Tax Turnaround: E-Filing May Be Mandatory, VAT Hike Likely for Electronics
Online income tax return filing may become mandatory for both individual and corporate taxpayers in the upcoming fiscal year 2025–26. Meanwhile, corporate tax rates are unlikely to be reduced, and a number of products—ranging from electronics to aircraft components—may be brought under the tax net.
According to sources, new items that may face Value Added Tax (VAT) or duty include computers, printers, routers, modems, aircraft engines, buses, electronic equipment, industrial machinery, medical instruments, chemical products, airplanes, networking devices, and printer accessories.
Just six months after the corporate tax rate was doubled for refrigerator and air conditioner manufacturers, the VAT on these items may now be increased. Currently, a 7.5% VAT is levied on domestically produced refrigerators and air conditioners at the production stage. The National Board of Revenue (NBR) is considering raising this to 15% in the next fiscal year.
Similarly, the current VAT of 5% and 7.5% on mobile phone production—depending on the level of local value addition—may be increased to 7.5% and 10%, respectively. The corporate tax on battery production may also be doubled from the existing 7.5%.
According to the Income Tax Division, the NBR received a strong response to mandatory online return filing from individual taxpayers in fiscal year 2024–25. Government employees and staff of several multinational companies were required to file returns online, leading to around 1.6 million submissions. As a result, the upcoming budget is expected to further expand the scope of online return filing, potentially making it mandatory for corporate taxpayers as well.
In recent years, the government has gradually reduced corporate tax rates, albeit with conditions. However, businesses have claimed that the benefits of such reductions have not been fully realized. While the government may relax some of these conditions in FY 2025–26 in response to ongoing economic instability and business community demands, a further reduction in corporate tax is not expected at this time.
