ISLAMABAD: The government has taken measures of around Rs506 billion, including taxation measures of Rs264 billion and enforcement measures of Rs242 billion in the budget (2021-22)to meet annual target of Rs5,829 billion including 17 percent sales tax on crude oil, Federal Excise Duty (FED) on phone calls/SMS messages/internet data usage, 17 percent sales tax on silver/gold jewellery, and 7.5 percent withholding tax on monthly electricity bill of above Rs25,000 of domestic users not appearing on the Active Taxpayers List.
During the technical briefing on the Finance Bill,2021, held at the FBR House, the FBR team of members informed media that total taxation measures have been proposed at Rs383 billion for 2021-22.
Total relief measures stood at Rs119 billion.
The net impact of the measures stood at Rs264 billion.
In order to materialise the fixed tax target of Rs5,829 billion, the FBR will generate Rs2,182 billion through direct taxes, and Rs3,647 billion in the shape of indirect taxes.
The government has reduced tax rate on capital gain tax on disposal of securities from 15 to 12.5 percent; exempted ED to industrial units located in the Fata and the Pata; exemption from FED on motor vehicles up to 850 cc and sales tax reduced from 17 percent to 12.5 percent, and withdrawal of value-added tax (three percent) on motor vehicles up to 850 cc. The FBR will generate Rs7 billion from sugar to be a Third Schedule item and manufacturer to collect tax on retail price.
The FBR has taken customs duties measures of Rs52 billion and relief measures of Rs42 billion. The net impact of the customs duties measures stood at Rs10 billion.
Sales tax/federal excise measures amounted to Rs215 billion, whereas, sales tax relief totalled at Rs19 billion.
The net effect of the sales tax measures comes to Rs196 billion. The income tax measures have been projected at Rs116 billion, whereas, relief has been provided of Rs58 billion. The net impact of the income tax measures totalled at Rs58 billion.
The FBR members informed that the enforcement measures would result in revenue generation of Rs242 billion. They said that the government has reduced the threshold of monthly electricity bill for withholding tax on electricity consumption from 75,000 to 25,000 from domestic users not appearing on the Active Taxpayers' List. Under the Finance Bill 2021, the zero-rating is proposed to be withdrawn from petroleum crude oil, parts/components of zero-rated plant and machinery, import of plant and machinery by petroleum and gas sector, and supply, repair and maintenance of ships.
The FBR will generate revenue of Rs38 billion from this taxation measure.
The FED on mobile phone calls and SMS @ Re1 per call (call exceeding three minutes) and Re0.10 per SMS will generate additional Rs70 billion in the next fiscal year.
The levy of FED on internet data usage at the rate of Rs5 per GB will fetch additional revenue of Rs30 billion.
The government has also announced establishment of border sustenance markets for mainly food items.
The FBR members stated that the FBR has not changed the income tax slabs for the salaried class and the FED on cigarettes. However, the FBR has eliminated block taxation of property income and shift to normal tax regime; reduced block taxation on capital gain on disposal of immoveable properties if gain exceeds Rs20 million, and reduced block taxation on interest income, if it exceeds Rs5 million.
During the current financial year, Tax Laws (Second Amendment) Ordinance, 2021was promulgated to implement corporate income tax reforms to provide a level playing field to all the businesses.
Certain tax credits, concessions and exemptions were withdrawn.
The provisions of the Ordinance have been made part of the Finance Bill 2021, they stated.
The government has withdrawn 12 withholding taxes including collection of tax on payment of royalty to residents; cash withdrawal, banking instruments, banking transactions other than through cash, collection of tax from persons remitting amounts abroad through credit or debit or prepaid cards, collection of tax on domestic air travel, international air travel, extraction of minerals; members by a stock exchange registered in Pakistan, collection of tax on marginal financing by NCCPL, CNG stations, and collection of tax on certain petroleum products. The FBR has abolished 100 percent tax credit for new industrial undertaking if investment is made through equity or proportionate tax credit if investment is made through equity as well as debt and this corporate sector revenue measure will fetch Rs65 billion into the FBR kitty.
The rate of minimum tax was reduced from 1.5 percent to 1.25percent for all persons, for refineries from 0.75percent to 0.5percent, fast moving goods sold by integrated retailers from 1.5percent to 0.25percent, SEZ enterprises from 1.5percent to zero percent and Special Technology Zones (STZs) enterprises from 1.5percent to zero percent.
The shifting of goods from reduced rate (one percent, five percent, 10percent, 12percent) to standard rate (17percent) silver/gold jewelry, fat filled milk, LNG/RLNG will bring additional tax of Rs35 billion.
The withdrawal of exemption on imported luxury food items such as cereals, milk and cream, frozen meat and sausages, fat filled milk at standard rate of GST of 17 percent will fetch Rs14 billion. On enforcement side, the FBR has placed master bill of lading and certificate of origin made mandatory in order to discourage concealment.
The FBR also extended anti-smuggling regime to retailers.
On telecommunication Services, the rate of GST is harmonised and bring down rate from 17percent to 16percent for the Islamabad Capital Territory (ICT).
The government has granted exemption from FED to industrial units located in the Fata and the Pata.
The sales tax relief has been provided on high quality printing paper for the holy Quran and temporary imports by international athletes (SAF Games).
The increase in the threshold of turnover for cottage industry has been enhanced from Rs3 million to Rs10 million.
The export proceeds of services to be taxed @ one percent at par with goods and this measure will bring Rs5 billion revenue in the kitty.
For discouraging "on money" - penal additional tax on sale of vehicle will be imposed from Rs50,000 to Rs200,000 on the basis of capacity of engines of cars prior to registration.
Copyright Business Recorder, 2021