The federal government is likely to abolish the exemptions on sales tax on petroleum products and tax for the agricultural sector in a bid to increase the country’s tax revenue.
According to the contents of the Letter of Intent (LoI), sent by Pakistan to the International Monetary Fund (IMF), the government would impose a 10.5 percent sales tax on petroleum products from October.
The prices of petroleum products will go up by Rs. 20 per liter if the sales tax is imposed.
The LoI further states that the government would also abolish the sales tax exemption given to the agricultural sector if the tax collection remains lesser than the set target. In this scenario, sales tax exemption on agricultural products including pesticides, fertilizers, and tractors would be abolished.
If tax exemption for the agricultural sector is abolished, it could provide the national exchequer with revenue of Rs. 150 billion.
The taxes on sugar-sweetened beverages are also under consideration, which could generate revenue of Rs. 60 billion.
As per LoI, if the tax collection targets are not achieved in the first quarter of the fiscal year 2023, the said measures will be taken from October.
