On Tuesday the government of Pakistan increased GST up to 18% and randomly increased the sales tax on cigarettes. The plan is to collect PKR 115 billion out of PKR 170 billion of the mini-budget.
The step was taken by the federal cabinet to implement the conditions put by the IMF in order to revive the derailed $6.5 billion program. Since then, President Arif Alvi has refused to promote the ordinance sent by the government.
The global lenders will accept only permanent tax measures. Hence, the administrative authority has increased the GST rate from 1% to 18% and with that, the federal excise duty on cigarettes has also increased.
It is for the first time in history that the government has dented the tobacco industry by increasing the tax.
The FBR has notified the FED increase on expensive brands from PKR 6.5 per cigarette to PKR 16.5 per cigarette. However, for the less expensive brands, the price increase on per stick is PKR 2.55 to PKR 5.05.
The bill was presented by the government to the federal cabinet and it will now be presented in parliament on Wednesday for approval. According to the finance minister, the federal cabinet has all the authority to increase the GST rate and FBR can also increase the FED rate on its own.
Out of the total PKR 115 billion, we can at least cover PKR 55 billion by increasing 1% GST in just four and a half months. Also the maximum amount of PKR 60 billion will be collected by increasing the FED on cigarettes.
According to the Finance Minister Ishaq Dar:
“The President advised that it would be more appropriate to take the Parliament into confidence on this important subject and that a session be called immediately so that the bill is enacted without delay”.
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