Shafaqna Pakistan: The International Monetary Fund (IMF) has reportedly urged Pakistan to increase the standard General Sales Tax (GST) rate by 1 percentage point, raising it from 18% to 19% in the upcoming 2026–27 budget.
However, Pakistani authorities are strongly opposing the proposal, arguing that such a move would further intensify inflationary pressures. Preliminary estimates suggest that if the IMF’s recommendation is accepted, it could generate an additional Rs250–300 billion in revenue.
The proposal comes in the wake of a shortfall in revised tax collection targets for the current fiscal year. Although the Federal Board of Revenue (FBR) may approach the Rs13 trillion mark, officials believe it will still fall short of the set target.
Given this underperformance, the IMF has pushed for the GST increase, with sources noting that a 1% rise could yield Rs250–300 billion in additional revenue. The IMF has also projected that consumer price index (CPI)-based inflation may average around 8.4% in the coming financial year.
The IMF mission failed to present innovative ideas to expand the narrow tax base and had exhausted all options, so it came up with this new proposal to raise the GST rate which was so far resisted by the Pakistani authorities, said sources.
The IMF also asked Pakistan to raise GST from 8.5pc to standard rate of 18pc for hybrid vehicles in the upcoming budget, as its existing policy was going to expire in 2026. On Electric Vehicles (EV), discussions were continuing between the two sides.
The IMF has endorsed fixed scheme for retailers in the coming budget whereby retailers having turnover up to Rs200 million will have to pay a fixed tax of Rs25,000 and they would be exempted from audit. If the FBR finds out any major discrepancy in income or assets, then the FBR will go for an audit but it will also take the retailers’ representatives into confidence. The FBR’s QR code certificate will be handed over to retailers. For the salaried class, the government is negotiating with the IMF team for granting some relaxations but, so far, the Fund is asking for alternative revenue measures to bridge this gap. The IMF may grant its assent for reduction in the rate of Super Tax by 1.5pc to 2pc in the coming budget for 2026-27.
Overall, tough negotiations are underway with the IMF, which will continue even after presentation of the budget in parliament. There will be last minute changes in the presented budget and approved budget for 2026-27 from parliament. When contacted, Chairman FBR Rashid Mahmood Langrial denied it and said that no such proposal was under consideration.
Source: The News
