ISLAMABAD, June 20: The government has assured the business community of lowering General Sales Tax (GST) rates to encourage more private sector investment in the country.

Informed sources told Dawn here on Friday that President Gen Pervez Musharraf has directed Finance Minister Shaukat Aziz before leaving for four-nation tours to look into the possibility of reducing GST rates.

However, the president was told that there will be a sharp reaction by the IMF in case these GST rates were reduced and that the issue needed to be first taken up with the Fund officials to have their favourable response.

The sources said that the president called for having minimum taxes and has assured the business community on more than one occasions recently that GST rates will gradually be reduced. The president admitted that 15 per cent GST rate was on the higher side.

The sources said that after removing excise duty on cables & wires and paper & paper board, it was also being considered to do away with this duty on paints with a view to promoting the construction industry.

Mr Sohail Altaf, Chairman Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Islamabad office when contacted confirmed that promises have been made by the highest authority to reduce GST rates to facilitate more private sector activities.

“But it might be difficult for the government to oblige us on the issue of reducing GST rates unless the ongoing three-year Poverty Reduction Growth Facility (PRGF) programme with the IMF ends in November 2004,” he said.

Nevertheless, Altaf said that the government was sympathetic to look into the demand of reducing GST rates. “It depends how the government takes up the issue with the IMF,” he said adding that since the government has largely fulfilled the IMF criteria during the last three years, it could convince the Fund authorities to get the GST rates reduced.

He was hopeful that GST rates would be reduced by the present government after doing a favour to exporters by revising DTRE rules. He said the initial utilization period has been enhanced from 12 months to 18 months and the scope of DTRE extended to cover supplies against international tenders.

Responding to a question the chairman of FPCCI Islamabad office said that a number of irritants still existed to do business in Pakistan. He said that one-window facility needed to be offered to have electricity, gas, telephone and water connections quickly with a view to promoting industrialization in the country.

“The cost of doing business is still high and the government should look into the issue seriously by reducing GST rates and interest rates of the banks,” he added.