detail on REFORMED RGST

8/8/2019 detail on REFORMED RGST

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Definition of General Sales Tax

Taxes are an important part of financing the programs needed to keep a state running efficiently. Some

states have a break from their sales tax rates on specific items periodically. For example, consumers may

pay no taxes on school supplies shortly before school begins.

Identification

General sales tax is the default tax rate placed on all goods sold in a country, state, city or town. All

commodities sold in the jurisdiction are subject to that tax rate, unless a specific law states otherwise.

Function

Taxes, including general sales tax, are used to pay for the salaries of civil servants like police officers and

firemen, fix roads and schools and help finance programs for low-income residents.

Introduction of Tax and Implementation of Reformed GST in Pakistan

1. Pakistan is in dire need of increasing its tax revenues by implementing a broad-based modern form of

sales tax on goods and services. The Sales Tax Act, 1990, was originally designed on the basis of

accepted value added taxation doctrines but due to political compromises and revenue exigencies, it

increasingly became distorted and narrow-based because of ever-expanding exemptions, special

regimes, multiplicity of rates and several other deviations from international best concepts and

practices. Resultantly, not only the tax base of sales tax and income tax has been eroded but also lack of

documentation of the national economy has proved a big hindrance in the development of effective tax

policy options.

2. Under the existing constitutional framework, the Federal government can impose taxes on the sales

and purchases of goods imported, exported, produced, manufactured or consumed. The Federal

government has been levying excise duty on services. After passage of the 18th Constitutional

Amendment, taxation of services now wholly falls within the domain of Provincial governments.

3. Presently, apart from sales tax on the supply and import of goods, Federal excise duty is chargeable

on communication (including telecom) services, certain categories of advertisements, insurance services

other than life, marine, health and crop, banking services, franchise services and services provided by

property developers/promoters, stockbrokers and port/terminal operators. Besides, Provincial sales tax

is chargeable on services provided by hotels/clubs/caterers, custom agents, ship chandlers and

stevedores, courier services and advertisements on TV & radio. Except franchise services, Federal excise

duty and Provincial sales tax on all the aforesaid services is being collected under GST mode with

backward and forward cross-crediting (inter-tax adjustment) with Federal sales tax.


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4. Tax-to-GDP ratio on account of the said sales taxes has stagnated on lower side although

internationally, the standard rate of 17 percent sounds on higher side. The principal reason of lower tax

to GDP ratio of sales taxes has been widespread and unbridled concessions and waivers on both local

supply and import stages including zero-rating on several categories of domestic supplies, besides non-coverage of the services sector in general.

5. The consultations with tax professional circles have over the passage of time convinced that there is

an overdue need to thoroughly reform and revamp the whole existing sales tax system to bring it closer

to international standards. The new GST system will change the mindset of the public at large as well as

of the tax machinery and will strengthen governments efforts to formally depart from excise-style of

sales taxation on goods and services.

6. The GST Bill, 2010 will replace the present Sales Tax Act, 1990. While the issues of collection and

administration of sales tax on services are being separately negotiated with the Provinces in the light of

recent NFC award, a provision has been included in the Federal Bill to integrate Provincial sales tax on

services with the Federal sales tax on goods as and when the Provinces authorize FBR to collect and

administer sales tax on services.

7. Under the new GST law, exemptions have been kept intact in respect of basic food items including

wheat, rice, pulses, vegetables, fruits, live animals, meat and poultry etc. Edible oil chargeable to Federal

excise duty will remain exempt from GST as before. Exemptions earlier available for philanthropic,

charitable, educational, health or scientific research purposes or under international

commitments/agreements including grants-in-aid will also continue. Moreover, life saving drugs, books

and other printed materials including newspapers and periodicals have been kept exempt.

8. Local consumption of sectors like textile (including carpets), leather, surgical and sports goods has

however, been subjected to tax. Similarly, defence stores, stationary items, dairy products,

pharmaceuticals (other than lifesaving), agricultural inputs, agricultural machinery and implements,

aviation/navigation equipments including ships & aircrafts etc. have also been proposed to be taxed.

Acquisition of capital goods will be facilitated through expeditious adjustment/refund of input tax

involved therein.

9. GST will be chargeable only on value added component of each stage of the supply chain. Due to the

provision for set-off of the tax paid at earlier stages in the chain, net tax incidence remains as a single

stage levy. Due to automatic input tax adjustment facility, businesses are attracted towards voluntary

registration so that they may avail such adjustments and improve their cash flows. For this reason, GST

always promotes documentation and encourages self-compliance.


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10. Other salient features of the new GST system are as follows.

GST will replace the existing regimes of sales tax and excises on services. GST will apply on both at import and local supply stages. Standard rate of 15% has been proposed instead of the present rate of 17% or multiple other

rates going upto 25%.

There shall be no fixed tax, reduced tax, enhanced tax, retail price-based tax or special taxscheme under the new GST system.

A uniform enhanced annual exemption threshold of Rs.7.5 million (which is presently Rs. 5million) shall be applied to keep small businesses including small traders/retailers/cottage

industry out of mandatory tax compliance.

All exports shall be zero-rated. Input tax adjustment of both direct and indirect constituents shall be allowed on totals basis

(excluding entertainment and non-business use passenger vehicles).

Sales tax on goods and services where so authorized by the Provinces shall be mutuallyadjustable so that double taxation does not occur.

No general zero-rating shall be admissible on any commercial form of domestic supply or onany local consumption.

The GST system will work purely on self-assessment and self-policing basis. Cash flow of businesses shall be facilitated through expeditious centralized (Electronic) refund

payment system.

Tax compliance shall be encouraged through transparent and fair audit system with increaseduse of modern information technology.

Adjudication, appeal and alternative dispute resolution (ADR) systems have been provided asbefore.

FBR will issue simplified rules to regulate the GST procedures and processes. The GST Bill 2010 shall take effect from such date as may be notified by the Federal

government.

The new GST system will be applied in FATA/PATA, the Province of Gilgit-Baltistan and AJ&K indue course.

11. The proposed GST system will certainly not generate any sudden increase in revenue yield. It will

however, increase the overall tax-to-GDP ratio from the present below 10% to about 12% in next 3-5

years. Pakistan has a strong potential to implement such value added tax type sales tax because of the

reason that besides having a properly-reformed collection infrastructure, it has a long-operating sales


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tax system and substantial hidden sales taxation on inputs of exempt outputs (exempt supplies are input

taxed) is already being borne in the aggregate national consumption.

12. The proposed GST system is expected to operate without any serious inflationary impact. It will

rather promote economic equity and enable the country to direct national resources towards more

productive goals of national development. Reformed GST is also likely to progressively minimize the grey

component of the national economy and facilitate fair income redistribution. It will eventually cast

healthy impact on income tax receipts and enhance fool-proof tax culture in the country.

National Budget for the financial year 2010-11 and Tax Measure

Following are the highlights of tax measures announced by the government in the National Budget for

the financial year 2010-11.

Existing system of General Sales Tax would be reformed to eliminate multiple tax rates andreplace it with a single lower rate of 15%.

The reformed GST will not apply on health, education and food items consumed by the poor.The GST will not apply to turnover less than Rs. 7.5 million per year whereas the current

threshold is Rs 5 million per year and would be automated thus reducing possibilities of

corruption and refund delay.

It will broaden the tax base instead of burdening the existing tax payer. The proposed GST reform is expected to be in place by October 1, 2010 in consultation with all

the provinces and other stakeholders.

As an interim measure the GST rates are proposed to be raised by 1 percentage point. Once thereform GST is in place the proposed single lower rate of 15 % will become effective.

Current 1% Special Excise Duty levied on most items of imports and local manufacture has beenabolished.

Federal Excise Duty incidence on all categories of cigarettes has been enhanced and levy FED atRs. 1 per filter rod of cigarettes has been proposed.

The rate of FED on natural gas has been increased to Rs. 10 per MMBTU, while intensiveappliances, levy of FED @ 10% ad valorem on air conditioners and deep freezers is proposed.

On income tax side, exemption limit for the salaried taxpayers has been enhanced from Rs.200,000 to Rs.300,000, benefitting approximately 430,000 taxpayers.


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Exemption limit for non-salary income is also proposed to be raised from Rs. 100,000 to Rs.300,000 per year benefitting approximately 350,000 taxpayers.

Rate of income tax collected along with monthly electricity bill from industrial and commercialconsumers is proposed to be reduced from 10% to 5%. This will provide a relief of Rs.4.5 billion

to the 66,000 taxpayers.

Under the Prime Ministers Fiscal Relief Package to Khyber Pakhtunkhwa, Federally AdminsteredTribal Areas (FATA) & Provincially Adminstered Tribal Areas (PATA) additional tax relief of about

Rs.2 Billion have been provided to benefit 300,000 taxpayers of the province.

Instead of monthly withholding tax statements, now only quarterly withholding statement willbe required to be e-filed.

Taxation on interest free / concessionary interest loans provided by an employer is proposed tobe waived.

Rate of final withholding tax on non-specified payments to nonresidents is to be reduced from30% to 20%.

Tax free payments to non-residents on profits on debt will be allowed 10% tax credit forbalancing, modernization and replacement to all companies.

A 5% tax credit is proposed to be allowed to a company in the tax year of its enlistment. 10% withholding tax has been announced as final charge on profit on debt (in debt instruments)

and also for the investment in government securities (treasury bills and PIBs) to allow hassle

free compliance by non-residents.

It has been proposed that income tax be raised for the Association of Persons (AOPs) at a flatrate of 25% against the existing progressive rate averaging up to 20%.

Tax on short-term Capital Gains on stocks/shares will be charged at 10% where shares are heldfor a period less than six months and at 7.5% where they are held for more than six months and

less than 12 months. However, stocks held for over one year will not be subject to CGT.

The withholding tax rate payable by commercial importers is proposed to be increased from 4%to 5%.

A withholding tax on banking transactions including withdrawal through demand draft, payorder, RTCs, CDRs etc. will be charged at 0.3% where such transaction exceeds Rs.25000 in a

day.


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Turnover tax on loss making companies and AOPs is proposed to be increased from 0.5% to 1%. Withholding tax on domestic air travel is proposed to be charged at 5% on gross value of the

ticket.

Reformed GST: new label for VAT

ISLAMABAD: The ministry of finance has decided to stop using the term of value

added tax because of strong opposition to it from various quarters, and instead

impose an upgraded version of general sales tax (GST) from Oct 1.

Finance Ministrys Special Secretary Asif Bajwa told journalists here on Wednesday thatthere was no threat to the IMF programme because of any issue, including VAT.

He said the issue had been politicised and some sections had failed to understand that the

GST was also a form of VAT.

Mr Bajwa said the finance minister had clearly indicated in his budget speech that a

reformed GST regime would be introduced. The message is clear.


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The official said the finance ministry would hold consultations with the provinces during the

July-September period.

He said the GST was already in force in the VAT mode and further improvements would be

made in coming months.

He said the GST regime had been there for over 20 years and the experience was vital for

expanding its scope, which is actually a VAT.

He said there would not be any serious implication for revenue generation in switching

between the VAT and GST modes.

The International Monetary Fund has not refused to hold further negotiations with

Pakistan, he said.

He said there was not even a remote chance that the release of next instalment under thestandby arrangement with the fund would be withheld.

He said IMF teams would visit the country soon to hold routine discussions and prepare a

report for their executive board.

The IMF cannot refuse to hold negotiations after the new developments on VAT. It is

expected that the government will try to convince the IMF authorities on the issue and final

decisions will be taken by the IMF executive board in August.

Answering a question, the special secretary said an integrated VAT on goods and services

with an option of allowing a province to tax some services and giving collection rights to thefederal government on some would create complications.

Another senior official of the Federal Board of Revenue also said that the present GST

regime was in fact VAT, but added hat exemptions given to various sectors would be

withdrawn.

The government will incorporate all the documentation requirements of VAT in the

reformed GST regime at the uniform rate of 15 per cent, he said.

Enforcement of RGST

ISLAMABAD: Federal Finance Minister Dr Hafeez Shaikh announced here on Thursday that the

reformed General Sales Tax (GST) would be enforced from Oct 1.

Talking to newsmen, Dr Shaikh said that the government intends to introduce GST in its original format,

eliminating all exemptions.


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The original form of GST has been distorted by exemptions, and the lobby which has benefited from

exemptions is opposing restoration of GST to its original form, he said.

GST already exists in Pakistan; however it would be transformed through reformed GST, capturing the

features of a VAT, enabling the government to start raising tax revenues required for a sustainable

growth.

Pakistan, Dr Shaikh said has the lowest tax-to-GDP ratio in the world, with only nine per cent.

The decision of the government to introduce GST has now buried the issue of VAT which became

controversial following differences between the federal and provincial governments on modalities of

VAT.

Politically, it was easier for economic managers to include substantive features of VAT to make reformed

GST broad-based, reduce exemptions and input crediting.

The government would now withdraw the five VAT bills submitted to the national and provincial

assemblies.

Dr Hafeez Shaikh said that the ministry of finance was currently working on formulating new taxes with

the objective of taxing the affluent class.

Countrys financial situation was not good before floods, but worsened after the devastation caused by

floods, he said.

The ministry of finance is to re-evaluate the macroeconomic framework once the damage / needs

assessment is completed, and a revised budget would be submitted to the federal cabinet and

presented to the National Assembly and Senate standing committees on finance and revenue.

The government does not want to get loans from international financial institutions but wants to protect

economy.

The affluent class must show generosity and think selflessly and sincerely. There is no tradition in this

country to pay taxes by the elite, Dr Shaikh said.

The finance minister disagreed with newsmen on use of term mini-budget or financial emergency.

Responding to questions about financial crisis of universities, the finance minister said that education is

the biggest responsibility of the government, and there is no cut in the budget of public sector

universities.

The government has already increased the budget by eight per cent.


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Though there is a freeze on current expenditures, all projects completed by 80 to 90 per cent would be

allowed to be completed.

At the same time, the government will fully honor its commitment to scholarships, and all those

studying abroad on scholarships would be allowed to complete their studies.

Support of RGST

Pakistan Peoples Party

Pakistan peoples party strongly in support of RGST as i t is purposed by their govt. and their finance

minister Hafiz Sheikh said it will increase the tax revenue and also help in prosperity of the country. It

will reduce the inflation affect on the people and people will give 15% tax on all items instead of paying

multiple tax variables.

World Bank strongly supports reformed GST

The World Bank (WB) has strongly supported introduction of reformed general sales tax (GST) as it

would contain all features of the value added tax (VAT). A World Bank official told Business

Recorderhere on Wednesday that at present the major concern of the World Bank is supporting the

government to get the economy moving again to achieve higher growth rates on sustained basis.

There is very little impact on the budget from the delay of the VAT/reformed GST from July 1 to October

1, as the revenue impact of the three-month delay has been made up from increases in other taxes

indicated in the budget speech of the Finance Minister. Secondly, all of the features of VAT are to be

included in the reformed GST, which is a value-added tax of the same nature as the proposed VAT, the

official explained. The World Bank has been in discussions with the government of Pakistan and FBR for

more than a decade on reform of tax administration and tax policies. We have an ongoing lending

program to the GoP in both of these areas. Broadening the base, removing exemptions and increasing

compliance have been at the heart of these efforts, he said. A reformed GST, that would achieve these

objectives, is a long standing agenda item in our dialogue and is one of the actions we are supporting

with our Poverty Reduction Strategy Credit. There are other actions we are supporting with this credit,

which will go forward if the agreed actions are completed.

The major concern of the World Bank at the moment is helping the government get the economy

moving again and achieve higher growth rates on a sustained basis. High growth is clearly pro-poor in

Pakistan in many ways - it would reduce the poverty headcount; improve education and health

outcomes; increase employment, especially in rural areas and among rural women. The longer high

growth rates persist, the more equitable that growth seems to be. The key to moving to higher growth

now are Pakistan s macroeconomic policies to bring about lower budget deficits, which will allow lower


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interest rates, more credit for the private sector, faster growth of the formal sector industries and

higher exports, the official added.

Opposes of RGST

The ruling PPP is facing stiff resistance from mainstream opposition parties like the PML-N and PML-Q,while their own allies MQM and JUI-F have publicly announced intentions to vote against the bill.

So far, the government has succeeded in securing the approval of the Senate on the bill with the help of

PML-Q and the legislation was sent to the national assemblys standing committee for approval before

moving it for a final vote.

In the lower house of parliament, the government messed up the committee proceedings and did not

seek voting on the draft law which was necessary before sending the bill in the National Assembly for

final approval. Recent political developments like the JUI-F pulling out of the ruling coalition and MQMs

stiff opposition to the law have made the task even more difficult for PPP government to pass this

legislation.

December 31 is the third deadline given by the International Monetary Fund for implementing RGST: a

two-year $11.3 billion bailout programme will lapse on the same date.

The most crucial condition of the IMF was to implement the so-called reformed GST by June 2010.

Pakistan again promised to implement the programme by October 1 and then again from January 1 next

year.

The IMF has suspended the programme since May this year with two tranches of $3.6 billion remaining

undisbursed.

The GST is not all about collecting Rs40 billion taxes this year but a declaration of intent of what we are

going to do to tap our resources, said a top finance ministry official on condition of anonymity. He

refused to speak on record due to the political sensitivity of the issue.

He said that the finance ministry had clearly told Prime Minister Yousuf Raza Gilani on Tuesday that if

the government did not implement the reformed GST, it would result into a widening the budget deficit.

He said the most worrisome aspect was that the government will borrow the same amount from the

domestic market, which will be a double edged sword. He added that the State Bank will have to

increase the main discount rate to control inflation, which will not only increase government debt

financing cost but will also break the backbone of the industry.

Background interviews with multilateral donors reveal that in a worst-case scenario, donors will hold

review meetings in mid-January and try to work out joint strategies to deal with Islamabad. They say the

donors may not stop funding for ongoing result-oriented projects, but will definitely block programme

lending and budget financing. A worrisome aspect is that it will undermine post floods rehabilitation and

reconstruction efforts, they say.


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Experts divided over imposition of RGST

The acting president of the Lahore Chamber of Commerce and Industry, head of the Agri-Forum and an

economist on Thursday pointed out flaws in the Reformed General Sales Tax Bill and suggested

alternatives to increase tax collection without adding to the difficulties of the common man.

However, Punjab PPP Secretary General Samiullah Khan said some people were opposing the RGST fortheir vested interests, and insisted that the new taxation measure would help improve the economy. All

four expressed their points of view at Aiwan-i-Waqt.

Ibrahim Mughal, Chairman, Agri-Forum, said the RGST was an international conspiracy to destroy

Pakistans agriculture and industry. He warned that in case the government imposed the tax it would

create a turmoil which no government would be able to control.

The agricultural sector, he said, would be badly hit.

He said the RGST should not be imposed at all, or its rate should be brought down.

In his opinion it would be better for the government to go for direct taxation to recover more money

from the elite.

Similarly, he said, an amount of Rs 400 billion being wasted on various state corporations should besaved. Another Rs 1,000 billion could be brought to the exchequer by plugging corruption in

departments.

Mughal recalled that tax-to-GDP ratio stood at 14 per cent in 1980-81, but it went down in the

subsequent years to 9.3 per cent at present.

The situation would improve remarkably if the government removed the flaws in the recovery system,

he said.

He said if the RGST was imposed and the target was set at Rs 120 billion, Punjab alone being the biggest

province would have to contribute up to Rs 100 billion. He urged the Punjab chief minister to oppose the

new tax to save the people of his province. Otherwise, he said, the agriculture sector would be hit to an

extent that the country would have to import even rice and wheat.

Industrialists, exporters disapprove RGST

Industrialists and exporters disapprove RGST. A joint session of leather goods, sports goods, hosiery,

surgical good and host of other types of industries was held on Tuesday under the chairmanship of SCCI

President Ch. Ghulam Mustafa. The chairman readymade garments Ijaz Khokhar in his speech said RGST

imposition is being done to win the favors ofIMF so that next installment of loan can be had.

He said if RGST is imposed it will prove ruinous for the country as exports will be cut to minimum, we

therefore demand from the government that is should ink all financial policies by taking the industrialsector into confidence after considering the pros and cons of the goods and bad of it, he opined that if

the policy makers do so Pakistan shall not have to beg for foreign financial aids and loans, he further said

that the Sialkot Exporters have practically exhibited it under the city package by demonstrating so in the

mega project.

He went to the extent that the industrialists will not allow the Government lavish spending with the


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foreign exchange earned with their sweat and blood, billions of refund cases are decorating the files of

the Government pending disposal, how can we wait and see and rely on the false promises of the

Government in 2005 RGST could not be imposed for the plan leaked, if RGST is not abandoned then we

will close down the industries totally and hand over the keys to the Government and ask her to provide

us jobs thereof.

Effect of reformed GST

The latest decision to extend the program came in response to Pakistans renewed commitment to

implement key revenue administration reforms. The WB has given commitment to support all efforts to

boost compliance and revenue collection. The World Bank stressed that FBR should enhance project

performance by improving integrated management system to monitor taxpayer compliance and

electronic filing of returns. It also underscored the need of extensive cross-checking of information,

which would provide a strong justification for the proposed restructuring. Pakistans revenue collection

stood at around Rs1, 340 billion in financial year 2010 and the government has set an ambitious target

of Rs1, 667 billion for the current fiscal. Tax experts said that the reform program could not yield resultsas the country failed to tap the real potential of revenue collection. The World Bank said that TARP had

been hitting snags since 2007 due to implementation issues. Some policy issues also weakened its

potential impact, it added. In order to extend operational network and achieve a more balanced work

load, the FBR proposes to increase the number of Regional Tax Offices from 12 to 13 and Model

Customs Collectorates from 6 to 9. This will be essential for the successful implementation of a broad-

based VAT or reformed GST, which covers both goods and services,

Ex-President RCCI says RGST will have positive effect on economy

ISLAMABAD, November 27, 2010 (Balochistan Times): Former President Rawalpindi Chamber of

Commerce and Industry Syed Asad Mashhadi has said the Reformed General Sales Tax (RGST) will have a

positive effect on the economy. He said further lowering of the tax rate would bring more positive

effects. Speaking to Radio Pakistan, he said that only the equal and uniform implementation will help

improve the tax base to meet the revenue requirements of the government. He said that it may burden

the existing tax payers too, but over all, the RGST would have positive effects on economy. He added

that those who are out of the tax net, should be brought into it. He said that the government should

have consulted the chambers of commerce and industries to facilitate the implementation of the RGST.

Asad Mashhadi said every Pakistani wants that the government should have enough revenue to

rehabilitate the flood victims. He said that nobody is unwilling to pay tax.

Reformed GST would not add to inflation: Hafeez Sheikh

Federal finance minister Abdul Hafeez Sheikh has confessed that there are some serious discrepancies in

the taxation system of the country while he also said that the implementation of the reformed GST

would not add to the already prevailing wave of inflation.

The federal minister, during a meeting of the standing committee of finance, said that a wrong

conception is being projected and professed amongst the masses as if the government is implementing


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some new taxes whereas the case is the other way round and the government just wants to reform the

taxes already present. He further said that the flood tax is a new tax and the masses would be briefed

about its nature and reason of implementation. The federal minister added that everyone has his own

view of the taxes just to fulfill his own vested interests. Dr. Sheikh also said that the previous

governments could not increase the rate of taxes proportionately with the national income.

Earlier Senator Haroon Akhter said during the meeting that there are several ways to increase revenue.

He said that instead of expanding the tax net and implementing taxes on the real estate business, the

entire burden is being shifted to the shoulders of poor masses. He also termed the GST Bill 2010 as

illegal.

Senator Professor Khurshid Ahmed said that many points of the bill need to be reviewed and that the

legislation of the bill should not be done in an unnecessarily hasty manner.

How will it impact you?

The new tax does have a wider reach than the old GST. When the RGST is imposed, everyone from the

suppliers to the middleman in small and large businesses will be brought within the tax net.

Unlike the old GST, the RGST will not be imposed just on the final price of a product; rather, a certain

amount of tax will be added at each stage of production.

For example if a supplier sells raw material worth Rs100 to a manufacturer, he would charge Rs115

instead of Rs100, and remit the extra Rs15 as tax.

After manufacturing the product, the manufacturer, for example, adds a profit of Rs2o. The product now

costs Rs135, but instead of selling it to the retailer at Rs135, the manufacturer will add another 15 per

cent to the value addition of Rs20 which will bring up the cost to Rs138. The extra Rs3 will be remittedas tax.

Finally, the retailer will add his profit. Assuming that is another Rs20, the price of the product is now up

to Rs158 again. Instead of selling it at Rs158, the retailer will add yet another 15 per cent of the value

addition and the final cost will be Rs161. The retailer will then pay the added tax back to the treasury.

There are exemptions and conditions, but so far the glitches are being worked out. According to

economic experts, this system of taxation will help bring more people into the tax net. Not just that, tax

evasion will become more and more difficult. Since everyone will be documenting and paying the tax at

each level, any attempt at tax evasion will automatically be highlighted.

The reformed general sales tax (RGST) is bad for consumers. Which means it`s bad for the poor and the

less well-off.

The reason is pretty straightforward. RGST is an indirect tax, i.e. a tax on goods and services. Which

means it will get passed on to the end consumer, which includes the poor and the less well-off.


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Yes, the government wants to harp on the positive aspects, for obvious reasons: new taxes on leather

goods and carpets, for example, are unlikely to hurt the poor because they don`t use carpets or leather

goods.

But look at all the stuff that is getting taxed. And for that we need go no further than the information

ministry`s six-page handout on RGST. `Surgical items` which means your next trip to a doctor maycost more. Pharmaceuticals (other than life saving)` which means the next time you have a mild

illness you`ll pay more to get better. Stationery items, dairy products` self-explanatory.

But, and here`s the rub, there is a very different kind of problem which has ravaged the poor in recent

years: inflation. In part, the fiscal deficit the country has been running has helped keep inflation high.

Now, with the floods having added colossal expenditures to the overall budget, the fiscal deficit, in the

absence of revenue-generating measures, would balloon again further driving up inflation.

Our view

Biggest Objection on Reformed GST

Among the cluster of some 172 countries, the Sierra Leone is the country where the lowestnumbers of people pay tax. Then comes our shining Pakistan, where people evade the tax.

Taxation is the primary source of income for any country. But before blaming the general public

for this malaise, we need to find out what exactly is the reason people abhor paying the taxes.

The government has tabled the Reformed GST (RGST) bill in parliament along with someadditional taxation measures including the one-time flood tax. This tax which will be

promulgated soon will bring a new wave of price hike and initiate a new round of poverty in the

country, which is already has grown economically bankrupt. 14 Corer people are earning only $2

a day.

The problem with this new GST is that instead of widening the tax net, the government has onceagain put more burdens on the people who are already paying the taxes. The existing tax net is

the one who will pay more. All those crocodiles and snakes will once again have a tax holiday.

And where would this tax is spent? Nobody trusts this government, and masses are more thansure that there hard earned money will go to Swiss or French banks.

The fact is that Pakistan has made a commitment with the IMF to implement this tax for thedebt servicing the IMF debt. It will provide a fine platform for the government to get more loans

from the IMF and other lenders. That loan will help maintaining the luxurious lifestyle of our

elite.


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Miscellaneous

Exempt Items


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Fraud and Misconducts


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