Taxes Worth Only Rs. 2 Billion to be Imposed on the Common Man in New Finance Bill : AsiaNet-Pakistan

Taxes Worth Only Rs. 2 Billion to be Imposed on the Common Man in New Finance Bill

December 30, 2021 | | Share:

A Special Cabinet meeting was convened on 30 December 2021 to discuss and approve the Finance (Supplementary) Bill, 2021. Chairman Federal Board of Revenue (FBR) explained the salient features of the Bill. In his presentation, he emphasized the importance of General Sales Tax(GST) reforms.

The Chairman apprised the Cabinet that IMF had demanded Rs. 700 billion of tax and imposition of 17 percent GST across the board. However, Team FBR managed to negotiate tax exemptions worth Rs. 343 billion and defended the productive and marginalized sectors of society.

While explaining the salient features of the proposed Finance Supplementary Bill, 2021, he clarified that commodities of daily use by the common man like food items, dairy products, clothing were being kept tax-free in the domestic market. Similarly, import/supply of rice, wheat, meslin, local supply of other grains, fruits, vegetables, beef, mutton, poultry, fish, eggs, sugar cane, beet sugar, and imported vegetable and fruits from Afghanistan are also retained as tax-free. Moreover, milk and fat-filled milk have also been kept tax-free.

Chairman FBR further elaborated in his presentation to the Cabinet that various items, which might somehow attract adverse impact of tax reforms, have been identified for targeted subsidy. He added that input adjustment shall remain available to all taxable business inputs and assured expeditious sales tax refunds to business and industry on import of raw material and capital goods, including the pharmaceutical sector.

He further explained that pharmaceutical firms have been equated with exporters for purposes of the release of refunds within 72 hours. Therefore, pharma firms will now be able to claim refunds on GST paid as input tax on packaging material, utilities, etc., which they previously could not – having a price tag of Rs. 35 billion. Expectedly, the prices of medicines in the retail market should come down, approximately by 20 percent.

He highlighted the breakup of total withdrawn tax exemptions of Rs. 343 billion and said they can be broken into three main segments. These segments are Pharmaceutical with Rs. 160 billion, Plant and Machinery, Rs.112 billion, and goods, Rs. 71 billion. It was clarified that Rs. 272 billion of the above tax expenditure on account of machinery and pharma is refundable/adjustable.

Only Rs. 71 billion tax exemptions on goods is the net imposed tax and this tax includes a tax on luxury goods of Rs. 31 billion and Rs. 31 billion on business goods. Only a meager amount of Rs. 2 billion is related to goods, which may affect the common man for an elaborate targeted subsidy plan of Rs. 33 billion, which has been proposed to protect any segment of the population that may get affected indirectly by the withdrawal of some exemptions etc.

He further clarified that FED on imported and locally manufactured/assembled vehicles is proposed to be increased on the recommendation of the Tariff Policy Board and Ministry of Commerce. Advance tax on cellular services Is proposed to be increased from 10 percent to 15 percent while Withholding Taxes are proposed on foreign-produced TV serial/dramas and advertisements with foreign actors. Tax on transfer of newly purchased vehicles has been increased to discourage on-money. Exemptions available to REIT have been extended to special purpose vehicles set up under a REIT.

It is pertinent to mention that various issues, including the pharmaceutical sector, plant & machinery, came under discussion in the Cabinet meeting. The Cabinet members raised their concerns about the inflationary impact of the withdrawal of GST exemptions.

Finance Minister explained the dynamics of these withdrawals and assured the cabinet that the inflationary impact would be minimal, and further added that due to adjustment of inputs on account of utilities and packaging material, etc., the prices of pharmaceutical products will come down. Similarly, adjustment/refund is available on any input paid on plant and machinery, he added.

A question was also raised regarding the increase in advance tax on cellular services. Finance Minister explained that this increase was necessary to cover the revenue loss due to the loss of FE on mobile phone calls that was enacted in the Finance Act, 2021.

Source: Pro Pakistani

Category: Business