Finance Minister Shaukat Tarin on Thursday introduced two bills in the National Assembly to give effect to the Rs375 billion mini-budget and handover absolute autonomy to the central bank, which the opposition terms will make Pakistan economically a slave of the west and its institutions.
Amid strong protest by the opposition parties, Tarin proposed amendments in income tax, sales tax and federal excise laws to impose Rs375 billion taxation measures. Where the government withdrew the Rs343 billion sales tax exemptions that will affect every segment of the society, it has proposed income tax exemption to those richest persons who own real estate investment trusts (REITs).
The introduction of both the bills in the National Assembly marks the first serious step towards meeting the International Monetary Fund’s conditions for approval of both the pieces of legislation before January 12.
Out of Rs375 billion, the Rs343 billion worth of sales tax exemptions are proposed to be withdrawn. The Rs7 billion income tax measures have been taken in the shape of increasing the income tax rate on telephone calls by 50% and enhancing advance income tax on registration of cars by 100%. Up to Rs3 million tax has also been slapped on foreign produced dramas.
Read: ‘Mini-budget’ tabled in NA amid ruckus
In addition to that, the government has also proposed to increase federal excise duties on purchase of locally made and imported cars of 1,000cc and above categories to raise another roughly Rs25 billion in revenues. But a presentation given to the cabinet showed that the revenue impact of federal excise duty will be over Rs6.5 billion.
Both the SBP Amendment Bill, 2021 and Finance Supplementary Bill 2021 have been introduced in the National Assembly for the sake of revival of the stalled $6 billion IMF programme. Tarin told The Express Tribune that the IMF board meeting might be delayed for a few days due to the process involved in securing approval of both the bills.
After December 1971 (creation of Bangladesh), Pakistan has today economically surrendered before the IMF and the countries that are controlling it, Khawaja Mohammad Asif, the senior leader of the PML-N said while reacting to the introduction of both the bills in the house.
Asif said that the government has effectively given the control of the SBP to the IMF with the introduction of the new bill. “Do not sell Pakistan,” thundered Khawaja Asif while equating the government’s bills with the sub-continent's takeover through East India Company by the United Kingdom in the 17th century.
However, his party’s opposition leader Shehbaz Sharif was missing from the National Assembly, like Prime Minister Imran Khan.
While addressing a news conference, Finance Minister Shaukat Tarin rejected these allegations and said that giving autonomy to the SBP was part of the Pakistan Tehreek-e-Insaf’s election manifesto. Tarin said that the IMF was of the view that Pakistan had badly treated the SBP in the past and there was a need to give it autonomy.
“In case the SBP misused its autonomy, the federal government can make amendments anytime in the SBP law through simple majority,” Tarin said while responding to a question over giving absolute autonomy to the SBP.
Tarin said that Rs343 billion sales tax exemptions have been proposed to be withdrawn. These include Rs160 billion pharmaceutical related sales tax exemptions, Rs112 billion are related to capital machinery imports and Rs71 billion were related to the people. However, the exemptions that would really impact people only amount to Rs2 billion, which would not unleash inflation, the finance minister claimed.
He said that Rs272 billion tax exemptions were related to machinery and pharmaceuticals, which are refundable and adjustable. The purpose is to ensure documentation and those who would not document themselves will not be entitled to refunds, Tarin said.
Cars to become expensive
The government has proposed to increase sales tax from 12.5% to 17% on cars of above 850cc engines. The sales tax on HEVs up-to 1800 CC engines has been proposed to increase from 8.5% to 12.5%. The sales Tax on Electric Vehicles has been increased from 5% to 17%
Similarly, the government has significantly increased the federal excise duty rates on locally produced and imported cars. On imported cars of 1001 – 1799cc engines, the FED has been doubled from 5% to 10%, on 1800 – 3000cc engines, the rates have been increased from 25% to 30% and from 3001cc engines and above, these have increased from 30% to 40%.
Likewise, the FED has been increased on local motor cars of 1001 – 2000cc engines from 2.5% to 5%, 2001cc and above engines, these are increased from 5% to 10%. The FED on imported (4x4) double cabin pick-ups has been increased from 25% to 30% and on local (4x4) double cabin pickups, the FED has increased from 7.5% to 10%.
The government has also 100% increased the advance tax on registration of new cars. On cars of 1000cc engines, the advance income tax rate is increased from Rs50,000 to Rs100,000, on 1000cc to 2000cc engines it is increased from Rs100,000 to Rs200,000 and for 2000cc or higher engines, the tax is increased from Rs200,000 to Rs400,000.
The government has also proposed sales taxes on 144 goods and their details show that once passed by the National Assembly, it could increase malnutrition and stunting in the country because of the increase in cost of goods that were critical for nourishment.
The zero-rating available on imports and supplies of goods and raw materials for preparations of milk for infants is proposed to be withdrawn and be taxed at 17%. Similarly, preparations suitable for infants that are currently exempted will be taxed at 17%. The net revenue from taxing infant milk is estimated to be over Rs15 billion.
The raw materials for pharmaceutical products for revenue are proposed to be taxed at 17%. Breads prepared in bakeries, restaurants, food chains and shops will be taxed at 17% rate for nearly Rs5 billion every year. Nan, chapati and sheermal prepared at tandoors will remain exempted. Cooked food served in messes will be taxed at 17% rate.
The premixes of growth stunting will be taxed at 17%. Tax on prepared foodstuff and sweetmeats supplied by restaurants, bakeries, caterers and sweetmeat shops will increase from 7.5% to 17%, making the business expensive.
Imported edible vegetables will be taxed to generate Rs7 billion. Red chilies not sold in retail packaging will be taxed. Imported cereals and products of the milling industry will be taxed at 17%.
Read more: 17% GST on 144 items to yield Rs360 billion
Match boxes will also be taxed at 17% rate. Whey excluding those sold in retail packing under a brand name and sausages and similar products of poultry meat or meat offal excluding those sold in retail packing under a brand name or trademark are proposed to be taxed at 17%.
The tax rate on flavored milk sold in retail packing under a brand name will be increased from 10% to 17%. The rates of yogurt, cheese, butter, cream, desi ghee, whey, milk and cream sold in retail packing under a brand name will go up from 10% to 17%.
Machinery and equipment related to dairy products will now be taxed at 17% as against the existing 5%. Mobile phones will be taxed at the standard 17% rate as against the fixed rate.
Supplies made from retail outlets as are integrated with the FBR’s computerised system that are currently taxed at 10% will now be taxed at 12%. The tax rate of frozen prepared or preserved sausages will go up from 8% to 17%.
Seeds, fruit and spores of a kind used for sowing are proposed to be taxed for Rs4 billion. The 17% GST on Cinchona bark will fetch a minimum of Rs4 billion every year. The import of sugarcane will also attract 17% tax.
The import of newsprint, newspapers, journals, periodicals, books but excluding directories will be taxed at 17% for Rs1.5 billion every year. However, the local supply of newspapers will remain exempted.
Promotional and advertising material will be taxed at 17% rate.
Goods imported by or donated to federal and provincial hospitals will be taxed at 17% rate. Similarly, goods supplied to hospitals run by the federal or provincial governments will be taxed for Rs1.5 billion every year.
Goods imported by various agencies of the UN, diplomats, and diplomatic missions will also be taxed at the rate of 17%. The annual revenue potential at current import volume is Rs300 million. Goods received as a gift or donation from a foreign government or organisation will be taxed at 17%.
The import of all goods received, in the event of a natural disaster will also be subject to tax. Articles imported through post as unsolicited gifts will be subject to 17% tax.
Imported samples, contraceptives and accessories will be taxed for Rs200 million every year. Sewing machines will be taxed at 17% rate. The import of live animals and live poultry will be taxed at 17% for Rs700 million every year but its local supply will remain exempted.
The meat of bovine animals, sheep and goat will be taxed but their local supply will remain exempted. The import of fish and crustaceans excluding live fish will be taxed but their local supply will remain exempted. Eggs including eggs for hatching will be taxed for Rs2 billion annually but their local supply will remain exempted.
The import of live plants will be taxed and their local supply will remain exempted. Uncooked poultry meat is on the list to be taxed for a minimum of Rs2 billion.
Cotton seed is proposed to be taxed at 17% GST for Rs3 billion. Iodized salt will be taxed for Rs300 million annually. The rate on ingredients of poultry feed, cattle feed, except soya bean meal will go up from 10% to 17%.
Taxes on tillage and seedbed preparation equipment, seeding and planting, irrigation, drainage, and agrochemical preparation, harvesting, threshing and storage equipment and post-harvest handling equipment will go up from 5% to 17%.
The GST on machinery for the poultry sector will go up from 7% to 17%, multimedia projects from 10% to 17% and lithium iron batteries will increase from 12% to 17%. The GST on silver and gold will increase from 1% to 17% and articles of jewelry to 17%.
Read Also: Pakistan, India nearing deal on Afghan wheat transit
Green house farming equipment will be taxed for Rs5.5 billion revenue. Fans for dairy farms for Rs500 million, fish feed, bovine semen, preparations for making animal feed will be taxed for Rs4 billion. The micro feeder equipment, plant and machinery imported by green field industries will be subjected to the new taxation.
Sprinkler, drip and spray pumps equipment is proposed to be taxed. Raw cotton, single cylinder agriculture diesel engines will be taxed. Sunflower and canola hybrid seeds meant for sowing will be taxed.
Combined harvesters up to five years old to face 17% GST, oil cake and solid residue will have 17% tax and to generate minimum Rs5 billion revenue. The local supply of locally produced crude vegetable oil will be taxed for Rs2 billion.
The tax rate on import of oilseeds meant for sowing will be increased from 5% to 17%.
Machinery and equipment for BMR of coal firing system, gas processing plants and oil and gas field prospecting, plant machinery, equipment for mine construction or extraction phase, coal mining machinery, and equipment imported for the Thar Coal Field will attract 17% GST rate.
The machinery, equipment and spares for BMR or expansion projects for power generation under an agreement with the government of Pakistan will be taxed for Rs14 billion. Machinery, equipment and spares for BMR or expansion projects for power generation will also be subject to 17% GST for Rs42 billion.
Similarly, machinery, equipment and spares for BMR or expansion projects for power generation through nuclear or renewable energy resources will be taxed for Rs6 billion.
Effluent treatment plants, items for use with solar energy will be taxed for Rs12 billion.
The rate of tax on import of plant and machinery having no compatible local substitutes will be increased from 10% to 17% to fetch an additional revenue of Rs12 billion.
Even the import of POS machines will be taxed at 17%. The import of plant and machinery for the manufacturing of cell phones by local manufacturers will be subjected to the 17% GST. Personal computers, laptop computers, notebooks -- whether or not incorporating multimedia kits -- will also face the new taxation.
The cottage industry’s annual turnover limit has been reduced from Rs10 million to Rs8 million and after that it will meet the status of a company or an association of persons. The criteria of advanced tax collected on sales to wholesalers, distributors and retailers have been included for registration as tier-1 retailers.
According to another proposal, the shopkeeper will be responsible if an incorrect CNIC number is provided by the seller. It has proposed to delete the third proviso in Section 23 g.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ