The International Monetary Fund (IMF) has suggested that the Pakistani government include a number of items, such as unprocessed food, stationery, medications, POL products, and others, under the normal General Sales Tax rate of 18%.
International Monetary Fund (IMF) has calculated that the reduction of GST rates might result in 1.3% GDP, or Rs1,300 billion, being collected for the national coffers.
The IMF hasn’t yet determined how much this indirect taxation would contribute to inflation in the upcoming months, though.
The Fifth Schedule should be repealed, the Sixth Schedule’s exclusions should be removed, and the Eighth Schedule of Sales Tax’s reduced tax rate should be removed, according to the IMF’s recommendations.
The lender is requesting that all zero ratings under the Fifth Schedule be removed, with the exception of exported products, that the Sixth Schedule’s exemptions be limited to the supply of residential property exclusively (apart from the first sale), and that all other commodities be subject to the regular GST rate.
Additionally, it has requested that the Eighth Schedule’s lower rates be eliminated and that all goods be subject to the standard GST rate, with the exception of a select few necessities like food staples and requirements for health and education, which will only be subject to a single, 10% reduced rate of taxation.
The study said, “In total, the IMF has asked removing all compliance related distortionary tax policy changes, which include removing the Ninth and Tenth Schedules as well as the minimum taxes and surtaxes.”
The IMF has suggested doing away with all zero ratings under the Fifth Schedule, with the exception of exports, in order to rationalize the GST. It requested that all other commodities be subject to the current normal GST rate of 18%.
Supply to diplomats, diplomatic missions, privileged individuals, and privileged organizations may be included in the Fifth Schedule’s zero-rated items. These items fall under a variety of acts, orders, rules, regulations, and agreements passed by the parliament or issued or agreed upon by the Government of Pakistan. Other items that may be included in this category include supplies of raw materials, components, and goods for further manufacturing of goods in the Export Processing Zones, supplies made to exporters under the Duty and Tax Remission Rules subject to the observance of the procedures, restrictions, and conditions prescribed therein, imports or supplies made to the Gwadar Special Economic Zone—aside from vehicles subject to the Pakistan Customs Tariff—and imports or supplies made by, for, or to a qualified investment, among other things.
Additionally, the IMF has suggested that the Sixth Schedule’s exemptions be limited to deliveries of residential property (apart from the first sale) and that all other commodities be subject to the ordinary GST rate.
The Sixth Schedule, which is under consideration, may include edible vegetables imported from Afghanistan including roots and tubers, ware potato and onions, fresh, frozen or otherwise preserved, pulses, fruit imported from Afghanistan excluding apples, red chillies excluding those sold under brand names and trademarks, ginger excluding those sold under brand names and trademarks, turmeric excluding those sold under brand names and trademarks, rice, wheat, wheat and meslin flour, Holy Quran, complete or in parts, with or without translation, Quranic verses recorded on any analogue or digital media, other holy books, newsprint and books but excluding brochures, leaflets and directories, currency notes, bank notes, shares, stocks and bonds, monetary gold, empty non-toxic bags for infusion solution, dextrose and saline infusion giving sets, intra-ocular lenses and glucose testing equipment, import of articles of household and personal effects including vehicles and also the goods for donation to projects established in Pakistan imported by any of the rulers of Gulf Sheikhdoms and other items.
Among the many commodities included by the Eighth Schedule of sales tax were natural gas and phosphoric acid that was imported for use as fertilizer.
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