KARACHI: Chief Minister Sindh Syed Murad Ali Shah on Wednesday presented a Rs3.56 trillion budget for fiscal year 2026-27 before the Sindh Assembly, proposing a sweeping tax rationalisation measures, major social spending and new initiatives in renewable energy, agriculture, financial infrastructure, besides a green data and artificial intelligence programme.
Amid protest chants from the opposition with Speaker Syed Awais Qadir Shah in chair, the chief minister announced a 4 percent increase in total outlay with a deficit of Rs37 billion in the fiscal plan that adds no fresh taxes to the existing taxpayers. The budget also approved a 7 percent increase in the government employees’ salaries with a minimum wage fixing at Rs43,000 a month.
According to the budget documents, the Sindh government budget outlay has been increased by 4 percent.
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Total receipts of the province are estimated Rs3.525 trillion for the next fiscal year as against estimated Rs3.411 trillion in this fiscal year. While, total expenditures estimated Rs3.562 trillion for FY27 compared to Rs3.442 trillion were projected in FY26. The budget carries a Rs37 billion deficit with Rs3.525 trillion receipts and Rs3.562 trillion expenditures.
On receipts side, current revenue receipts estimates Rs3.038 trillion including, revenue assignment Rs2.083 trillion, straight transfer Rs123 billion, grants to offset losses Rs56 billion, provincial tax receipts (excluding GST on services) Rs234 billion, provincial non tax receipts Rs85 billion and provincial sales tax on services and taxes from agricultural Rs456 billion. In addition, current capital receipts estimated Rs68.344 billion, carryover balance Rs90 billion and other receipts Rs328.53 billion for the next fiscal year.
On expenditure side, Current Revenue Expenditure (CRE) have been estimated at Rs2.560 trillion for FY27, compared to Rs2.142 trillion for the FY26. Current capital expenditures estimated Rs281.673 billion for FY27. Provincial development expenditure is estimated RS 720.3085 billion for the next fiscal year down from Rs1.018 billion.
Murad told the House that sales tax rates on selected services have been rationalised to simplify procedures, allow input tax credit, and end the dual tax rate system. He said Sindh’s shift from a positive-list to a negative-list regime for sales tax on services has helped broaden the tax base and reduce classification disputes and litigation.
Under the previous system, only services on a specified list were taxable. The new framework reverses that approach, making all services liable to the standard tax rate unless explicitly exempted under the First Schedule to the Sindh Sales Tax on Services Act, 2011, or subject to reduced or fixed rates under Part II of the Second Schedule.
In a bid to support education-related services including student consultancy, testing, and evaluation, the sales tax rate is proposed to be cut to 5 percent. The existing 5 percent reduced rate on recruiting agents providing overseas employment services for Pakistani workers is proposed to be extended for further two years.
Sales tax relief is also proposed for development projects in Sindh funded by international donor agencies. To encourage documentation and digitalisation in the retail sector, POS integration for beauty parlours and salons is proposed to be made mandatory. These services will continue to be taxed at the reduced rate of 8 percent.
The insurance sector has largely remained non-compliant with Sindh sales tax and has pursued litigation on the issue. To resolve this and expand access to health and life insurance, the government has negotiated a comprehensive resolution framework with industry representatives. Under it, sales tax on insurance agents is proposed to be reduced from 5 percent to 2 percent, and the rate for insurance brokers is proposed to fall to 3 percent. Individual life insurance will also receive further relief through an increase in the tax-exempt coverage limit from Rs0.5 million to Rs3.5 million.
In line with the National Fiscal Pact, penalties for non-filing of agricultural income tax returns are proposed to be reduced and rationalised. The super tax exemption threshold on agricultural income is proposed to rise from Rs150 million to Rs500 million, while the super tax rate is proposed to be cut from 10 percent to 8 percent, aligning it with federal income tax rates. To give legal effect to these measures, the government plans to present a Finance Bill to amend the Sindh Sales Tax Act, 2011.
In the budget 2026-27, the school education will see the largest allocation at Rs446.958 billion for primary to higher secondary institutions. Colleges are allocated Rs41.414 billion and universities and boards Rs9.417 billion. Health services follow with Rs354.271 billion. Law and order receives Rs216.537 billion covering policing, jails, and provincial security. Law and parliamentary affairs are allocated Rs27.565 billion, and local government services Rs201.39 billion for civic infrastructure.
Copyright Business Recorder, 2026