ISLAMABAD (Web Desk) – As Pakistan prepares to unveil its federal budget for fiscal year 2026-27, the International Monetary Fund (IMF) has reportedly recommended increasing the standard General Sales Tax (GST) rate from 18% to 19%.
According to media reports, Pakistani authorities have opposed the proposal, warning that a higher GST rate could add to inflationary pressures and increase the financial burden on consumers.
Officials estimate that a one-percentage-point increase in GST could generate between Rs250 billion and Rs300 billion in additional revenue. The IMF is said to have suggested the measure after concerns emerged over Pakistan’s inability to meet its revised tax collection targets for the current fiscal year.
Although the Federal Board of Revenue (FBR) is expected to collect close to Rs13 trillion by the end of the fiscal year, achieving the official target remains uncertain. In light of this performance, the IMF has pushed for stronger revenue-generating measures, including the proposed GST hike.
According to the reports, he IMF expects average inflation to remain around 8.4 percent during the next fiscal year. They added that the lender believes raising GST could help strengthen government revenues amid persistent fiscal challenges.
Officials also claimed that the IMF has urged Pakistan to withdraw preferential tax treatment for hybrid vehicles by increasing the GST rate on such vehicles from 8.5% to the standard 18% rate once the current policy expires in 2026. Talks regarding taxation of electric vehicles (EVs) are still ongoing.
Meanwhile, the IMF has reportedly supported a fixed-tax framework for small retailers. Under the proposed system, retailers with annual sales of up to Rs200 million would pay a fixed tax of Rs25,000 and would generally be exempt from audits. However, the FBR would retain the authority to conduct audits in cases involving significant discrepancies in declared income or assets, while consulting retailer representatives during the process.
Retailers covered under the scheme would also receive FBR-issued QR code certificates.
For salaried individuals, the government is seeking tax relief measures and is currently negotiating with the IMF. However, the lender has reportedly asked Pakistan to identify alternative sources of revenue before agreeing to any concessions.
Discussions have also included the possibility of reducing the Super Tax rate by 1.5% to 2% in the upcoming budget, subject to IMF approval.
Negotiations between Pakistan and the IMF remain ongoing and are expected to continue even after the budget is presented in parliament.