The federal government has decided to withdraw tax exemptions on herbal and homeopathic medicines and impose an 18 percent sales tax on these products.
The 18 percent sales tax will apply to herbal and homeopathic medicines, including those for cough, cold, and flu, as well as herbal supplements, serums, creams, potions, jams, and saffron. This tax is expected to be enforced through the 8th schedule of the Sales Tax Act.
The International Monetary Fund wants Pakistan to implement an 18 percent GST on food, medicine, petroleum products, and stationery. This was first recommended when the lender issued its report in February 2024 with recommendations for the new federal budget.
The IMF wants Pakistan to cancel certain schedules and exemptions related to GST, including removal of the Fifth Schedule and restricting exemptions under the Sixth Schedule to only residential property transactions. IMF wants all goods to be charged a standard GST rate, except for essential items like food staples, education, and health goods which could be taxed at 10 percent.
The IMF advised removing zero ratings under the Fifth Schedule which would affect items exclusive to diplomats, diplomatic missions, and certain organizations, among others. Similarly, they propose restricting exemptions under the Sixth Schedule to specific items, including imported vegetables, pulses, and certain medical equipment.
Other recommendations also target the Eighth Schedule, suggesting changes to items such as natural gas, phosphoric acid, and fertilizers.
The underlined changes will have significant implications for various sectors and consumer prices.
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