The International Monetary Fund (IMF) has proposed a huge increase in the standard General Sales Tax (GST) rate by 100 basis points to 19 percent in the upcoming federal budget for 2026-27.
The Revenue Division is strongly opposing the move as even higher indirect taxation could intensify inflation on the public.
If implemented, the proposed hike is estimated to generate an additional Rs. 250–300 billion in revenue.
While the Federal Board of Revenue (FBR) is expected to approach the Rs. 13 trillion collection mark, achieving the full target remains uncertain.
Alongside the GST proposal, the IMF has recommended ending concessional tax treatment for hybrid vehicles by raising their GST from 8.5 percent to the standard 18 percent, as the current incentive regime is set to expire in 2026.
For the retail sector, the IMF has backed a simplified fixed-tax scheme for small retailers with annual turnover up to Rs. 200 million, under which they would pay Rs. 25,000 and be exempted from routine audits.
Retailers under this system would also receive FBR-issued QR code certification.
IMF has also urged Pakistan to explore alternative revenue measures to address gaps in the salaried class tax structure.
Last-minute adjustments to the budget are still possible before final approval.
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