IMF Recommends 18% GST On Petrol, Food, Medicine to Raise Rs. 1.3 Trillion More

The International Monetary Fund (IMF) wants the Federal Board of Revenue (FBR) to increase the country’s tax collection by Rs. 1.3 trillion by charging an 18 percent GST on goods including unprocessed food, stationery items, medicines, and petroleum products. However, the IMF has not evaluated the potential impact on inflation if such a significant increase in GST is implemented through indirect taxation, reported a national daily. The IMF wants Pakistan to cancel certain schedules and exemptions related to GST, including removal of the Fifth Schedule and restricting exemptions under the Sixth Schedule to only residential property transactions. IMF wants all goods to be charged a standard GST rate, except for essential items like food staples, education, and health goods which could be taxed at 10 percent. The lender wants reduced rates under the Eighth Schedule canceled. It wants the government to end compliance-related tax policies such as minimum taxes and surcharges. The IMF has advised removing zero ratings under the Fifth Schedule which would affect items exclusive to diplomats, diplomatic missions, and certain organizations, among others. Similarly, they propose restricting exemptions under the Sixth Schedule to specific items, including imported vegetables, pulses, and certain medical equipment. Other recommendations also target the Eighth Schedule, suggesting changes to items such as natural gas, phosphoric acid, and fertilizers. In short, the IMF’s proposals aim to streamline GST rates to increase revenue while minimizing distortions in the tax system. The underlined changes could have significant implications for various sectors and consumer prices.