ISLAMABAD: Following are the highlights of budget 2021-22 of Pakistan presented by Minister for Finance and Revenue Shaukat Tarin in the Parliament House here on Friday 11th of June, 2021.
Budget at a Glance
ISLAMABAD, Jun 11 (APP):Following is the present position of overall resources and expenditure of the financial year 2021-22.
Resources:
Tax revenue (FBR) Rs 5,829 billion
Non-Tax revenue Rs 2,080 billion
A. Gross revenue receipts Rs 7,909 billion
B. Less: Provincial share Rs 3,412 billion
I.Net revenue receipts (A-B) Rs 4,497 billion
II. Non bank borrowing (NSSs& others) Rs 1,241 billion
III. Net external receipts Rs 1,246 billion
IV. Estimated provincial surplus Rs 570 billion
V. Bank brrowing (T-Bills, PIBs,Sukuk) Rs 681 billion
VI. Privatization proceeds Rs 252 billion
Total resources (I to VI) Rs 8,487 billion
Expenditure:
A. Current Rs 7,523 billion
Interest payments Rs 3,060 billion
Pension Rs 480 billion
Defence services Rs Rs 1,370 billion
Grants and transfer to provinces and other Rs 1,168 billion
Subsidies Rs 682 billion
Running of civil govt. Rs 479 billion
Provision for contingencies & fund Rs 25 billion
Provision for disaster/emergency Covid Rs 100 billion
Provision for pay & pension Rs 160 billion
B. Development Rs 964 billion
Federal PSDP Rs 900 billion
Net lending Rs 64 billion
Total expenditure (A+B) Rs 8,487 billion
— Support for 4-6 million low-income households, through Interest free business loans (upto Rs.5 lakh)
— Interest free farming loans (upto Rs.2.5 lakh)
— Agri-equipment loans (upto Rs.2 lakh)
— Technical training for 1 person from each household
— Subsidy of Rs. 300,000 for house construction for low-income individuals (Rs. 33 billion allocated)
— Increase in development budget from Rs. 630 billion to Rs. 900 billion, (40% increase)
— For Food Security; Rs. 1 billion for Locust Emergency and Food Security Project,
— Rs. 2 billion for enhancing productivity of rice, wheat, cotton, sugarcane and pulses,
— Rs. 1 billion for enhancement of olive cultivation on commercial scale
— Rs. 3 billion for improvement of water courses
— Rs. 100 billion allocated for construction of four hydro power dams (Dasu, Diamer, Mohmand, Neelum Jhelum)
— Gross Revenues for 2021-22 have been estimated at Rs. 7,909 billion
— FBR revenues are estimated to grow by 24% from Rs. 4,691 billion to Rs. 5829 billion
— Federal expenditures are budgeted at Rs. 8,487 billion compared to Rs. 7,341 billion
— Subsidies are projected at Rs. 682 billion (last year Rs. 430 billion)
— Allocation of Rs. 260 billion for Ehsaas (last year Rs. 210 billion), 24% increased
— Expenditure priorities: Vaccinations $ 1.1 billion, Universal Health Coverage in collaboration with Provinces
— Rs. 12 billion for collateral free lending to SME,
— Rs. 10 billion for Kamyab Pakistan Program,
— Rs. 100 million for anti-rape fund
— Rs. 66 billion for Higher Education Commission budget
TAX PROPOSALS:
— Introduction of self assessment scheme, E-audit system and a strict adherence to no harassment for taxpayers
— No new taxes on salaried class
— Promotion of third party audits and minimizing requirements for tax compliance
— Expansion of GST base and introduction of new simplified Tax Return Form and new tax code
— Withdrawal of FED and reduction of sales tax on locally manufactured cars upto 850cc
— Allowing zero rating to export of IT services
— Exemption to SILOS for storage of agriculture products
— Reduction in withholding tax regime by 40%
— Exemptions on COVID-19 related medical equipment / items have been extended for six months
— For making Pakistan a tourism friendly destination in the World, relief / concessionary measures of more than Rs. 45 billion have been given
— Grant of 10% Ad-hoc relief allowance to all Federal Government employees with effect from 1 July 2021
— 10 % increase in pension to all Federal Government pensioners with effect from 1 July 2021
— Minimum wage increased to Rs. 20,000 per month.
Federal Minister for Finance and Revenue Shaukat Tarin Friday announced that the government has proposed Rs118 billion in the Budget 2021-22 to efficiently manage the distribution of surplus energy generated by the country.
In his Budget speech at the National Assembly, the minister said the country was possessing surplus electricity generation capacity but due to weak distribution infrastructure was not able to transport and distribute the entire energy production to the end-consumers.
Tarin said in order to meet this challenge, our investment priorities would now shift towards achieving this objective.
He shed light on the key priority areas of investment including Rs7.5 billion for 1000KVs Islamabad West and Lahore North transmission lines, Rs 8.5 billion evacuation of 2160 MW of power from Dasu, Rs 5.5 billion for evacuation of power from Suki Kinari, Kohala, Mahala Hydro Power Project and Rs12 billion for secondary transmission line Hyderabad and Sukkur.
Tarin went on to mention that the government would simultaneously invest in completing the already started electricity generation projects such as 1200 MW of coal fired power plant project in Jamshoro which would be earmarked Rs22 billion, also K1 and K2 in Karachi for which Rs16.5 billion were proposed and 5th extension of Tarbela hydro-power project.
Federal Minister for Finance and Revenue Shaukat Tarin on Friday said Prime Minister Imran Khan was keen
to develop water reservoirs; small, medium and large dams to meet water needs of our future generations.
In his budget speech at National Assembly, he said Pakistan was among the countries to face water scarcity in near future and to overcome water shortage three big dams Dasu, Diamer Bhasha, and Mohmand Dams would be our priority.
“We aim to complete these projects on time”, he said adding that a total of Rs. 91 billion were proposed in the budget for countering water security besides the hydel energy generation project.
“Large projects that will receive maximum funding include: Dasu Hydro Power Project Rs. 77 billion were proposed in the budget for the stage-1. Rs. 23 billion proposed for Daimer Bhasha, Mohmand Rs. 6 billion and Neelum-Jehlum Hydro power project Rs.14 billion,” he added.
He said that many other projects to increase water security were also underway including Darwat Dam,
Khattak Banda Dam, Makh Banda Dam, Pezu Dam, Sari Kalash, Winder Dam etc.
The government has proposed to bring third-party sales through established online marketplaces within the purview of sales tax.
In his budget speech, Federal Minister for Finance and Revenue Shaukat Tarin Friday said the basic objective was to bring e-commerce transaction under sales tax net.
“We have seen extraordinary sales through online marketplaces especially due to COVID-19 lockdown,” he said, adding that however, contribution made by these e-commerce digital platforms in national exchequer was negligible.
The federal government has proposed a funding of Rs 14 billion for Prime Minister Imran Khan’s flagship Ten Billion Tree Tsunami Plantation project (TBTTP) in the Budget 2021 to be spent during the current financial year.
Federal Minister for Finance and Revenue Shaukat Tarin announced this decision during his Budget speech at the National Assembly here on Friday.
Tarin said Pakistan was low on carbon-emissions and was regarded as one of the top ten countries most affected by climate change. He added that the TBTTP was the flagship project of the present government to address the issue of environmental degradation.
Minister for Finance and Revenue Shaukat Fayaz Ahmed Tarin on Friday said that the government had proposed a total of Rs 91 billion in the budget for ensuring water security.
In his budget speech here in the National Assembly, the minister said that an amount of
Rs 57 billion has been proposed for Dasu Hydro Power Project stage-1, Rs 23 billion for Diamer Bhasha dam, Rs 6 billion for Mohmand and Rs 14 billion for Neelum Jhelum hydro power project in the budget for fiscal year 2021-22.
He said Pakistan was fast becoming water scarce country. “The Prime Minister is keen in developing water reservoirs, small, medium and large dams so that our future water needs are safeguarded”.
He said the three large dams including Dasu, Diamer Bhasha and Mohmand were our priority while many work on other projects including Darwat dam, Khattak Banda dam, Makh Banda dam, Pezu dam, Sari Kalash dam and Winder dam were underway to increase water security.
Every household will be provided Rs 600,000 interest free business loan, besides the facility of Sehat Card and free technical training for one member of every household, Minister for Finance and Revenue Shaukat Tarin said while presenting the Federal Budget 2021-22.
In his budget speech, the minister said each farming household will also be given Rs 2.5 lakh interest free loan and Rs 2 lakh interest free loans for purchasing tractor and machineries.
Low interest bearing housing loan up to Rs 2 million will be provided to the deserving people to enable them to construct their own houses.
Prime Minister Imran Khan wanted to change the course of history and interested to ensure trickledown effect for, 4-6 million low income households, from the next year.
Minister for Finance and Revenue Shaukat Tareen on Friday said that the government has established Covid-19 Emergency Fund and Rs 100 billion have been proposed to be kept for meeting exigencies related to the Coronavirus.
In a budget speech at the National Assembly, Shaukat Tareen said that to protect the country’s population from COVID-19, around $1.1 billion dollars will be spent on importing vaccinations.
In addition, the government will provide funding for increasing the local production of vaccines. Our initial estimate is that more than 100 million people should be vaccinated by June 2022, he added.
Sharing details about Universal Health Coverage, he said that the Prime Minister’s universal health coverage scheme will be rolled out further in collaboration with the provinces. He added every household will be provided with a Sehat-Card.
He said that the excellent health insurance program launched by the Khyber Pakhtunkhwa government a few years ago has transformed the lives of low-income groups who are now availing free-of-cost hospitalization services from the leading public and private hospitals.
Minister of Finance and Revenue, Shaukat Tarin, during his budget speech 2021-22, proposed a special export of goods regime to promote IT services, freelancers and export of other services.
He said that all services brought to Pakistan through banking channel will be taxed at the reduced rate of 1 percent under final tax regime without questioning about it.
Export of IT and IT enabled services has been brought under the ambit of 100 percent tax credit.
He said that the conditions for availing tax credit have been relaxed and discretionary
powers of tax authorities have been curtailed. The scope of such services is proposed to be broadened by including data storage and cloud Computing services.
Finance Minister Shukat Tarin said that in order to facilitate the tax payers Pakistan Single Window shell be operational in near future, adding that the activities connected with the clearance of imports , exports on a single portal which would lead to significant reduction in the number of days required for cargo clearance.
The work on harmonization of sales tax on services with the provinces is moving apace and would be made fully operational during the year, he said adding that government would simplify the system of tax through introduction of new simplified tax return forms and new tax code and rules.
Besides, he said that specific tax policy proposals included in the Finance Bill 2021 on Sales Tax and Federal Excise Duty, adding that in Sales Tax and Federal Excise Duty, the government were giving the relief measures including enhancement of threshold for cottage industry.
The small businesses are the backbone of our economy as they create maximum job opportunities and provide subsistence to significant number of people, he said adding that to facilitate small businesses, threshold of annual turnover is being enhanced now a cottage industry having annual turnover of up to Rs 10 million will not be required to register for sales tax.
Previously, he said a small business having turnover of Rs 3 million per annum was required to register and face the hassle of filing monthly sales tax returns, he added.
The minister said that in order to promote ease of doing business as well as to facilitate the registered persons and enhancing ease of doing business, the government is proposing various schemes such as allowing constructive payment for adjusting payable and receivable under section 73 of sales tax law, doubling the tier-I retailer shop area requirement for furniture business and enhancing the scope of compensation for delayed
refunds, and excluding advance payment from chargeability of sales tax.
Relaxation of restriction on input tax adjustment under section 8B, removal of restriction on input tax allowance under sales tax law has been a major demand from business community: however, considering the importance of minimum value addition on VAT model, it is proposed to eliminate this restriction on highly regulated corporate sector that is public limited companies listed on Pakistan Stock Exchange, he added.
The government has proposed withdrawal of FED and Reduction in Sales Tax on Locally Manufactured cars up to 850 cc, he said adding that rising prices of locally manufactured small cars is a major concern for low earning families.
Accordingly, it is proposed that small cam up to 850 cc capacity may be exempted from levy of FE besides reducing Sales Tax rate from 17% to 12.5% .
Finance Minister Shaukat Tarin said that tax Incentives for promoting electric vehicles are also proposed to address environmental issues, reduce reliance on gasoline and provide cheaper source of transportation to public.
The government is encouraging the manufacture and use of electric vehicles and for this purpose, various tax exemptions and concessions are being proposed, which include tax exemption on import of CKD kits for local manufacturing of electric vehicles, reduction in sales tax rate on locally manufactured electric vehicles from 17% to 1%, he added.
Withdrawal of value addition tax on import of electric vehicles and CKD kits and withdrawal of federal excise duty on 4-wheelers electric vehicles were also proposed, he added.
Regarding the Sales tax exemption to auto disable syringes and oxygen cylinders, he said that COVID-19 has badly damaged entire human race and global economy. To mitigate adverse effects of this killer virus and debilitating diseases such as Hepatitis, we have been taking several measures, which include tax exemption on import of auto disable syringes and their raw material and exemption on oxygen cylinders.
Exemption to Special Technology Zones (STZ) as technological revolution would bring sustainable economic growth and reduce poverty, he said adding that for this purpose, STZ are being established throughout the country. To encourage investment in these IT zones, tax exemption on import of plant, machinery, equipment, and raw materials is being proposed.
Food security is a major challenge for our government despite being agricultural country, he said that accordingly, to facilitate the farmer and encourage storage of grain and agricultural activity and improve shelf lives of commodities, in the rural areas, it is proposed to grant exemption on locally produced silos. This initiative is part of the Prime Minister’s comprehensive Agriculture Transformation Plan.
To facilitate businesses and provide relief to the general masses, rate of federal excise duty on telecommunication is proposed to be reduced from 17% to 16%, he added.
He said that major initiative taken by the government is the introduction of concept of Tier-1 retailers and their integration with FBR. On this front, the government have received encouraging results and substantial revenues, adding that this year, we foresee speedy integration of remaining retailers by way of offering more facilitation and concessions.
All POS holders will be included in Tier-1. In addition, we are proposing new prize scheme for the customers making purchases from Tier-1 retailers integrated with FBR. The monthly prizes of Rs 250 million will be disbursed to customers holding system generated invoices issued by Tier-1 retailers integrated with FBR through computer random balloting, he added.
Bringing 0-commerce transactions in sales tax not: We have seen extraordinary sales through online marketplaces especially due to Covid-19 lockdowns. However, contribution made by these e-commerce digital platforms in national exchequer is negligible. Accordingly, it is proposed to bring third party sales made through established online marketplaces within the purview of sales tax.
One of the major concerns of our times is the availability of counterfeit goods especially cigarettes in the market. Although we have already introduced the mechanism of Trace & Track system, which is in the process of implementation; however, to enforce more stringent measures, legal requirement of registration of brand licenses is being introduced, he added.
He said that through this measure, all the manufacturers of specified goods will be legally required to get registered their brands with FBR and accordingly unregistered brands will be treated as counterfeit goods liable for outright confiscation and destruction.
Telecommunication in the country witnessed robust growth over period of time, he said adding that to reap reasonable level, Federal Excise on mobile phone calls exceeding 03 Minutes, Internet data usage and SMS messages is being proposed this will result into mild taxation of a broad spectrum of population.
Sugar is although not a staple food, is still a source of daily caloric intake for millions of people in Pakistan, he said adding that recently, an unprecedented increase in the prices of sugar has been witnessed.
However, this increase has not resulted in corresponding increase in revenue due to that fact that for the purposes of sales tax the value of sugar is not ad-valorem but specific that is Rs.60 per kg. which is considerably below the actual market price of the commodity.
To address this anomaly, sugar is proposed to be included in the Third Schedule to the Sales Tax Act so that tax is charged on actual retail price of the product, he said adding that this measure would not only ensure due payment of tax but also help in putting a more effective price control mechanism.
Federal Minister for Finance and Revenue Shaukat Tarin Friday announced that the government has proposed a reduced withholding tax regime to provide enabling environment for Market Development of regulated commodities.
In his budget speech, the minister said the initiative of future markets development of regulated commodity markets was another important step of the government to provide enabling environment to logistic services.
Tarin said the market development would also provide warehousing services, and collateral management services on a reduced rate of 3 percent instead of 8 percent.
The trading of electronic warehouse receipt on Pakistan Mercantile exchange was being exempted from withholding taxes, he added.
Minister for Finance and Revenue Shaukat Tarin said on Friday that multiple incentives given to the export sector helped achieve ‘remarkable’ growth of 14 percent during the financial year 2020-21.
Presenting the Federal Budget for Fiscal Year 2021-22, he said “Exports are now better than before”, adding that the sector was lagging largely due to ill-conceived policies of the past, particularly with regard to distortion in the exchange rate.
The Minister said that a variety of concessions were offered to revive the exports industry which included rebates, duty drawbacks and subsidies on utilities. The concessions mitigated some of the competitive disadvantages faced by the industry, he added.
Federal Minister for Finance and Revenue Shaukat Tarin Friday said the government was encouraging the manufacturing and use of electric vehicles to address environmental issues and reduce reliance on gasoline besides provision of cheaper source of transportation to public.
In his budget speech, the minister said that for the purpose, various tax exemptions and concessions were proposed, which include tax exemption on import of CKD kits for local manufacturing of electric vehicles, reduction in sales tax rate on locally manufactured electric vehicles from 17 percent to one percent, withdrawal of value addition tax on import of electric vehicles and CKD kits and withdrawal of federal excise duty on 4-wheelers electric vehicles.
The government is providing a subsidy of Rs300,000 for low income household to enable them to own their house. For this purpose, an allocation of Rs33 billion was proposed in the budget.
Minister for Finance and Revenue Shaukat Tarin said this during his budget speech in the Parliament House on Friday.
The government has set a target of constructing 5 million houses for the low income groups under the Naya Pakistan Housing programme.
The housing and construction package has spurred a flurry of economic activities in this sector and its allied industries. The government was taking the various steps to promote this programme.
The Naya Pakistan Housing Authority has been established for overall coordination of policy making and implementation.
A package of tax incentives was especially designed for housing schemes under the initiative in addition 2021-22.
The finance minister said in order to increase exports for moving out of recurrent balance of payment crisis and repeatedly opting for the International Monetary Fund (IMF) programmes, the government was investing in establishment of special economic zones, supporting new exports in IT (information sector) sector and agro-based industries, and endeavouring make CPEC the platform where industries would be relocated, employment opportunities created and exports were made possible.
He said efforts would be made to promote foreign direct investment in the export sector.
The government, he said, was also involving the private sector in the development projects. Currently the Public Private Partnership Authority had 50 infrastructure projects of around Rs 2,000 billion at various stages of processing.
Six projects of Rs 710 billion would be processed in the next fiscal year, he added.
The minister also mentioned the flagship Billion Tree Tsunami project for which the government had earmarked Rs 14 billion in the next budget.
The minister said the social sector development was also the priority of the government. Health, education, attaining sustainable development goals and climate change were some key areas of focus for which an amount of Rs 118 billion was proposed in the PSDP.
Talking about the budget’s salient features, the minister said the gross revenues for the next year had been estimated at Rs 7,909 billion against revised estimates of Rs 6,395 billion for 2020-21, showing growth of 24 percent.
He said the revenues of Federal Board of Revenue (FBR) were projected to grow by 24 percent from Rs 4,691 billion to Rs 5,829 billion. The non-tax revenues were expected to grow by 22 percent.
The minister said the provincial share in federal taxes would increase from Rs 2,704 billion last year to Rs 3,411 billion. It meant that additional Rs 707 billion or 25 percent as compared to the revised estimates, would be made available to the provinces, he added.
Tarin said after provincial transfers, net federal revenues were estimated at Rs 4,497 billion as compared to Rs 3,691 billion under the revised estimates for the last year, showing growth of 22 percent.
He said the federal expenditures were budgeted at Rs 8,487 billion for next year as compared to the revised ones of Rs 7,341 billion for 2020-21, showing an increase of 15 percent.
Shaukat Tarin said the current expenditure was projected at Rs 7,523 billion for next year against Rs 6,561 billion for last year, reflecting an increase of 14 percent.
Excluding interest and non-off expenditure on Covid-19 and settlement of IPP (Independent Power Producers) dues, the current expenditure was projected to increase by 12 percent, he added.
The subsidies, he said, were projected at Rs 682 billion for next year against revised estimates of Rs 430 billion last year, mostly comprising payments of dues of IPPs, tariff differential subsidies and subsidies on food.
He said the allocation for Ehsaas programme including that of Pakistan Baitul Maal and Poverty Alleviation Fund had been increased from revised estimate of FY2020-21 of Rs 210 billion to Rs 260 billion, with an increase of 24 percent.
It was far the highest amount allocated for the lower income segments of the society, he added.
The minister said the overall fiscal deficit budget was estimated at 6.3 % as opposed to the revised estimate of 7.1% for the current year, while the primary deficit was targeted at 0.7% as against the revised estimate of 1.2% for the year 2020-21.
Despite Covid-19, the government had continued its journey of reducing the primary deficit, he added.
Talking about the key-expenditure priorities in the budget 2021-22, the minister said it would focus on vaccinations, for which around $1.9 billion would be spent to protect the population from the COVID-19.
In addition, universal health coverage would be rolled out in collaboration with the provinces while SME support programmes would be introduced for risk sharing and collateral free lending to SMEs for which various schemes had been envisaged for which an allocation of Rs12 billion was made.
Likewise, he said, Rs10 billion allocation was made for Kamyab Pakistan Programme whereas an anti-rape fund was being established with an initial allocation of Rs100 million.
An amount of Rs 66 billion had been proposed to be provided to HEC for the current budget and Rs44 billion for the development budget, which would be subsequently expended by an additional Rs15 billion, he added.
The minister said the government also announced various schemes for export sectors and public entities.
He said the Federal Government has increased allocations for Azad Jammu and Kashmir from Rs 54 billion to Rs 60 billion, for Gilgit Baltistan from Rs 32 billion to Rs 47 billion and for merged districts of Khyber Pakhtunkhwa from Rs 56 billion to Rs 60 billion.
Moreover, Shaukat Tarin said, a special grant of Rs19 billion had been provided to Sindh and Rs 10 billion to Balochistan over and above their National Finance Commission (NFC) share.
He said Rs 5 billion was proposed as federal share for undertaking new population census in 2022, and Rs 5 billion for the local government elections.
The minister said the government also proposed Rs100 billion for meeting exigencies related to Covid-19 pandemic.
Finance Minister Shaukat Tarin said the discretionary powers of the income tax authorities were proposed to be curtailed, adding that Tax authorities could conduct inquiry in certain matters regarding amendment of assessment without selection of case for audit.
The power to conduct inquiry was proposed to be withdrawn, he said adding that time limit for disposal of show cause notices was proposed to be 120 days, and the power of the commissioner to reject advance tax estimates has also been proposed to be withdrawn.
To curb the misuse of these discretionary powers, it has been decided that audits would only be conducted through third parties and not by the officers of Federal Bureau of Revenue, he said adding that automated Issuance of refunds to claim refunds, taxpayer was required to file refund application and provide documents for physical verification to facilitate taxpayers.
A centralized automated refund system was being proposed where there would be no requirement for application and verification, he said.
The delay in the issuance of exemption certificate was a major concern of taxpayers, he said adding that it was proposed that time limit of fifteen days might be observed for issuance of exemption certificate for corporate taxpayers after the lapse of statutory time limit.
Taxpayers were subject to multiple compliance, he said adding that currently they were required to update their profile periodically. This requirement costs time, energy, and resources. In view of the fact that significant information was already available through tax returns, and to facilitate taxpayers in line with ease of doing business, the requirement to update tax payers’ profile was proposed to be withdrawn.
He said reduction in Withholding Tax Regime by 40 percent was proposed, adding that in past there has been a trend to collect direct taxes in the indirect manner. He said it would not only increases burden on the people but raise compliance cost for the documented sectors of the economy.
At present they were determined to reduce the compliance cost and simplify the taxation system, he said adding that the documented sector was required to collect taxes on 38 different legal provisions. It was being proposed that 12 withholding tax provisions might be omitted.
These included withholding and tax collection provisions regarding banking transactions; Pakistan stock exchange; Margin financing; Air travel services, International transactions through debit and credit cards; and
extraction of minerals.
It was also proposed that three other provisions might be mother existing provisions to simplify and merged with tax laws.
It was however, clarified that the information which was made available through withholding taxes, now mostly available through the data sharing arrangements and reporting requirements from the documented sectors.
Reduction of withholding tax rate on mobile phone users was also proposed, he said adding, the current withholding tax on mobile services i.e 12.5 percent would be proposed to reduce to 10 percent for next financial year.
Finance Minister Shaukat Tarin said that government had proposed reduced rate of tax for certain services as many services carry low margins and higher withholding rate is causing problem for them, adding that therefore, it is proposed that withholding tax on oilfield services, warehousing services, security services, logistic services, telecommunication services and collateral management services may be reduced to 3% from existing 8%.
In order to Covid-19 pandemic, the capital market has been alleviated the difficulties faced by the stock market in the past two years, it is proposed that the rate of capital gain tax be reduced to 12 5% from 15%, he said adding that adjustment of Losses against Property Income under present legal dispensation current year business loss is adjustable against income under all heads except property and salary income.
This is causing hardship to many businesses. As property income has been brought under normal tax regime therefore, current year business loss has also been allowed to be adjusted against property income, he added.
Unconditional Grant of Exemption from Tax to Different Organizations proposed as law provides for conditional and unconditional exemptions to different organizations, he said adding that to encourage philanthropy NGOs like Abdul Sattar Edhi Foundation, Indus Hospital and Network, Patient’s Aid Foundation, Sundus Foundation, The Citizen Foundation, Ali Zaib Foundation these are proposed to be placed in the list of unconditional exempt entities.
To promote IT services, freelancers and export of other services, a special regime at par with export of goods regime is proposed all services receipts which are brought to Pakistan through banking channel shall be taxed at a reduced rate of 1% under final tax regime and no question thereafter shall be asked about it, he added.
Special Economic Zones are a key project of CPEC, he said adding they were exempted from tax however, under the law they are still liable to pay minimum tax on their turnover.
This is causing hardship to the investors. It is proposed that SEZ enterprises would be exempted from minimum tax for tax-year 2021.
To expand telecommunication network and attract investment, telecom sector is proposed to be extended the status of industry undertaking and tax on telecommunication service is proposed to be reduced.
He said that agriculture, livestock and poultry were a major source of our GDP, adding that livestock and poultry, both less organized and informal sectors formed an essential component of our food supply.
The government was striving to strengthen these sectors, he said, adding that multiple relief measures had been taken for livestock & poultry sectors as well as agricultural sector in the budget.
Vaccines for the veterinary medicines had been exempted from customs duties, he said, adding that similarly, concessions in tariff had been given to a number of feed additives which were considered as one of the most basic requirements of the dairy sector and had now been made importable at concessionary rates.
To give relief to agricultural sector and farmers of the country for long term grain storage, mechanical silos had been exempted from the customs duties fulfilling the demand from this sector, he added.
He said that auto industry was contributing significantly to the country GDP and national exchequer in term of duty and taxes being the largest contributor, adding that vehicles upto 850cc were being exempted, whereas relief to existing manufacturing industry and new models was also being provided by removing ACD and rationalizing the tariff structure.
Due to these targeted interventions the middle class of this country will be able to afford a car of this specific category and will accrue the benefits of “governments flagship projects of “Meri Gari Scheme” which will enable many countrymen who wish to graduate from motorcycle to own their car by providing small car at an affordable price.
Moreover further incentives in the form of reduction of customs duties are electric vehicles for one year to promote the culture of electric vehicles in Pakistan, he said, adding that similarly keeping in view of changing international motorcycles trend usage of local manufacturing of heavy motorcycles and specific categories of trucks and tractors were also being incentivised.
The minister said that that government had taken kinetic measures to boost the industrial growth to tear away the label of fragile, attached with our economy, adding that this government from the day one focused on boosting domestic industry and reducing their cost of doing business.
In the “Finance Act, 2019-20 tariff rates were reduced to 0% on 1639 PCT codes” , which were primarily raw material for domestic industry.
Following are the salient features of Income Tax measure and reliefs proposed by the government for FY 2021-22-Special regime for export of services at par with export of goods to be taxed @ 1% under final tax regime.
-Elimination of block taxation of property income and shift to normal tax regime.
– Reduction of block taxation on capital gain on disposal of immoveable properties if gain exceeds Rs. 20 million.
-Reduction in block taxation on interest income, if it exceeds Rs. 5 million.
-Tax on “on” money on vehicles, if vehicle is disposed without registration.
– Expansion of scope of withholding tax collection from supply chain below manufacturers and importers of specified sectors (sections 236G and 236H).
– Reduction in threshold of monthly electricity bill for withholding tax on electricity consumption from 75,000 to 25,000 from domestic users not appearing on Active Taxpayers’ list.
-Removal of requirement of issuance of separate notice in concealment cases.
– Withholding of tax on rental income of sub-lessee.
– Broadening of scope of withholding agents for the purpose of collection of withholding tax on commission income (section 233).
– Streamlining withholding tax collection on sale and purchase of immoveable property (section 236C and 236K).
– Rationalization of withholding tax regime for exporters.
– Taxability of profit on debt component of GP fund and other such funds.
Withdrawal of personal income tax exemptions. During the current financial year, Tax Laws (Second Amendment) Ordinance, 2021 was promulgated to implement corporate income tax reforms to provide level playing field to all businesses. Certain tax credits, concessions and exemptions were withdrawn. The provisions of the Ordinance have been made part of the Finance Bill.
-Reduction in generalized rate on Minimum Tax on Turnover basis and increase in threshold for individuals and AOPs for chargeability of minimum tax.
-Broadening of scope of IT services by inclusion of cloud computing and data storage services.
– Exemption to Special Economic Zone Enterprises from payment of minimum tax.
-Ten year tax exemption for Special Technology Zone Authority, Zone Developers and Zone Enterprises.
– Tax exemption on the import of capital goods and dividend income of private funds from investment in special technology zone enterprise.
– Introduction of special tax regime for manufacturing SMEs.
– Exemption from tax on income of deep conversion new refineries and BMR projects of existing refineries for 10 years.
-Reduced rate of withholding tax of 3% on oilfield services, warehousing services, logistic services, collateral management services and telecommunication services.
– Inclusion of telecommunication services in definition of industrial undertaking.
– Exemption to Electronic warehousing receipts traded on Pakistan Mercantile Exchange.
– Allowance of provincial WWF and WPPF as a deductible allowance while calculating income.
– Adjustment of business loss against property income.
– Unconditional grant of exemption from tax to certain organizations.
– Withdrawal of power of Commissioner to reject advance tax estimates presented by taxpayer.
– Non recognition of gain/loss on disposal of assets to non-residents under gift from relative, inheritance and agreement to live apart.
– Reduction in tax rate on capital gain tax on disposal of securities from 15% to 12.5%.
– Withdrawal of power of tax authorities to conduct inquiry under section 122(5A).
– Inclusion of live animals, raw hides and unpackaged meat in definition of agriculture produce.
– Reduction in tax liability by 25% for women entrepreneurs.
– Exemption from tax on import of books and agriculture equipment.
– Exemption from tax for bagasse fired power generating units and reduced rate of tax on dividend income from such projects.
– Extension in time limits for availing tax benefits under section 100D and Eleventh Schedule vide Income Tax (Amendment) Ordinance 2021 dated 21.02.2021 made part of the bill.
-Tax exemptions and concessions for Roshan digital accounts and implementation of electric vehicles and mobile phone policy implemented vide Tax Laws (Amendment) Ordinance, 2021 dated 11.02.2021 made part of bill.
The enterprises of the Special Economic Zones (SEZs) being built under the China Pakistan Economic Corridor (CPEC) are proposed to be exempted from the minimum tax for the year of 2021-22 and onwards.
The minister for finance and revenue Shaukat Tarin in his budget speech here on Friday said the SEZs are a key project of the mega CPEC project. He said the SEZ enterprises were earlier exempted from tax however under the law, they are still liable to pay minimum tax on their turnover which was causing hardship to the investors.
The minister said the government has set its priorities of implementing the CPEC projects, besides constructing and operationalizing the SEZs under CPEC during the upcoming fisal year.
He said the PTI government has showed its commitment to speed up the projects under CPEC.
So far 17 mega projects have been completed at a cost of US$13 billion while 21 more projects of $21 billion are in the pipeline. Besides, he said the 26 projects valuing $28 billion of strategic nature are also in planning stage.
In the budget 2021-22, he said the government has prioritize six projects under CPEC include completion of Karachi-Lahore Motorway, the 120 kilometers Havelian-Thahkot road phase-I, the second phase of Karakoram highway, Zhob-Kuchlak road, and expansion and construction of Chitral-Boni-Mustoj-Shundor road.
He said the construction of Main line -1 of Pakistan railways and construction of dry port phase-I near Havelian are also the government’s key priorities during the upcoming year.
Sales Tax and Federal Excise Duty (FED): – The sale of goods through online market place is proposed to be brought into the sales tax net by deeming the online market place as supplier in respect of third party sales through their platform.
-For specified goods, it is proposed that it may be made mandatory for manufacturers of such goods to obtain brand license for each separate brand or SKU.
– Section 56C provides for prize scheme to promote tax culture. To ensure that the said incentive is not misused, a new sub-section is proposed to be inserted to provide for randomize “mystery shopping”.
– The rate of sales tax on potassium chlorate is proposed to be increased from Rs. 80 per kg to Rs. 90 per kg in addition to 17% standard rate.
– Zero-rating is proposed to be withdrawn from Petroleum Crude Oil, parts/components of zero-rated plant and machinery, import of plant and machinery by petroleum and gas sector and supply, repair and maintenance of ships.
– Sixth Schedule is proposed to be streamlined and exemptions other than relating to basic food items, health and education are proposed to be withdrawn.
– Eighth Schedule is proposed to be streamlined and reduced rates other than relating to basic food items, health and education are proposed to be brought into standard regime.
– Reclaimed lead and used lead batteries is an unorganized sector. Therefore, entire amount of sales tax in respect of sales of such goods is proposed to be withheld at source under Eleventh Schedule.
-To ensure collection of due taxes, sales tax on sugar is proposed to be levied on retail price by including the said product in third schedule.
Relief measures
The minimum annual threshold of turnover from all supplies for cottage industry is proposed to be increased from Rs. 3 million to Rs. 10 million.
– The threshold of shop area in case of furniture outlet/showrooms is proposed to be increased from 1000 square feet to 2000 square feet for inclusion in tier-1 retailer.
– Public limited companies are proposed to be excluded from the purview of section 8B.
-A separate section introduced for allowing extension of time for furnishing of return.
– Exemption is proposed to be granted to art and printing paper for publication and printing of Holy Quran.
– Exemption on import of CKD kits for electric vehicles by manufacturers granted by Tax Laws (Amendment) Ordinance, 2021 is proposed to be incorporated in the Sixth Schedule.
-To facilitate international athletes, exemption to goods temporarily imported by athletes/sportsmen granted by Tax Laws (Amendment) Ordinance, 2021 is proposed to be incorporated in the Sixth Schedule.
– Tax exemption to auto disable syringes granted vide Tax Laws (Second Amendment) Ordinance, 2021 is proposed to be incorporated in the Sixth Schedule.
-To encourage IT industry in the country, import of plant, machinery and raw material by Special Technology Zone is proposed to be exempted from sales tax.
– To facilitate farmers and encourage storage of grain, tax exemption on locally manufactured silos is proposed to be granted till 30.06.2026.
– Reduced rate of sales tax @ 1% on locally supply of electric vehicles granted vide Tax Laws (Amendment) Ordinance, 2021 is proposed to be incorporated in the Sixth Schedule.
– In order to address litigation issue, fixed tax on SIM cards is proposed to be deleted with effect from 1st July, 2020.
– Exemption from value addition tax on import of electric vehicles, CKD kits for small car, 2-3 wheelers, HCVs and all these vehicles in CBU conditions was granted vide Tax Laws (Amendment) Ordinance, 2021 is proposed to be incorporated in the Twelfth Schedule.
– For facilitation purpose, the concept of constructive payment is proposed to be introduced in section 73.
– To provide relief to the registered persons, the benefit of compensation for delayed payment of refund is also proposed to be extended to those persons in whose case order under section 66 is passed.
– For promoting ease of doing business, the concept of Common Identifier Number is proposed to be introduced.
– For establishment of Border Sustenance Markets, exemption from sales tax is proposed to be granted on food related and other consumable goods.
– In order to introduce umbrella Export Facilitation Scheme by Customs Wing, exemption on import and zero-rating on local supplies in respect of raw materials, components, parts and plant and machinery to authorized exporters is proposed.
– Rising prices of locally manufactured small cars is a major concern for low earning families. Accordingly it is proposed that small cars upto engine capacity of 850cc may be exempted from value added tax besides reducing sales tax rate from 17% to 12.5%.
Federal Excise Duty
The proposed budgetary measures pertaining to Federal Excise Duty (FED) for FY 2021-22 are:
Revenue measures
-In order to reap reasonable revenue from this sector, federal excise on mobile phone calls exceeding three minutes @ Re 1 per call, SMS message @ Re. 0.1 per SMS, and internet data usage @ Rs. 5 per GB is being proposed. This will result into mild taxation of a broad spectrum of population.
– Electronically heated tobacco products are also proposed to be brought into the tax net by inserting new S. No. 8c of Table-1 of the First Schedule to the Federal Excise Act, 2005.
Relief Measures
– In order to facilitate the people of tribal area and encourage investment and economic growth in these areas, exemption is being given from levy of FED to the industrial units located in FATA and PATA.
– The provision to revise return without prior approval of the Commissioner-IR which is available in Sales Tax Act, 1990 is now proposed to be made available in Federal Excise Act, 2005.
– Exemption from federal excise duty to 4-wheelers granted vide granted vide Tax Laws (Amendment) Ordinance, 2021 is proposed to be incorporated in the Federal Excise Act.
– The rate of federal excise duty on telecommunication is proposed to be reduced from 17% to 16%.
– Payment on account of Merchant Discount Rate (MDR) is proposed to be excluded from the purview of FED.
– For establishment of Border Sustenance Markets, exemption from federal excise duty is proposed to be granted on food related and other consumable goods.
-Rising prices of locally manufactured small cars is a major concern for low earning families. Accordingly it is proposed that small cars upto engine capacity of 850cc may be exempted from federal excise duty.
– In order to introduce new Export Facilitation Scheme, 2021, exemption on import and zero-rating on local supplies in respect of raw materials, components, parts and plant and machinery to registered persons is proposed.
– Federal excise duty on fruit juices was imposed vide Finance Act, 2019 and resultantly, prices of juices were increased. Moreover due to pandemic, this sector is faced with adverse situation. In order to provide relief to this sector, it is proposed to withdraw federal excise duty on juices.
Following are the salient features of customs duty and regulatory duty measures proposed by the government for FY 2021-22.
– Reduction / exemption of CD, ACD and RD on import of goods falling under 589 PCT codes to incentivize the textile industry.
-Reduction / exemption of CD, ACD and RD on import of flat rolled products of HRC and stainless steel.
– Reduction / exemption of CD and ACD on raw materials and intermediary goods and point of sale machines falling under 328 tariff lines as a consequent of tariff rationalization.
– To incentivize the pharmaceutical sector and to keep the prices stable in the market, – Exemption of CD and ACD on raw material of auto-disable syringes and reduction in tariff on finished auto-disable syringes
– Reduction / exemption on inputs / raw materials of food processing industry.
-Reduction of CD and ACD on uncoated paper and paperboard for printing and graphic arts industry.
– Reduction / exemption of CD and ACD on vaccines for veterinary medicines and feed additives to incentivize the dairy sector.
– Reduction / exemption of CD and ACD on goods falling under more than 100 PCT codes relating to tourism industry.
– Reduction of duties on raw material/inputs of footwear industry.
– Reduction / exemption of CD and ACD on inputs for poultry industry.
– Reduction / exemption of CD & ACD on raw materials for Chemical and Artificial Leather Industry.
– Reduction / exemption of CD and ACD on inputs for Electronics Manufacturing Industry.
The government is also decided to adopt the following relief measures for the common man:
-Reduction of ACD on goods falling under 2436 tariff lines pertaining to 20% customs duty slab from 7% to 6%.
– Extension in exemption from customs duties on import of COVID-19 related items for further six month.
– Exemption of CD and ACD on Inputs of Ready-To-Use Supplementary Foods (RUSF) and Ready-To-Use Therapeutic Food (RUTF).
– Exemption of CD and ACD on 06 life-saving drugs.
– Enhance the value of unsolicited gifts through post or courier from Rs.20,000 to 30,000.
-The government has also decided to exempt CD and ACD on import of grain storage hermetic bags and cocoons.
-Rationalization of tariff structure on auto sector.
– Rationalization of RD on import of Mobile Phones to encourage import substitution
– Increase in rates of RD on import of non-essential / luxury items to support local industry.
-Reduction of RD on import of cocoa paste, butter and powder being industrial input goods.
The government also provided the facilitation measures to the export sectors:
– To ease of doing business, a new Uniform Export Facilitation Scheme is being proposed. The existing schemes shall be phased out in next two years.
– Bond to Bond Transfer of goods through WeBOC without prior approval of the Collector is being proposed to be allowed.
– Reduction of RD on export of molasses, skin and hides to boost positive image of the country with our important trading partners across the world.
Enforcement Features:
– Inclusion of master bill of lading and certificate of origin in the existing definition of document to discourage origin fraud.
– Inclusion of the retailing in definition of smuggling to discourage retailers from selling smuggled goods.
– Making shipping lines responsible for re-export of banned items imported in commercial quantities.
– Increasing the pitch of fine in case of non-placement of invoice and packing list in container to inculcate compliance.
– Discouraging smuggling by denying release of vehicles used repeatedly for smuggling against redemption fine.
Minister for Finance and Revenue Shaukat Fayaz Ahmed Tareen on Friday said that there is a proposal of tax exemption on import of auto-disable Syringes and their raw material and exemption on oxygen cylinders.
“We all know that COVID-19 has badly damaged the entire human race and the global economy and to mitigate adverse effects of this killer virus and debilitating diseases such as Hepatitis, all such measures are being taken for citizens,” Shaukat Tareen said in a budget speech at the National Assembly.
He said that the government is aware of the condition of a common man in the post-Covid-19 scenario. “Considering the sensitivity of the fact that we are still in the pandemic, therefore, exemptions given earlier by this government on Covid-19 related medical equipment or items have been extended for a further six months.”
Further, additional 35 raw materials required in the manufacturing of these items, have also been exempted from customs duties so that the supply of COVID-19 related medicines to those in need be available readily at affordable prices.
Tareen said “We have successfully contained the ill effects of COVID-19 even after facing the third wave during the March-May period, which in many ways was more severe than the first one. We have avoided large-scale lockdowns, expanded the hospitals’ capacity, improved supplies of equipment and medicines and mass awareness campaigns to elicit voluntary compliance from people.“
He said that the National Command and Operation Centre (NCOC) kept people aware of the state of the pandemic and counselled them on precautionary measures required to avoid infections. He added NCOC also coordinated with provincial authorities to evolve a National Strategy to combat COVID-19.
He said that the government has reached out to the affected population through cash transfer programs. Additionally, by avoiding general lockdowns we have enabled people to remain engaged in their economic activities. It is because of such measures that the wheel of the economy has kept running, he added.
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