IMF recommends Pakistan to jack up GST on medicines, petroleum to 18pc

The International Monetary Fund (IMF) has recommended the government of Pakistan to implement 18 per cent General Sales Tax (GST) on food, medicine, petroleum products, and stationery.

According to details, the IMF experts have recommended the newly-elected government of Pakistan to end sales tax relaxation in its report dispatched to Islamabad.

The IMF team visited Pakistan in December 2023, and dispatched its report in February 2024 with a set of recommendations ahead of the FY2024-25 budget.

The IMF has recommended bringing several dozen items under the standard rate of 18% GST, including unprocessed food, stationery, medicine, POL products and others.

The IMF estimated that rationalizing GST rates could generate 1.3 percent of Gross Domestic Product (GDP) revenue, which equates to Rs1,300 billion in national exchequer.

Read more: Pakistan to seek loan package plus climate finance from IMF

Overall, the IMF has called for the removal of all distortionary tax policy changes related to compliance, including the abolition of minimum taxes and additional taxes, as well as the abolition of the Ninth and Tenth Schedules.

Last month it emerged that Pakistan would seek a loan package from the International Monetary Fund plus 1.5 billion dollars in climate finance.

The country is exploring the possibility of increasing the program to $7.5-8 billion, reportedly seeking the addition of climate finance in the next bailout package, sources said.