ISLAMABAD: The federal government on Thursday presented the Finance (Supplementary) Bill 2021, termed as the mini budget by opposition parties, in the National Assembly (NA).
Finance Minister Shaukat Tarin while addressing a press conference following the NA session said that tax exemptions worth Rs343 billion out of Rs700 billion recommended by the International Monetary Fund (IMF) given to various sectors will be withdrawn under the supplementary bill.
“The common man will have to bear a burden of only Rs2 billion taxes,” he said, adding that items which will affect the common man include personal computers, sewing machines, matches, iodised salt and red pepper.
He also claimed that there is no such thing as a storm of inflation hitting the masses by taking these measures.
“We have not taxed local food items like wheat and its products, rice, vegetables, pulses, sugarcane, poultry and meat, agricultural tractors, fertilisers, pesticides, old clothes, and cinema equipment,” Tarin said, adding that the government had only proposed taxes on luxury items which it has nothing to do with the IMF.
“The taxes on luxury items have been proposed in view of the trade deficit,” he further added.
According to the details, besides withdrawing exemptions, the bill proposes the imposition of 17 per cent tax on nearly 150 items, 140 of which are essential consumable and industrial goods.
The session was adjourned until Friday for debate and voting.
Taxes on the auto industry
According to the details of the bill, taxes have been proposed to be increased from 5 to 10pc through enhancing Federal Excise Duty (FED) on imported vehicles having the engine capacity of 1,000cc to 1,799cc from 5pc to 10pc, on 1,800cc to 3,000cc vehicles from 25pc to 30pc and on those higher than 3,000cc from 30pc to 40pc.
FED on locally made vehicles of engine capacity between 1,000 and 2,000cc has been proposed to be raised from 2.5pc to 5pc and on those higher than 2,000cc from 5pc to 10pc while the same on locally made double cabin vehicles has been suggested to be hiked from 7.5pc to 10pc.
The government has also proposed to double vehicle registration fee and advance tax while sales tax on batteries will be increased from 12pc to 17pc.
The FBR has proposed to keep 1pc sales tax on locally manufactured electric vehicles including road tractors, electric buses, three wheeler electric rickshaw, three wheeler electric loader, electric trucks, and electric motorcycles.
Income Tax
The finance bill states that FBR has proposed to charge Rs100,000 income tax on vehicles above 1000cc, Rs200,000 on 1001cc to 2000cc, and Rs400,000 on 2001 cc and above engine capacity vehicles.
Documents show that the tax department has also proposed to charge Rs1 million per episode on foreign produced TV shows in addition to imposing advance tax of Rs0.5 million per second on advertisements starring foreign actors.
However, the FBR has proposed to give exemptions to special purpose vehicles as given to Real Estate Investment Trust (REIT) schemes under the REIT regulations proposed by AKD REIT Management, Arif Habib Dolmen REIT Management, ISE REIT Management, Magnus Investment Advisors, SB Global REIT, TPL REIT, and Veritas REIT.
Sales tax
The bill states that FBR has proposed to impose a 17pc sales tax on a number of items including meals served to passengers on airplanes, seeds, matches, imported baby milk, bicycles, diesel engine kits for agriculture usage, poultry machinery, imported animals and livestock, meat of sheep, goat, edible fruits, sugar cane, non-commercial fertiliser and dozens of other items.
Items prepared in bakeries, sweet shops, restaurants and food chains, as well as jewellery made of gold, silver or other precious metals or stones will also be subject to the same amount of tax.
Similarly, a 5pc sales tax on imported laptops and computers has also been proposed.
Taxes on imported, local phones
The bill proposes the imposition of a 17pc additional tax on imported mobile phones priced at $200 or above in addition to hiking the extend sales tax from 10pc to 17pc on imported phones kits.
Taxes for services in ICT
Anyone providing services in the fields of information technology (IT), automobiles, travel, health club, gyms and fitness centers, salons, marriage halls, auto workshops, and industrial machinery workshops in the federal capital will be subject to 5pc GST according to the draft bill.
Furthermore, the FBR has proposed to withdraw collector Customs powers in determining the values of imported goods.
Moreover, the government has also proposed to restrict the cottage industry’s turnover from Rs10 million to Rs5 million.
The NIC condition for making payment through debit or credit cash may also be curtailed.
Meanwhile, Shaukat Tarin said that inflation has risen from 1pc to 6.8pc in the United States of America (USA) whereas Pakistan’s inflation rate is around 11.5pc. “If Joe Biden Fails, then I will fail too,” he added.
He said Pakistan’s inflation rate was mainly driven by four major imported items including petroleum products, cooking oil, steel, and coal, the prices of which had gone up sharply in the international market.
“Once the prices of these commodities subsides in the international market, the inflation rate in Pakistan would also come down,” he claimed.
He said the main purpose of the supplementary finance bill was not to increase revenues as the FBR was already ahead of its target of revenue collection, but was the documentation of various businesses and individuals.
“We have categorically told businessmen and other professionals that they will not get any refunds until they document themselves,” he said, adding that the approval of this bill would help expand the tax net as more people will start paying income and sales taxes.
While responding to a question, Shaukat Tarin said that the government cannot openly discuss the finance supplementary and SBP amendment bills due to a ban by the IMF.
Once the prices of these commodities drop in the international market, the inflation rate in Pakistan will also drop. I think this looks correct.