The International Monetary Fund has rejected a formal request from Pakistan’s Ministry of Energy to reduce sales tax on electricity bills, citing liabilities under the existing loan programme, Express News reported.
The decision deals a blow to the government’s efforts to ease financial pressures on consumers.
The Ministry of Energy had requested IMF approval to reduce sales tax rates, arguing that this would provide much-needed relief to electricity consumers.
However, IMF officials stressed that granting exemptions or reductions on new taxes would jeopardize Pakistan’s ability to achieve tax collection targets.
Currently, the 18% GST is charged twice on the electricity bill, once on the total bill amount and again on fuel cost adjustments. The IMF insists that these taxes remain intact to ensure compliance with fiscal targets under the loan agreement.
In a separate move to comply with International Monetary Fund conditions, the federal government agreed to impose a tax on power plants owned by it. The tax will be implemented gradually to mitigate the significant decline in gas supplies to these facilities.
The report indicates that the International Monetary Fund showed flexibility regarding cutting off gas from power plants, but stressed that the tax must be imposed before the next financing tranche is launched.
This development highlights the challenges the government faces in balancing economic reforms and public relief amid increasing pressure from international creditors.