Government weighs income tax cuts while considering higher GST on key goods.
Image: Gotrade
ISLAMABAD: The government is waiting for approval from the International Monetary Fund (IMF) on a proposed tax relief package ahead of the 2026–27 federal budget.
The plan includes possible income tax cuts for salaried individuals, a reduction in the Super Tax, and incentives for the property sector.
Officials are also discussing lowering tax slabs for middle-income earners and cutting the Super Tax by two percentage points, from 10% to 8% for selected taxpayers.
Another proposal under review is the removal of 1% advance income tax on exporters.
At the same time, authorities are considering raising the General Sales Tax (GST) to 18% on solar panels, hybrid vehicles and nearly two dozen other product categories to increase revenue.
Pakistan has asked the IMF to keep a lower GST rate on electric vehicles, arguing it supports energy goals and aligns with its climate financing programme.
Revenue pressure remains high, with the Federal Board of Revenue (FBR) targeting Rs15,264 billion for FY27. Officials say meeting this goal will require significant additional tax collection compared to the current year.
The government has also proposed easing tax rules in the property sector, including reducing transaction taxes for filers. However, the IMF is pushing for a minimum tax on property deals for documentation purposes.
The IMF is also urging Pakistan to move many goods from reduced GST categories to the standard 18% rate. These include items currently taxed at 1% to 16%, such as EVs, hybrid vehicles, fertiliser inputs, electronics, and food products.
Negotiations are ongoing, and final decisions will depend on the fiscal space agreed between the government and the IMF before the budget is finalised.
