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ISLAMABAD: The Senate Standing Committee on Finance has sought from the Federal Board of Revenue (FBR) complete details of the entities that are being provided tax exemptions in the budget for the next fiscal year.

A meeting of the committee presided over by Senator Talha Mahmood, on Saturday, continued discussion on the Finance Bill 2021 and asked the high-ups of the FBR to provide the committee the details with justification for providing tax exemption to them.

The committee meeting rejected the imposition of tax on the expenses of the working class.

The committee also directed the FBR to remove political parties from the tax exemption schedule as political parties neither had any income nor file-returns.

Senator Mohsin Aziz said that he was unable to understand on what basis tax exemption is being given to a Foundation.

The committee also opposed imposition of sales tax on milk, after it was told that the price of milk would escalate and fuel inflation in the country.

While briefing the committee, the Association of Large Scale Steel Manufacturers stated that removal of the FED in FATA and PATA should be withdrawn.

However, officials of the FBR stated that there was an agreement by the federation that sales tax exemption would remain effective till June 30, 2023.

Member FBR Inland Revenue said that the proposal involves revenue impact of Rs2 to 3 billion, and association numbers in terms of revenue appears to be exaggerated.

The committee directed the steel manufacturers to submit the details in the next meeting, after they pointed out that scrap being imported for the Fata/Pata was being used in other parts of the country.

The committee rejected 17 percent sales tax on poultry feed and recommended that sales tax should be maintained at existing rate of 10 percent.

Former president of the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) said the business community was glad over the decision to revisit 203-A.

Senators Sherry Rehman and Farooq H Naek also protested over allowing business associations to speak about their issues with regard to budget proposals even before the completion of the Finance Bill.

"We will listen to them once the reading of the Finance Bill is completed," they stated.

However, the chairman of the committee responded that it was not appropriate to leave the Finance Committee meeting like this after Naek and Rehman left the committee.

The meeting was informed that Special Technology Zones (STZs) are also being provided tax exemption.

Meanwhile, Adviser to the Prime Minister on Commerce Razzak Dawood said the main purpose of tariff rationalisation is to promote industrial development as well as “made in Pakistan” goods.

The adviser maintained this, while briefing the Senate Standing Committee on Finance on the budget for the next fiscal year and went on stating that there are free-trade agreements of Pakistan with China, Malaysia, and Indonesia.

He further stated that negotiations are underway for free-trade agreements with Turkey and Sri Lanka, whereas, the second phase of the free-trade agreement with China has been completed.

Dawood said that Pakistan has been able to get concessions from China on 313 tariff lines and their implementation was commenced from January 1, 2020.

The trade between the two countries was affected subsequent to corona outbreak in China and industries of both the countries, the adviser contended that duties on import of industrial raw material was reduced to zero and industries were provided every possible incentives and opportunity to grow.

“We have given industries a chance to grow this year,” he said, adding that focus in the next year would be on agriculture, iron and steel industry.

He said that in the coming fiscal year, duties on import of raw materials are being reduced as finished products are cheaper and raw material is expensive owing to duties.

The adviser also acknowledged irregularities in tax and duties and stated he was aware of them.

The adviser said that the policy should have been formulated in 2006 to increase domestic production of auto industry (vehicles), and stated that manufacturers have been told that the effect of decrease in duties should be reflected in the prices.

He said that the pharmaceutical sector is being provided Rs2 billion tax relief.

However, the chairman pointed out that the prices of medicines have increased over 200 percent.

Earlier, the Engineering Development Board (EDB) told the committee that tax exemption was allowed on vehicles up to 850cc and there is no restriction on the import of spare parts for vehicles.

The meeting was further informed that local production of Suzuki vehicle is 65 percent and consumers would get benefit from the proposed tax reduction from July 1, 2021 and measures are being taken to ensure that benefits of reduced taxes on vehicles is passed on to the consumers.

The officials of the Ministry of Industries stated that the price of Suzuki Alto from existing Rs1.633 million is expected to come down after tax relief.

The committee recommends to the Ministry of Industry for taking up the issue of delisting program with the auto makers.

Copyright Business Recorder, 2021

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