- Finance minister says tax applicable for FY23, announces reduction in sales tax on large shops
Finance Minister Miftah Ismail elaborated on Friday that the government's recently-announced indirect tax (super tax) is aimed to helping the state accumulate funds under the head of tax collection and narrow down the budget deficit.
He was referring to the 10% poverty alleviation tax, or super tax, imposed on large industries. The announcement was made by Prime Minister Shehbaz Sharif on Friday morning.
Speaking in the National Assembly, Miftah said that this tax is a one-time levy, and will be imposed on 13 sectors ie sugar, cement, steel, textile, tobacco, fertiliser, bank, oil and gas, beverages, automobile, chemical, airlines and LNG terminals.
“These 13 industries made huge profits last year and hence, they were identified by the government for super tax,” he said.
He added that companies earning more than Rs300 million within these sectors would pay 10% super tax.
"This tax is a one-time levy and it will only be applicable for fiscal year 2022-23," he said.
Taking to twitter, he clarified that the super tax of 4% will be applicable to all sectors.
“For the specified 13 sectors, another 6% will be added for a total of 10%,” he said. “So their tax rates will go from 29% to 39%. This is a one-time tax needed to curtail the previous four record budget deficits.”
Companies from other sectors earning more than Rs150 million would be liable to pay 1% super tax while firms making over Rs200 million would pay 2% tax. These are additional taxes on top of existing rates.
Companies making more than Rs250 million in income would pay 3% super tax and those earning over Rs300 million would pay 4% super tax.
Citing figures, he added that there were 9 million retail and wholesale outlets in Pakistan and the government was aiming to add 2.5-3.5 million into the tax net.
“We are linking the income tax and sales tax of these shops with the electricity bill,” he said. “Now, small shops will pay a fixed tax of Rs3,000 and large shops will pay Rs10,000.”
He stated that out of more than 30,000 trading businesses of gold in Pakistan, only 22 were registered and average sales shown by them clocked in at Rs4,000.
Gold shops situated at an area of 300 square feet or less will now pay Rs40,000 fixed income and sales tax, he said.
He announced that the government was reducing sales tax on large shops from 17% to 3%.The withholding tax on selling of jewellery by public to gold shops has been decreased from 4% to 1%, he said.
“Similar fixed tax schemes will be introduced for builders, realtors and car dealers,” he said. “This tax is applicable on income and not on expenditure therefore inflation will not rise.”
Moreover, withholding tax on IT companies has been withdrawn. Those IT firms that earn less than Rs80 million would be exempted from sales and income tax.
He added that minimum tax on oil marketing companies was raised from 0.5% to 0.75% by the past government. “This has been reversed to 0.5% again,” he said.
Sales tax has been removed on surgical instruments and sale and purchase of hides He highlighted that companies owned by Shahid Khaqan Abbasi and PM Shehbaz’s sons would be covered under the new tax as well.
“Due to this tax, my own companies will pay Rs200 million more tax in fiscal year 2022-23,” he said.
He highlighted that resumption of International Monetary Fund (IMF) programme is vital for Pakistan because the country’s foreign exchange reserves are at a critical level.
“We agreed with IMF to turn primary deficit into a surplus next year,” he said.