ISLAMABAD: The government on Tuesday announced some major taxation concessions while conceding to demands of industrialists in a move that may undermine its drive to document the economy. But it also slapped federal excise duty on all imported cars including ones used by middle income groups.
Winding up the ongoing debate on budget in the National Assembly, the Minister of State for Revenue Hammad Azhar also announced to withdraw the Income Tax Commissioner’s powers to raid premises of people on suspicion of hoarding foreign currency and the gold.
Azhar also announced to relax the definition of nonresident Pakistani for tax purposes.
The government took these decisions in light of the recommendations of the Senate, background lobbying by those who were affected by the government’s decisions and the debate in the National Assembly.
The National Assembly will approve these measures on Friday along with approval of the Finance Bill 2019. Prime Minister Imran Khan and Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh did not attend the budget session.
It is proposed that any person will be considered resident Pakistani, if he stays in Pakistan for 120 days, said Azhar. In the budget speech, the minister of state had announced that a person will be treated resident Pakistani, if he stays in Pakistan for 90 days. Before the budget, the limit was 181 days.
The government was of the view that people were staying abroad for 180 days just to avoid taxes that they had to pay, if they lived in Pakistan for six months.
Azhar also announced to withdraw a budget proposal that was aimed at allowing the tax officers to conduct raid on residences on suspicion of hoarding of gold and foreign currency. The original decision to give these powers has been termed as draconian by all the segments of the society.
He also proposed to cut the dividend income tax for mutual funds from 25% to 15%.
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In a major concession, the government has partially relaxed the condition of seeking Computerized National Identity Cards (CNIC) from the manufacturers on sales to unregistered persons. On June 11, the step had been taken to discourage the black economy.
Hammad proposed that the manufacturers will not be required to get the CNIC on sales of up to Rs50,000. He further said that no criminal action or tax related penalty will be imposed on industrialists, if they provide wrong CNIC details. He said the industrialists will be entitled to input tax even if the CNIC number turned out to be bogus.
The minister acknowledged that the original decision to get the CNIC from all unregistered persons was necessary for documentation of the economy but argued that it was a difficult measure.
In a major relief to the tobacco growers, Azhar said the tax rate on GLT leaves would be just Rs10 per kilogramme. Earlier the tax rate was proposed to be Rs300 per kg. The government reversed the decision on the intervention of the National Assembly Speaker Asad Qaiser.
Qaiser actively engaged with the Federal Board of Revenue (FBR) to get this tax measure reversed. It will largely benefit tobacco growers of Khyber Pakhtunkhwa province. Azhar said the tobacco manufacturers were recovering this tax from the growers.
The revenue minister also announced to reduce the sales tax rate on domestic sales of textile and leather goods by the registered sales tax persons to 14% from the proposed 15%. Before the budget, the rate for registered retailers of these products was only 6%.
But Azhar did not announce any cut in the standard 17% GST rate that has been proposed to slap at the manufacturing stage and is agitated by the exporters due to apprehension of blocking their refunds.
The government also proposed a relief for the ship breaking industry by allowing them to pay 17% sales tax on the 80% weight of a ship. In another relief measure, the government relaxed the turnover limit for small industrial units setup in residential areas from Rs2 million to Rs3 million annually. If their annual turnover will be above this threshold, these small units will have to get sales tax registrations.
The revenue minister also announced to impose federal excise duty on all types of imported cars aimed at bringing parity with the locally assembled cars. This will be double jeopardy for the imported cars users who are already affected by the steep devaluation of the currency.
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The Finance Bill 2019 has proposed to extend the scope of FED to cars with smaller engine capacity as per the following slabs. The cars from 0 to 1000cc have been slapped with 2.5% FED that will now be applicable on imported cars.
The cars from 1001cc to 2000cc have been hit with 5% FED, which is now extended to imported cars. And the cars from 2001cc and above category have been slapped with 7.5 % FED.
The government also allowed the rental income earners of up to Rs4 million annually to adjust their expenses aimed at lowering their tax burden.
Towards end of his speech, the revenue minister said the government is ready to discuss charter of economy with the Leader of Opposition Shehbaz Sharif, provided that he is serious about it.