The International Monetary Fund (IMF) has turned down Pakistan’s proposal to abolish General Sales Tax (GST) on electricity bills in an effort to provide relief to consumers.
During ongoing economic review talks, the government also presented proposals to ease the tax burden on the real estate, property, beverage, and tobacco sectors.
Sources privy to the development said tax reductions in these sectors may be implemented with the IMF’s approval. Additionally, there are discussions on reducing tax rates for the salaried class in the next budget.
To bridge the revenue gap, the government has outlined a plan to collect Rs 250 billion through various sectors, including retail. Tax collection is expected to be facilitated through trader-friendly schemes, compliance risk management, and administrative measures, with final approval resting with the IMF.
Meanwhile, Pakistan and the IMF are also negotiating strategies to address the mounting circular debt in the energy sector.
However, the IMF has refused to extend the winter relief package for the industrial and agricultural sectors nationwide.
To manage circular debt, Pakistan plans to secure a Rs 1,250 billion loan from commercial banks, with an agreed interest rate of 10.8%. The IMF has also urged the government to implement gas tariffs on captive power plants.
No mini-budget needed to meet tax shortfall
Earlier, the Federal Board of Revenue (FBR) has assured the International Monetary Fund (IMF) that the tax shortfall of Rs 605 billion will be addressed without the need for a mini-budget, as economic review talks between Pakistan and the IMF continue.
According to officials, a plan has been presented to the IMF, under which the shortfall will be met through the settlement of pending tax cases.
The IMF has been informed that the revenue target is expected to be achieved by June; otherwise, expenditure cuts will be made to compensate for any remaining deficit.
The FBR is hopeful of securing Rs 157 billion through the Supreme Court’s upcoming decision on super tax. The apex court is set to hold a crucial hearing on the matter on March 10, with Rs 57 billion expected from the Supreme Court ruling and the remaining Rs 100 billion from the High Court’s verdict.
In addition, the FBR has collected Rs 23 billion under the windfall profit tax imposed through Section 99D and Rs 72 billion from the advance deposit ratio in banks.
