Contingency revenue steps agreed with IMF: Govt to impose 10.5pc GST on POL products in first phase

ISLAMABAD: The government under the contingency revenue measures agreed with the International Monetary Fund (IMF) would impose 10.5 percent GST on petroleum products initially and would take it to 17 percent if monthly revenue collection data showed signs of underperforming against the first quarter of fiscal year 2023 and subsequent targets.

Sources on condition of anonymity said that if monthly revenue data showed signs of underperforming against the Q1 fiscal year 2023 and subsequent targets, the government will take immediate action to raise additional revenue, as necessary, through; (1) immediately setting the GST on fuel products to 10.5 percent, before eventually setting it at the standard rate of 17 percent later in fiscal year 2023; (2) removing agricultural GST exemptions on pesticides, fertilizers, and tractors amounting to (over Rs150 billion), sugary drinks (Rs 60 billion), and other unwarranted exemptions such as those benefitting exporters; and/or (3) increasing Federal Excise Duty on Tier I and Tier II cigarettes by at least 2 rupees per stick with immediate effect.

The government has unequivocally recommitted to not launch any future tax amnesties or grant any further tax exemptions/concessions through Statutory Regulatory Orders (SR0s) without prior National Assembly approval. In addition, the government promised to work towards the harmonization of the service sales tax across provincial jurisdictions, with support from the World Bank.

Pakistan has met last prior action, says IMF after govt increases petroleum levy

The Fund was also assured that the PDL on diesel will rise by Rs 5/liter per month from July 1 until it reaches PRs 50/liter on April 1.

The PDL will remain at Rs 50/liter for both products until the end of fiscal year 2023, resulting in average PDL rates for petrol and diesel of Rs 40/liter and PRs 32/liter for petrol and diesel, respectively, over FY23, and an increase in customs duty on crude from the current 2.5 percent to 5 percent with a commitment not to reduce this rate below 5 percent during fiscal year 2023. To shore up revenue through an assortment of 17 measures to add PRs 608 billion in revenue, with the most notable being: (1) a Federal Excise Duty increase of PR1/stick on Tier I and Tier II cigarettes (PRs50 billion); (2) Customs Duty increases on various products (Rs 59 billion), including an increase from 2.5 to 5 percent for crude oil; (3) direct taxes on high incomes (Rs 256 billion), including most notably a super tax of between 1 and 4 percent for individuals earning over Rs150 million, (Rs120 billion) and of 10 percent on high earnings from certain sectors (Rs 80 billion), as well as an increase in the taxation of banks from 39 to 42 percent (Rs 45 billion); and (4) five different direct taxes on immoveable property targeting deemed income and capital gains (Rs118 billion).

Copyright Business Recorder, 2022