Pakistan Poised To Terminate Sales, Income Tax Exemptions

The Pakistan government is expected to abolish tax exemptions in the FY2024-25 budget as per the IMF’s request. According to budget proposals for the fiscal year, Pakistan is likely to phase out exemptions on sales and income tax.

Furthermore, the government is contemplating imposing sales tax on tractors and pesticides, which could potentially result in price increases for these vital agricultural commodities. Presently, pesticides and their active ingredients registered by the Department of Plant Protection enjoy exemption from sales tax under the Sixth Schedule of the Sales Tax Act.

Read more: IMF Urges Pakistan to Tax Civilian And Military Retirees

Similarly, tractors, including road tractors for semi-trailers, are zero-rated for sales tax. However, discussions are underway among budget planners to eliminate these exemptions and introduce a lower sales tax rate on both tractors and pesticides in the upcoming fiscal year.

Such measures could significantly affect farmers, elevating the cost of agricultural machinery and pesticides and potentially burdening those reliant on these products.

Additionally, commercial importers are expected to face withholding tax in the upcoming budget, aiming to generate an additional Rs30 billion in taxes.

The IMF has emphasized the necessity for Islamabad to implement “strong cost-side reforms” to restore the viability of Pakistan’s energy sector.