Islamabad: Ahead of the 2026-27 federal budget, the International Monetary Fund (IMF) has reportedly proposed increasing Pakistan’s standard General Sales Tax (GST) rate by one percentage point, from 18% to 19%, according to official sources.
Pakistani authorities have so far strongly resisted the proposal, arguing that any further increase in taxation would intensify inflationary pressures on the public. According to The News, officials are pushing back “tooth and nail” against the suggestion.
Sources said that if the proposal is approved, it could generate an additional Rs250 to Rs300 billion in revenue. The IMF’s recommendation comes in the wake of a shortfall in Pakistan’s revised tax collection target for the outgoing fiscal year, with the Federal Board of Revenue (FBR) expected to come close to Rs13 trillion but still falling short of its goal.
Officials familiar with the discussions said the IMF has also projected inflation at around 8.4% on average for the coming fiscal year, which further complicates fiscal planning.
The IMF has additionally proposed increasing GST on hybrid vehicles from 8.5% to the standard 18% once current concessions expire in 2026, while discussions on electric vehicles continue between both sides.
On retail taxation, the IMF has supported a simplified fixed tax scheme for small retailers with turnover up to Rs200 million, under which they would pay Rs25,000 annually and be exempted from routine audits, unless major discrepancies are detected.
For the salaried class, talks are ongoing regarding possible relief measures, though the IMF is reportedly insisting on alternative revenue sources to balance any concessions. The Fund is also considering a reduction in Pakistan’s Super Tax by 1.5% to 2% in the upcoming budget.
Overall, negotiations remain ongoing and are expected to continue even after the budget is presented in parliament, with last-minute adjustments likely. However, FBR Chairman Rashid Mahmood Langrial has denied that any such GST increase proposal is currently under consideration.