ISLAMABAD: The Ministry of Finance Tuesday informed the Senate Committee on Finance the IMF did not allow the government to slash the General Sales Tax (GST) on stationery items in the budget. The Senate Committee on Finance also reviewed the government’s tariff rationalisation plan, which is expected to result in a revenue loss of approximately Rs143 billion.
Separate meetings of National Assembly and Senate Standing Committees on Finance were held at the Parliament House on Tuesday to examine various provisions of Finance Bill 2026-27. The NA committee rejected a proposal allowing the Federal Board of Revenue (FBR) to blacklist businesses that fail to install electronic monitoring systems, but it did permit the FBR to suspend the registrations of such units.
Najeeb Memoon, Director General of Tax Policy Office at the Ministry of Finance, told the Senate committee the IMF had not agreed to tax relief for stationery products. He defended higher taxes on sugary drinks, noting many countries impose substantially higher taxes on such beverages.
Briefing the Senate committee, CommercAAe Secretary Jawad Paul said the government’s tariff rationalisation plan would reduce customs and regulatory duties, lowering tax revenues by around Rs143.4 billion. According to him, the government plans to cap customs duties at 50 percent and gradually reduce additional customs duties from 6 percent to 4 percent, 4 percent to 2 percent and 2 percent to zero in most cases. However, some products will continue to face an additional customs duty of 2 percent.
The government also plans to reduce regulatory duties by setting a maximum rate of 20 percent. Duties currently above that level will be cut to 20 percent, while rates at or below 20 percent will generally be reduced by 20 percent. Regulatory duties of 1 percent, 2 percent and 2.5 percent are proposed to be eliminated altogether. Paul added certain export-oriented and strategic sectors would remain exempt from these reductions.
During the Senate committee meeting, industry representatives voiced concerns over several proposed tax measures. Representatives of beverage industry urged the government to lower taxes on sugary drinks, while stationery manufacturers requested relief from sales tax, arguing the price of a Rs10 pencil had risen to Rs20.
Exporters also expressed concern over transition from Final Tax Regime to Normal Tax Regime. Exporters’ representative Javed Bilwani told lawmakers tax refunds were becoming delayed and that new businesses were being discouraged from entering export markets.
Senator Talha Mahmood argued exporters should be given greater flexibility and warned that increased taxation and audit requirements could negatively affect exports and foreign exchange earnings.
Finance Minister Muhammad Aurangzeb informed the committee extensive consultations had been conducted during budget preparation and noted the government had already abolished Super Tax on exporters. “Exporters still receive financing at a concessional rate of 4.5 percent, despite policy rate being 11.5 percent,” he added.
The Senate committee also discussed public complaints regarding fixed charges on electricity bills. Senator Kamil Ali Agha called for their abolition, describing them as an unbearable burden on consumers. He cited cases where fixed charges exceeded actual electricity consumption costs, noting that consumers using around 100 units were effectively paying bills similar to those consuming 400 units.
During the National Assembly’s committee meeting, PPP lawmakers Hina Rabbani Khar and Sharmila Farooqi raised questions about the Finance Bill and called for a review of FBR’s powers. FBR Member Dr Hamid Ateeq Sarwar defended the institution, stating it currently collects nearly Rs40 billion in taxes daily. While acknowledging corruption still exists within tax authority, he urged lawmakers not to undermine the institution, emphasizing all taxes are imposed with parliamentary approval.
He informed lawmakers only about 37,000 retailers have so far been registered as Tier-1 retailers connected to Point of Sale (POS) system. Under the proposed amendments to Section 43A of the Sales Tax Act, requirement for debit and credit card facilities as a condition for POS registration will be removed. Officials said the change could result in around 500 already registered retailers being excluded from POS regime, while government aims to bring 100,000 Tier-1 retailers into the system during the next fiscal year. Tier-1 retailers include large retail chains, stores in major shopping malls, and businesses with annual sales exceeding Rs200 million.
The committee approved amendments authorising FBR to deregister inactive retailers from POS system. Another proposal included in Finance Bill would allow prices of items listed in Third Schedule of the Sales Tax Act to be determined through third-party mechanisms or by Pakistan Bureau of Statistics (PBS) for taxation purposes.
Finance Secretary Imdadullah Bosal told the committee improved cash liquidity would help ensure smooth transfer of provincial shares under the National Finance Commission (NFC) Award. The committee approved several amendments to the Customs Act. One proposal seeks to increase penalties on terminal operators for delays in cargo clearance. Although, the FBR initially proposed raising fine from Rs500,000 to Rs10 million, lawmakers considered amount excessive, leading officials to agree to a revised penalty of Rs5 million.
The committee approved amendments requiring suspicious or non-duty-paid vehicles seized by police to be handed over to the FBR after registration of a First Information Report (FIR).
Another amendment would permit the FBR to rent private warehouses through Public Procurement Regulatory Authority (PPRA) procedures for storing and auctioning confiscated goods, due to limited government warehouse capacity.
