The National Assembly passed the Finance Bill 2013, thus giving effect to a one-percent increase in the General Sales Tax from its announcement in the budget speech’s taxation measures on June 13. The GST increase, along with the other taxation measures, was implemented before passage by the National Assembly, and this premature imposition was taken notice of by the Supreme Court. The government was never going to withdraw the increase, Senator Dar saying that his hands were bound, and the state of the economy did not provide many options but to increase the regressive GST. In this he is wrong, as the other option was VAT. A system which would have helped document Pakistan's huge black market economy and increase the minuscule tax base. The increase in the price of fuel due to the GST immediately means that the price of transport, and consequently all goods, will go up, including such basic food items as flour and lentils. The GST increase, as well as the return of the federal excise on several items, means that the budgetary measures just passed will cause a wave of inflation which will hit particularly at the common man, who is already hard-pressed to keep body and soul together. This is made harsher by two additional factors. First, the budget itself afforded no general relief that might counterbalance inflation it would cause. Second, the advent of Ramzan means that the inflation caused by profiteers will mix in with that caused by the GST rate increase, and make the holy month a worry for the people. The inflation that will be caused will also have a negative effect on Eid shopping, which is one of the great economic occasions of the year, especially for the retail sector.

Finance Minister Ishaq Dar said to the National Assembly, while responding to the points raised by the opposition on the Finance Bill, that the new taxes were not imposed to obtain a new IMF package, but the presence of an IMF team in Pakistan certainly does not support this claim, specially as he himself has said that Pakistan will seek a fresh IMF package. The present burden of taxation is overwhelming enough, and thus his saying that no additional tax was being imposed is not particularly impressive for the already hard-pressed citizen. It was also noticeable that there was not even a meaningless gesture towards ending the exemption on taxing agricultural income. If Senator Dar was sincere about widening the tax net, this is the first place to do so, rather than by increasing a consumption tax which will only hurt the poorest of the poor by literally snatching the food out of their mouths.

The government should realise that the GST increase impacts everyone negatively, and is not worth the expenditure made of political capital so soon after its election victory. It would be best, both for it politically, and for the economy, if it was to consider reversing this particular step and implement the bold and necessary measure of imposing VAT.