Pakistan’s sales tax collection rises 26% to PKR 3.9 trillion in FY25

Pakistan’s sales tax collection climbed to PKR 3,901.4 billion in the fiscal year ended June 30, marking a 26.4% year-on-year increase, an addition of PKR 814.5 billion compared with the previous year, according to annual report of Federal Board of Revenue.

The sales tax accounted for 33.2% of the tax collection authority’s total tax receipts, nearly achieving its annual target with a performance rate of 98.3%.

The growth was supported by strong gains in both components of sales tax—domestic and import.

Sales tax (domestic) collections rose 32.4% to PKR 1,619.5 billion from PKR 1,222.9 billion a year earlier, while sales tax (import) increased 22.4% to PKR 2,281.9 billion, up from PKR 1,863.9 billion.

Electrical energy emerged as the top contributor within the domestic segment, accounting for 22.8% of total domestic sales tax collection.

The sector’s growth was attributed largely to higher electricity tariffs.

Conversely, the contribution of petroleum, oil, and lubricants (POL) products fell to 2.6%, down sharply from 6.9% in the prior year.

Among other sectors, motor vehicles showed the most dramatic increases.

Sales tax from motor cars surged 158.8%, driven by higher production and sales volumes, while collections from motorcycles rose 136.2%.

Car production rose from 79,594 units in FY2023-24 to 111,402 units in FY2024-25, while motorcycle output climbed from 1.15 million to 1.51 million units during the same period.

“Strong industrial activity, especially in the auto sector, coupled with improved compliance and monitoring mechanisms, has significantly boosted domestic sales tax revenues,” an analyst said.

“However, the decline in POL contributions reflects both price stability and reduced import dependency.”

Import stage collection and Customs Duty

At the import stage, petroleum products remained the largest revenue source, contributing 13.8% to the total Sales Tax (Import) collection, with PKR 315.1 billion raised compared to PKR 309.6 billion last year.

Overall, the top 15 imported commodities accounted for 71.3% of import-stage sales tax.

Analysts noted that the 22.4% rise in import-stage sales tax collections aligns with a 6.1% increase in total import value.

“The data suggests strong elasticity between import growth and tax collection, implying effective customs enforcement and valuation practices,” he added.

Meanwhile, Customs Duty collections also recorded solid growth, reaching PKR 1,284.6 billion, a 16.4% rise from PKR 1,104.1 billion last fiscal year.

Customs Duty made up 10.9% of FBR’s total revenues, achieving 95.2% of its annual target.

The POL sector remained the single largest contributor with 22.7% of the total, despite a 9.1% decline in collection, while vehicles accounted for 13.4% of the total and drove a 41.1% increase in revenue.

Fiscal and inflation trends

Officials attributed the strong performance to fiscal policy reforms and improved economic stability.

The country’s consumer price index (CPI) showed a marked decline, with the ten-month average dropping to 4.7% in FY 2024-25, down from 25.9% the previous year.

However, analysts cautioned that lower inflation could eventually temper sales tax growth. “While the reduction in CPI is a positive sign for consumers, it has a moderating effect on price-based tax revenues,” he said.

“Future fiscal planning will need to balance inflation control with sustainable revenue generation.”