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IMF demands hike in GST, cigarette duty hiked by 1%

Government of Pakistan Introduces New Tax Measures to Appease IMF.

In an effort to revive its bailout program, the Shehbaz Sharif government has introduced new taxation measures worth Rs115 billion, according to a notification issued by the Federal Board of Revenue (FBR).

The government quickly got the money bill approved by the federal cabinet after President Dr Arif Alvi refused to promulgate an ordinance for unveiling a mini-budget.

During the cabinet meeting chaired by PM Shehbaz Sharif, it was decided to impose Rs115-116 billion in taxes through a Statutory Regulatory Order (SRO) by the FBR, while the remaining Rs55 billion would be introduced through a money bill before the Parliament.

The Tax Laws Amendment Bill 2023 was approved by the cabinet, and the FBR issued the SRO to increase the General Sales Tax (GST) rate from the standard 17% to 18% and raise the Federal Excise Duty (FED) on cigarettes to fetch an additional Rs115 billion out of the Rs170 billion agreed to by the government in line with the IMF conditions.

According to sources, the government has also approved the GST on hundreds of high-end luxury items at the rate of 25%, but it will be introduced through the Tax Amendment Bill 2023, which would be laid down in the Parliament on Wednesday.

The FBR has increased the GST rate on all those imported luxury items that were banned by the Ministry of Commerce sometime back in order to make imports more expensive.

The enhanced rate of GST on some locally made luxury goods has also been proposed.

The government has abandoned the imposition of the Flood Levy due to stiff resistance by the Washington-based lender.

The move is seen as an attempt to pacify the International Monetary Fund (IMF), which has been pressuring the government to introduce measures to raise revenue and reduce the budget deficit.

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