In the upcoming budget, Pakistan has decided not to increase pensions and salaries of government employees, while imposing sales tax on the textile and leather sectors. The International Monetary Fund (IMF) report reveals that Pakistan will implement sales tax, advance income tax, withholding tax, and federal excise duty in various sectors.
According to documents, Pakistan assured the IMF that there would be no increase in pensions and government employees’ salaries in the current fiscal year to save around 18 billion rupees in the federal development budget. The government pledged not to issue any supplementary grants except in the case of natural disasters.
To manage energy costs, Pakistan aims to reduce subsidies by increasing electricity prices promptly and taking corrective measures if tax collection targets are not met.
The State Bank of Pakistan has informed the IMF that they will collect full taxes from sectors such as retail, property, construction, and digital markets. Sales tax for textile and leather industries will increase from 15% to 17%, resulting in a monthly federal excise duty of 5 rupees per kilogram on sugar.
Additionally, a 1% advance income tax will be imposed on machinery income and industrial raw material income. Contracts, services, and supplies will face a 1% withholding tax, and commercial importers will also pay a 1% tax. The government plans to initiate a door-to-door campaign against tax evaders.
The provincial governments of Punjab, Sindh, and Khyber Pakhtunkhwa will end subsidies on tube wells in the next fiscal year. In the second phase, they aim to reduce cross subsidies on tube wells in Balochistan and terminate the cross subsidy on gas for the fertilizer sector in March.
To equalize the cost of power generation, subsidies on gas given to the fertilizer industry will be discontinued. Subsidies on exports will be terminated to level the playing field for the non-export industry.
The regulatory control of the Discos will be transferred to the Transaction Advisor by April, introducing a monitoring system for the twenty most loss-making feeders. According to the report, gas circular debt increased by 142 billion rupees in the fiscal year.
To ensure consistent implementation of work on confirming and converting gas prices on a six-month basis, a notification of changes in gas prices will be issued by February 15.