Businesses say it’s a balanced budget but lacks exports revival vision
KARACHI: Business and industrial community has termed the budget 2026-27 as balanced but said it lacks vision for exports and industrial revival.
They appreciated partial relief on super tax, but criticised for not restoring Final Tax Regime (FTR). Besides, they also expressed disappointment on absence of industrial incentives.
The SITE Association of Industry (SAI) has reviewed the Federal Budget 2026-27 with cautious appreciation for certain measures but deep disappointment that it falls far short of what the manufacturing sector urgently requires.
SAI President Abdul Rehman Fudda stated, “Our members welcome the intent but reject the pace. Tariff reforms spread over five years, a marginal super tax reduction without a legislated sunset, and complete silence on industrial energy pricing will not revive factories operating at half capacity today. Industry needed a breakthrough budget; it received an incremental one.”
The association’s export-oriented members—including textiles, light engineering, chemicals, and processed goods—are particularly disappointed.
The reduction in export withholding tax from 2 percent to 1.25 percent is a modest relief for a sector carrying an effective tax burden that industry bodies estimate exceeds 68 percent. The long-demanded restoration of the FTR has not been addressed.
Most critically, the Finance Bill contains no mechanism to clear the billions of rupees in outstanding GST and income tax refunds owed to exporters.
These funds remain trapped in the FBR system while manufacturers struggle to finance production and compete in international markets.
The SITE Association further highlighted three major unresolved issues: uncompetitive industrial electricity tariffs that place Pakistani manufacturers at a disadvantage against regional competitors; the expansion of the Third Schedule of Sales Tax, which forces manufacturers to pre-finance sales tax at consumer prices and further strains working capital; and a harsher penalty regime that disproportionately burdens compliant businesses while the informal economy remains largely unaffected.
“The formal industrial sector continues to bear the burden of higher taxes, costly energy, delayed refunds, and now steeper penalties, while being expected to compete globally. That is the real crisis, and this budget does little to address it,” Fudda added.
SAI urges the Government to address these critical gaps through amendments to the Finance Bill before its passage by the National Assembly and the commencement of the new fiscal year.
Patron-in-Chief of the All Pakistan Fruit and Vegetable Exporter Association (PFVA), Waheed Ahmed, expressed serious concern over the Federal Budget 2026–27, stating that the agriculture sector—despite facing significant challenges—has largely been overlooked.
He noted that while the government has reduced minimum tax and advance tax on exports to improve competitiveness, the decision to not fully abolish these taxes remains disappointing for exporters.
Waheed Ahmed appreciated the allocation of Rs88 billion under the Export Refinance Scheme, terming it a positive step that will enable exporters to access financing at lower costs.
He also welcomed the allocation of Rs1 billion for development funding, highlighting that it reflects an increase compared to the previous year.
Commenting on taxation measures, he welcomed the abolition of super tax on income between Rs150 million and Rs500 million.
However, he emphasised that for income above Rs500 million, the tax has only been reduced rather than completely eliminated, which falls short of industry expectations. He further expressed concern that exports have not been included in the fixed tax regime.
Copyright Business Recorder, 2026