IMF Rejects Tax Exemption For Student Stationery Items

The federal government has informed a Senate committee that the International Monetary Fund (IMF) declined Pakistan’s proposal to exempt stationery items commonly used by students, including pencils and exercise books, from the sales tax regime.

During proceedings of the Senate Standing Committee on Finance, Dr Najeeb Memon, Director General of the Tax Policy Office, stated that the IMF had not agreed to grant sales tax relief to education-related stationery products and opposed expanding tax exemptions for the education sector. He further indicated that the government could not extend exemptions across all categories of essential goods.

The committee, chaired by Saleem Mandviwalla, is currently conducting a detailed review of the Finance Bill 2026-27.

The government had imposed an 18% sales tax in the previous federal budget on a range of student-use stationery products, including pencils, coloured pencils, geometry boxes, sharpeners, exercise books, glues, and retail-packaged adhesives. Despite ongoing concerns regarding the cost burden on students and educational institutions, the Finance Bill 2026-27 does not propose withdrawal of the tax.

The continuation of the tax has drawn attention because it coincides with the government’s previously announced education emergency initiative led by Shehbaz Sharif. While no relief has been proposed for stationery products, the budget does provide tax and duty exemptions for contraceptive products and sanitary pads.

Separately, Muhammad Aurangzeb rejected a proposal seeking a five-percentage-point reduction in Federal Excise Duty on beverages.

The proposal was presented by Dr Faisal Hashmi, who argued that the reduction could generate an additional Rs8 billion in revenue compared to the current fiscal year's collections. However, the finance minister declined to support the recommendation.

Aurangzeb also dismissed calls for additional tax concessions for exporters, stating that substantial relief had already been provided through reductions in advance income tax, the removal of super tax on exports, and the continuation of export financing facilities at an interest rate of 4.5%.

During the discussions, Mohsin Aziz of Pakistan Tehreek-e-Insaf argued that the government should have increased the fixed income tax rate for exporters rather than transitioning them to the normal tax regime.

He cautioned that Pakistan’s export performance could weaken further in the upcoming fiscal year if policies perceived as unfavourable to businesses continue to remain in place.

Meanwhile, the National Assembly Standing Committee on Finance, chaired by Syed Naveed Qamar, has also commenced its examination of the Finance Bill 2026-27.

Unlike the Senate committee, whose recommendations carry advisory status only, the National Assembly committee possesses the authority to approve, amend, or reject provisions contained within the Finance Bill before its final passage.