In a surprising and concerning move, the Government of Pakistan has proposed an 18% General Sales Tax (GST) on solar panels as part of the 2025–2026 federal budget. For a country that is already grappling with energy shortages, climate vulnerability, and economic instability, this decision could become a major obstacle in the path toward sustainable development.
The proposal has rightly drawn sharp criticism from environmental experts, solar industry stakeholders, and concerned citizens. Here’s why this tax could have serious short-term setbacks and long-term consequences for Pakistan’s clean energy ambitions.
Short-Term Impact: Immediate Shockwaves
Solar Becomes More Expensive
If the tax is implemented, the price of solar systems is expected to rise by 25–30%. This puts clean energy out of reach for middle-class homeowners and small businesses — the very sectors that have fueled the recent surge in rooftop solar installations.
Plummeting Adoption Rates
This price hike is likely to cause a significant drop in adoption, especially in urban residential areas where solar was becoming a practical alternative to unreliable grid power. The affordability equation will no longer hold, stalling momentum just when solar uptake was gaining speed.
Strain on Importers and Installers
Solar equipment importers, distributors, and installers face a turbulent future. Reduced consumer demand, squeezed profit margins, and operational uncertainty could trigger layoffs and shuttering of small solar businesses — weakening a fledgling green industry.
Long-Term Consequences: Derailing the Transition
Setback to Renewable Targets
Pakistan has committed to increasing the share of renewables in its energy mix. But a tax on solar will slow the shift away from fossil fuels, undermining national and international climate commitments.
Higher Burden on the Grid
Without private solar generation to ease pressure, the national grid will face increased load. This will likely exacerbate load-shedding, raise utility costs, and stress an already fragile infrastructure.
Rising Energy Inequality
Wealthy households may absorb the cost increase, but low-income groups will be pushed further away from energy independence. This risks creating an energy divide, where clean power becomes a privilege rather than a right.
Erosion of Trust
Policy inconsistency is a major deterrent for investors and innovators in the renewable energy space. An abrupt tax hike sends the message that Pakistan’s clean energy roadmap is volatile and unreliable — stalling foreign investment and local confidence.
Solar Is Not a Luxury — It’s a National Necessity
At a time when countries like India, China, and European nations are aggressively subsidizing solar adoption, Pakistan appears to be heading in the opposite direction. This move contradicts the global shift toward green energy and risks alienating the very population that needs it the most.
Instead of penalizing solar energy through taxation, the government should be:
- Zero-rating GST on solar imports and equipment.
- Introducing low-interest financing for households and SMEs.
- Supporting local manufacturing to reduce dependency on imports.
- Creating stable, long-term renewable energy policies.
Your Voice Matters
The green transition cannot be achieved without public support, industry engagement, and smart policymaking. If you believe that solar energy is a cornerstone of a cleaner, more resilient Pakistan, now is the time to speak up.
Should solar be taxed like a luxury, or prioritized as a strategic asset for our national future?
Let’s ensure Pakistan doesn’t miss the solar revolution.