Govt to end large-scale tax exemptions on 7,000 items in budget

The federal government has planned to end large-scale tax exemptions in the upcoming federal budget for the fiscal year 2024-25. 

As per a news report, this includes removing GST exemptions on approximately 7,000 items and eliminating exemptions and concessions on income tax and customs duty.

The National Economic Survey for 2024-25 highlighted details regarding these tax exemptions. Tax exemptions of Rs 3,979 billion, marking 73% increase, were granted in the current fiscal year across income tax, sales tax, and customs duty. 

This issue has been a contentious point in ongoing negotiations between Pakistan and the International Monetary Fund (IMF).

The Economic Survey of Pakistan 2024 revealed that despite multiple rounds of withdrawal of tax concessions and exemptions, the overall amount continues to rise annually. These tax exemptions, approved over the years, are protected under existing tax laws.

Losses from reductions in tax liabilities amounted to Rs4.43 billion, lower than the previous year. Exemptions from specific provisions cost another Rs62 billion, also lower than last year. 

Income tax exemptions availed by the government increased by 111% to Rs57 billion, benefiting judges of superior courts, the President of Pakistan, military generals, federal bureaucrats, pensioners, and army institutions.

Customs duty exemptions cost Rs543 billion, up from Rs522 billion the previous year, reflecting a 4% increase. The government’s move to end these exemptions aims to address the fiscal challenges and streamline tax policies.