In a surprising move that could reshape Pakistan’s solar energy landscape, the federal government has proposed an 18% sales tax on imported solar panels in its newly announced Budget 2025-26.

The announcement came during Finance Minister Muhammad Aurangzeb’s budget speech in the National Assembly on Tuesday, sparking concerns among solar users and industry stakeholders.

The government claims the new tax is aimed at encouraging the local solar panel industry, but experts fear it may slow down Pakistan’s fast-growing transition to clean energy. Over the past few years, rooftop solar panels have become a lifeline for homes and businesses struggling with soaring electricity bills.

According to the Pakistan Economic Survey 2024-25, the country’s net-metering capacity surged to 2,813 megawatts (MW) by March 2025 — a 300MW jump from the previous year. This growth was largely fueled by the plummeting prices of solar panels and the appeal of earning back money through net-metering.

Now, the newly proposed 18% tax could reverse that momentum.

Despite being a low-income country, Pakistan has made headlines on the global stage as a solar success story. A recent Global Electricity Review 2025 by UK-based energy think tank Ember revealed that Pakistan imported 17 gigawatts (GW) of solar panels in 2024 alone — placing it among the top global importers. The report noted how "solar is now so cheap that large markets can emerge in a single year — as evidenced in Pakistan."

High electricity costs, largely tied to expensive thermal power contracts, have pushed many Pakistanis toward solar as a more affordable and sustainable alternative. But that shift could now face serious headwinds.

Another recent report by Renewables First — “Leader of One or Leader of None” — highlighted that Pakistan imported over 39GW of solar panels in the last five years, most of them from China. That’s enough capacity to cover more than three-quarters of the country’s total electricity generation. In 2024 alone, China exported 16GW worth of panels to Pakistan — more than it did to several G20 countries.

The report warns that Pakistan might be the first country to face a large-scale clash between outdated coal energy systems and the rapidly growing rooftop solar market.

With the imported solar panels tax looming, questions arise: Will this support local manufacturers or stifle the green revolution that’s just beginning to gain traction?