Govt bypasses cabinet on Rs1.5 trillion tax measures

The government bypassed the federal cabinet on Rs1.5 trillion new tax measures, and Prime Minister Shehbaz Sharif approved the Finance Bill’s presentation in Parliament without input from cabinet ministers.

Express Tribune reported, quoting sources, that the cabinet only debated one taxation issue in detail: the withdrawal of sales tax and income tax exemptions for the former Federally Administered Tribal Areas (FATA). 

Other tax matters, including those affecting the salaried class and taxes on packaged milk and infant milk, were not discussed.

Nearly half of the special cabinet meeting focused on the $5000 fee that top bureaucrats receive for attending board meetings of government-owned enterprises. 

Prime Minister Shehbaz Sharif and Deputy Prime Minister Ishaq Dar suggested these bureaucrats should retain only part of the fees, surrendering the rest to the exchequer. 

The remaining meeting time was spent discussing budget figures and proposed salary increases for government employees.

It is uncommon for the federal cabinet to avoid discussing revenue measures totaling Rs1.5 trillion.

The National Assembly will now review these measures for approval.

In the budget 2024-25, the government has made significant changes to the sales tax regime to raise an extra Rs484 billion, which is expected to increase inflation. An 18% tax has been imposed on milk, infant milk, and fat-filled milk, and all stationery items are now taxed at 10%.

An 18% sales tax has been applied to vegetables and fruits imported from Afghanistan, diagnostic kits imported by hospitals, and supplies of electricity and gas to hospitals, generating Rs30 billion. 

A 10% GST is proposed on oil cake, poultry feed, tractors, cattle feed, sunflower seed meal, and canola meal, increasing the prices of cooking oil, milk, and chicken. Likewise, a 10% sales tax has been imposed on the sale of stationery and newspapers. 

The government has also imposed an 18% sales tax on cardiology, cardiac surgery, and other medical treatments.

The excise duty on cement has increased by Rs1 per kg, and a Rs15 per kg excise duty has been imposed on sugar. 

These measures, along with other taxes, were approved without cabinet input, though the PM had reviewed and approved them.