IMF Proposes Increasing GST to 19%
IMF Budget Presented The International Monetary Fund IMF has proposed a major increase in Pakistan’s General Sales Tax GST rate in the upcoming federal budget for 2026-2027. According to reports the IMF wants the government to increase the standard GST rate by 100 basis points from 18 percent to 19 percent to increase the collection of national taxes so that the public does not have to face inflation.
FBR Faces Rs. 190 Billion Revenue Shortfall in May 2026 as Tax Collection
This proposal to the IMF has created an alert of severe inflation within the Revenue Division. The public is worried. The IMF believes that imposing additional taxes on food items will have a further negative impact on the public in terms of inflation. The Pakistani public is already very worried about rising prices. Heavy aid to ordinary citizens may increase significantly and the negative effects may increase slightly.
آئی ایم ایف نے پاکستان کے آئندہ وفاقی بجٹ 2026-27 میں جنرل سیلز ٹیکس (GST) کی شرح 18 فیصد سے بڑھا کر 19 فیصد کرنے کی تجویز دی ہے۔ رپورٹس کے مطابق اس اضافے سے حکومت کو تقریباً 250 سے 300 ارب روپے اضافی ریونیو حاصل ہو سکتا ہے۔ تاہم اس تجویز نے عوام اور حکومتی حلقوں میں تشویش پیدا کر دی ہے کیونکہ پہلے ہی مہنگائی کی وجہ سے عام شہری شدید مشکلات کا شکار ہیں۔ ماہرین کا کہنا ہے کہ اگر جی ایس ٹی میں اضافہ کیا گیا تو روزمرہ استعمال کی اشیاء، ایندھن، ٹرانسپورٹ اور دیگر ضروری خدمات مزید مہنگی ہو سکتی ہیں۔
دوسری جانب ایف بی آر کو مئی 2026 میں تقریباً 190 ارب روپے کے ٹیکس شارٹ فال کا سامنا کرنا پڑا جس کے بعد حکومت پر نئے ٹیکس اقدامات متعارف کروانے کا دباؤ بڑھ گیا ہے۔ آئی ایم ایف نے ہائبرڈ گاڑیوں پر رعایتی ٹیکس ختم کرنے اور چھوٹے تاجروں کے لیے فکسڈ ٹیکس اسکیم متعارف کروانے کی بھی سفارش کی ہے۔ اگر یہ تجاویز منظور ہو جاتی ہیں تو اس کے اثرات کاروباری طبقے، تنخواہ دار افراد اور عام عوام سب پر پڑ سکتے ہیں جبکہ لوگ اب وفاقی بجٹ 2026-27 کے حتمی فیصلوں کا انتظار کر رہے ہیں۔
IMF Proposal to Increase GST
Under the IMF recommendation, the GST rate would rise to 19 percent across various goods and services. If approved, the increase is expected to generate an additional Rs. 250 billion to Rs. 300 billion in tax revenue for the government.
Pakistan is currently facing economic challenges including a budget deficit, rising debt obligations, and pressure to improve revenue collection. The IMF believes that increasing GST could help strengthen the country’s financial position and support economic reforms.
However, critics argue that indirect taxes like GST affect the common public the most because they increase the prices of daily-use items fuel transport and other essential services.
Revenue Division Opposes the Move
The Revenue Division has reportedly expressed strong reservations regarding the proposed tax hike. Officials fear that another increase in GST could worsen inflation at a time when people are already facing economic hardship.
Experts believe that higher GST rates may reduce consumer purchasing power and increase the overall cost of living. Business communities have also warned that additional taxation may slow down market activity and negatively affect small businesses.
FBR Revenue Collection Challenges
The Federal Board of Revenue (FBR) is expected to reach nearly Rs. 13 trillion in tax collection during the current fiscal year. Despite this progress, authorities remain uncertain whether the full annual target can be achieved.
Recently, the FBR also faced a significant tax collection shortfall of around Rs. 190 billion in May 2026, which increased pressure on policymakers to explore new revenue sources before finalizing the federal budget.
IMF Recommendations for Hybrid Vehicles
Apart from the GST increase, the IMF has also recommended ending concessional tax treatment for hybrid vehicles. Currently, hybrid vehicles are subject to a reduced GST rate of 8.5 percent under an incentive policy designed to promote environmentally friendly transportation.
The IMF now wants the government to increase the GST on hybrid vehicles to the standard 18 percent rate because the current incentive regime is scheduled to expire in 2026.
If implemented, hybrid vehicles may become more expensive in Pakistan, affecting consumers planning to purchase fuel-efficient cars.
Punjab Govt Approves Summer Camps for Public & Private Schools
Simplified Tax Scheme for Retailers
For the retail sector, the IMF has supported a simplified fixed-tax scheme aimed at small retailers with annual turnover up to Rs. 200 million.
Under the proposed system:
- Small retailers would pay a fixed tax of Rs. 25,000
- Retailers would be exempt from routine tax audits
- Businesses would receive FBR-issued QR code certification
The government believes this scheme could help improve tax documentation while making compliance easier for small businesses.
Focus on Salaried Class Tax Reforms
The IMF has also urged Pakistan to explore alternative revenue measures to address issues in the tax structure for salaried individuals. Discussions are ongoing regarding possible adjustments to income tax slabs and other taxation policies affecting employees.
Officials say that last-minute changes to the federal budget are still possible before the final approval and presentation in parliament.
FAQs
1. Why does the IMF want Pakistan to increase GST to 19%?
The IMF believes that increasing the General Sales Tax (GST) will help Pakistan generate additional revenue and reduce the budget deficit. The proposed increase could add around Rs. 250–300 billion to government revenue.
2. Will the GST increase affect common people?
Yes, if implemented, the GST increase may raise the prices of many daily-use goods and services. This could increase inflation and place additional financial pressure on the public.
3. What changes are being proposed for hybrid vehicles?
The IMF has recommended ending the reduced GST rate for hybrid vehicles. The current concessional rate of 8.5% may be increased to the standard 18% GST rate after 2026.
4. What is the new fixed-tax scheme for retailers?
Under the proposed scheme, small retailers with annual turnover up to Rs. 200 million would pay a fixed tax of Rs. 25,000 and would be exempt from regular tax audits. They would also receive FBR-issued QR code certification.
5. Has the government officially approved the GST increase?
No, the proposal is still under discussion. Final decisions will be made during the approval of the Federal Budget 2026-27, and last-minute changes are still possible.
Punjab Approves Summer Camps for Public and Private Schools
Final Words
The IMF’s proposal to increase GST in Pakistan to 19 percent has put Pakistan on high alert. The public is very worried about this federal budget. Although the aim of this move is to strengthen the government and improve economic stability, concerns remain about rising inflation and the impact on ordinary citizens. Businesses retailers and salaried individuals are all expected to feel the effects if the proposal is approved. As the federal budget 2026-2027 approaches people across the country are waiting to see what final decisions the government will take regarding taxes and economic reforms and whether it will have a negative impact on the public.