Despite a categorical denial on the floor of National Assembly, the government is said to have been secretly pushing forward its Plan 'B', mainly based on implementing most of the controversial provisions of 'reform general sales tax' (RGST) through notifications.
Sources said that Plan 'B' of bringing in some major changes in the existing GST framework was discussed at a meeting, with Prime Minister Yousuf Raza Gilani in the chair. The meeting was clearly conveyed that due to tough resistance from the opposition and some of the allied parties of the government it was getting difficult to bring in RGST for reforms in existing fiscal framework, and it was being felt, very seriously, to introduce some provisions of RGST in the next couple of weeks, through notifications.
Exactly on the same day when Prime Minister Yousuf Raza Gilani chaired an 'important' meeting to discuss RGST stand-off, and finally decided to push forward Plan 'B' for setting in the controversial RGST, Hina Rabani Khar gave a firm assurance to the parliament that the government was never ever considering the option of implementing RGST through notification.
However, most participants of the meeting, held the same day, proposed implementation of RGST through notifications. The notifications, to be issued by the Federal Board of Revenue (FBR), would finish exemptions being enjoyed by some of the key sectors like textile, fertilisers pharmaceutical sectors. There are strong feelings among the policy-makers that exemptions available under existing GST to selected sectors of the economy had caused disparity among taxpayers, besides undermining government efforts to bring new taxpayers in the net to widen its base and push upward the tax-to-GDP ratio which in Pakistan at the moment is the lowest in the region.
Implementation of some key provisions of RGST, if not in totality, through a notification is possible before the International Monetary Fund's board meeting scheduled for December 29. Pakistan's request to the Fund for extension in its standby arrangement (SBA) to qualify for remaining two instalment is likely to be presented to the Fund's board on December 29.
The proposal of bringing in some key provisions of RGST through a notification is meant to give IMF a strong message to support Pakistan's case at the upcoming board meeting for grant of extension. Pakistan's request for extension in SBA for 9 months is already pending with IMF for a final word.
The government's economic team, advocating implementation of Plan 'B' to avoid more criticism on RGST, is under pressure. There are strong indications from some of the top level government officials, working on Plan 'B' to get RGST implemented through a notification, that the government could lead to serious financial and administrative difficulties in the case of failing to have RGST implemented.
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