However, Pakistani officials are said to be strongly resisting the proposal, arguing that any such increase would add further pressure on already high inflation, according to The News.
Sources estimate that if the IMF proposal is accepted, it could generate an additional Rs250 to Rs300 billion in revenue.
The suggestion comes after the IMF observed a shortfall in Pakistan’s revised tax collection target for the outgoing fiscal year. Although the Federal Board of Revenue (FBR) is expected to approach the Rs13 trillion mark, officials believe achieving the full target remains unlikely.
In response to the weak performance, the IMF has reportedly pushed for the GST hike as part of broader revenue-raising measures.
Officials quoted in the report said a 1% increase in GST could raise Rs250–300 billion, while the IMF has also projected average inflation of around 8.4% in the upcoming fiscal year.
Sources further claimed the IMF mission did not introduce new options to widen Pakistan’s narrow tax base and instead focused on raising existing tax rates, a move opposed by local authorities.
The Fund has also proposed increasing GST on hybrid vehicles from 8.5% to the standard 18% once the current policy expires in 2026, while discussions on electric vehicles are still ongoing.
In addition, the IMF has reportedly endorsed a simplified tax scheme for retailers, under which businesses with turnover up to Rs200 million would pay a fixed tax of Rs25,000 and be exempt from routine audits, unless major discrepancies are found.
Retailers would also be issued QR-coded tax certificates under the proposed system.
Negotiations are also continuing over possible relief for the salaried class, although the IMF is said to be insisting on alternative revenue measures to offset any tax cuts.
At the same time, discussions include a possible reduction in the Super Tax by 1.5% to 2% in the upcoming budget.
Officials say negotiations remain ongoing and are expected to continue even after the budget is presented in parliament, with further revisions likely before final approval.
However, Federal Board of Revenue Chairman Rashid Mahmood Langrial has denied that any such GST increase proposal is currently under consideration.
