ISLAMABAD Contrary to Governments claims that Value Added Tax will not increase inflation, it is feared that inflation will go up by around five percent in the next fiscal year, as VAT will be levied on food and other items, TheNation reliably learnt on Friday. As the Government is mulling to replace General Sales Tax (GST) with Value Added Tax (VAT) from the start of the next fiscal year at the rate of 15 percent and its total impact will be 21 percent on the consumers, as it will cover the total supply chain till end consumers. Therefore, the inflation rate would go up due to the imposition of VAT in the coming fiscal year, as manufacturers and retailers would pass VAT effects to the consumers. However, on the other hand Chairman Federal Board of Revenue (FBR) Sohail Ahmad in his several press briefings had told the media that VAT would increase the inflation rate by only two percent but sources in FBR informed that it would go up by around five percent in the upcoming financial year, which would create further problems for the inflation-stricken masses. The Government is considering imposing VAT on goods including food commodities and their prices would be surged in the coming financial year. VAT will be imposed on several food items including packed milk, butter, chicken and eggs. It may be mentioned here that Government has kept the inflation rate at 8 percent for 2010-11, which is still hovering around 13 percent, and after imposing VAT it will be difficult for it to achieve the said target. Due to fear of soaring inflation due to imposition of VAT, Senate Standing Committee on Finance had already asked the Government to start VAT rate from 12 percent.