Prices of solar panels, batteries and inverters to rise sharply as govt weighs 18% sales tax

To meet IMF demands, the government is considering a proposal to increase sales tax on solar panels from the existing one per cent to 18 per cent, while batteries and inverters may also face an 18 percent sales tax.

Citing sources, media reports said the IMF is seeking the withdrawal of tax incentives provided to the solar sector, raising fears of an increase in prices of solar energy products from July 1, 2026.

The sales tax exemption currently available on CKD kits for electric vehicles is also likely to be abolished. However, the one per cent sales tax concession on locally manufactured or assembled electric vehicles will remain in place until June 30, 2026.

The reports said that the concessional sales tax regime for hybrid electric vehicles is also set to expire on June 30, with little possibility of an extension.

In addition, the government is considering increasing sales tax on imported electric buses from one per cent to 18 per cent. However, the sales tax exemption on electricity supply to tribal areas will continue until June 30, 2026.

Consultations between the government and the IMF on these proposals are ongoing, while a final decision is expected to be announced in the upcoming federal budget.