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Saturday, April 13, 2024

IMF Demands 18% GST on Petroleum Products

The IMF pressures Pakistan for tax reforms, advocating for an 18% GST on petroleum and various fiscal policy changes to address economic challenges and boost revenue.

The International Monetary Fund (IMF) has urged Pakistan to enforce an 18 percent General Sales Tax (GST) on petrol and end sales tax exemptions on all items, including petroleum. This recommendation comes as part of the IMF’s efforts to enhance tax revenue in Pakistan.

Additionally, the IMF has proposed levying a Rs 60 levy on petroleum products to boost tax income. The rationalization of GST rates, according to IMF estimates, could generate revenue equivalent to 1.3 percent of Pakistan’s Gross Domestic Product (GDP), amounting to Rs1,300 billion.

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In response to IMF demands, the Pakistani government is contemplating imposing a GST on petroleum or increasing the current levy rate. There is a proposal to raise the levy on petroleum from Rs 60 to Rs 100 per liter in the upcoming fiscal year’s budget. Currently, a levy of Rs 60 per liter is imposed on petrol and diesel, generating an estimated annual revenue of Rs 950 billion. The government had initially proposed an 18% GST on petroleum products in the budget.

The IMF has recommended various tax policy changes to Pakistan, including equalizing the Federal Excise Duty (FED) on locally manufactured cigarettes, imposing the Petroleum Development Levy (PDL) on environmentally polluting machinery inputs, and progressively increasing excises on domestically produced cars and luxury items. The IMF also advocates for taxing e-cigarettes similarly to tobacco. These measures aim to enhance revenue collection and address fiscal challenges faced by Pakistan.