General Sales Tax Rate Likely to Increase by 1% in New Budget on IMF Demand

General Sales Tax

The government is considering raising the General Sales Tax (GST) rate by 1 percent in the upcoming 2024-25 budget to meet the demands of the International Monetary Fund (IMF).

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

The IMF has also requested an increase in the Personal Income Tax (PIT) rate to 40 percent. However, the plan to tax pensioners receiving 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.

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

The IMF has 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.