The government’s financial plan for the impending monetary year is expected to include new charges of 2 trillion rupees. The Government’s Leading group of Income has proposed a few measures to create more expensive incomes.
Reliable sources say one of the proposed measures is a 5% sales tax on petroleum products. The finance bill has approved a zero percent sales tax on petroleum products. However, this tax is expected to be raised to 5% in the following fiscal year, and new taxes of Rs 2 trillion will be imposed in the upcoming federal budget for the fiscal year 2024-2025. These changes, if implemented, could significantly impact the economy. The preparations for this budget are well underway.
It’s worth noting that the proposal to introduce a five percent tax. FBR sources expect petroleum products to fetch about Rs600 billion. They are preparing proposals to end all sales tax exemptions available in the finance bill for the next fiscal year. This thorough approach to taxation could generate additional revenue of approximately Rs550 billion. The sales tax rate is possible by one percent to achieve this additional revenue from taxation.
It’s important to consider the potential benefits of these proposals. For instance, an increase of one percent point in the standard general sales tax rate could fetch about Rs100 billion more revenue annually. Proposals include raising the sales tax rate from 18 percent to 19 percent in the next federal budget. At the same time, another suggestion under consideration was the enhancement of import duties. One percent point specifically for commercial importers. Which might generate around Rs50 billion. These measures, if successful, could significantly boost the economy.
The government has shared all these taxation proposals with the International Monetary Fund (IMF). They have also pointed out that increased sales tax may lead to higher inflation. We will review these suggestions in the next financial year, as they are at the initial stage. According to FBR sources, among other proposals under consideration. We will finalize an estimated generation worth Rs700 billion as soon as possible. Raising the standard GST rate from 18% to 19% will affect more than 7000 tariff lines.
Assuming the deal charge rate on sugar increases from 18% to 19%, the cost per kilogram could increase by five rupees. Similarly, a one percent increase in sales tax might make ghee dearer by Rs5 to Rs7 per kg. A one percent point increase in sales tax may also enhance the prices of electronics, make-up products, clothes, leather items, spices, tea, branded baking items, noodles/pasta, utensils, cameras, phones, smartwatches, watches, etc.
Similarly, a one-percent increase in sales tax may also increase the prices of lotions, creams, face powder, foundation sticks, eye pencils, mascara, lipsticks, nail polish, artificial jewelry, perfumes, and body sprays.
