FBR considers raising GST rates on essential items for 2025-26 budget: report

The Federal Board of Revenue (FBR) is considering a series of tax hikes in the upcoming 2025-26 budget, with a focus on increasing General Sales Tax (GST) rates for a range of goods, including secondhand clothing, footwear, fertiliser inputs, and select motor vehicles, The News reported. 

Currently, reduced GST rates are applied to certain goods, and the FBR is considering raising the tax rate from 5% to 10% for some of these items. Among those on the list are secondhand and worn clothing and footwear, as well as natural gas supplied to fertiliser plants for use in manufacturing. 

The tax on natural gas, currently at 5%, may be increased to 10%, impacting the fertiliser sector. Similarly, phosphoric acid used in the production of DAP fertiliser, which is currently taxed at 5%, could also see a hike.

The FBR is also reviewing the tax rates for imported cinematographic equipment, which is currently subject to a 5% GST rate, potentially raising this to 10%. 

In the automotive sector, the government is considering an increase in GST from 12.5% to 15% on locally manufactured or assembled cars with cylinder capacities of up to 850cc. There may also be slight increases in the tax rates on hybrid electric vehicles and other locally manufactured vehicles.

Other proposed changes include adjustments to the GST on jewellery, raw materials for pharmaceuticals, and electric vehicles (EVs). Specifically, the tax on locally manufactured jewellery may increase from 3% to a higher rate, while the 12.5% tax on electric vehicles with a 50 kWh battery may be revised. Furthermore, the tax on imported electric transport buses may also rise.

For the fertiliser industry, DAP fertiliser’s GST rate, currently at 5%, is under review for an increase to 10%, which would significantly impact the agricultural sector. Additionally, the government is considering higher GST rates on various stationery items, currently taxed at 10%.

These tax proposals will be finalized during the upcoming visit of the IMF mission, scheduled for May 14 to 22. The mission’s visit could remain in person or shift to a virtual format, depending on circumstances.