The Federal Board of Revenue (FBR) began the new fiscal year with tax collections of Rs810 billion during July 2026, exceeding its monthly revenue target of Rs780 billion by Rs30 billion. The collection also represented a 7 percent increase compared with the Rs757 billion collected during the same month last year. The improved performance was mainly supported by higher sales tax receipts, although income tax collections remained below target during the opening month of the fiscal year.
According to the latest revenue figures, income tax collections exceeded Rs300 billion but remained Rs23 billion below the monthly target. Officials indicated that one of the reasons for the shortfall was the advance collection of taxes in June to achieve the revised revenue target for the previous fiscal year. As a result, income tax receipts during July remained almost unchanged compared with the corresponding month last year. Another contributing factor was the government’s decision in the latest federal budget to reduce withholding tax rates on property transactions and the salaried segment, a move that may have lowered tax receipts during the initial month of the fiscal year.
Sales tax emerged as the strongest contributor to revenue growth during July. The FBR collected Rs358 billion in sales tax, surpassing the monthly target by Rs53 billion while recording an 18 percent increase compared with the same period last year. The improvement marked a departure from previous months in which sales tax collections frequently fell below expectations. However, the composition of the collection shows that import-related taxation continued to dominate, with approximately Rs275 billion, representing nearly 78 percent of total sales tax revenue, collected at the import stage where opportunities for tax evasion are comparatively lower.
The federal budget introduced significant changes to the sales tax framework by shifting the tax base for numerous products from factory gate prices to prevailing market prices. The objective of this policy adjustment is to reduce opportunities for under-invoicing and tax evasion while improving transparency in tax collection. Although the revised mechanism is expected to strengthen compliance, it has also altered the traditional value-added taxation chain that previously existed for many goods.
Collections from other tax categories remained broadly in line with expectations. Federal excise duty generated Rs48 billion during July, slightly exceeding the monthly target while remaining close to the amount collected in the corresponding period last year. Customs duty collections reached Rs105 billion, meeting the target and exceeding last year’s figure by approximately Rs2 billion.
Import-related taxation continued to play a central role in overall revenue performance. More than Rs440 billion, representing around 54 percent of total tax collections during July, was generated through imports. Revenue collected at ports and customs checkpoints generally provides greater certainty because the scope for tax evasion is considerably lower than taxes collected from domestic transactions.
The Federal Board of Revenue also reported progress in tax administration and taxpayer services during the month. After uploading the updated income tax return forms to its online portal, the authority received approximately 227,000 income tax returns during July. At the same time, the FBR issued tax refunds amounting to Rs98 billion, around Rs13 billion higher than refunds paid during the same month last year, reflecting continued efforts to process legitimate refund claims.
For the current fiscal year, the Federal Board of Revenue has been assigned an annual revenue target of Rs15.263 trillion, agreed jointly by the Government of Pakistan and the International Monetary Fund (IMF). Achieving this objective will require approximately 17 percent growth over the previous year’s tax collection. Unlike previous programmes, the IMF has linked the release of the sixth loan tranche to the achievement of revenue targets during the first half of the fiscal year, increasing the importance of sustained tax collection performance.
The government’s broader fiscal strategy also depends on meeting the annual revenue target. Provincial governments have committed to providing more than Rs1 trillion in grants for defence and water resource projects, subject to the condition that the Federal Board of Revenue achieves the agreed collection target. To support this objective, the federal budget introduced more than Rs1 trillion in additional revenue and enforcement measures aimed at strengthening tax compliance, expanding the tax base and improving overall revenue mobilisation throughout the fiscal year.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.