Pakistani news outlets reported on May 20 that their government has decided to remove the 17% general sales tax (GST) on PV modules (or solar panels). Prime Minister Shehbaz Sharif personally made the announcement at a meeting with the country’s leaders of industries and businesses. He said eliminating this tax, which was imposed by the previous government, was the “only way forward” as the country faces a sharp increase in the costs of importing energy.
According to the reporting by Pakistani newspaper Dawn, Prime Minister Sharif, who just formed a new coalition government, invited representatives of various sectors to discuss key economic issues and suggest solutions for addressing current challenges. After making a 30-minute opening remark, the Prime Minister opened the floor for questions and proposals.
After the meeting, the Prime Minister Office released a statement saying that the 17% GST on PV modules will be immediately waived. Furthermore, the Prime Minister proposed a mandate to have every home fitted with a water heater that is exclusively powered by solar energy. The Prime Minister pointed out that Pakistan now has an oil import bill of USD 20 billion. Hence, efforts must be made to develop renewable energy in order to cut energy import costs. He also noted that regions such as Sindh and Baluchistan have a wealth of renewable energy resource.
The International Monetary Fund (IMF) is currently in the process of providing a loan package of USD 6 billion to Pakistan. However, only a tranche installment of USD 1 billion was approved this April. As reported by news agencies such as Reuters, IMF has delayed the package because it is pressuring the Pakistani government to accept certain terms and conditions, such as the elimination of fuel and energy subsidies. The Pakistani government is resisting these demands because carrying out such “reforms” will have significant economic and political repercussions.
In response to the Prime Minister’s announcement, Zubair Motiwala, who is the president of the Business Group, said that his organization appreciates both the government’s willingness to hear the suggestions of its members and the waiving of the GST on PV modules. Motiwala added that he hopes the Prime Minister will really heed the call to devise a mechanism for providing sufficient natural gas to local industries without affecting the needs of consumers. The Business Group is an association of commercial and industrial interests based in Karachi.
As quoted by Dawn, Motiwala pointed out that businesspeople and industrialists in Karachi will “play [their] role and contribute” when the government provides the right kind of support. Besides the removal of the GST on PV modules, Motiwala also wants the Prime Minister to keep his promise on minimizing the impact of a recent ban on certain imports. He noted that a lot of existing import orders have to be fully carried out because payments have already been paid. At the same time, no new import orders will be made.
Pakistan has recently experienced a massive increase in trade deficit that could threaten the stability of its economy, so its government imposed an emergency ban on all non-essential luxury goods in May. However, fuel products are exempted from the import ban.
Muhammad Faheem Ashraf, vice chairman of Pakistan Solar Association, revealed that the country’s Ministry of Energy held a meeting on June 4 to allocate budget that would allow reductions in taxes levied on PV generation equipment. Dawn also reported this February that Pakistani renewable energy advocates have asked the IMF to pressure their government to revoke taxes on PV generation equipment and electric vehicles.