Pakistan Budget 2026-27: IMF Calls for GST Increase to 19%

ISLAMABAD: Before the 2026–27 federal budget, the International Monetary Fund (IMF) has asked Pakistan to increase the standard General Sales Tax (GST) rate by 1%, from 18% to 19%.

However, Pakistani authorities are strongly opposing the proposal, saying it would increase inflation even more.

According to estimates, if the IMF’s suggestion is accepted, it could generate an extra Rs250 to Rs300 billion in revenue.

The IMF made this demand after seeing a shortfall in Pakistan’s tax collection target for the current fiscal year. Officials say the Federal Board of Revenue (FBR) may reach around Rs13 trillion, but it is still unlikely to fully meet the target.

Because of weak tax performance, the IMF has suggested increasing the GST rate.

Officials also said that a 1% GST increase could raise prices, with inflation expected to average around 8.4% next year.

The IMF has also proposed raising GST on hybrid vehicles from 8.5% to 18% in the upcoming budget, while discussions on electric vehicles are still ongoing.

For retailers, the IMF has suggested a fixed tax system where those earning up to Rs200 million turnover would pay Rs25,000 and be exempt from audits, unless major issues are found. Retailers would also receive QR-based tax certificates from the FBR.

Talks are also ongoing about possible relief for salaried people, but the IMF is still pushing for other revenue options.

The IMF may also agree to reduce the Super Tax by 1.5% to 2% in the next budget.

Overall, tough negotiations are still ongoing between Pakistan and the IMF, and changes may be made even after the budget is presented in parliament.

FBR Chairman Rashid Mahmood Langrial, however, denied that any such GST increase proposal is currently under consideration.