The International Monetary Fund has asked Pakistan to raise the standard General Sales Tax rate from 18% to 19% in Budget 2026-27.
Pakistani authorities have resisted the IMF GST demand and warned that the move could add to inflationary pressures, according to the sources.
Officials estimated that a one-percentage-point increase in GST could generate revenue of Rs250 billion to Rs300 billion. The IMF proposed the hike after weak tax collection by the Federal Board of Revenue.
The FBR may move close to Rs13 trillion in collections for the outgoing fiscal year. However, the tax authority may still miss its revised target.
The IMF also asked Pakistan to move GST on hybrid vehicles from 8.5% to the standard 18% rate. Talks on electric vehicles continued between both sides.
Read: IMF Talks with Pakistan Continue Without Budget Agreement for FY2026
The lender endorsed a fixed tax scheme for retailers with turnover up to Rs200 million. Under the plan, retailers would pay Rs25,000 and receive audit exemption unless the FBR finds major gaps.
The federal government also sought relief for the salaried class. However, the IMF asked for alternative revenue measures to cover any shortfall.
FBR Chairman Rashid Mahmood Langrial denied the proposal, saying no such proposal was under consideration.
