IMF Proposes Raising GST to 19% in Pakistan’s FY2026-27 Budget
The International Monetary Fund (IMF) has proposed increasing Pakistan’s standard General Sales Tax (GST) rate from 18 percent to 19 percent in the federal budget for fiscal year 2026-27, according to official sources.
Pakistani authorities have reportedly opposed the proposal, arguing that an increase in the GST rate would further fuel inflation and raise the prices of key products, including solar panels and electric vehicles.
Sources said the IMF recommended the one-percentage-point increase to help Pakistan achieve a tax revenue target exceeding Rs15 trillion in the next fiscal year and address the current year’s revenue shortfall. If implemented, the measure could generate an estimated Rs250 billion to Rs300 billion in additional revenue.
The proposal is also being considered alongside possible increases in GST rates on electric and hybrid vehicles. Under the suggested changes, the GST on hybrid vehicles could rise from the current 8 percent to 18 percent, while the tax rate on electric vehicles may increase from 1 percent to 18 percent. Similarly, GST on solar panels could be raised from 10 percent to 18 percent.
Industry officials have confirmed that these proposals are under discussion, although no final decision has been made.
If approved, the measures could significantly increase the prices of electric cars, motorcycles, rickshaws, buses, trucks, pickup vehicles, tractors, and double-cabin vehicles, potentially affecting consumer demand and the country’s transition toward cleaner energy technologies.
The IMF’s recommendation comes amid concerns over Pakistan’s revenue performance. The Federal Board of Revenue (FBR) has collected Rs11.232 trillion during the first eleven months of the fiscal year and faces a challenging task in meeting its revised annual target. Officials estimate that FBR revenues may reach around Rs13 trillion by the end of the fiscal year, falling short of the original target.
Sources also indicated that the IMF expects Pakistan’s average Consumer Price Index (CPI) inflation to remain around 8.4 percent during the next fiscal year.
In addition, the IMF has endorsed a proposed fixed-tax scheme for retailers under the upcoming budget. Under the proposal, retailers with annual turnover of up to Rs200 million would pay a fixed tax of Rs25,000 and would be exempt from tax audits.
Negotiations between Pakistan and the IMF on taxation measures and budget proposals for the next fiscal year are continuing, with final decisions expected before the presentation of the federal budget.
