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ISLAMABAD: The Federal Board of Revenue (FBR) has raised the Federal Excise Duty (FED) on cigarettes and air travel for business class and first class, imposed sales tax on the import of different kinds of scrap, and also raised the tax on high-income earners and buyers of 1600cc and above cars.

Under the Finance Bill 2022, the FBR has increased the scope of tax on payments to non-residents and the enhancement of rate from five per cent to 10 per cent on the offshore digital services.

Every banking company shall collect advance tax, at the time of transfer of any sum remitted outside Pakistan, on behalf of any person who has completed a credit card or debit card or prepaid card transaction with a person outside Pakistan at the rate specified. The advance tax collected under this section shall be adjustable.

Under the Finance Bill 2022, the FBR has raised the FED on locally-manufactured cigarettes by 20 paisa n per cigarette for tier-1 and 40 paisa for tier-2. The rate of the FED is enhanced on the club, business, and first-class travel by air from Rs10,000 to Rs50,000 and the rate of FED is enhanced on telecommunication services in the ICT from 16 per cent to 19.5 per cent to harmonize the GST on services with the provinces.

To keep the prices of medicine stable in the market and to encourage local manufacturing of pharmaceuticals, the customs duties have been exempted on 26 more items on the Active Pharmaceutical Ingredients (API).

Challenges in tobacco control in Pakistan

FBR Chairman Asim Ahmed along with his team told reporters in a technical briefing after the announcement of the budget in the Parliament that they have conveyed to the IMF the whole taxation measures and discussion with the IMF continues for staff-level agreement. When asked about Personal Income Tax (PIT) reforms agreed with the IMF, he replied that the Minister for Finance should be asked about it. He said that the FBR proposed 75 percent taxation on direct taxes and the remaining from the other three.

The FBR also proposed relief measures of Rs85 billion out of which it granted relief of Rs49 billion on PIT.

The FBR has also reduced the number of withholding taxes and abolished withholding taxes on educational expenses and machinery on rent.

The FBR proposed to increase advance tax on purchase of immoveable property to non-Active Taxpayer List (ATL) person from two to five percent Rs20 billion, raised tax rate on purchase and sale of immoveable property by the ATL person from existing one to two percent, capital value tax at the rate of one percent on foreign immoveable properties of Pakistani residents and increase of advance income tax on luxury vehicles of above 1600cc.

The FBR also imposed two percent on high-income earnings of all persons including individuals, businesses etc for income above Rs300 million and this measure will bring a tax of Rs38 billion.

The FBR proposed increased differential tax on low advance to deposit ratio (ADR) of bank income on income attributable to all investment including T-bills on the ADR from 40 percent to 55 percent which will bring Rs25 billion.

The FBR increased income tax rate at the import stage on import by commercial importers from two to four percent that will bring Rs17 billion additional tax.

On direct taxes side, the government took major taxation measures on deemed income at the rate of five percent of the immoveable property such as plot or house of more than one asset having a value of Rs25 million. This measure will fetch Rs30 billion in revenue in the next fiscal year.

The FBR also imposed fix on retailers other than tier-1 as retailers will have to pay Rs3,000 fixed tax up to monthly electricity bill of Rs30,000, Rs5,000 on monthly electricity bill of Rs50,000, Rs10,000 up to electricity bill of Rs100,000, and Rs50,000 per month for special class such as car dealers and precious watch and this will bring additional Rs30 billion.

The private-funded gratuity and pension scheme allowance 50 percent of employer’s contribution will be subject to income tax and will fetch Rs10 billion.

The audit will be done once in four years, reduction in tax on Behbood Certificate from 10 to five percent, an exemption to charitable/government organization and a reduced rate on IT exports of 0.25 percent.

The continuation of 20 per cent RD on the import of Disodium Carbonate is proposed to protect the local industry. To encourage the vendor industry, the RD has been reduced on import of case hardening steel from 30 per cent to 20 per cent.

In major relief measures, the condition of CNIC/NTN in case of supply to unregistered persons has been removed. The sales tax exemption has been granted on the import and supply of all types of seeds. The sales tax on tractors at the rate of five per cent is withdrawn.

The exemption has been granted on imports by the UN diplomats/diplomatic missions and privileged persons. The import and supply of solar panels (PV module) has been exempted from sales tax. The goods imported by or donated to non-profit charitable hospitals have been exempted. Furthermore, the goods supplied to charitable hospitals of 50 beds or more have also been exempted from sales tax. The temporary imports have been exempted from the levy of the sales tax.

The made-up jewellery has been made chargeable to three per cent fix tax on local supply and four per cent fix tax on imports. Plant and machinery imported by power generation projects that entered into an implementation agreement with the GoP has been exempted from sales tax. Rs90 per kg is reduced to Rs60 per kg on potassium chlorate. The import by EPZ has been exempted from sales tax. On GST taxation measures, the scope of further tax has been enhanced to include non-active taxpayers as well.

The regime of other than Tier-1 retailers has been streamlined.

The Value-Added Tax (VAT) has been imposed on compressor scrap, motor scrap, and copper cutting scrap even when imported by manufacturers.

Copyright Business Recorder, 2022

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