ISLAMABAD: The government has decided to offer new tax incentives and concessions to the Small and Medium Enterprises (SMEs) under the simplified tax regime as per the new SME Policy.
Adviser to the Prime Minister on Finance and Revenue Shaukat Tarin chaired a meeting to review the SME Policy at the Finance Division, on Monday.
Federal Minister for Industries and Production Khusro Bakhtiar, Adviser to the PM on Commerce and Investment Abdul Razak Dawood, secretary finance, secretary commerce, Secretary I& P, chairman FBR, governor SBP, CEO SMEDA, and senior officers attended the meeting.
Secretary Industries and Production briefed the meeting on proposed SME Policy and the concerns of stakeholders on key policy recommendations in regulatory and tax environment, SMEs’ access to finance, and institutional strengthening of SMEDA and SME development fund.
Proposed policy is designed to increase the contribution of SMEs to the economy. The meeting deliberated in detail the concerns of all the stakeholders to agree to the framework of the policy to reach consensus.
Highlighting the importance of SMEs in the economic and social development of Pakistan, the adviser said that the government is keen to provide a conducive environment to facilitate small and medium enterprises’ growth and ease of doing business. Further, he emphasised to make SMEDA more effective and fully functional in order to cater to the SMEs and increase the penetration of the regional SMEs across the country.
In last budget, the Federal Board of Revenue (FBR) had announced a special tax regime for manufacturing sector’s SMEs from July 1st. The SMEs have been divided into two categories for taxation purposes: Category-I: SMEs having turnover up to Rs100 million would pay tax at 7.5 percent of their taxable income.
Category-II: SMEs having turnover exceeding Rs100 million and up to Rs250 million would pay tax at 15 percent of their taxable income. Another salient feature of this regime is the option to pay tax on turnover basis under the final tax regime.
Category-I SMEs having turnover up to Rs100 million may opt to pay tax at 0.25 percent of their turnover. Category-II SMEs having turnover exceeding Rs100 million and up to Rs250 million may opt to pay tax at 0.5 percent of their turnover.
Moreover, tax collectible under Section 148 on import of plant and machinery and raw material shall be adjustable in case of manufacturing SME being industrial undertaking. The export proceeds of the SMEs shall be taxed at the reduced rate of 0.25 percent and 0.5 percent final tax on the basis of their category, the FBR added.
The MoI&P had proposed tax reduction of between 67 per cent and 83 per cent, whereas, minimum turnover tax will be 0.25percent and 0.5 percent or flat tax rate of 7.5 percent and 15 percent. There will be presumptive regime without any audit and sans harassment; online and simple tax filing, inclusion of IT and ITeS, and gradual reduction in withholding tax with corresponding increase in formalization, sales/income tax receipts.
The banks will fix credit line of Rs60 billion under SME Asaan Finance Scheme (SAAF) for collateral-free lending. Each SME will get loans up to Rs10 million, with three years’ tenure. The number of borrowers will be approximately 30,000, while credit-risk guarantee will be 40-60 per cent. The government will also extend a subsidy of Rs25 billion.
They added that the collateral-free financing for SMEs will be based on size, sector, geography, and gender.
Copyright Business Recorder, 2021