• Rs8.49trn FY22 outlay is based on 4.8pc growth target and increased spending on public sector development
• Ad hoc relief of 10 percent raise in basic pay and pensions of the federal government employees announced
ISLAMABAD: Finance Minister Shuakat Tarin, on Friday, presented a Rs8.495 trillion spending-led outlay for the fiscal year 2021-22 designed to achieve six to seven percent GDP growth in next two to three years 4.8 percent for FY2021-22 by facilitating auto, telecom, agriculture as well small and medium enterprises for job creation amid roaring protest from the opposition.
The finance minister, in his budget speech, came down hard on the economic policies of the previous governments, and stated that Prime Minister Imran Khan helped the country avert a default and put it back on economic growth of 3.4 percent in the outgoing (current) fiscal year.
The finance minister said that a 40 percent increase on development outlay to Rs900 billion from Rs650 billion for the current fiscal year would pave the way for much-needed growth.
Gross revenue for the next fiscal year has been estimated at Rs7,909 billion, higher by 24 percent over Rs6,395 billion for the current fiscal year, and the Federal Board of Revenue (FBR) tax collection at Rs5,829 billion for 2021-22 from Rs4,691 billion for the current fiscal year.
Provinces' share has been estimated at Rs3,411 billion, Rs707 billion higher over allocation for current fiscal year, and the federal government's share after transferring provinces' share in the tax collection would be at Rs4,497 billion, while a 22 percent increase in non-tax revenue.
The expenditures are estimated at Rs8,495 billion against Rs7,341 billion for the outgoing fiscal year, up by 15 percent and subsides have been allocated at Rs682 billion. The GDP growth target for the next fiscal year is projected at 4.8 percent.
The government has allowed 10 percent ad hoc relief allowance to all federal government employees from 1 July 2021 and 10 percent increase in pension to all pensioners increased in orderly allowance from Rs14,000 to Rs17,500 besides increase in minimum wage to Rs20,000.
Fiscal deficit is projected at 6.3 percent against the revised target of 7.3 percent for the current fiscal year, and primary deficit target is 0.7 percent. The government has reduced the primary deficit to 3.2 percent in three years from 3.7 percent in 2018-19.
Tarin said that the government wanted to restructure the tax regime and as a first step self-assessment scheme would be restored in actual shape.
Tax on income and expenditure would be primary instruments and information technology would be used to broaden the tax base.
The minister asked the rich to pay their due taxes and announced that exemption in terms of professions would be withdrawn.
No new tax would be imposed on salaried class and trace and track initially implemented in four industries would be gradually expanded to the other sectors, he said, adding that the government wants to increase GST net and entire wholesale and retail sector linked with the Federal Board of Revenue (FBR) would be brought into the tax net.
Pakistan single window is being launched, added the finance minister.
The finance minister said that minimum turnover threshold for cottage industry has been increased from Rs3 million to Rs10 million, local production of 850cc vehicles to be exempted from federal excise duty (FED) and sales tax is being reduced from 17 percent to 12.5 percent and value-added tax is being removed.
The minister said the export of IT sector would be provided zero-rating; for promotion of electric vehicles, sales tax on local production of CKD is being reduced from 17 percent to one percent and tax would be exempted on their export value addition.
There would be exemption of FED on four-wheel electric vehicle as well.
The minister said that there is exemption of tax on import of machinery and raw material for SEZs, and locally-constructed storage of agriculture products would be given tax exemption.
On telecom industry, the FED is proposed to be reduced from 17 percent to 16 percent.
The FED on mobile phone calls exceeding three minutes, internet data usage and SMS messages is being proposed.
The government has also proposed inclusion of sugar in the Third Schedule.
The minister said that 12 withholding taxes are being withdrawn from banking transactions, Pakistan Stock Exchange and margin financing, air travel service, international transactions through credit/debit cards, exploration of minerals. Withholding tax (WHT) on use of mobile phones would be reduced from 12.5 percent to 10 percent while WHT on different services - oil field services, warehouses and travel and tourism services - would be reduced from eight percent to three percent.
Disposable and CGT tax is proposed to be reduced and CGT would be reduced from 15 percent to 12.5 percent.
Turnover tax threshold for individuals and association is being increased to Rs100 million, and tax is being reduced from 1.5 percent to 1.25 percent.
He said that withholding tax on import of stationery books and agriculture products is being exempted.
There is proposal that block taxation in property tax should be removed and limit block tax on non-transferable property.
There is a proposal of special tax regime for SMEs and those who have turnover of Rs100 million would be required to pay tax at the rates of 0.25 percent or 7.5 percent of their income and those whose turnover is of over Rs100 million would be required to pay 1.5 percent of their turnover.
All services receipts should be taxed at one percent and IT-related exports are brought under the provision of 100 percent tax credit.
Turnover tax of SEZs was abolished, and under SEZA, zone developers and zone enterprises are being exempted from tax for a period of 10 years.
Tax on warehouses services, logistics services and platinum management is being reduced from eight percent to three percent.
He said that in the Finance Bill 2021, textile-related 164 tariff headings regulatory and custom duty have been removed.
The minister said that Prime Minister Imran Khan wanted to change the course of history and four to six million people low-income households would be protected through a bottom-up approach.
The government would disburse every household Rs0.5 million interest-free business loan, every farming household will be given Rs0.25 million interest-free farming loan, and Rs0.2 million interest-free loans for tractors and machineries besides low-interest housing loans of up to Rs2 million as well as Sehat Card and free technical training to one member of each family.
The finance minister said that Rs900 billion development budget for the next fiscal year would pave the way for development as its development priorities would be to ensure provision of water and energy security, infrastructure development, progress on CPEC implementation, development of SEZs and their operation, SDGs targets as well as measures against climate change.
These measures would help achieve sustainable development besides reducing poverty and unemployment.
The government would initiate national agriculture transformation plan to develop the agriculture and livestock on modern lines and Rs12 billion has been allocated in the budget for the next fiscal year.
Rs91 billion for water sector and completion of Diamer-Bhasha and Mohmand dam would be a priority of the government.
Rs57 billion has been allocated for Dasu hydropower and Rs23 billion for Diamer-Bhasha dam and Rs6 billion for Mohmand dam.
He said that Rs14 billion has been allocated for Neelum-Jhelum hydropower.
The government, he said, wants to expedite work on the China-Pakistan Economic Corridor (CPEC) and so far 17 big projects of $13 billion worth have been completed and 21 projects of $21 billion worth are being implemented besides 26 strategic-level projects (worth $28 billion) are in the process of planning. ML-I with a cost of $9.3 billion is being implemented in three packages and a first package has already started.
The government has allocated Rs118 billion in the budget for power transmission projects and secondary transmission line Hyderabad-Sukkur would also be constructed at Rs12. 5 billion, whereas Rs22 billion is allocated for production of 1200MW of electricity from coal at Jamshoro power project, and Rs15.5 billion has been allocated for K-1, K-2, and Tarbela hydro project expansion in the next fiscal year's budget.
The government has allocated Rs20 billion for southern Punjab development plan and would provide Rs98 billion in the PSDP for the Karachi transformation plan.
Gigit-Baltistan to get Rs40 billion, and KP for merged areas Rs54 billion. There have been allocations of Rs14 billion for Ten Billion Tsunami project and Rs118 billion for social sector and Rs100 billion for Covid-19 expenditure as well.
The government has also allocated Rs12 billion for SMEs support programme, Rs10 billion for Kamyab Jawan Programme, and Rs100 million for anti-rape fund.
The finance minister said that Rs66 billion is being allocated for the High Education Commission (HEC) and Rs44 billion for development budget.
Support to the export sector under various schemes would be continued and PIA and Pakistan Steel Mills would be provided Rs20 billion and Rs16 billion, respectively.
He said that for Kashmir Rs60 billion, Rs47billion for G-B have been allocated. Sindh would be provided Rs12 billion special grant while Balochistan would be provided additional Rs10 billion.
Copyright Business Recorder, 2021