GST in Pakistan increased from 17 to 18 percent: Govt

GST in Pakistan has increased from 17 to 18 percent at its regular rate.

ISLAMABAD: President Dr. Arif Alvi declined to publish an ordinance for releasing a mini-budget in accordance with the requirements of the International Monetary Fund (IMF), thus the government imposed taxation measures of Rs115 billion through a notification issued by the Federal Board of Revenue (FBR).

Starting on February 15, 2023, the general sales tax (GST) rate will increase from 17 to 18 percent. Cigarettes now carry a higher Federal Excise Duty (FED).

After receiving approval from the federal cabinet for a mini-budget in the form of the Tax Laws Amendment Bill 2023, the FBR issued the Statutory Regulatory Order (SRO) to raise the GST rate from the current 17 percent to 18 percent and increase the Federal Excise Duty (FED) on cigarettes in order to raise an additional Rs115 billion out of the Rs170 billion the government agreed to as part of the IMF’s conditions.

To be adopted through the Tax Amendment Bill 2023, which will be submitted in the parliament on Wednesday, the government also approved the GST on hundreds of high-end luxury items at a rate of 25%, according to top official sources (today).

In an effort to increase the cost of imports, the FBR increased the GST rate on all luxury goods that were previously prohibited by the Ministry of Commerce.

On a few domestically produced luxury items, an increased GST charge has also been proposed.

Due to strong opposition from the IMF, the government has given up on imposing the Flood Levy.

Despite choosing this strategy to immediately begin collecting Rs115 billion in taxes beginning on February 15, 2023, with the approval of the federal cabinet, the IMF’s staff-level agreement may be postponed because the government has scheduled today’s National Assembly session for 3:30 pm and the Senate meeting for 4:30 pm to introduce the Tax Amendment Bill 2023.

At 9.25 p.m., Finance Minister Ishaq Dar was supposed to make a televised statement outlining the key aspects of the mini-budget, however, due to a change in plans, his scheduled press conference was postponed at the last minute.

Having attended the federal cabinet meeting, Dar informed two reporters outside the Ministry of Finance on Tuesday night that he had asked Alvi to publish an ordinance but that Alvi had declined.

He recommended to the government that the tax levy law be introduced.

Dar advised the president that there were taxation-related concerns and that the government couldn’t wait for another 8 to 10 days because some actions would have a financial impact, but the president refused to consider the proposal.

According to him, the government took the other course and ordered the FBR to issue an SRO increasing the GST rate from 17 to 18 percent while increasing the FED on cigarettes.

He steadfastly declined to reveal the precise rate and counseled patience until the release of a formal notification to this effect.

As part of the Tax Amendment Bill 2023, which will be introduced in Parliament, the FED on beverages, sugary drinks, and juices would be raised from 13 to 20 percent (today).

The staff-level agreement was expected to be inked this week, the minister said. Earlier, according to a statement from the President’s Secretariat, President Dr. Arif Alvi was summoned by Federal Minister for Finance and Revenue Senator Ishaq Dar, who informed him of the progress in negotiations with the IMF and that all procedures had been agreed upon.

The government’s efforts to reach a deal with the IMF were commended by the president, who also reaffirmed Pakistan’s commitment to upholding its obligations.

The minister notified the president that the administration intended to enact an ordinance to impose higher taxes in order to increase income.

The president suggested that in order to ensure that the bill was passed without delay, it would be more appropriate to take the parliament under confidence on this crucial issue.

Following this declaration, the federal cabinet met under the leadership of Prime Minister Shehbaz Sharif, and it was decided to impose taxes totaling Rs115–116 billion through an SRO by the FBR, with the remaining taxation measures totaling Rs55 billion to be introduced through a money bill before the parliament.

Several sources claim that the government will make a last-ditch effort to persuade the IMF to allow it to present the bill to the parliament and will ask the mission chief of the Fund to reach a staff-level agreement with the commitment that the parliament would approve the proposal until the IMF’s executive board meeting.

A representative of a sizable global tobacco corporation claimed that the proposed hike in excise rates appeared to be an intentional effort to undermine the legal industry and give illegal players the upper hand in the cigarette market.

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