IMF wants Pakistan to impose 18% GST on several items

The International Monetary Fund (IMF) has proposed Pakistan to increase general sales tax (GST) on dozens of items, including unprocessed food, petroleum products, medicines, stationary items and others, from 17 percent to 18 percent, sources said on Monday.

According to the sources, the global loan lender estimated that the measures recommended to Pakistani authorities will assist the country in increasing revenue to 1.3% of Gross Domestic Product (GDP), equivalent to Rs1300 billion. 

However, the US-based lender has not estimated the burden of indirect taxation would raise inflation in the cash-strapped country. 

The IMF, in its recommendations, also highlighted the need to eliminate the fifth schedule, remove exemptions from the sixth schedule, and remove low-rate sales tax from the eighth schedule.

The lender suggested eliminating all tax exemptions under the Fifth Schedule except for exported goods and ending the exemptions under the Sixth Schedule except supply of residential property.

It also asked to bring all other goods to the standard rate of GST. Only a small number of items, such as food staples, education, and some health items to be taxed at a single reduced rate of 10%, as per recommendations.