A GST Overview


Followed by vociferous objections and emphatic ‘no-confidence’ votes put forward by the blatant opposition and sporadic allies, the government called the RGST bill and the flood surcharge bill in to the parliament on Friday.

The initiation of the bill reforms dates back to the Pakistan Development Forum organized in order to draw attention of international donors towards the re-construction of the flood-hit areas of the country.

Features of the GST:

1. Imposition of a uniform GST of 15% on sale and purchase of goods as compared to the present one which is 17% to 25%.

2.Special exemptions and subsidies have been removed on goods related to textiles,carpets,plastics and miscellaneous.

3.The flood surcharge connotes and additional pay of 10% on income tax for the year 2011.

4.Increase in the rate of special excise duty to 2% which was 1% formerly.

Major Objections on RGST:

The foremost point of disapproval between the PPP and the other parties is the tax-collection system operational in the country.The annual corruption reports of the FBR and excise cells working as federal and provincial revenue systems respectively encourage dissatisfaction and disagreement.

The bill has been entitled “anti-people” and “IMF-style designated”. It is believed to create a turmoil of price-hike for the middle-class and poorly of the country. Furthermore, the opposition complains of not building the required confidence between the leading party and the subservient parties.

  • faizan

    Unlike the old GST, the RGST will not be imposed just on the final price of a product; rather, a certain amount of tax will be added at each stage of production.

    For example if a supplier sells raw material worth Rs100 to a manufacturer, he would charge Rs115 instead of Rs100, and remit the extra Rs15 as tax.

    After manufacturing the product, the manufacturer, for example, adds a profit of Rs2o. The product now costs Rs135, but instead of selling it to the retailer at Rs135, the manufacturer will add another 15 per cent to the value addition of Rs20 which will bring up the cost to Rs138. The extra Rs3 will be remitted as tax.

    Finally, the retailer will add his profit. Assuming that is another Rs20, the price of the product is now up to Rs158 again. Instead of selling it at Rs158, the retailer will add yet another 15 per cent of the value addition and the final cost will be Rs161. The retailer will then pay the added tax back to the treasury.

    Your 1st point suggests that tax has been lowered to Uniform 15% from 17% to 25%