Govt imposes Rs223bn additional taxes

ISLAMABAD: The government has slapped additional taxes of Rs223 billion, including withholding tax of 0.6 percent on cash withdrawal from banks, expanding super tax across the board, and has proposed securing legal powers to bring up to 50 percent windfall gains profit into the tax net. 

In total, the Federal Board of Revenue (FBR) will fetch additional revenues of Rs903 billion through continuation of taxation measures taken through the mini budget in last February 2023, which will add Rs680 billion in whole financial year while additional revenue measures will fetch Rs223 billion.

The FBR has given tax relief of Rs23 billion on all the four taxes, so the net additional revenues of Rs880 billion will be materialised in the next financial year.

In order to collect Rs9.2 trillion revenue target in the budget for 2023-24, the government will achieve nominal growth of 24.3 percent, including real GDP growth rate of 3.5 percent and inflation at 21 percent.The measures taken in the mini budget of last February 2023 as well as net additional taxation measures will jack up tax collection in the next budget up to the desired level of Rs7.2 trillion for the outgoing fiscal year.Under the proposed amnesty scheme, the FBR also jacked up threshold on foreign remittances to be increased from Rs5 million to $100,000 or equivalent in tax year in order to cater fluctuation in exchange rate. The withdrawal of cash exceeding Rs50,000 would fetch Rs14 to15 billion in the national kitty.

Waiver was announced for 2 percent final withholding tax on purchase of immovable property for nonresident individual POC/NICOP holder where immovable property is acquired through foreign remittances remitted from abroad.The government imposed Federal Excise Duty (FED) on energy inefficient fans at the rate of Rs2,000 per fan and incandescent bulbs at the rate of 20 percent (according to the value). The scope of FED on services is proposed to be enhanced by adding royalty and fee for technical services.

Through withdrawal of exemption, the government imposed 18 percent sales tax on edible products sold in bulk under brand names or trademarks. The FBR raised enhancement in reduced rate of sales tax from 12 percent to 15 percent on supplies made by the Point of Sale (POS) tier-1 retailers dealing in leather and textile products. For electric power transmission, services are proposed to be taxed at 15 percent in Islamabad Capital Territory (ICT).The FBR proposed to increase withholding tax on foreign payments through credit card/ debit cards. For foreign domestic workers helping in Pakistan, the FBR has proposed Rs200,000 adjustable advance tax from employers at time of issuance/ renewal of work permit.

In a technical briefing given by FBR Chairman Asim Ahmed along with his team at the FBR headquarters on Friday after the announcement of the budget, it was stated that the Super Tax would be imposed on all sectors instead of selected sectors. When asked about exact revenue estimates through imposition of windfall gain tax, the chairman replied that only legal provision was proposed to get powers for slapping windfall gains tax on those sectors earning extraordinary profits. He said that they had worked it out but no decision was made when this tax would be imposed.The rationalisation of Super Tax under Section 4C would be applied on all persons across the board on income above Rs150 million as insertion of additional three new income slabs of Rs350m to Rs400m, Rs400m to Rs500m and Rs500m above to be taxed at 6 percent, 8 percent and 10 percent respectively.The government slapped 0.6 percent advance adjustable withholding tax on non-filers on cash withdrawal exceeding Rs50,000.

The government jacked up withholding tax rates by one percent on supply of goods other than sale of rice, cotton seed or edible oils, on rendering of services including service subject to concessionary tax rate of 3 percent but excluding electronic and print media advertising services and on execution of contracts, excluding sportsperson. It imposed 0.5 percent increase in withholding tax rate for commercial importer on import of goods falling in Part III of Twelfth Schedule to the Income Tax Ordinance 2001. Now the withholding would be 6 percent.The government did not bring any change in the tax rate of 1 percent on capital goods imported by commercial importers. The rate of withholding tax will remain unchanged at 2 percent on raw materials imported by industrial undertakings. The rate on raw materials imported by commercial importers will also remain unchanged at 3.5 percent.

The government imposed 10 percent final withholding tax on issuance of bonus shares by a company and 20 percent for non-filers.The FBR has increased withholding tax rate from 1 percent to 5 percent on payment to non-residents through debit/ credit or prepaid cards and 2 percent to 10 percentfor non-filers.

The government imposed additional tax at the rate not exceeding 50 percent on income profit and gains of a person or class of persons on account of extraordinary gains due to exogenous factors.The FBR proposed removing of capping from 1,300cc to 1,800cc old and used Asian market vehicles on duty and taxes. Earlier, it was charged from 1,800cc but now the old vehicles from 1,300cc to 1,800cc will have to pay duty and taxes.The government proposed Regulatory Duty from 15 to 30 percent on six tariff lines. The FBR has proposed to remove the 10 percent regulatory duty on the import of second-hand clothing.

It proposed to remove 5 percent RD on synthetic filament yarn of polyester not locally produced.It proposed changes in the definition of smuggling to enable Customs to conduct anti-smuggling operations within the territorial limits of the country. The provincial Levies and Khasadar Force have been proposed to be added in the list of government agencies mandated to assist Customs in anti-smuggling operations in Khyber Pakhtunkhwa and Balochistan.The requirement of shop area for tier-1 retailers is proposed to be withdrawn. The Directorate General of Digital Invoicing and Analysis is proposed to be renamed as Directorate General of Digital Initiatives. The scope of penal action is proposed to be enhanced by substituting the “cigarette packs” with “goods specified by the Board”.

For harmonisation of GST on goods and services, the production, transmission and distribution of electricity is proposed to be excluded from the purview of sales tax in accordance with the decision of National Tax Council.The FBR proposed exemption of Customs duties on specific papers and art card and board for printing of Holy Quran, incentive for Pharma sector, manufacturing of solar panels, inverters and batteries, exporters of IT and IT enabled services, raw materials of diapers, sanitary napkins and adhesive tape and reduction of Customs duty from 10 percent to 5 percent on non-localised (CKD) of Heavy Commercial Vehicles (HCVs).The FBR has jacked up a one percent increase in withholding tax rate on supplies, contracts, and services in the budget 2023-24. The increased 1 percent withholding tax will be charged from both companies/ association of persons (AOPs) and individual taxpayers.It proposed that on supplies in case of companies the rate has been increased from 4 to 5 percent. From AOPs and individuals, the rate of withholding increased from 4.5 to 5.5 percent on supplies.On contracts, the rate of WHT from companies will be increased from 6.5 percent to 7.5 percent. In case of AOPs and individuals, the rate of WHT will be charged from 7 to 8 percent.On services, the rate of WHT will be increased 8 to 9 percent on services and from AOPs and individuals the rate proposed to be increased from 10 to 11 percent.