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ISLAMABAD: Pakistan People’s Party (PPP) former finance minister Senator Saleem Mandviwalla claimed that a “tsunami of inflation” would hit the country if “The Finance (Supplementary) Bill, 2021”was passed by the National Assembly.

“Several edibles, especially imported items, are going to get costlier if the finance bill is passed. The bill proposed 17percent sales tax on a number of items including imported live animals, steak meat, fish, vegetables, high-end bakery items, branded cheese and sausages that were earlier exempted from taxes. Even though poultry and beef are among the basic food items that have been exempted from tax, they may get costlier given that the legislation will raise the sales tax on imported machines used in the poultry sector from 10percent to 17percent in addition to increasing tax on local poultry and cattle feed from 7percent to 17percent. The bill also proposed an increase in general sales tax, from 10pc to 17pc, on dairy items sold in branded packaging,” Saleem Mandviwalla expressed these views, while addressing a news conference along with Senator Palwasha Khan on Wednesday.

Mobile calls and imported phones

He said that the legislation, once passed, would lead to the imposition of a uniform sales tax of 17 percent on imported mobile phones priced above $200. He said that previously, fixed tax rates were applied to imported handsets that were divided into three categories according to their price.

A tax of Rs1,740 had to be paid on imported phones priced between $200 to $300, Rs5,400 on phones worth $350 to $500 and Rs9,270 on phones having a price higher than $500. In addition to imported handsets, advanced tax on cellular services will also be increased from 10pc to 15pc, he said.

He said that there are also chances of an increase in the price of locally-manufactured mobile phones with the government proposing 17pc sales tax on imported machines for mobile phone manufacturing.

Automobiles: Locally manufactured cars

He said that Federal Excise Duty (FED) on vehicles having an engine capacity between 1,001cc and 2,000cc would increase from 2.5pc to 5pc. Similarly, he said that the duty on vehicles with an engine capacity higher than 2,000cc would be raised from 7.5pc to 10pc.

He said that meanwhile, the sales tax on locally-assembled vehicles with an engine capacity higher than 850cc would be increased from 12.5pc to 17pc. On locally-manufactured double cabin vehicles, the federal excise duty would increase from 7.5pc to 10pc, he said.

Imported vehicles

The PPP senator said that the bill proposed raising the federal excise duty on imported vehicles having the engine capacity of 1,001cc to 1,799cc from 5pc to 10pc, on 1,800cc to 3,000cc vehicles from 25pc to 30pc and on vehicles having an engine capacity higher than 3,000cc from 30pc to 40pc.

He said that it also proposed increasing the duty on imported double cabin vehicles from 25pc to 30pc and on hybrid electric vehicles up to 1,800cc from 8.5pc to 12pc.

Increase in advanced tax

He said that the bill suggested increasing the advanced tax on up to 1,000cc vehicles from Rs50,000 to Rs100,000, on 1,001cc to 2,000cc vehicles from Rs100,000 to Rs200,000 and on those higher than 2,000cc from Rs200,000 to Rs400,000.

Tax on Services

Mandviwalla said that the government has proposed to impose taxes on several services in the federal capital, Islamabad. He said under the bill, a 5pc advanced tax has been proposed for several services, including those provided at health clubs, gyms, indoor sport facilities and massage centres.

This levy has also will also cover laundry and dry cleaning services, services by car dealers, marriage halls, catering, IT services, web designing and hosting and call centres, among others, he said.

Medicines and Pharmaceutical

He said that medicines could also get expensive as the legislation proposes the withdrawal of tax exemptions worth Rs160billion on the pharmaceutical sector. He said that it would also lead to the imposition of 17pc sales tax on imported raw material for pharmaceutical active ingredients.

Computers

The PPP leader said that the bill also proposes a 5pc sales tax on imported laptops and 17pc tax on imported magazines and journals.

Textile sector

He said that the bill suggests an increase in sales tax from 10pc to 12pc on sales from retail outlets connected with the Federal Board of Revenue (FBR) through a point of sales system — an online real-time system for documentation of sales that connects the computerised sales system of big retailers to the FBR’s system through internet. He said that after this garments and clothes would likely get more expensive if the bill is passed.

Gold and Jewellery

The senator said that jewellery made of gold, silver or other precious metals or stones would be taxed at the rate of 17 percent.

Foreign TV dramas

He said that the mini-budget proposed advanced tax on foreign TV serials and dramas. A single episode of a foreign TV serial would be taxed Rs1 million and a one-episode play would be taxed Rs3 million, he said.

He said that TV advertisement featuring foreign actors would also be taxed heavily. “A 30 second advertisement would be taxed Rs15 million at the rate of Rs500,000 proposed in the mini-budget, he said.

Tax exemptions to REIT extended

The PPP leader said that on a separate note, the legislation also proposed extending tax exemptions available to Real Estate Investment Trust (REIT) — companies that own or finance income-producing real estate across a range of property sectors — to special purpose vehicles — a subsidiary created by a parent company to isolate financial risk — set under REITs.

He said that the government has made plan to withdraw the incentive on electric vehicles (EVs) which would be taxed at the rate of 17 percent. He said that the sales tax on electric vehicles is currently set at five pc as a part of the government policy to promote clean energy.

About foreign funding case against the PTI, the PPP leader claimed that there were massive financial irregularities in handling of foreign funding of the PTI. He said that the PTI dragged the case for almost more than seven years and was unable to reply to the allegations.

He said that theft has been caught in the PTI’s foreign funding case, now it is blaming other parties in response. He also said that a Joint Investigation Team headed by a Supreme Court judge should be constituted to expose the faces of the funders. About the case filed by the PTI on the PPP/PPPP and the PML (N), he said that the PPP is ready to disclose the details of all its bank accounts before the Election Commission of Pakistan.

Copyright Business Recorder, 2021

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