IMF suggests Pakistan to increase 18% GST on fuel and medications

The government of Pakistan has been advised by the International Monetary Fund (IMF) to impose an 18% General Sales Tax (GST) on food, medicine, petroleum items, and stationery. Details indicate that in their report sent to Islamabad, the IMF specialists advised Pakistan’s recently elected government to stop easing sales tax.

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Following its December 2023 visit to Pakistan, the IMF team sent out a report in February 2024 that included a number of suggestions ahead of the FY2024–2025 budget. The IMF has suggested placing a number of goods, such as unprocessed food, stationery, medications, POL products, and others, under the usual 18% GST rate.

According to IMF estimates, the national exchequer might receive Rs1,300 billion from the rationalization of GST rates, or 1.3 percent of GDP.

All things considered, the IMF has demanded the elimination of any tax policy changes that may cause distortions in relation to compliance, such as the elimination of additional taxes and minimum taxes, as well as the removal of the Ninth and Tenth Schedules.

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It was revealed last month that Pakistan would ask the International Monetary Fund for a credit package in addition to $1.5 billion in climate money. According to reports, the nation is looking into expanding the program to $7.5-8 billion in order to include climate funding in the upcoming bailout package.