High-powered think tank to consider reduction in GST rate from 17-15pc

ISLAMABAD: The high-powered think tank constituted by Prime Minister Imran Khan to devise a short-term plan for kick-starting the stagnant economic activities has decided to consider reduction in GST rate from 17 to 15 percent and discuss its details with the FBR.

The think tank also decided to meet on weekly basis before the announcement of the upcoming budget that is expected to be unveiled in the first week of next month, probably on 5th June (Friday) 2020.

"Now there is a need to give an impetus to stimulate economic activities through such an incentive package that reduces the cost of doing business and providing solace to poor segment but also take such fiscal measures that burdened the rich more through direct taxation measures,” one member of high-powered think tank said while talking to The News after the meeting here on Sunday night. He said that the reduction in GST would have to be harmonised both at domestic and import stage. The rate of GST on goods and services that fall into domain of the Centre and provinces respectively, also required to evolve a consensus on single rate.

Another member said that it would not be easy to go ahead on wish list at a time when the country was under the IMF programme.

According to a press statement issued here by the Ministry of Finance on Sunday, Adviser to PM on Finance and Revenue, Dr. Abdul Hafeez Shaikh chaired the third meeting of the think tank here on Sunday to assess the emerging situation from Covid-19 related economic slowdown and its impact on individuals and businesses. The forum has the mandate to provide cognitive support to ongoing response of the federal government apart from extending help in designing new initiatives and mid-course correction of interventions already under execution. The forum has representation form eminent public finance practitioners, financial analysts, bankers, development and monetary economists and academia. The participants included Adviser to PM on Commerce, Finance Secretary, Dr. Ishrat Husain, Shaukat Tareen, Dr Ijaz Nabi, Sultan Ali Allana, Arif Habib and Dr. Waqar Masood.

The Adviser to PM on Finance engaged with all the participants in extensive deliberations, while defining that the focus of the forum would remain on the short-term urgently-needed measures to give a boost to the economy which is under acute stress due to both demand and supply compression. He emphasized the need to learn from international experience in designing fiscal, monetary and other policy responses by the federal as well as provincial governments.

The think tank has devised an "Impact and Urgency Response Matrix" by identifying multiple actionable themes with low, medium and high economic impacts, pitched against short, medium and long time horizons. The participants discussed the evolving economic scenario and identified priority areas which carry the potential of giving the maximum boost to economy through accelerating aggregate demand and easing out supply concerns while also ensuring stability of financial system, which is equally critical in robust recovery of the economy.

Adviser to PM Dr Abdul Hafeez Shaikh emphasized the need for evolving a roadmap for chosen domains, thereby bringing clarity about what needs to be done and who will do it. The need for real-time data and research was highlighted in development of clear roadmap and implementation framework. The forum selected six broad priority domains including boosting social safety nets (Ehsaas and allied initiatives), food security and safety of supply chains, boosting role of banks and financial institutions in appropriately designing incentives for market participants, kick-starting low and medium cost housing projects, making PSDP and Provincial ADPs responsive to labor intensive propositions and business facilitation through fiscal interventions.

The forum decided that fiscal proposals including changes in rates of Sales Tax, refunds etc. would be deliberated with the FBR in detail, so that the next federal budget addresses these burning concerns which are essential to spur consumer spending. Moreover, proposals related for financial and banking matters, including review of payroll refinancing scheme, incentives to banks to finance MFIs and MFB, measures for enhancement of remittances and injecting additional liquidity to commercial banks by cutting CRR/SLR and CCB, were decided to be dealt by the forum in more detail.

Adviser to PM on Finance concluded the session with the consensus decision that detailed roadmaps for chosen six domains would be prepared so that respective ministries are engaged, to create further value in ongoing plans meant for giving economic boost. It was further decided that implementation review of PM Economic Stimulus Package (worth Rs1,240 billion) would be a regular feature in next think tank meetings to ensure value for money apart from smooth service delivery to deserving segments of society.