Federal Budget Outlay Set at Rs18.8 Trillion
The federal government has announced the budget for fiscal year 2026-27, with a total federal outlay of Rs18.8 trillion.
Finance Minister Muhammad Aurangzeb presented the budget in Parliament House, outlining new revenue measures, targeted relief steps and stricter compliance rules.
The budget focuses on widening the tax base, tightening enforcement and reducing loopholes in several sectors.
A major part of the plan targets retailers, wholesalers, luxury imports, digital earnings, vaping products and fuel-related items.
At the same time, the government has announced limited relief for selected health products and critical medicines.
The overall budget package shows a clear policy direction. The government wants to increase revenue while protecting some essential sectors from higher costs.
Retailers, Wholesalers and Digital Earners Face New Tax Rules
The government has announced a simplified fixed tax system for retailers with annual sales up to Rs200 million.
Eligible retailers will pay either a minimum tax of Rs25,000 per year or 1 percent of sales, depending on the applicable condition.
The measure is designed to make tax compliance easier for small and medium retail businesses.
The budget also proposes a separate fixed tax system for small shopkeepers under Section 99B of the Income Tax Ordinance.
This system will apply to shopkeepers with annual sales below Rs10 million. They will pay 0.5 percent of annual sales as tax.
The minimum tax rate for distributors and wholesalers has also been increased from 0.25 percent to 0.5 percent.
In the digital economy, the government has introduced withholding tax on income from platforms such as YouTube, Instagram and TikTok.
Banks will be responsible for deducting the tax at source.
Luxury Imports, Fuel Products and Health Relief Included
The budget proposes Federal Excise Duty on high-value imports, including vehicles above 2000cc engine capacity.
Luxury electric vehicles valued above Rs20 million will also face tighter taxation.
The government has also proposed Federal Excise Duty of Rs80 per litre on petroleum-based solvents such as white spirit and naphtha.
Officials said these products are often blended with fuel, creating loopholes in the tax system.
For vaping products, Federal Excise Duty on e-liquids has been increased from Rs10,000 per kilogram to Rs16,500 per kilogram.
The earlier retail-price-based tariff of up to 65 percent has been removed.
The budget also proposes a new tax on misuse-based life insurance policies. The measure targets schemes designed to exploit regulatory gaps rather than provide genuine insurance coverage.
On the relief side, the government has removed import duties on Active Pharmaceutical Ingredients used in critical disease treatments, including cancer medicines.
This step is aimed at reducing healthcare costs and supporting access to essential treatment.
Overall, Budget 2026-27 combines compliance tightening, luxury taxation, digital income tracking and targeted relief for healthcare-related imports.
