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Category: Budget 2022-2023

  • Budget 2022/2023: Salient features of customs duty act

    Budget 2022/2023: Salient features of customs duty act

    ISLAMABAD: Following are salient features of amendments made to Customs Act, 1969 through Finance Bill, 2022.

    GUIDING PRINCIPLES

    (a) Remove anomalies in cascading structure of tariff.

    (b) Promote and protect domestic industry by introducing targeted interventions.

    (c) Rationalizing tariffs on industrial raw materials / intermediate goods.

    READ MORE: Budget 2022/2023: Salient features of sales tax

    ADOPTION OF WCO HS – 2022 VERSION:

    The World Customs Organization (WCO) updates its Harmonized Commodity Description and Coding System (HS) after every five years to accommodate modern developments and changing trade patterns. The last HS version was updated in 2017. The current amendments to the HS nomenclature have entered into force since 1st January, 2022. Pakistan being a signatory to the HS Convention has obligation to adopt the HS 2022 version. Since, these amendments are required to be incorporated in the First Schedule to the Customs Act, 1969 (Pakistan Customs Tariff), therefore, Pakistan adopted the same by incorporating all of its latest amendments introduced in earlier nomenclature / HS codes in Pakistan Customs Tariff by the process of addition / deletion and creation of local PCT codes, accordingly. It will be effective from 1st of July, 2022.

    READ MORE: Budget 2022/2023: Salient features of income tax

    INDUSTRIAL RELIEF MEASURES:

    1. To incentivize packaging industry, CD and ACD on various tariff lines pertaining to aluminum, polymers of ethylene, BOPP etc. have been downward rationalized.

    2. Reduction in CD and ACD on 10 tariff lines pertaining to direct and reactive dyes.

    3. To incentivize agricultural sector and farmers, customs duty exemption extended further to Farm Mechanization and Logistics including agricultural machinery pertaining to irrigation, drainage, harvesting / post- harvest handling & processing, plant protection equipment as well as machinery, equipment and other capital goods for miscellaneous agro based set ups in Sr. 1, 2 and 3 of Part-I of Fifth Schedule.

    4. To incentivize Coating Industry, CD and ACD have been exempted on Aluminum paste and powder and CD and ACD have been reduced on glycerol crude and glycerol.

    5. To incentivize manufacturers of filters other than automotive, CD and ACD have been reduced on their raw materials i.e, Adhesive, Epoxide resins, Filter media/ paper, Non-woven fabric media and Steel plates / sheets of prime quality.

    6. To incentivize footwear industry, customs duties have been reduced on different categories of other woven fabrics and artificial flowers / foliage of other materials.

    READ MORE: Pakistan allocates Rs800 billion for FY23 PSDP

    7. To incentivize LED lights and bulbs manufacturers customs duties have been exempted on import of 05 more items i.e, Aluminum Electrolytic capacitor, SMT Electrical Transformer, aluminum alloy sheet, Tantalum capacitors (DIP/SMD) and Other inductors, small transformer, coil (DIP/SMD). Furthermore, the scope of exemption has also been extended for the manufacturers of Parts of LED light and Bulbs.

    8. Tariff structure on the different tariff lines related to MDF / HDF have been rationalized evenly.

    9. To encourage local manufacturers of brush ware, customs duties have been exempted on import of Poly-butylene terephthalate.

    10. CD & ACD on import of Stamping foils have been exempted for manufacturing of Optical Fiber Cable.

    11. Tariff structure on import of Synthetic filament yarn, monofilament, staple fibers of polypropylene has been rationalized to resolve the cascading issues.

    12. To encourage export oriented industry, CD and ACD have been exempted on import of Guts, bladders and stomachs of animals etc.

    13. Reduction in CD and ACD rates on import of Plywood, veneered panels & similar laminated wood, poly (methyl methacrylate), cyanoacrylate.

    14. Extension in scope of concession on import of organic composite solvents and thinners for the manufacturers of Dibutyl Orthophthalates.

    15. Rationalization of Tariff structure on import of IV Leaves extract powders and exemption of CD & ACD on its raw materials i.e, other plants and parts of plants from 3 per cent CD and 2 per cent ACD.

    16. Exemption of customs duties on import of membrane for filtering / purifying water from 16 per cent CD & 4 per cent ACD.

    17. Exemption of customs duties on 03 different raw materials for first aid bandages manufacturing industry from 5 per cent.

    18. Reduction of customs duties on import of flavouring powders for food preparation for snacks manufacturers.

    19. Exemption of CD & ACD on raw materials of aluminum conductor composite core manufacturers.

    20. Exemption of CD & ACD on import of raw materials of paper sizing industry and chlorinated paraffin wax industry.

    READ MORE: Federal government presents budget 2022-2023

    RELIEF FOR COMMON MAN:

    21. To keep the prices of medicines stable in the market and to encourage local manufacturing of pharmaceuticals, customs duties have been exempted on 26 more APIs and on one drug “Grafalon”.

    22. Irisvision is for low vision individuals of all ages and with this gadget low vision persons can read and write easily, therefore customs duties have been exempted on import of Irisvision Device with its complete components.

    REVIEW OF RD REGIME:

    23. 10 per cent CD rate on import of motor spirit has been replaced with 10 per cent RD.

    24. Continuation of 20 per cent RD on import of Disodium Carbonate to protect the local industry.

    25. To encourage the vendor industry, RD has been reduced on import of case hardening steel from 30 per cent to 20 per cent.

    26. Withdrawal of 15 per cent RD on import of Chrome yellow.

    27. 10 per cent RD has been levied on import of Other paper, paperboard, cellulose wadding and webs of cellulose fibres to protect the local industry.

    28. Withdrawal of RD exemption available on import of High Carbon Wire Rod.

    29. RD on import of optical fibre cables has been increased from 10 per cent to 20 per cent to encourage the local manufacturers.

    READ MORE: Tax exemptions cost Rs1.76 trillion in FY22

    LEGISLATIVE CHANGES:

    1. The definition of smuggling has been widened to include smuggling of essential commodities out of Pakistan through bordering and coastal areas to curb this menace.

    2. To facilitate trade and industry, changes have been incorporated to align the provisions of the Customs Act, 1969 with the Pakistan Single Window (PSW) Act, 2021, providing platform for integration of other government agencies.

    3. The timeline to finalize the provisional assessment has been reduced from existing nine months to four months to facilitate trade and avoid delay in realization of government revenue.

    4. Powers regarding extension in warehousing period have been delegated to Additional Collector of Customs to facilitate trade by expediting grant of requests for extension.

    READ MORE: Share of domestic electricity consumption declines

    5. Option to change consignee name in relation to frustrated cargo has been provided to address the issue of port congestion.

    6. Pecuniary jurisdiction of Additional Collector and Deputy Collector has been increased to rationalize the workload of adjudicating authorities and quick disposal of legal cases.

    7. To reduce the cost of doing business and rationalize fees charged by the terminal operators, enabling provision has been provided for determination of various charges by customs authorities.

    8. Provision has been incorporated to indemnify the officers of provincial governments for their actions taken in good faith to prevent the smuggling of essential commodities under the Customs Act, 1969.

  • Budget 2022/2023: Salient features of sales tax

    Budget 2022/2023: Salient features of sales tax

    ISLAMABAD: Following are the salient features of amendment made to Sales Tax Act, 1990 through Finance Bill, 2022.

    The proposed budgetary measures pertaining to Sales Tax for FY 2022-23 are:

    RELIEF MEASURES:

    1. The condition of CNIC/NTN in case of supply to unregistered persons have been removed.

    READ MORE: Budget 2022/2023: Salient features of income tax

    2. Sales Tax exemption has been granted on import and supply of all types of seeds.

    3. Sales Tax on Tractor is withdrawn.

    4. Exemption has been granted on imports by UN diplomats/diplomatic missions and privileged persons.

    5. Import and supply of solar panels (PV module) has been exempted from sales tax.

    6. Goods imported by or donated to non-profit charitable hospitals have been exempted. Furthermore, goods supplied to charitable hospitals of fifty beds or more have also been exempted from sales tax.

    7. Temporary imports have been exempted from the levy of the sales tax.

    READ MORE: Pakistan allocates Rs800 billion for FY23 PSDP

    8. Made up jewellery has been made chargeable to 3 per cent fix tax on local supply and 4 per cent fix tax on imports.

    9. Plant and machinery imported by power generation projects that entered into implementation agreement with GoP has been exempted from sales tax.

    10. Rs.90 per kg is reduced to Rs.60 per kg on potassium chlorate.

    11. Import by EPZ has been exempted from sales tax.

    READ MORE: Federal government presents budget 2022-2023

    REVENUE MEASURES:

    12. The scope of further tax has been enhanced to include non-active taxpayers as well.

    13. Regime of other then Tier-1 retailers has been streamlined.

    14. VAT has been imposed on compressor scrap, motor scrap and copper cutting scrap even when imported by manufacturers.

    READ MORE: Tax exemptions cost Rs1.76 trillion in FY22

  • Budget 2022/2023: Salient features of income tax

    Budget 2022/2023: Salient features of income tax

    ISLAMABAD: Following are the salient features of amendment made to Income Tax Ordinance, 2001 through Finance Bill, 2022.

    REVENUE MEASURE:

    1. Increase in tax rate for banks for tax year 2023 onwards from effective 39 per cent to 45 per cent.

    2. Increase in tax rate of banking companies on adverse ADR ratio.

    READ MORE: Pakistan allocates Rs800 billion for FY23 PSDP

    3. Tax on higher earning persons for poverty alleviation for tax year 2022 and onwards.

    4. Tax on deemed income from unutilized property above Rs. 25 million including luxury farmhouses and exclusive of one self-occupied house.

    5. Increase in rate from 1 per cent to 2 per cent on sale and purchase of property for filers.

    6. Increase in rate from 100 percent to 250 percent in case of purchase of property by persons who are not active taxpayers.

    READ MORE: Federal government presents budget 2022-2023

    7. Increase in rate of 200 from 100 percent in case of purchase of motor vehicles by persons who are not active taxpayers.

    8. Level playing field for all classes of assets. Capital gain tax on disposal of securities and real estate synchronized along with incentives for vertical growth of cities.

    9. Increase in advance tax rate on private vehicles of 1600 cc and above.

    10. Increase in yearly advance tax rate on tax on passenger vehicles.

    11. Omission of deductible allowance for profit on debt and tax credit for investment in shares, health insurance and pension funds.

    READ MORE: Tax exemptions cost Rs1.76 trillion in FY22

    12. Restriction on carry forward of minimum tax in subsequent years.

    13. Omission of exemption on flying allowances and submarine allowance.

    14. Omission of reduced rate of taxation for investment in Government securities.

    15. Withdrawal of Income Tax (Amendment) Ordinance, 2022.

    READ MORE: Share of domestic electricity consumption declines

    RELIEF MEASURES:

    1. Fixed tax regime for retailers and specified service providers.

    2. Restriction on frequency of audits to once in four years.

    3. Adjustment of tax collected on all materials at import stage for industrial undertaking for own use.

    4. Relief on taxation for salaried and business individuals by increasing threshold for taxation.

    5. Admissibility of 100 per cent depreciation in first year.

    6. Reduction in tax rate from 10 per cent to 5 per cent on Bahbood certificates.

    READ MORE: Average inflation estimated up to 12% in FY22

    7. Withdrawal of withholding tax on educational expenses payments.

    8. Exemption from tax on income of certain non-profit entities.

    9. Reduced rate of 3 per cent on provision of services by REIT management company and NCCPL.

    10. Withdrawal of withholding tax on rent of machinery.

    11. Exemption from advance taxes to exempt entities.

    STREAMLINING MEASURES:

    1. Requirement for adoption of digital mode of payment for companies.

    2. Clarification regarding exempt income of partners if income of AOP is exempt.

    READ MORE: SBP jacks up policy rate by 6.75% to 13.75%

    3. Introduction of Synchronized Withholding Administration Payment System.

    4. Streamlining of audit procedures.

    5. Increase in time limitation for best judgment from 5 to 6 years.

    6. Enhancement of restriction for passing of order in from 120 to 180 days.

    7. Clarification regarding remittance through money transfer operations.

    DOCUMENTATION OF ECONOMY MEASURES:

    1. Inclusion of concept of beneficial owner.

    2. Alignment of Point of Sale regime with Sales Tax provisions and introduction of prize scheme.

    READ MORE: Tax to GDP ratio estimated at 10.8% in FY22: Economic Survey

    3. Increase in scope of tax on payments to non-residents and enhancement of rate from 5 per cent to 10 per cent on offshore digital services.

    4. Increase in scope of criteria for becoming tax resident individuals.

    5. Introduction of advance adjustable tax on credit/debit card payments.

    6. Sharing of information between NADRA and FBR for tax base broadening.

  • Pakistan allocates Rs800 billion for FY23 PSDP

    Pakistan allocates Rs800 billion for FY23 PSDP

    ISLAMABAD: Pakistan on Friday allocated Rs800 billion for the Public Sector Development Program (PSDP) for fiscal year 2022/2023.

    The country presented the federal budget 2022/2023, which envisages PSDP worth 800 billion rupees for the next fiscal year.

    It has been centered on improvement in sectors such as water resources, transport and communication, energy, higher education, health, science and technology, and balanced regional development.

    READ MORE: Federal government presents budget 2022-2023

    The emphasis of PSDP is also on revival of CPEC and related projects for inter-provincial and regional connectivity with equal importance to Special Economic Zones to promote trade, industrialization and create job opportunities.

    The major thrust in the Information and Communication Technology sector including establishment and operations of Special Technology Zones.

    Under the PSDP, the government has allocated 44.179 billion rupees including foreign aid of 1.3 billion rupees to the Higher Education Commission for implementation of 151 development projects.

    READ MORE: Tax exemptions cost Rs1.76 trillion in FY22

    The allocation indicates an increase of one hundred percent over the last year.

    An allocation of over 197 billion rupees has been made for 117 power related projects.

    These include hydro power generation projects such as Diamer-Bhasha, Mohmand, Nai Gaj and the fifth extension of Tarbela. Initiatives like developing water storages, automatic telemetry system, rainwater harvesting, decreasing water losses, ground water regulation and management would be undertaken in consultation with the stakeholders.

    READ MORE: Share of domestic electricity consumption declines

    Over nine billion rupees have been earmarked for Ten Billion Trees Tsunami Programme Phase-I to achieve the target of planting 500 million trees.

    Similarly, over 563 million rupees and over 1.2 billion rupees have been allocated for installation of weather surveillance radars at Multan and Sukkur respectively.

    The Federal PSDP has also proposed an amount of 1.5 billion rupees to complete the emergent nature of small flood schemes all over Pakistan. 

    READ MORE: Average inflation estimated up to 12% in FY22

    An allocation of 227 billion rupees has been made for strengthening efficiency of transport and logistics for domestic commerce and regional connectivity. 

    The high impact infrastructure projects to be completed under Public Private Partnership mode include Sukkur-Hyderabad Motorway, Sialkot-Kharian Motorway, Kharian-Rawalpindi Motorway, and Karachi Circular Railway. Under the CPEC, D I Khan-Zhob section is under discussion with the Chinese side for financing and it is expected to be launched in the next financial year.

    READ MORE: SBP jacks up policy rate by 6.75% to 13.75%

    The concessional financing agreement for landmark ML-1 project is to be finalized in the second quarter of the next fiscal year and subsequently arrangements will be made for groundbreaking of the project.

    A comprehensive National Action Plan for agriculture modernization has been prepared in terms of capacity building, agricultural product processing technology extension, fishery science and technology, aquaculture and aquatic products processing.

    READ MORE: Tax to GDP ratio estimated at 10.8% in FY22: Economic Survey

  • Government employees get 15% salary increase

    Government employees get 15% salary increase

    ISLAMABAD: The government on Friday announced a 15 per cent increase in employees of the federal government.

    Finance Minister Miftah Ismail while presenting budget 2022/2023 announced increase in salary of government employees by 15 per cent.

    READ MORE: Share of domestic electricity consumption declines

    The finance minister said that despite the fact that country is facing a severe fiscal crisis now we are aware of the hardships faced by government employees.

    Price hike has affected the household spending badly, especially that of salaried class but in spite of the severe fiscal difficulties and lack of resources. Salaries of government employees are being increased by 15 per cent in order to improve their purchasing power.

    READ MORE: Average inflation estimated up to 12% in FY22

    The basic threshold of taxable salary is proposed to be enhanced to 12 lac from the current 6 lac rupees for salaried individuals. This would pass tens of billions of rupees benefit to salaried people.

    This will generate a positive economic cycle whereby this money would get transferred to the businesses as the disposable income of salaried people increases therefore ultimately, the government will benefit through the thriving of the business, the creation of more jobs, and tax revenues in the future.

    READ MORE: Federal government presents budget 2022-2023

  • Federal government presents budget 2022-2023

    Federal government presents budget 2022-2023

    ISLAMABAD: The federal government on Friday announced the budget for fiscal year 2022-2023. The budget looks progressive and provide better relief with a total outlay of Rs9.502 trillion to stabilize the poor economy and reduce the sufferings of oppressed segments of society.

    The finance minister Miftah Ismail unveiled the budget and discussed of curtailing the imports and reducing the expenditures on luxury items.

    READ MORE: Share of domestic electricity consumption declines

    The finance minister said, “out of total Rs9.502 trillion budget, an amount of Rs2,950 billion had been allocated for debt servicing and Rs800 billion earmarked for the Public Sector Development Programme (PSDP 2022-23).”

    He said that the amount of Rs1,523 billion had been earmarked for defence expenditures, Rs550 billion for civil administration and Rs530 billion for pensions. Similarly, Rs699 billion had been proposed for providing targeted subsidies to the poor segments of society.

    READ MORE: Average inflation estimated up to 12% in FY22

    The budget specially focused on fiscal consolidation to curtail overall deficit, prioritizing practical austerity measures along with strategies to enhance tax-to-GDP (gross domestic product) ratio, reduce gross public debt, slice trade and current account deficits, and promote sustainable economic growth.

    Announcing the radical national development and pro-common man initiatives in the National Assembly, Miftah Ismail said that the budget was being presented at a critical juncture as the previous government had caused a huge damage to the economy during its three years and nine months tenure.

    READ MORE: SBP jacks up policy rate by 6.75% to 13.75%

    The finance minister said that the government had embarked on introducing drastic measures in the Federal Budget 2022-23 to uplift and put the economy on sustainable growth trajectory.

  • Pakistan may increase normal sales tax rate to 18%

    Pakistan may increase normal sales tax rate to 18%

    Pakistan is likely to increase sales tax rate to 18 per cent in the federal budget 2022-2023, which is scheduled on June 10, 2022. The existing normal sales tax rate is 17 per cent.

    According to Budget Preview 2022/2023 issued on Thursday, analysts at Arif Habib Limited said the government is considering to raise an additional Rs400 billion – Rs450 billion during next fiscal year 2022/2023.

    READ MORE: PM Shehbaz assures favorable measures on CNIC requirement

    For this purpose, the analysts said, the government plans to raise revenue from the following measures:

    • Increase in general sales tax (GST) from 17 per cent to 18 per cent
    • Increase in GST on fertilizer products from 2 per cent to 17 per cent
    • Increase in corporate tax rate / windfall levy by 3 per cent
    • Incremental super tax of 3 per cent on commercial banks
    • Increase in personal income tax
    • Increase in federal excise duty (FED) by Rs 500/ ton on cement
    • Increase in FED on tobacco
    • Increase in Customs Duty from 2 per cent to 6 per cent on edible oil imports
    • FBR’s administrative measures
    • Imposition of additional taxes on real estate.

    The analysts said that the fiscal policy should remain supportive of the economy in the short term, with targeted measures to collect tax and reduce expenditure, backed by credible medium –term fiscal consolidation plan.

    READ MORE: New tax measures likely in budget 2022-2023

    “However, in short term, need of the hour is taking tough fiscal measures given the tight fiscal situation.”

    Pakistan achieved total revenue growth of 18 per cent during the first nine months (July – March) 2021/2022 to Rs5.4 trillion up from Rs4.6 trillion in the corresponding months of the last fiscal year, which comes out to be 9.2 per cent of the GDP against 9 per cent in the same period last year.

    The analysts said that the total tax revenue collection was up by 33 per cent year on year (YoY) to Rs4.82 trillion while non-tax revenue of Rs1.05 trillion, displayed a decline of 14 per cent YoY.

    READ MORE: Pakistan Budget 2022-2023 – estimates

    The government expects the tax revenue collection to settle at Rs 7.9 trillion for FY23b, a jump of 19 per cent YoY compared to tax revenue of pKR 6.6 billion for FY22E. Likewise, to ensure prudent fiscal management, IMF also proposed stringent FBR tax revenue target of Rs 7.26 trillion compared to Rs 6.1 trillion for FY22E, which is much needed given the overall fiscal situation of the economy. Also, from the government’s standpoint, in order to ensure growth moderation, the analyts believe that the government will not shy away from putting additional major tax burden on the different economic classes of the community and might take some non-populous taxation measures in order to ensure the same.

    The government is planning to raise an enormous total tax collection target of Rs 7.9 trillion through new taxes worth Rs 400-450 billion, additional taxes on higher income salary bracket, raising Rs 4.7 trillion through indirect tax measures, and the rest is likely to be collected from administrative measures and by bringing more people under the tax net. They believe direct tax collection will likely increase due to broadening tax base as government would be targeting to increase the number of income tax filers in the upcoming year.

    READ MORE: Compliance cost much higher for corporatization: PSX

    Indirect tax contributes around 60 per cent to the overall tax revenue coming in mainly from three major heads including Custom Duty, Sales tax and Federal Excise Duty which contributed around 25 per cent, 67 per cent and 8 per cent, respectively to the total indirect tax collection during 9MFY22. Share of sales tax and custom duty increased in 9MFY22 due to surge in imports of various commodities amid an uptick in aggregate demand of the economy. Going forward, indirect tax contribution is likely to increase by almost 20 per cent (Rs 4.7 trillion) in FY23B due to higher sales tax while higher import bill is likely to earn more tax revenue from custom duties.

    Government expects non-tax revenue collection to increase by 12 per cent to Rs 1.6 trillion in FY23 with Petroleum Development Levy (PDL) expected to settle at around Rs 500 billion. The analysts at Arif Habib Limited believe the collection in lieu of PDL is likely to be higher YoY in FY23 with an assumption that government increases it by Rs – 22/litre on MS and HSD. Currently PDL stands at Rs 125 billion during 9MFY22. Another constituent that is likely to support the overall non-tax revenue is expected to be State Bank’s profits. They expect it will be more than last year’s number mainly due to higher interest rates during July – March 2021/2022.

  • PM Shehbaz assures favorable measures on CNIC requirement

    PM Shehbaz assures favorable measures on CNIC requirement

    KARACHI: Prime Minister Shehbaz Sharif has assured business community of taking favorable measures related to CNIC requirement will be taken in the budget 2022-2023.

    A high-level delegation of the Karachi Chamber of Commerce and Industry (KCCI) led by Chairman Businessmen Group (BMG) Zubair Motiwala held meetings with Prime Minister Shehbaz Sharif and Federal Minister for Finance and Revenue Miftah Ismail in Islamabad to discuss the overall economic challenges, budgetary measures for fiscal year 2022-2023, taxation policies and the problems being suffered by the business and industrial community of the country.

    READ MORE: New tax measures likely in budget 2022-2023

    The delegation, which also comprised of Vice Chairman BMG Jawed Bilwani, President KCCI Muhammad Idrees, Former Senior Vice President Saqib Goodluck, Former Vice President Shahid Ismail, President Site Association of Industry Abdul Rasheed, President North Karachi Association of Trade and Industry Faisal Moiz Khan and President Site Superhighway Association of Trade and Industry Aamir Hassan Lari, highlighted the following major points:

    KCCI delegation requested the Prime Minister that 17.5 percent Sales Tax on Solar Panels must be withdrawn at the earliest as committed by the Prime Minister at a meeting held at CM House Sindh during his last visit to Karachi. The Prime Minister and Finance Minister assured that it will be withdrawn next week.

    READ MORE: Pakistan Budget 2022-2023 – estimates

    Matter of Indenting Commission also came under discussion with a humble request by KCCI delegation that indenting commission may please be declared as export proceeds.

    Moreover, it was further brought into the limelight that the local manufacturers have the capacity of producing Fiber Optic Cables therefore, the government must take measures to stop the imports of fiber optic cables so that the local manufacturers could be encouraged to enhance their production capacity which would certainly help in saving substantial foreign reserves being wasted on the imports of fiber optic cables.

    KCCI delegation also advised Prime Minister and Finance Minister to issues directives for withdrawal of Sales Tax imposed on LED bulbs and its parts so that energy conservation could be promoted all over the country which was badly needed as the countrymen were currently going through prolonged load shedding for many hours every day due to severe energy crises.

    READ MORE: Compliance cost much higher for corporatization: PSX

    KCCI delegation also expressed deep concerns over delays in release of Drawback of Local Taxes and Levies (DLTL) claims of the exporters which have remained stuck up since long. In response, the Prime Minister promised to disburse the same in the days to come.

    KCCI delegation also sought Prime Minister’s assistance in dealing with the unjust imposition of 17 percent Sales Tax imposed on cattle feed made from the agricultural waste. As it is purely agricultural waste used as animal feed for livestock farming and milking, hence sales tax imposed must be withdrawn in the Federal Budget 2022-23. Prime Minister and Finance Minister, while agreeing to KCCI’s viewpoint, assured that ST imposed on cattle feed will also be withdrawn.

    KCCI delegation also advocated that the commercial importers of polyester yarn may please be allowed to declare their payment of sales tax and other taxes under Final Tax Regime (FTR) which was also agreed with an assurance that the commercial importers will be treated under FTR.

    READ MORE: FBR suggested reduction in tax rates for equity funds

    IT related issues along with its potential and an ambitious export target of US$15 billion in three years for IT sector given by Prime Minister was also discussed in detail and it was assured that all the issues being faced by businessmen associated with IT sector will be resolved to promote this sector. In addition to resolving issues, the government would create such an environment wherein Pakistani IT companies abroad could be encouraged to comfortably open up their offices in Pakistan. Gas Tariff for the export sector was also discussed in detail.

    READ MORE: PSX proposes tax exemption on property transactions

    KCCI delegation, while thanking the Prime Minister Shehbaz Sharif and Finance Minister Miftah Ismail, for taking keen interest in resolving the issues being suffered by the business community, hoped that the Karachi Chamber’s recommendations which have been submitted in the larger interest of the country, will be taken into consideration and incorporated in the forthcoming budget so that the overall business climate could be improved that would certainly lead to promoting industrialization all over the country and generate employment opportunities.

    KCCI delegation also extended full support and cooperation to the Prime Minister and his teams for all his future endeavors being undertaken to pull the economy out of crises.

  • New tax measures likely in budget 2022-2023

    New tax measures likely in budget 2022-2023

    Pakistan is presenting the federal budget 2022-2023 on June 10, 2022. A bulk of new taxation measures likely to be announced in the budget to generate additional revenue.

    (more…)
  • Pakistan Budget 2022-2023 – estimates

    Pakistan Budget 2022-2023 – estimates

    Pakistan government is going to announce federal budget for fiscal year 2022-2023 on June 10, 2022. The country is eyeing revival of an IMF program and it is likely that the upcoming budget will have measures that promotes fiscal austerity and stabilization.

    According to Topline Securities the budget outlay for 2022-2023 is estimated at Rs9-9.5 trillion (11.5 per cent to 12 per cent of GDP) as against budget of Rs8.5 trillion (12.7 per cent of GDP) for the outgoing fiscal year.

    READ MORE: Compliance cost much higher for corporatization: PSX

    The government is likely to set tax revenue collection target of Rs7.25 trillion for the next fiscal year (9.2 per cent of GDP), which is up 19 per cent from the revised target of Rs6.1 trillion (9 per cent of GDP) for the outgoing fiscal year. It is likely to impose new taxation measures of Rs400-450 billion in the upcoming budget.

    Current expenditure target is likely to be set at 12 per cent of GDP in FY23 or Rs8 trillion which is around 11 per cent YoY higher than what was budgeted in the outgoing fiscal year. Similarly, government is likely to set aside Rs3.5-Rs3.9 trillion (4.5 per cent-5.0 per cent of GDP) for markup payment for FY23 budget and Rs1.6 trillion is likely to be set aside for Defense expenditure which is 2.1 per cent of GDP.

    For fiscal year 2022-2023, Federal Public Sector Development (PSDP) is budgeted at Rs800 billion vs. Rs466 billion disbursed in 10MFY22 and revised budgeted amount of Rs603 billion for the outgoing fiscal year.

    READ MORE: FBR suggested reduction in tax rates for equity funds

    Consolidated PSDP (Federal & Provincial) is anticipated to clock in at Rs1.4 trillion (1.8 per cent of GDP) in the next fiscal year, as against Rs1.2 trillion in the current fiscal year.

    Few taxation measures that are under consideration includes: 1) increase in super tax for Banking sector and re-imposition of super tax on highly profitable companies, 2) increase in tax rate for individuals earning high salaries, 3) reduction in tax concessions and exemptions for various sectors, 4) increase in regulatory duties on luxury items, 5) luxury tax on immovable property & vehicles, and 6) increase in taxes for non-filers.

    With economic slowdown, tax revenue target of Rs7.25 trillion will be challenging to achieve in FY23. However, it will depend on the amount of new taxes to be imposed in Budget FY23.

    IMF has already demanded government to remove tax exemptions & subsidies and increase the rate of taxes on few sectors as per news reports.

    READ MORE: PSX proposes tax exemption on property transactions

    Non-tax revenue target for FY23 is estimated at Rs1.6 trillion (2.1 per cent of GDP) as against Rs2 trillion (3.1 per cent of GDP) budgeted for FY22. Lower target is due to expected decline in petroleum development levy (PDL) during the year.

    With likely slowdown in economic activity, total revenue target (tax & non-tax) of Rs9 trillion will be difficult to achieve. However, it will depend on how much new taxes government imposes in Budget FY23.

    Net revenue receipts after provincial share is budgeted at Rs4.7 trillion for FY23 as against Rs4.5 trillion for FY22 budgeted.

    Current expenditure target is likely to be at 12 per cent of GDP in FY23 or Rs8 trillion which is around 11 per cent YoY higher than what was budgeted in FY22.

    The government is likely to set aside Rs3.5-Rs3.9rn (4.5 per cent-5.0 per cent of GDP) for interest payment for FY23 budget. This is against Rs3 trillion (4.6 per cent of GDP) budgeted for FY22. Rising debt & high interest rates is responsible for this 20 per cent+ increase in interest payments.

    For defense expenditures, government will likely set Rs1.6 trillion or 2.1 per cent of GDP for FY23. This compares to an allocation of Rs1.4 trillion or 2.1 per cent of GDP in FY22.

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    Annual Plan Coordination Committee finalized Federal Public Sector Development Program (PSDP) of Rs800 billion (1 per cent of GDP) for FY23. This compares to Rs466 billion of PSDP disbursed in 10MFY22 and revised budgeted amount of Rs603 billion for FY22. To recall, PSDP allocation even for FY22 budget was set much higher to the tune of Rs900 billion which was later revised down due to fiscal constraints.

    Consolidated PSDP (Federal & Provincial) is anticipated to clock in at Rs1.4 trillion (1.8 per cent of GDP) in FY23, as against Rs1.2 trillion in FY22.

    Low spending on development budget and no major reduction in current expenditure will affect overall economic activity in FY23, we believe.

    The government will be setting fiscal deficit target of 6 per cent of GDP or Rs4 trillion for FY23 versus estimated fiscal deficit of Rs5.6 trillion or 8 per cent of GDP in FY22. We believe this fiscal discipline relative to last year may help in convincing IMF to resume the pending tranche.

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