Mini-budget: Senate panel turns down several GST proposals

The opposition and the government joined hands on Thursday to fast track the approval of the Rs375 billion mini-budget by parliament to meet an International Monetary Fund (IMF) deadline.

The opposition-controlled Senate Standing Committee on Finance on Thursday continued discussions on the Supplementary Finance Bill in the absence of the Finance Minister Shaukat Tarin.

Federal Board of Revenue Chairman Dr Mohammad Ashfaq briefly attended the proceedings, chaired by its chairman, Senator Talha Mehmood of the Jamiat Ulema-e-Islam-Fazl (JUI-F). However, the committee continued its deliberations in his absence.

The standing committee of the upper house of parliament supported some budgetary proposals but objected to some others that had an impact on certain classes. The Senate’s recommendations are not binding on the government in case of finance bill.

The committee discussed many important clauses and endorsed amendments to the Customs Act and giving the FBR powers to make changes in the Sales Tax Act’s Third Schedule that deals with imposition of 17% sales tax at the retail price of any good.

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The standing committee also agreed with the proposal to seal the business premises for not integrating with the FBR system subject to the condition that show-cause notice would be served before sealing the premises.

The FBR chairman said the government’s decision to increase annual turnover limit for cottage industry to get registered with the FBR from Rs3 million to Rs10 million in October 2019 was termed wrong by the IMF. “The IMF had demanded to fix it at Rs5 million, but we have proposed it at Rs8 million.”

The committee rejected the proposal for increasing sales tax from 1.5% value of gold and 2% value of diamond plus 3% of making charges, to 17 % on articles of jewellery or parts of precious metal. The FBR member policy said that gold was a luxury good and it should be taxed, accordingly.

The standing committee also unanimously rejected the proposal to impose 17% GST on matchbox. It also unanimously rejected the proposed 17% sales tax on formula milk and other products of a common good, stating that such a sales tax affecting the growth and health of infants would bring shame to the country at the national level.

“The tax on infant formula milk is against the prime minister’s vision to end stunted growth among the children,” said Senator Kamil Ali Agha. “We are against the policy of the government that on the one hand promotes health card for both rich and poor but on the other, it is taxing the goods used by the poor,” Agha added.

The committee proposed non-imposition of tax on up to Rs25,000 worth of imported bicycles and imposition of duty on more than 25,000 imported bicycles. The government has proposed 17% sales tax on bicycles.

The 17% GST on goods for donation to hospitals, educational institutions and other entities are also being imposed, the FBR Member informed the committee. The committee rejected the proposal to impose a 17% tax on donations.

Senator Sherry Rehman, while expressing her reservations, said the people will stop donating goods to hospitals, schools and other institutions. The committee also rejected the proposal to impose sales tax on contraceptives.