Tuesday, May 24, 2011

30 percent GST likely on commercial, industrial power

It has been learnt that the government is considering a proposal to increase the rate of GST from 17 to 30 per cent for industrial and commercial users of electricity in the upcoming budget to raise additional revenue.

Economic experts think that the move will boost inflation because industries will pass on the increase to consumers. It will also increase the cost of production and may lead to closure of some industrial units and this will create more joblessness. Finance ministry and tax officials who have proposed the GST increase estimate that it will yield an additional revenue of about Rs25 billion.

At present the FBR collects about Rs20 billion from GST on industrial and commercial users of electricity.

International Monetary Fund had expressed concern over the government move at a recent meeting in Dubai. “IMF officials informed the Pakistani delegation that the proposed increase in the GST rate for industrial and commercial users of electricity would be inflationary and would have more political cost,” the official said, adding that it would be a difficult decision for the government.

He said the proposal, if approved by the federal cabinet, would affect 4.3 million industrial and commercial units whose production had already declined over the past few years because of power outages. The large-scale manufacturing sector has also been witnessing a negative growth for a few years.