NIP 2025-30: Govt to include key suggestions for home industries in budget
ISLAMABAD: The federal government is planning to incorporate key recommendations of the gamechanger National Industrial Policy (NIP) 2025–30 for domestic industries/sectors/ manufacturers including reduction/withdrawal of the super tax and incentives to exporters in the upcoming budget (2026-27).
Top government officials told Business Recorder that the Tax Policy Unit and budget makers in the Federal Board of Revenue (FBR) have started initial working on the budget proposals submitted by the industry and trade. The budget is expected to be presented in the first week of June.
The budget preparation exercise has seriously focused on the recommendations of the National Industrial Policy (NIP) 2025–30, sources said.
READ MORE: NIP 2025-30 unveiled
“The National Industrial Policy (NIP) 2025–30 has some very critical proposals for the industry and trade and will be implemented in the coming budget”, senior officials said.
The budget makers are seriously reviewing proposal of the NIP to reform the Super Tax & its phased abolition as fiscal space improves. Secondly, the proposal is to reduce corporate income tax (CIT) from 29% to 26% gradually (1% reduction per year) as and when fiscal space is created via enhancing the tax base through better compliance. The proposal is to simplify CIT into a single predictable rate to avoid distortions post conclusion of the Fund Programme.
Another proposal under consideration is to reform direct export taxes post the Fund Programme to match the Normal Tax Regime.
To facilitate exporters, the policy recommended reduction in tariff-like taxes on imported inputs for exporters as fiscal space become available. Detailed review of tariff-like taxes faced by industry to consider value added tax (VAT) on imported inputs for exports is to be gradually reduced and the withholding taxes on imported inputs for exports is to be reduced gradually and Fast-track refunds to the exporters.
Under the NIP, the Super tax was introduced for 1-year: for it to continue without reform is unfair & crippling growth.
The FBR data (2024) shows ST Collection excluding the banking sector as Rs. 204.76 billion. Around Rs 192bn contributed by the highest income earners in the slab of Rs. 500 million.
Exporters sales tax collected was Rs. 1.3 billion and manufacturers ST collected was Rs. 93 billion.
The collection from Exporters is extremely small.
The Speed & Modality will be determined in coordination with FBR and given fiscal space. The super tax on exporters should be abolished in one go from tax year 2026 if ‘The Fund’ agrees.
Application of the super tax on manufacturers to be on the ‘incremental’ income rather than the flat slab w.e.f. tax year 2027, it recommended.
Super tax rates will be halved over a period of 5 years, with 1% reduction each year and with maximum tax rate falling to 5% in the 5th year. If the primary balance becomes positive by the 5th year, the super tax will be abolished in the sixth year.
The policy has recommended withdrawal of advance income tax for exporters and SME Exporters regime
It recommended gradually reform collection of the Export Development Fund (EDF) from exporters (0.25% of turnover) and its operations. Withdraw the Infrastructure Development Cess for exporters in Sindh province. Remove the 1% minimum tax on turnover for exporters (but retain the 1% advance tax that is adjustable against CIT).
Final tax regime for SMEs with 1% up-front tax and FBR to adopt SME definition as per SME Policy further corrected for dollar-rupee parity
The FBR agreed in principle and carries the opinion that that all incomes regardless of the source of income should be subject to normal regime. This transition has already started however, now the regime is hybrid, and it will take about 5 years to fully move to normal tax regime. This will be backed up with digitalization, simplification, and capacity building of those small businesses who do not have current capacity to retain and produce books of accounts.
It was agreed to remove this as it may open a new review by IMF on the overall incentive, and it may end up depriving existing beneficiaries from this reduced rate. If the fiscal space is available after ending of the current Fund programme, Minimum tax as applicable on other businesses to be applicable on exporters, the remaining taxes may be collected in the same mode of advance taxes as from other businesses in quarterly frequency if due.
The policy has also recommended abolition of the capital value tax (CVT) on Foreign Assets. In principle FBR agrees that the government should not impose restriction on foreign capital for Pakistan residents as it distorts economic activity. A robust system may be designed to obviate the need for measures pertaining to taxation costs.
Under the policy, the government to announce drawback of local taxes and levies (DLTL) scheme for exporters, in coordination with the Finance Division and approval of the Federal Cabinet.
The FBR to clear all stuck-up refunds including sales tax (deferred, RPOs), customs rebates, income tax, and provincial taxes & ensure clearance of the sales tax refunds within a reasonable time, with gradually reducing the time to refund.
Power Division shall remove cross subsidy from industrial power tariff, and abolish Peak Rates.
Petroleum Division shall remove cross subsidy from industrial Gas prices.
If the fiscal space is available after the end of the current Fund programme, the Minimum tax as applicable on other businesses to be applicable on exporters, the remaining taxes may be collected in the same mode of advance taxes as from other businesses in quarterly frequency if due.
The FBR shall simplify regulatory procedures and conduct audits of exporters, once in 3 years only, it recommended.
The policy recommended reduction of tariff-like taxes on imported inputs for exporters. The FBR agrees that these taxes need to be reduced in the medium to long term however in the current fiscal space such reduction may not be possible in the short term, the new policy recommended.
Copyright Business Recorder, 2026