, where a rapid reduction in grid payments from the commercial and industrial sector could put further pressure on centralized utilities already under financial strain.

Syed Faizan Ali Shah, who sits on Prime Minister Shehbaz Sharif’s solarization committee, told pv magazine in 2024that unrestricted PV generation was a “major concern” in a country where utilities are locked into long-term, dollar-indexed power purchase agreements with independent power producers. Those contracts must be honored regardless of generation volumes.

The budget will be debated in in Pakistan’s National Assembly with the government aiming to secure approval by the end of June.