Govt to unveil Rs650bn mini-budget with focus on tax evasion, higher GST

The government is preparing to introduce a mini-budget aimed at raising approximately Rs650 billion, primarily by intensifying efforts to combat tax evasion and increasing the General Sales Tax (GST) on properties, tractors, and other goods. 

According to a media report, the Federal Board of Revenue (FBR) is expected to implement these measures, though it remains to be seen how much revenue will be generated through enforcement actions and additional taxation.

As part of the agreement with the International Monetary Fund (IMF), Pakistan will increase real estate valuation tables in 42 cities by the end of September 2024. 

The FBR rejected a blanket 1% increase in GST from 18% to 19% but is considering raising GST on specific items, such as tractors. Additionally, the withholding tax rates on property transactions are likely to be reviewed.

The FBR is also planning strict measures against non-filers and under-filers, including freezing bank accounts, suspending utilities, and banning property and vehicle purchases. The FBR is expected to increase the withholding tax rate on property transactions as part of these enforcement efforts.

A high-level briefing by the FBR chairman to the prime minister on the mini-budget was postponed, but it is anticipated to take place soon, with a decision expected before the IMF Executive Board meeting at the end of September. 

In background discussions, tax authorities revealed that only 8% of tax filers—around 45,000 individuals—contribute 92% of the income and sales tax revenue in Pakistan. 

The FBR plans to use data from the National Database and Registration Authority (NADRA) and artificial intelligence (AI) tools to identify under-filers and send them notices, asking them to disclose all transactions in their tax returns for the current fiscal year.