The International Monetary Fund (IMF) wants the Federal Board of Revenue (FBR) to charge an 18 percent GST on goods such as unprocessed food, stationery, medications, and petroleum products in order to enhance tax revenue by Rs. 1.3 trillion.
However, the IMF has not assessed the potential impact on inflation if such a large increase in GST is enforced through indirect taxation, according to a national daily.
The IMF wants Pakistan to abolish some GST schedules and exemptions, such as removing the Fifth Schedule and limiting Sixth Schedule exemptions to residential property transactions.
The IMF wants all goods to be paid a standard GST rate, except for vital categories like food staples, education, and health supplies, which might be taxed at 10%.
The lender wishes to terminate the reduced rates under the Eighth Schedule. It urges the government to eliminate compliance-related tax measures including minimum taxes and surcharges.
The IMF has suggested removing zero ratings from the Fifth Schedule, which would affect products only available to diplomats, diplomatic posts, and select organisations, among others.
Similarly, they suggest limiting exemptions under the Sixth Schedule to certain products such as imported vegetables, pulses, and certain medical devices.
Other recommendations focus on the Eighth Schedule, including adjustments to natural gas, phosphoric acid, and fertilisers.
In brief, the IMF’s proposals seek to streamline GST rates in order to enhance revenue while reducing tax system distortions. The aforementioned changes could have a considerable impact on many sectors and consumer costs.
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