IMF opposes sales tax exemption for education-related stationery

The government informed a Senate panel on Tuesday that the International Monetary Fund (IMF) had rejected its proposal to exempt pencils, exercise books and other stationery items used by students from sales tax.

According to a news report, Director General of the Tax Policy Office Dr Najeeb Memon told the Senate Standing Committee on Finance that the IMF had opposed tax exemptions for the education sector and had not agreed to keep stationery products outside the sales tax regime.

He said exemptions could not be extended to all essential goods.

The committee, chaired by Pakistan Peoples Party Senator Saleem Mandviwalla, is reviewing the Finance Bill 2026-27. 

The government imposed an 18% sales tax in the previous budget on pencils, including coloured pencils, geometry boxes, pencil sharpeners, exercise books, glues and adhesives packaged for retail sale for student use.

The Finance Bill 2026-27 does not propose withdrawing the tax on these products, despite Prime Minister Shehbaz Sharif’s declaration of an education emergency. The budget has, however, proposed tax and duty exemptions for contraceptives and sanitary pads.

Finance Minister Muhammad Aurangzeb, who attended meetings of both parliamentary committees, also rejected a proposal to reduce the federal excise duty on beverages by five percentage points.

Dr Faisal Hashmi, representing the beverage industry, proposed the reduction in return for an increase of Rs8 billion in revenue over the current year’s collection. The finance minister did not accept the proposal.

Aurangzeb also ruled out further tax reductions for exporters, saying the government had already provided relief by lowering advance income tax, abolishing the super tax on exports and maintaining financing for exporters at an interest rate of 4.5%.

Pakistan Tehreek-e-Insaf Senator Mohsin Aziz said the government should have increased the fixed income tax rate for exporters instead of shifting them to the normal tax regime.

He warned that exports could decline further in the next fiscal year because government policies remained unfavourable for businesses.

The National Assembly Standing Committee on Finance, headed by PPP’s Syed Naveed Qamar, has also begun its review of the bill.

Unlike the Senate committee, whose budget recommendations are not binding, the National Assembly committee has the authority to approve or reject proposals contained in the Finance Bill.