IMF Blocks Tax Relief on Pencils and Notebooks

The International Monetary Fund (IMF) did not allow the government to reduce the General Sales Tax (GST) on stationery items in the FY2026-27 budget, officials from the Ministry of Finance informed the Senate Standing Committee on Finance on Tuesday.

During discussions on the Finance Bill 2026-27, Najeeb Memoon, Director General of the Tax Policy Office, told lawmakers that the IMF had opposed providing sales tax relief on stationery products despite requests from manufacturers and businesses.

Representatives of the stationery industry urged the government to reconsider its stance, arguing that prices of basic school supplies have risen sharply. Industry representatives told the committee that the price of a pencil that previously sold for Rs. 10 has increased to around Rs. 20.

The current General Sales Tax (GST) on stationery items stands at 10%.

Representatives of the Federation of Chambers of Commerce and Industry’s Stationery and Taxation Committee also urged lawmakers to review the proposal and exempt educational materials from taxation.

Speaking before the committee, Riyaz-ud-Din called for tax exemptions on items used for educational purposes, including sharpeners, exercise books, glue, writing pads and colour pencils. He said the government had earlier decided against imposing the full 18 percent sales tax on stationery and argued that such a levy would be unjustified given its likely impact on education costs.

The Senate panel also reviewed the government’s tariff rationalization plan, which is expected to reduce customs and regulatory duties and result in an estimated revenue loss of Rs. 143.4 billion.

Commerce Secretary Jawad Paul informed lawmakers that the government plans to cap customs duties at 50 percent and gradually reduce additional customs duties, while regulatory duties above 20 percent would be lowered to that level. He said export-oriented and strategic sectors would remain protected from some of the reductions.

Meanwhile, exporters expressed concerns over the proposed transition from the Final Tax Regime to the Normal Tax Regime, warning that delayed tax refunds and increased compliance requirements could discourage new businesses from entering export markets.

Finance Minister Muhammad Aurangzeb told the committee that extensive consultations were held during budget preparations and highlighted that the government had already abolished super tax for exporters. He added that exporters continue to receive financing at a concessional rate of 4.5 percent despite the policy rate standing at 11.5 percent.

The committee also discussed fixed charges on electricity bills, with some lawmakers calling for their abolition, arguing that the charges have become an excessive burden for low consumption households.