ISLAMABAD: The federal government is likely to abolish tax exemptions for Chitral and other previously exempt merged districts including former FATA and PATA regions, as part of ongoing negotiations with the International Monetary Fund.
Sources indicate that the government has decided not to extend tax relief beyond June 30, 2026. From July 1, residents and businesses in these areas may fall under the regular national tax system for the first time.
The proposed move is aimed at broadening the tax base and increasing revenue collection in line with IMF conditions tied to Pakistan’s fiscal program. Officials estimate that ending these exemptions could generate around Rs40 billion in additional revenue.
As part of the changes, income tax and withholding tax exemptions are expected to be withdrawn, while sales tax in these regions may also be increased. Industries in these areas could face higher tax rates, and imported raw materials may also be brought under standard taxation.
Government sources say the decision reflects a wider policy shift toward reducing concessions and ensuring uniform taxation across the country.
However, the move may trigger concern among local stakeholders, as these exemptions were originally introduced to support economic development in remote and underdeveloped regions like Chitral.
The final decision is expected to be announced in the upcoming federal budget for 2026–27.
