September 21, 2023
Economy Pakistan

Pakistan Increases GST on Packaged Items to 18%, Experts Warn of Heavy Burden on Public

The Pakistan government has announced a hike in the General Sales Tax (GST) on all packaged items to 18 per cent, along with an increase in tax on cigarettes. The Federal Board of Revenue (FBR) issued a notification in this regard, effective immediately. Edible oil, ghee, biscuits, spices, jam, jelly, noodles, toys, chocolates and coffee, among other products falling under the category of packed items, will become expensive. The new notification will also apply to makeup products, shaving foam, gel, cream, blades, shampoo, lotion, soap and toothpaste. The GST increase will also affect TVs, LED, LCD, smartphones, iPods, computers, laptops, gadgets, juicers, blenders, shakers and other electronic items.

According to economists, a 1 per cent increase in the GST rate will put a burden of more than Rs 50 billion on the Pakistani population. The government is hoping to raise an additional Rs 115 billion out of Rs 170 billion agreed to by the government in line with IMF conditions. The increase in GST and Federal Excise Duty (FED) on cigarettes was approved by the federal cabinet as part of a mini-budget in the shape of the Tax Laws Amendment Bill 2023. The FBR has issued the statutory regulatory order (SRO) for hiking the GST rate from the standard 17 per cent to 18 per cent and increasing the FED on cigarettes.

However, top official sources disclosed that the government has also approved a GST on hundreds of high-end luxury items at the rate of 25 per cent, which will be introduced through the Tax Amendment Bill 2023 to be presented to Parliament. The FBR enhanced the GST rate on all the imported luxury items that the Ministry of Commerce had previously banned to make imports more expensive. The enhanced rate of GST on some locally made luxury goods has also been proposed.

Pakistan has been facing economic difficulties for some time and the government is making various efforts to raise revenues to address these issues. The increase in GST and FED on cigarettes is one such measure, and the government is hoping that it will help it meet the IMF conditions for the release of the next tranche of the extended fund facility (EFF) worth $7 billion. However, this increase in tax is likely to have an adverse impact on the already struggling economy, as economists predict that inflation will rise, and the burden on the common people will increase.

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