FBR collects Rs1.72tr in Jul-Aug, narrowly exceeds two-month target

Tax collection grows just 3.3% year-on-year, significantly below the 17.4% growth needed to achieve the annual Rs15.263 trillion target

 

ISLAMABAD: The Federal Board of Revenue (FBR) collected Rs1.722 trillion in taxes during the first two months of the current fiscal year, marginally surpassing its July-August target of Rs1.71 trillion, provisional data showed.

 

However, the modest 3.3% year-on-year increase in revenue collection highlights the significant challenge facing the tax authority in achieving its annual target of Rs15.263 trillion, which requires revenue growth of 17.4%.

 

FBR's collection during July-August was Rs55 billion higher than the corresponding period of the previous fiscal year and exceeded the cumulative target by around Rs12 billion.

 

Officials said stronger-than-expected collections in July helped offset a shortfall in August. Against an August target of Rs930 billion, the FBR collected approximately Rs900 billion, leaving a gap of Rs29 billion.

 

The annual revenue target of Rs15.263 trillion has been agreed between the Pakistani government and the International Monetary Fund (IMF). Meeting tax collection milestones has gained added importance, as progress under the IMF programme is linked to the achievement of agreed fiscal targets.

 

Sales tax drives revenue performance

 

Sales tax emerged as the strongest contributor during the first two months of the fiscal year, with collections reaching Rs719 billion — Rs85 billion above the target and 14%, or Rs86 billion, higher than a year earlier.

 

A substantial portion of sales tax receipts came from imports, with Rs496 billion, or nearly 69% of total sales tax collection, generated at the import stage.

 

Recent changes in tax laws allowing sales tax collection based on market prices rather than factory-gate prices for several products have helped curb opportunities for tax evasion, although concerns remain over their impact on the value-added tax chain.

 

Income tax collection, meanwhile, remained under pressure. The FBR collected more than Rs685 billion in income taxes, falling Rs74 billion short of the target and registering a 4% decline compared with the same period last year.

 

Federal excise duty collection stood at Rs118 billion, broadly in line with the target and Rs3 billion higher year-on-year. Customs duty receipts reached Rs198 billion, slightly below the target and largely unchanged from last year's level.

 

Heavy reliance on import-stage taxation

 

Of the total revenue collected during July-August, more than Rs810 billion, or around 47%, was generated at the import stage, where tax collection is generally easier to enforce.

 

The FBR also issued Rs155 billion in tax refunds during the period, up by approximately Rs31 billion compared with the previous year.

 

Digital enforcement challenges persist

 

The tax authority continues to face hurdles in expanding its enforcement and digital integration initiatives.

 

Officials indicated that plans to restrict certain economic transactions by ineligible individuals have been delayed due to political considerations and technical limitations in developing the required automated systems.

 

Meanwhile, the FBR has made progress in expanding its Point-of-Sale (POS) network. The number of integrated large retailers rose to 17,337 during fiscal year 2025-26, representing an increase of around 31% over the previous year.

 

However, the finalisation of regulations required to bring additional service sectors into the digital tax reporting system remains pending.

 

A draft notification issued earlier this year has yet to become operational, preventing the integration of multiple service providers into the FBR's electronic invoicing and reporting network.

 

The proposed framework covers a broad range of businesses and service providers, including restaurants, hotels, marriage halls, transport operators, courier and cargo companies, beauty and wellness centres, clinics, dentists, diagnostic laboratories and other medical service providers.

 

Businesses will be required to register and integrate electronic invoicing systems with the FBR's digital infrastructure once the necessary regulations are formally notified.