GST rate may be revised downward

ISLAMABAD (December 16 2004): The current 15 percent general sales tax (GST) in Pakistan is comparatively higher as compared to other countries of the region, which needs to be reviewed, official sources told Business Recorder here on Wednesday. The Central Board of Revenue (CBR) will review the GST rate because it is up to 10.4 percent in some of the countries of South Asia. In Pakistan and Bangladesh a uniform GST rate of 15 percent is applicable, which is higher as compared to other countries of the region.

The officials said, “We are not talking about other parts of the world, but in our region the GST is as low as 10.4 percent and it needs little downward revision in Pakistan as well.”

Contrary to this viewpoint of the CBR high-ups, the fiscal experts said that lower rate of GST in other countries of the region cover wholesalers as well as retailers. In Pakistan, most of the retailers are working

below the exemption threshold and 15 percent GST rate is needed to meet the revenue targets and annual increase in tax-GDP ratio.

The sources said that the Task Force on Economic Policy (TEP) under Finance Division is also examining rates of taxes to make them more realistic keeping in view business environment. The Task Force will deliberate and propose appropriate measures pertaining to tax policy analysis and tax administration.

On the other hand, fiscal experts told Business Recorder that it is not an easy task to slash the GST rate in Pakistan, as the government has to meet the revenue targets. Moreover, there is a pressure on the tax authorities to increase tax-GDP ratio every year.

People give example of other countries where low GST rate is applicable, but the fact is that low GST rate is applicable at the retail level in these countries. But in Pakistan most of the retailers are exempted from sales tax and those falling within the exemption threshold are not liable to pay any sales tax, the experts added.

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