IMF urges 18pc GST on medicines, POL and other items

The International Monetary Fund has demanded of the Pakistan government to implement 18 per cent GST on various items including food, medicine, petroleum products and stationery.

As per details, the International Monetary Fund has recommended the FBR to bring several dozen items under the standard rate of 18 per cent general sales tax, including unprocessed food, stationery, medicine, petroleum products and others.

The Fund  estimated that rationalization of GST rates could generate 1.3 percent of gross domestic product (GDP) revenue, which is equal to Rs1,300 billion in national exchequer.

However, the IMF did not estimate how much the inflation-affected public would suffer in the months and years to come if such a drastic measure of GST was implemented through indirect tax hikes.

The IMF recommendations highlighted abolition of Fifth Schedule, abolition of Sixth Schedule exemptions and abolition of reduced rate of tax under Eighth Schedule of sales tax.

It has decided to end zero-rating of all goods except export goods under the Fifth Schedule. It was demanded that all goods be brought under standard GST rate.

The Fund has also called for the removal of reduced rates under the Eighth Schedule and bringing all goods to standard GST rates. Overall, the financial agency 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.