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ISLAMABAD: The government has taken new taxation measures of Rs223 billion in the budget (2023-24) including the applicability of super tax on all persons having income above Rs150 million, 0.6 percent withholding tax on cash withdrawals by non-filers from banks and re-imposition of 10 percent withholding tax on issuance of bonus shares and raised withholding taxes on supplies/contracts/services to meet the revenue collection target of Rs9.2 trillion set for 2023-24.

The government has also retained all tax measures introduced in a mini-budget in mid-February 2023 but announced a series of relief measures on June 9 to support various industries/sectors.

The continuation of taxation measures taken in February 2023 of Rs170 billion would have a revenue impact of Rs680 billion in 2023-24.

Import/export cargoes: FBR tightens procedures for tracking, monitoring

Therefore, the total revenue impact of all measures including the mini-budget would be over Rs900 billion in 2023-24.

Under the Finance Bill 2023, the government has imposed additional tax at the rate not exceeding fifty percent on income profit and gains of a person or class of persons on account of extraordinary gains due to exogenous factors.

During the technical briefing on Finance Bill 2023 held at the Federal Board of Revenue (FBR) Headquarters on Friday, FBR Chairman Asim Ahmed said that the FBR required growth of 28 percent in revenue to meet the target of Rs9.2 trillion in 2023-24.

“We have not specified any figure for revenue generated from enforcement/administrative measures in 2023-24, but these are linked with the policy measures,” the FBR chairman added.

He stated that a target of one million new taxpayers has been set for 2023-24.

The FBR chairman stated that the revenue impact of (additional tax on certain income, profits and gains) under new section 99D of the Income Tax Ordinance 2001 cannot be calculated because it is not a new tax, but an enabling provision introduced in the law, the FBR chairman clarified.

In the technical briefing given by the FBR Chairman Asim Ahmed along with his team at FBR’s headquarters on Friday after the announcement of the budget stated that the Super Tax would be imposed on all sectors instead of only on selected sectors. When asked about exact revenue estimates through imposition of windfall gain tax, the Chairman FBR replied that only legal provision was proposed to get powers for slapping windfall gains tax on those sector earning extra ordinary profits, He said that they worked out but no decision was made when this tax would be imposed at the moment.

Total taxation measures stood at Rs223 billion and relief measures of Rs23 billion in the budget (2023-24).

The net impact of the taxation measures comes to around Rs200 billion for 2023-24.

The income tax measures stood at Rs185 billion, whereas, relief measures of Rs10 billion. The net impact comes to Rs175 billion.

The sales tax measures amounted to Rs22 billion, whereas, zero relief measures and a net impact of sales tax measures totalled at Rs22 billion.

The customs duty measures totalled at Rs12 billion and relief measures of Rs13 billion, resulting in a net impact of relief of Rs1 billion.

The Federal Excise Duty measures of Rs4 billion were taken in the budget (2023-24) with no relief impact.

The government has enhanced the monetary limit of foreign remittances from outside Pakistan from five million rupees to rupee equivalent of USD 100,000 for the purpose of section 111(4) which places a bar on asking nature and source of unexplained income/assets.

The super tax under section 4C will apply on all persons across the board on income above Rs150 million. There will be three new income levels: Rs350m to Rs400m, Rs400m to Rs500m, and above Rs500m. They will be taxed at six percent, eight percent, and 10 percent.

The 0.6 percent withholding tax will be charged again on non-Active Taxpayers List (ATL) people when they withdraw cash beyond Rs50,000. The withholding tax rates on goods supply (except rice, cottonseed, or edible oils), services (except electronic and print media advertising), and contracts (except sportspersons) will increase by one percent.

The withholding tax rate for commercial importers of specific goods will increase by 0.5 percent to six percent. A final withholding tax of 10 per cent will be charged on bonus shares issued by a company, or 20 per cent for non-ATL.

The withholding tax rate on payments to non-residents using debit/credit or prepaid cards will increase from one percent to five percent for ATL person, or from two percent to 10 percent for non-ATL people. An adjustable advance tax of Rs200,000 will be charged when issuing a work permit/visa for a foreign domestic helper.

An additional tax of up to 50 percent may be charged on the income of a person or group due to extraordinary gains from outside factors.

A two percent final withholding tax on immovable property purchases by non-resident POC/NICOP holders will be waived if purchased with foreign remittances.

Builders will receive a 10 per cent reduction in tax liability or Rs5m, whichever is lower. Individuals constructing their own house will receive a 10 per cent reduction or Rs1m, whichever is lower, for three years.

Youth entrepreneurs (up to age 30) will receive a 50 per cent reduction in tax liability for three years. The concessionary tax rate of 20 per cent for banking company income from additional advances to low-cost housing, agriculture, and SMEs (including IT and ITeS) will be extended for two years. Indirect exporters of commodities (agriculture produce, gems, metals, etc) through online platforms will receive a one per cent concessionary final tax rate. Minimum tax liability on turnover for companies listed on the Pakistan Stock Exchange will be reduced from 1.25 percent to one percent.

Exemptions for profits and gains on the sale of immovable property or shares of special purpose vehicles to any type of REIT scheme and income tax exemption for Fata/Pata residents will be extended until June 30, 2024.

A 5-year tax holiday will be granted to agro-based SMEs set up after July 1, 2023.

An exemption certificate for payment to non-residents will be automatically issued within 30 days of application.

The government has withdrawn sales tax on edible products sold in bulk under brand names or trademarks.

Sales tax has been increased from 12 per cent to 15 per cent on supplies made by POS retailers dealing in leather and textile products.

Copyright Business Recorder, 2023

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