ISLAMABAD - The International Monetary Fund (IMF) Tuesday agreed with Pakistan to give relaxation on the much-debated and much-controversial Reformed General Sales Tax (RGST), as Islamabad assured the international donor that it would bring Plan-B which would generate more revenue than the RGST in the coming budget 2011-12.
“Yes, the International Monetary Fund has agreed with Pakistan to not introduce the Reformed General Sales Tax, and now we will adopt Plan-B in which all tax exemptions will be eliminated in the annual budget 2011-2012, and this plan is more feasible than the RGST,” said a senior official of the Ministry of Finance while talking to TheNation on Tuesday.
To a question, he said that Pakistan did not demand the Letter of Comfort (LoC) from the IMF in its recent meeting, as “we only discussed budget-related issues”. The LoC would help Pakistan in getting budgetary support from the World Bank and the Asian Development Bank.
Sources were of the view that Pakistan and the IMF would negotiate in July this year for the LoC.
Under the Plan-B (as RGST is not being implemented), the government expects Rs1.968 trillion revenue in the coming financial year. This includes Rs90 billion on account of withdrawal of exemptions and zero-ratings given to textile, leather, sports, surgical sectors, which would be eliminated, additional Rs254 billion through normal revenue growth and Rs36 billion through administrative measures. Under the Plan-B, the government would keep standard General Sales Tax (GST) rate at 17 per cent, while in the RGST the government had to decrease it to 15 per cent.
On the other hand, the government expected additional revenue of Rs72 billion from the RGST. About 16 per cent of Rs254 billion would come because of inflation and economic growth rate (normal revenue growth over current year) and Rs36 billion through administrative measures to achieve a target of Rs1.952 trillion against the revised target of Rs1.588 trillion for the current year.