Senate body asks govt to withdraw GST on food items, medicines

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ISLAMABAD: Finalising its recommendations, the Senate Standing Committee on Finance has unanimously asked the government to withdraw sales tax on food items, medicine and education-related stationery material, as proposed in the Reformed General Sales Tax Bill 2010.
The committee also asked the government that flood surcharge should not be imposed on people or firms having annual income less than Rs 500,000.
The committee said that all the above-mentioned items were part and parcel of life and imposition of any new tax on them would further increase their prices and hit the poor segment of the society, which was already burdened by inflation.
The members of the body belonging to MQM were absent from the meeting on the second day running, but they sent a letter to the committee asking the members to reject the bill, as it would raise inflation and poverty in the country.
PPP Senator Islamuddin Shaikh, who was chairing the meeting, read out the letter before the committee members. The committee also asked the government to review some of the penalties proposed in the bill for tax evaders, saying some of the penalties were too harsh for small offences. Earlier, Federal Minister for Finance Hafeez Shaikh said there would be no immediate negative effect on the country’s economy if IMF refused to provide money, but it would have far-reaching impact if the country did not reform its tax system and made difficult decisions.
“If Pakistan does not reform its tax system and make difficult decisions, it will have grave impact on our economic future and affect our international trade.
When we violate our international commitments and agreements, our credibility will be zero and it will have negative impacts. So the issue is not the IMF tranche… we have to make difficult decisions, not for others, but for ourselves, our country, as we have to exist in this world”, Hafeez said while arguing in favour of the GST bill.
The minister said GST would not raise inflation. “At present GST is between 17 to 25 percent and after the reformed GST, it will be reduced to 15 percent. The offset, caused by the cut in the tax, will be compensated by broadening the tax base”, the minister argued.
Shaikh said the reformed GST was introduced at a difficult stage.
“Everyone knows we cannot afford commodities’ financing, heavy subsidies, cannot reduce defence budget owing to security reasons and need money for debt services.”