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GENERAL SALES TAX (GST)

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GENERAL SALES TAX (GST) The General Sales Tax was introduced as a federal tax by the first administration (1990-1993) of Prime Minister Mian Nawaz Sharif in the budget presented to the National Assembly in June 1991 The GST was a variant on the value-added tax (VAT) that had become the mainstay of the revenue raised by many developing countries The authorities in Pakistan determined that it would have been premature to impose the VAT in the country, since that would have required that the transactions covered by the tax be fully documented For cultural reasons-and also because of the deep distrust of tax administration prevalent in the country-a very large number of transactions were not formally recorded The rationalization of the GST so that it included only a few rates and its extension to cover retail trade were among the many conditions agreed to by the government of Prime Minister Benazir Bhutto and Shahid Javed Burki, the caretaker finance advisor with the International Monetary Fund (IMF), in return for Pakistan’s access to the IMF’s Standby Program In March 1997, the government of Mian Nawaz Sharif extended the GST to retail trade as a part of the structural-reform package it presented to the IMF so as to qualify for the IMF Extended Structural Adjustment Facility The scope and coverage of the tax were expanded by the government of President Pervez Musharraf as a part of the program of economic stabilization agreed to with the International Monetary Fund in 2000

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