ISLAMABAD: Meeting the IMF conditions, the government Thursday slapped taxation measures to fetch Rs343 billion as a pre-requisite for resumption of $6 billion External Fund Facility (EFF) of the International Monetary Fund (IMF).
The measures include abolition of the General Sales Tax (GST) exemptions over 150 items, jacking up advance Withholding Tax on cellular service from 10 to 15 percent, and doubling advance tax on vehicle registration.
The government imposed Rs1 million per episode advance tax on foreign-produced TV serials, Rs3 million on foreign-produced TV dramas, and Rs0.5 million on advertisements starring foreign actors.
According to the details shared by the FBR with the federal cabinet, the IMF demanded Rs700 billion taxation measures — including 17 percent GST across the board — but the FBR conceded Rs343 billion.
The FBR defended productive and marginalized sectors. On food items, the FBR proposed GST on import of certain items to fetch Rs7.9 billion including imported live animals and poultry, imported branded meat, cow, buffalo, sheep, and goat, imported branded poultry meat,branded fish, imported branded. On renewable energy, the government imposed GFST to fetch Rs13.550 billion, power sector adjustable Rs65 billion, food group (entry 1) Rs4 billion, food group entry 2 Rs305 million, in another food group Rs800 million, food group entry 6 Rs41 billion.
The government through the mini-budget also increased Federal Excise Duty (FED) on import of cars (Completely Built Unit (CBU) over 1001cc to 1700cc from 5 percent ad valorem to 10 percent, from 1800cc to 3000cc from 25 percent ad valorem to 30 percent and exceeding 3000cc from 30 percent ad valorem to 40 percent ad valorem.
On locally manufactured cars, there is no change up to 1000cc and from 1001cc to 2000cc, the tax rate of FED increased from 2.5 percent ad valorem to 5 percent, and exceeding 2000cc, the rate of FED was increased from 5 percent ad valorem to 10 percent.
The FED on imported double cabins (4x4) pick up vehicles increase from 25 percent ad valorem to 30 percent and on locally manufactured, the FED was proposed to be increased from 7.5 percent ad valorem to 10 percent having revenue impact of Rs6.5 billion. The FBR high-ups told the cabinet that there would be a targeted subsidy of Rs33 billion, including Rs19 billion on the domestic front and Rs14 billion at the imported stage.
The government proposed 17 percent GST including imported plant and machinery, dairy products, meat/poultry, pharmaceutical raw materials, beauty products/food supplements, computers, baggage of overseas Pakistanis, cotton/sunflower/canola seeds, mobile phones (exceeding US$200), branded iodized salt, energy saver lamps/tube lights and imported remeltable scrap, jewelry and silver.
The sales tax on high-end phones (exceeding US$200) ranges between Rs1,750 to Rs9,270 per phone set. The mobile phones valuing more than $200 imported in the CBU condition has been charged to 17 percent sales tax.
The Finance (Supplementary) Bill 2021 has amended four Schedules of the Sales Tax Act including Third Schedule (printed retail price); Fifth Schedule (sales tax zero-rating); Sixth Schedule (exemption); Ninth Schedule (mobile phones).
The government proposed GST on the import of laptop computers, notebooks whether or not incorporating multimedia kit and personal computers; goods received as gift or donation from a foreign government or organization by the federal or provincial governments or any public sector organization; sunflower and canola hybrid seeds meant for sowing; combined harvesters up to five years old.
The sales tax is proposed to be imposed on the import of fish feed; fans for dairy farms; bovine semen; preparations for making animal feed; promotional and advertising material including technical literature, pamphlets, brochures and other give-aways of no commercial value, distributed free of cost by the exhibitors; equipment imported by M/s China Railway Corporation to be furnished and installed in Lahore Orange Line Metro Train Project; micro feeder equipment; plant and machinery excluding consumer durable goods and office equipment as imported by greenfield industries, intending to manufacture taxable goods, during their construction and installation period; oil cake and other solid residues, whether or not ground or in the form of pellets; goods temporarily imported into Pakistan by international athletes which shall be subsequently taken by them within 120 days of temporary import.
The government has imposed 17 percent GST on import of certain items but their local supplies are exempted from sales tax including sugarcane, bread, live animals/poultry, fish, cereals, edible vegetables/fruit, sugar care/eggs, locally manufactured computers, compost (non-commercial fertilizer), eggs and meat of bovine animals.
The import of pharmaceutical raw materials has been subjected to 17 percent sales tax, but the local supplies of the finished product i.e. medicine was brought at zero-rating. The zero-rating is proposed to be allowed to the pharmaceutical sector under Fifth Schedule of the Sales Tax Act.
The sales tax exemption on the import of crude oil has been replaced with sales tax zero-rating.
Under the Bill 2021, the condition of the CNIC shall not apply for the general public in case a payment is made through the credit and debit card or digital mode under Section 23 of the Sales Tax Act 1990. However, the law which exonerated the seller from any liability where fake CNIC was provided by the purchaser in case of sale made in good faith has been omitted to check misuse.
The government slapped sales tax on number of items which were previously being exempted under Federal Sales Tax Act, 1990 through supplementary finance bill 2020-21.
According to details, sales tax @ 17% is purposed to be levied on supplies of goods to numbers of items/categories including hospitals run by the federal and provincial government or charitable operating hospitals of 50 beds or more; sewing machines of the household types; import and supply of iodized salt bearing brand names and trademarks whether or not sold in retail packing; raw cotton; match boxes; whey, excluding that sold in retail packing under a brand name and sausages and similar products of poultry meat or meat offal excluding sold in retail packing under a brand name or trademark.
The government has also proposed levy of standard rate of 17 percent sales tax at import stage of following items; however, local supplies of these items will remain exempted.
These item included live animals and live poultry; meat of bovine animals, sheep, goat and uncooked poultry meat excluding those sold in retail packing under a brand name; fish and crustaceans excluding those sold in retail packaging under a brand name; live plants including bulbs, roots and the like; cereals other than rice, wheat, wheat and meslin flour; edible vegetables including roots and tubers, except ware potato and onions, whether fresh, frozen or otherwise preserved (e.g. in cold storage) but excluding those bottled or canned; edible fruits, sugar cane, compost (non-commercial fertilizer) and locally manufactured laptops, computers, notebooks whether or not incorporating multimedia kit and personal computers.
The federal government has also proposed withdrawal of reduced rate of sales tax from the following items.
These items are oilseeds meant for sowing; plant and machinery not manufactured locally and having no compatible local substitutes; flavored milk; yogurt; cheese; butter; cream; Desi Ghee; whey; milk and cream, concentrated or containing added sugar or other sweetening matter; ingredients of poultry feed, cattle feed, except soya bean meal of PCT heading 2304.0000 and oilcake of cotton-seed falling under PCT heading 2306.1000; incinerators of disposal of waste management, motorized sweepers and snow ploughs; supplies; import of remeltable scrap; frozen prepared or preserved sausages and similar products of poultry meat or meat offal; meat and similar products of prepared frozen or preserved meat or meat offal of all types including poultry, meat and fish.
The scope of reduce rate of sales tax @ 12.5% supplies of motor cars up to 1000cc is curtailed to the extent up to 850cc.
It is proposed that the supplies of sugar to be excluded from the third schedule of the Sales Tax Act, 1990 and by virtue of the proposed amendment supplies of sugar is no more chargeable on retail price.
The zero rating of sales tax is also withdrawn from certain categories which include supplies to duty free shops, provided that in case of clearance from duty free shops against various baggage rules issued under the Customs Act, 1969, supplies from duty free shops shall be treated as import for the purpose of levy of sales tax; goods exempted under section 13, if exported by a manufacturer; local supplies of raw materials, components, parts and plant and machinery to registered exporters authorized under Export Facilitation Scheme, 2021 notified by the Board with such conditions, limitations and restrictions.”; supply, repair or maintenance of any ship which is neither; (a) a ship of gross tonnage of less than 15 LDT; nor (b) a ship designed or adapted for use for recreation or pleasure; supply of spare parts and equipment for ships; supply of equipment and machinery for salvage or towage services; supply of equipment and machinery for other services provided for the handling of ships in a port; bicycles.
Zero rating of sales tax is also proposed to be extended on following two items.
These items include drugs registered under the Drugs Act, 1976, or medicaments as classified under chapter 30 of the First Schedule to the Customs Act, 1969 except PCT heading 3005.0000 and Petroleum Crude Oil (PCT heading 2709.0000).”
Sales tax has been imposed on the goods imported by various agencies of the United Nations, diplomats, diplomatic missions, privileged persons and privileged organizations which are covered under various Acts and, Orders, rules and regulations made thereunder; and agreements by the Federal Government.
Sales tax has been proposed to be imposed on articles imported through post as unsolicited gifts, subject to the same conditions as are envisaged for the purposes of applying zero-rate of customs duty under the Customs Act, 1969; imported samples; goods imported by or donated to hospitals run by the federal government or a provincial government; and non-profit making educational and research institutions; goods excluding electricity and natural gas supplied to hospitals run by the federal or provincial governments or charitable operating hospitals of fifty beds or more or the teaching hospitals of statutory universities of two hundred or more beds; import of all such gifts as are received, and such equipment for fighting tuberculosis, leprosy, AIDS and cancer and such equipment and apparatus for the rehabilitation of the deaf, the blind, crippled or mentally retarded as are purchased or otherwise secured by a charitable non-profit making institution solely for the purpose of advancing declared objectives of such institution, subject to the similar conditions as are envisaged for the purposes of applying zero-rate of customs duty under the Customs Act, 1969; educational, scientific and cultural material imported from a country signatory to UNESCO Agreement or a country signatory to bilateral commodity exchange agreement with Pakistan, subject to the same conditions as are envisaged for the purposes of exemption under the Customs Act, 1969; import of replacement goods supplied free of cost in lieu of defective goods imported, subject to similar conditions as are envisaged for the purposes of applying zero-rate of customs duty under the Customs Act, 1969 and goods (including dry fruits imported from Afghanistan) temporarily imported into Pakistan, meant for subsequent exportation charged to zero-rate of customs duty.
Sales tax has been proposed to be imposed on the import of ship stores; contraceptives and accessories thereof; goods produced or manufactured in and exported from Pakistan which are subsequently imported in Pakistan within one year of their exportation; personal wearing apparel and bona fide baggage imported by overseas Pakistanis and tourists, if imported under various baggage rules and is exempt from Customs duties; goods and services purchased by non-resident entrepreneurs and in trade fairs and exhibitions subject to reciprocity and such conditions and restrictions as may be specified by the Board; uncooked poultry Meat whether or not fresh, frozen or otherwise, preserved or packed; cotton seed; preparations suitable for infants, put up for retail sale; sewing machines of the household type
Sales tax has been proposed to be imposed on the import of machinery, equipment and materials imported either for exclusive use within the limits of Export Processing Zone or for making exports therefrom, and goods imported for warehousing purpose in Export Processing Zone, subject to the conditions that such machinery, equipment, materials and goods are imported by investors of Export Processing Zones; goods imported temporarily with a view to subsequent, exportation as concurred by the Board, including passenger service item, provision and stores of Pakistani Airlines; items with dedicated use of renewable source of energy like solar and wind including (a) Solar PV panels; (b) LVD induction lamps; (c) SMD, LEDs, with or without ballast, with fittings and fixtures; (d) Wind turbines including alternators and mast; (e) Solar Torches; (f) Lanterns and related instruments; PV modules along with related components, including invertors, charge controllers and batteries. (h) 853[Tubular day lighting device. (i) Energy saver lamps and tube lights of varying voltages (operating on AC or DC). (j) Invertors (off-grid/on grid/ hybrid) with provision for direct connection/input from renewable energy source and with Maximum Power Point Tracking (MPPT); High Efficiency Irrigation Equipment (If used for agriculture sector); Green House Framing and Other Green House Equipment (If used for Agriculture Sector); plant, machinery and equipment imported for setting up industries in FATA and appliances and items required for ostomy procedures.
Sales tax has been proposed to be imposed on the import of machinery, equipment and tools for setting up maintenance, repair and overhaul (MRO) workshop by MRO company recognized by Aviation Division; operational tools, machinery, equipment and furniture and fixtures on one-time basis for setting up Greenfield airports by a company authorized by Aviation Division; import of plant, machinery and production line equipment used for the manufacturing of mobile phones by the local manufacturers of mobile phones duly certified by the Pakistan Telecommunication Authority; sodium Iron (Na Fe EDTA), and other premixes of vitamins, minerals and micro-nutrients (food grade).
Meanwhile, addressing a press, Finance Minister Shaukat Tarin said the government proposed taxation measures of Rs343 billion through the proposed mini-budget supplementary bill; however, only Rs2 billion burden would impact the common man.
Out of Rs343 billion taxation measures, Tarin said the government proposed withdrawal of GST exemptions on machinery and related products and Rs160 billion on pharmaceutical sector but it would be adjustable after paying 17 percent GST so they would be able to get refunds.
“The government has proposed abolition of GST exemptions to the tune of Rs71 billion on luxury items and it will not be refundable” he said.
On the State Bank of Pakistan’s autonomy, he said bill proposed administrative autonomy for the central bank but the federal government would appoint the executive board with the approval of president of Pakistan.
He said if the problem related to autonomy of SBP emerged, then the government would introduce reversal in the amended law with simple majority. “The talk of increased burden on people due to the supplementary finance bill is unfounded, he said.
Tarin said tax revision of worth Rs343 billion had been proposed in the bill.
Sharing details of the supplementary finance bill, he said the Rs70 billion rebate included taxes on luxury and business items including imported fish, high-end bakery items, expensive cheese and imported bicycles.
Tax exemptions of worth Rs2 billion will be removed from items of general use like personal computers, sewing machines, matchboxes, iodized salt, red chilies, and contraceptives.
“If we expect inflation to increase because of imposition of tax on these items then they [the opposition] are mistaken,” he said, adding that this was the “crux of the supplementary finance bill.”
“The opposition has been spreading rumors about an increase in inflation because of the finance bill,” the finance minister said, adding that no sales tax will be imposed on fertilizer, imported second-hand clothes and cinema equipment. “The agreement with the IMF is not just a matter of $1 billion,” Tarin said.
The finance minister went on to say that the PTI’s manifesto says that institutions should be given autonomy, as “they cannot be strong until they are given autonomy”.
Speaking about the State Bank of Pakistan (Amendment) Bill, 2021, he said the previous regimes kept "interfering" in the matters of the central bank. “The Board of Governors (BoG) of SBP will be appointed on the recommendations of the government,” he said, adding that it was earlier thought the BoG will be appointed by the bank itself.
Tarin clarified, however, that it was made clear to them that this wouldn't be possible.
"How can they make their own appointments?" he remarked.
“No amendment has been made in the bill regarding the appointment of SBP's board of directors,” he added.
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