Elimination of zero rating, other policy and administrative measures to generate Rs733.47 billion

KARACHI: Federal Board of Revenue (FBR) to generate additional revenue of Rs733.47 billion during current fiscal year after abolishing zero-rating of sales tax and other policy and administrative measures.

Pakistan has outlined its strategy for enhancing revenue collection before the International Monetary Fund (IMF) through eliminating exemptions, distortion and other policy and administrative measures.

These budgetary measures likely enhance tax to GDP ratio by 1.7 in the fiscal year 2019/2020.

The FBR will generate additional revenue of Rs222.77 billion from measures taken through budget 2019/2020 in the sales tax, which included:

Petroleum products levy increase to 15 PRs (and set as a floor) and

GST rate at 17 percent (set as a floor)

Cancel SRO # 480 and bring steel sector, edible oil and medium to large retailers to 17 percent GST regime

Extend the list of products under the retail price taxation – Third Schedule (home appliances, paint.., currently under SRO # 480)

Cancel SRO#1125 and bring exportable sectors to standard GST regime at 17 percent rate, with immediate cash refund for exported goods only

Remove certain items from exemptions (packaged food), and apply GST tax at 17 percent.

Increase GST on sugar from 8 percent to 17 percent

Redefine the exemption available to Cottage Industry

An additional amount of Rs90.114 billion estimated under Federal Excise Duty (FED) through following measures:

0.2 Increase of FED on cigarettes and remove the third tier.

Introduce FED on cigarettes coming from non tariff areas

Increase/introduce FED on sugary drinks to 13 percent

Increase FED on cement from 1.5 Rs per kg to 2 Rs

Additional amount of Rs324.98 billion estimated through eliminating exemptions and other distortions in Income Tax, such as

Personal Income Tax (PIT): lower the threshold to Rs400,00 and Rs600,000 for non-salaried and salaried individuals respectively, increase tax rates Increase in rate of minimum tax u/s 113 from 1.25 to 1.5 percent

Extend the regime of higher withholding tax rates for non-filers

Resume Telecom withholding rate

Change in income tax regime of Services sector (banks and insurance companies)

Abolish BMR credit incentives

Increase the holding period liable to tax for capital gain tax on immovable properties and securities

Taxation of gifts from unrelated person at standard PIT rate

Aligning value of immovable properties with the market rates

Reduction of number of withholdings and simplification of procedures

Amortization of expenditure in BOT projects over useful life of the project instead of current 10 year amortization

Long term lease hold right may be considered as purchase of property

Taxation of formal agricultural sector within the scope of federal government

Rationalization of tax credit available to Non-profit organizations (NPOs)

An amount of Rs60 billion has been estimated to be generated through measures taken under Customs duty:

Increase in Additional Customs Duty Rate on finished and luxury goods

Withdrawal of exemption on import of LNG and subjected to 5 percent duty

Revenue administrative measures to generate Rs 35.6 billion through following steps:

Implement Track and Trace system for Tobacco Products

Automated monitoring of GST and income at retail (point of sale)

Changes in ADCIR mechanism

Separation of audit & adjudication functions

Making procedure for prosecution easier

Enabling and strengthening FBR field formations

Cleansing of databases and integration to enable effective data mining

Enabling efficient enforcement through investment in FBR

Infrastructure and process reengineering

Taxpayer education and facilitation

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