Under IMF conditions, FBR will replace GST with VAT

The proposed reform plan said that VAT needs to be implemented within 2 to 4 years.

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  • FBR will eventually move towards full implementation of VAT across all sectors that are contributing to the country’s taxation system.
  • FBR will conduct assessment surveys of different industrial/business segments under the proposed reform plan.

GST

In order to assure effective collection of real due taxes, it has been decided that the Federal Board of Revenue will replace the existing General Sales Tax (GST) with Values Added Tax (VAT).

On Wednesday, top FBR representatives confirmed that:

“In this regard, the FBR will conduct assessment surveys of different industrial/business segments under proposed reform plan”.

Shabbar Zaidi, Chairman of the Federal Board of Revenue, stated that FBR would eventually move towards full implementation of VAT across all sectors for contributing to the country’s taxation system.

He further added that CNIC terms and condition was a move towards executing VAT and Federal Board of Revenue stood firm on it. He said that the establishment of PRA was delayed for some time but a plan to replace GST with VAT was part of the overall reform agenda of the FBR.

In 2011, the FBR struggled a lot to put VAT in place, but it resulted in the suspension of IMF sponsored programs during the PPP-led regime. Therefore, it would be a great challenge for the PTI-led regime whether they will be able to face resistance in the way of replacing GST with VAT.

Agreement b/w government and traders:

The government and traders have recently struck an agreement but its execution is already facing various kinds of practical problems, as the traders do not want to come in tax net at any cost. The proposed reform plan predicted that VAT needs to be implemented within the next 2 to 4 years.

It is proposed that the Director General (DG) Input-Output Coefficient Organization (IOCO-IR) will be re-designated as DG IOCO and VAT Compliance-Functional lead for VAT implementation.

Guidelines:

The guidelines for VAT implementation also predicted that it would be gradually implemented across various segments commencing with Third Schedule (retail price items) products and progressively absorbing complexed value chain products.


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