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June 1, 2026
IMF seeks 1% GST rise to 19%, estimating Rs250–300bn; Pakistan warns of inflationary risk as talks on taxes and retailer scheme intensify.
IMF pressure on Pakistan to lift the standard General Sales Tax (GST) rate from 18% to 19% has intensified as federal budget talks enter a critical phase for 2026–27. The move aims to plug a projected revenue shortfall after the Federal Board of Revenue missed revised collection targets.
Officials estimate a one-percentage-point GST increase could yield between Rs250 billion and Rs300 billion, a figure the IMF views as necessary given dismal tax performance. The IMF also projected average CPI inflation around 8.4% in the next financial year, figures the Fund used to justify the proposal.
Pakistani authorities have resisted the recommendation, arguing a GST hike would stoke inflation and squeeze consumers. “So far, the Fund’s push for higher GST has been resisted tooth and nail,” sources told local media, reflecting growing friction between Islamabad and the lender.
Alongside the GST demand, the IMF has recommended ending the reduced 8.5% rate for hybrid vehicles and aligning them with the standard GST once the policy expires in 2026. Talks on electric vehicle taxation remain ongoing.
The Fund has also backed a simplified fixed tax regime for retailers with turnover up to Rs200 million, proposing a Rs25,000 annual tax with audit exemptions unless major discrepancies emerge. Retailers would receive FBR QR code certification under the plan, aimed at widening compliance without heavy administrative burdens.
Negotiators are also discussing potential fiscal offsets: Islamabad is seeking relief for salaried taxpayers, while the IMF has asked for alternative revenue measures. Reports suggest the Fund might accept a 1.5–2% cut in the Super Tax, contingent on other revenue steps.
Despite media reports, FBR Chairman Rashid Mahmood Langrial denied that a GST increase was under consideration, telling outlets that “no such proposal was under discussion,” underscoring the sensitivity of the talks.
Negotiations are expected to continue even after the budget’s parliamentary presentation, leaving room for last-minute changes before final approval.
