- BY: MUHAMMAD UMAIR ZEB (FINANCE AND TAX ANALYST)
PESHAWAR: The standard rate of General Sales Tax (GST) has been jacked up from 17 to 18 percent. The government slapped Rs115 billion in taxation measures through a notification issued by the Federal Board of Revenue (FBR).
The government was forced to head to parliament after President Arif Alvi “advised” the finance minister to take parliament into confidence over the Rs170 billion in new taxes that are being levied.
Following the cabinet meeting, in a late-night development, the Federal Board of Revenue (FBR) issued SRO178 to enhance a federal excise duty on locally manufactured cigarettes which would generate up to Rs60bn in taxes on tobacco products and the Finance Division issued a notification increasing the general sales tax by one percent to 18pc. These measures would raise Rs115bn.
Since the government had agreed to a target of Rs170bn in new taxes with the IMF, the remaining amount of Rs55bn would be collected through an increase in excise duty on airline tickets, and sugary drinks and an increase in withholding tax rates after the Finance (Supplementary) Bill 2023 is approved by parliament today.
– BREAKDOWN OF TAXES
The government agreed with the IMF to raise Rs170bn through taxes. Of this,
• Rs60bn will be generated by increasing federal excise duty on locally manufactured cigarettes
• Rs55bn by increasing the general sales tax to 18pc%
• Rs55bn by increasing excise duty on airline tickets, and sugary drinks and raising withholding tax rates (following the bill’s approval by parliament)
The government is in a race against time to implement the tax measures and reach an agreement with the IMF as the country’s reserves have depleted to a critically low level of $2.9bn, which experts believe is enough for only 16 or 17 days of imports.
The agreement with the IMF on the completion of the ninth review of a $7bn loan program would not only lead to a disbursement of $1.2bn but also unlock inflows from friendly countries.
- Muhammad Umair Zeb is a Peshawar-based freelance journalist, columnist (The, Business Recorder, The News Int, Khyber Mail) & Finance and Tax Analyst.