General Sales Tax Rate Likely to Go Up By 1% in New Budget on IMF Demand

The government is planning to raise the General Sales Tax (GST) rate by 1 percent in the upcoming 2024-25 budget to woo the International Monetary Fund (IMF).

If implemented, the GST rate would help generate Rs. 180 billion in tax revenue. There is also a proposal to standardize the GST rate across all sectors, reported TheNews.

The IMF has also demanded to increase the Personal Income Tax (PIT) rate to 40 percent, however, the plan to tax pensioners pocketing over Rs. 100,000 has been dropped for now.

The IMF has shared its draft report with Pakistani officials, urging strict measures in the budget, including raising the GST rate and increasing taxes on higher-income earners.

The IMF also wants provinces to align agricultural income tax with federal tax rates and remove special tax regimes for SMEs and the construction sector.

The lender has so far proposed raising the standard GST rate from 18 percent to 19 percent, reducing the PIT slabs for salaried individuals from seven to four, with a 40 percent tax rate for incomes above Rs. 6 million, eliminating zero-rating (Fifth Schedule) except for exports, limiting exemptions (Sixth Schedule) to residential property, removing reduced rates under the Eighth Schedule, taxing most goods at the standard rate (only essentials at 10 percent), and repealing discretionary tax incentives.