LAHORE: The Punjab government has announced a tax relief package amounting over Rs56 billion in the budget 2020/2021. Punjab Finance Minister Makhdoom Hashim Javan Bakht on Monday presented the highlights of the relief package to be provided during next fiscal year.
(more…)Category: Budget
This is parent category of budgets presented by Pakistan government. Here you will find year-wise federal and provincial budgets.
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Punjab allocates Rs337 billion for development programs
LAHORE: The Punjab government has announced an allocation of Rs337 billion for the Annual Development Plan (ADP) for the fiscal year 2020-2021. This significant budget reflects Punjab’s commitment to sustained development and prioritization of ongoing projects.
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Punjab presents Rs2,240 billion budget 2020/2021; Rs56.5 billion for tax relief package
LAHORE: Punjab Finance Minister Makhdoom Hashim Javan Bakht on Monday presented provincial budget for fiscal year 2020/2021. The total outlay of the budget is Rs2,240.7 billion.
The provincial government allocated Rs337 billion for development program during next fiscal year. The allocation is 32 percent is higher than the annual development plan of the outgoing fiscal year of Rs255 billion.
In order to mitigate the impact of coronavirus the Punjab government announced a tax relief package of Rs56.5 billion for the next fiscal year.
The provincial minister said that this year’s budget making exercise was a challenging and daunting task.
Covid-19 Pandemic created unprecedented financial crunch and great economic uncertainty. Finance Department responded to this challenge with prudent financial management, enhanced allocations for the Health Sector, and acute austerity measures for non-essential services while simultaneously ensuring releases for Development Expenditure.
Timely distribution of cash grants under Social Protection to the marginalized segments of society was ensured.
The highlights of Budget 2020-21 are fiscal discipline, impetus to the economy, prudent austerity, participatory budget making and Framework for Rolling Expenditure control for efficient spending throughout the year.
Social sector spending for welfare of the people of Punjab and tapping private investments by means of Public Private Partnership are envisaged and made an integral part of the Budget.
The other highlights of the provincial budget are:
PRIMARY & SECONDARY HEALTHCARE
• Integrated Program for Communicable Disease Control Punjab – Rs. 200 million
• Provision of Free Medicines – Rs. 15.7 billion
• Punjab Health Facility Management Company (PHFMC) – Rs. 6 billion
• Expanded Program for Immunization (EPI) – Rs. 5.7 billion
• Establishment of 200 bedded Mother & Child Health Hospitals at Rajanpur, Layyah & Mianwali –Rs. 720 million
• PM Health Initiative – Rs. 2.7 billion
• Pro Poor Patients Treatment on CM’s Directives – Rs. 600 million
SPECIALIZED HEALTHCARE & MEDICAL EDUCATION
• Establishment of Tertiary Care Hospital-Nishtar-II, Multan – Rs. 1 billion
• Provision of Missing Specialties for Up-gradation of DHQ Hospital to Teaching Hospital Gujranwala -Rs. 500 million
• Health Insurance Program, Punjab (potential beneficiaries – 5.3 million families) – Rs. 12 billion
• Establishment of Sardar Fateh Muhammad Khan Buzdar Institute of Cardiology, D.G. Khan – Rs. 1 billion
• Allocation for COVID-19 Prevention and Control – Rs. 3 billion
• Provision of free medicines – Rs. 22 billion
HIGHER EDUCATION
• University of Chakwal – Rs. 95 million
• Baba Gurunanak University, Nankana Sahib (Phase-I) – Rs. 50 million
• Establishment of Ghazi University, D.G. Khan – Rs. 70 million
• Establishment of Thal University at Bhakkar – Rs. 30 million
• Chief Minister’s Merit Scholarships (CMMS) – Rs. 540 million
AGRICULTURE
• National Program for enhancement of Crop productivity of Wheat, Rice, Sugarcane & Oil Seeds – Rs. 1.68 billion
• Subsidy on Agricultural Inputs Rs. 4 billion
• Interest Free Loan Scheme for Farmers – Rs. 1.86 billion
• Fasal Bima Scheme (Crop Insurance) – Rs. 1.30 billion
COMMUNICATION & WORKS
• Rural Accessibility Program (Phase – 2) – Rs. 10 billion
• Dualization of Dina – Mangla Road – Rs. 300 million
• Development Package of Mianwali having 42 Roads. – Rs. 2.1 billion
• Construction of flyover at Nadirabad Phatak to Industrial Estate, Multan – Rs. 300 million
• Arterial Roads Improvement Program – Rs. 1 billion
SOCIAL PROTECTION
• Ba-Himmat Buzurg Program (for old age people having age 65 and above) – Rs. 3.6 billion
• Sila-e-Funn Program (for poor artists aged 50 and above) – Rs. 100 million
• Masawaat Program for Transgender people – Rs. 200 million
• Nai Zindagi Program (Medical & Psychological rehabilitation for Acid Attack Victims) Rs. 200 million
• Sarparast Program (for widows & orphans) – Rs. 1.5 billion
• Khiraj ush Shuhada Program (for families of Civilian Martyrs of Terrorist Attacks) – Rs. 150 million
• Hamqadam Program (for persons with disabilities) – Rs. 3.6 billion
• Zevar-e-Taleem Program (for school going poor girls) – Rs. 5 billion
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Budget fails to address industry issues amid COVID crisis: APTMA
KARACHI: All Pakistan Textile Mills Association (APTMA) has rejected the federal budget 2020/2021 saying that the budget has failed to address serious industry issues in the light of the worldwide Covid-19 created crisis.
This is likely to lead to large scale unemployment and closures and as the market dynamics have changed Post Covid, it said in a statement issued on Monday
Bold and direct steps were required to retain our export earnings and maintain employment in a shrinking world Market due to lack of demand especially textiles which constitute 60 percent of export earnings.
It said our Balance of Payments position is likely to worsen as a result of the lack of appreciation of the issues facing exports and the expected 20 percent drop in remittances (World Bank estimate) due to large scale layoffs in the Gulf countries and Saudi Arabia.
Resolution of followings is requested at earliest;
1. Provision of Regionally Competitive Energy Prices
Continuation of regionally competitive fixed electricity tariff at 7.5cents/KWh and $ 6.5 per MMbtu for RLNG/gas across the value chain to ensure competitive export pricing.
Non continuation of regionally competitive energy rates will lead to direct closure of around 30 percent of factories within six months.
Unless corrected, as of July 1st, 2020, exporting sectors will be charged Rs 24 / kwh as normal B3 industrial tariff instead of Rs 12 earlier and even if RLNG is continued at $ 6.5 /MMBTU this contrasts with $ 3.5 RLNG /Gas tariff for India and Bangladesh. Meanwhile Electricity Prices in India have seen a further drop of 16 percent over the last 2 months while currently averaging about 7.2 cents/kwh for Industry. Energy accounts for 35 percent of conversion costs in the Textile value chain and therefore competitive pricing of exports is very highly sensitive to Energy pricing.
It had been agreed that Rs 20 billion will be allocated for energy for use in maintaining 7.5 cents / kwh for electricity and $ 6.5 / MMBTU for RLNG/ Gas. The budget however only allocates Rs 10 billion for RLNG.
Competing countries are already poised to combat highly competitive market conditions through cheaper electricity and gas rates.
2. Zero Rating/ 17 percent GST
Continuation of 17 percent GST is not sustainable as by design GST refunds of 5 months remain in pipeline.
As a result Rs 20 billion per month has shifted from the coffers of the industry to FBR (amounts to Rs 100 billion plus which is in process at all times).
This has increased the cost of doing business by about 6 percent.
Sales tax exemption on imports through Bond, EOU & DTRE would be withdrawn immediately.
17 percent is a very high level incentive to cheat. A lower rate would;
a) Allow Proper Documentation
b) Increase FBR Revenue through wider application
c) Allow organized domestic retailers to compete in the 13 Billion dollars domestic textile market.
We therefore requested the government to restore zero rating or to reduce sales tax rate to 5 percent across the value chain.
3. 1.5 percent Turnover Tax/ Minimum Tax
This tax increases cost of exports by an average 5-6 percent as the tax is levied on the same goods multiple times as it passes through the value chain.
The Textile Industry works on very slim margins and turnover tax acts as an accelerator to early closure of mills.
Continuation of 1.5 percent turnover tax in a situation where there will be no profitability is completely unjustified.
4. MMF & Polyester Staple Fiber
There is 7 percent customs duty on the import of polyester staple fiber with total import expenses in the range of 20 percent including antidumping duty.
Polyester staple fibre is a raw material of the industry and as repeatedly committed by the government should not be subject to any duties.
More than 60 percent of world textile trade is in MMF materials and this duty protection given to obsolete plants in Pakistan is denying the Pakistani industry any chance to compete in this growing majority section internationally or domestically.
Any protection to domestic polyester plants may be given directly by the government and not at the cost of our country’s economic future.
5. DLTL
With refunds of approximately 5 percent due on $ 10 billion exports the quantum of DLTL due will be Rs 80 billion. This was also the amount requested for allocation by Ministry of Commerce.
The budget has allocated only Rs 10 billion for DLTL. DLTL is a calculation of government taxes component in the cost of exports and if this is not catered for will further weaken our export competiveness.
6. TUFF
Rs 4.5 billion are pending under TUFF scheme.
Whereas amount allocated in this budget for TUF scheme is only Rs 400 million.
The amounts have been due for the past 7 years and this sort of delay annuls industries’ faith in Government commitments.
7. New Textile Policy
Implementation of the in principle approved Textile Policy is required in true letter and spirit for Pakistan to maintain and increase employment and exports.
It may please be noted that without correction of these issues in the budget proposals, the industry will contract by 30-40 percent and well over one and half million people will lose their jobs.
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Details of transactions exempted from withholding tax
ISLAMABAD: The Finance Bill, 2020 has proposed to withdraw withholding tax collection on nine different types of transactions under Income Tax Ordinance, 2001.
According to budget commentary issued by PwC A F Ferguson, as part of reforms for ease of doing business, the government has proposed to withdraw following withholding tax provisions, which in government’s view were not generating enough revenues:
01. Section 148A – Tax on local purchase of cooking oil or vegetable ghee by certain persons
Two percent tax was chargeable on the purchase of locally produced edible oil by the manufacturers of cooking oil or vegetable ghee.
02. Section 156B – Withdrawal of balance under Pension Fund
A pension fund manager making payment from individual pension accounts, maintained under any approved Pension Fund, was required to deduct tax at the average rate of tax as calculated in section 12, from the amount so withdrawn by the pensioner before or after his retirement.
03. Section 235B – Tax on steel melters and composite units
Tax under this section was required to be collected from every steel melter, and composite steel units, registered for the purpose of Chapter XI of Sales Tax Special Procedure Rules, 2007 at the rate of one rupee per unit of electricity consumed for the production of steel billets, ingots and mild steel (MS products) excluding stainless steel.
04. Section 235D – Advance tax on functions and gatherings
Advance tax under this section was required to be collected by the prescribed person on the total amount of the bill from a person arranging or holding a function in a marriage hall, marquee, hotel, restaurant, commercial lawn, club, a community place or any other place used for such purpose including the food, service or any other facility is provided by any other person, from the person arranging or holding the function.
05. Section 235F – Advance tax on cable operators and other electronic media
Under this section, Pakistan Electronic Media Regulatory Authority was required to collect advance tax, at the time of issuance of licence for distribution services or renewal of the licence to a licencee.
06. Section 236J – Advance tax on dealers, commission agents and arhatis etc
Advance tax under this section was required to be collected by every market committee from dealers, commission agents or arhatis, etc. at the time of issuance or renewal of licences
07. Section 236R – Collection of advance tax on education related expenses remitted abroad
Advance tax was required to be collected by Banks, financial institutions, foreign exchange companies or any other person responsible for remitting foreign currency abroad for the purpose of education related expenses remitted abroad from the payer of education related expenses.
08. Section 236U – Advance tax on insurance premium
Advance tax was required to be collected under this section, by the insurance company at the time of collection of insurance premium from the person in respect of general insurance premium and life insurance premium.
09. Section 236X- Advance tax on tobacco
Pakistan Tobacco Board or its contractors, at the time of collecting cess on tobacco, directly or indirectly, shall collect advance tax at the rate of five percent of the purchase value of tobacco from every person purchasing tobacco including manufacturers of cigarettes.
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Withholding statements to be filed on quarterly basis
ISLAMABAD: Withholding agents shall require to file statement on quarterly basis from fiscal year starting July 01, 2020.
The Finance Bill, 2020 proposed amendments to Section 165 of Income Tax Ordinance, 2001, under which the filing of withholding statement will be on quarterly basis against existing biannual basis.
The requirement of filing withholding statement on biannual basis was introduced through Finance Supplementary (Second Amendment) Act, 2019 as it was required to file on monthly basis.
The bill proposed that filing requirement shall be:
(a) in respect of quarter ending on the 31st day of March, on or before the 20th day of April; 92
(b) in respect of quarter year ending on the 30th day of June, on or before the 20th day of July;
(c) in respect of quarter ending on the 30th day of September, on or before the 20th day of October; and
(d) in respect of quarter ending on or before the 31st day of December, on or before the 20th January.”;
Another amendment has been proposed which stated that every person involved or engaged in economic transactions as prescribed by the Board shall furnish to the Commissioner a quarterly statement in the prescribed form and manner.
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Bank account details made mandatory for registered taxpayers
ISLAMABAD: All registered taxpayers are required to update their profile by providing details of bank accounts otherwise they will be excluded from Active Taxpayers List (ATL).
The Finance Bill, 2020 has proposed amendment to insert Section 114A to the Income Tax Ordinance, 2001 to make the mandatory for all taxpayers to update their profile.
According to budget commentary issued by PwC A. F. Ferguson Chartered Accountants, all existing registered taxpayers as well as those who will obtain registration by September 30, 2020 will be required to file and update their tax profile by December 31, 2020 whereas other taxpayers will be required to file and update their profiles within 90 days of registration.
Furthermore, with regard to any changes in such profile, the updating is required to be made within 90 days of such change.
Failure to file and update tax profiles in the above manner and within the prescribed dates could result in a taxpayer’s exclusion from active taxpayers list. However, such persons can be included back in active taxpayers list by filing the requisite information and paying the prescribed amount of surcharges.
Following is the proposed new Section 114A to Income Tax Ordinance, 2001:
“114A. Taxpayer’s profile.— (1) Subject to this Ordinance, the following persons shall furnish a profile, namely:—
(a) every person applying for registration under section 181;
(b) every person deriving income chargeable to tax under the head, “income from business”;
(c) every person whose income is subject to final taxation;
(d) any non-profit organization as defined in clause (36) of section 2;
(e) any trust or welfare institution; or
(f) any other person prescribed by the Board.
(2) A taxpayer’s profile—
(a) shall be in the prescribed form and shall be accompanied by such annexures, statements or documents as may be prescribed;
(b) shall fully state, in the specified form and manner, the relevant particulars of—
(i) bank accounts;
(ii) utility connections;
(iii) business premises including all manufacturing, storage or retail outlets operated or leased by the taxpayer;
(iv) types of businesses; and
(v) such other information as may be prescribed;
(c) shall be signed by the person being an individual, or the person’s representative where section 172 applies; and
(d) shall be filed electronically on the web as prescribed by the Board.
(3) A taxpayer’s profile shall be furnished,—
(a) on or before the 31st day of December, 2020 in case of a person registered under section 181 before the 30th day of September, 2020; and
(b) within ninety days registration in case of a person not registered under section 181 before the 30th day of September, 2020.
(4) A taxpayer’s profile shall be updated within ninety days of change in any of the relevant particulars of information as mentioned in clause (b) of sub-section (2).”
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Filing annual tax return made mandatory for FTR taxpayers
ISLAMABAD: The filing of annual income tax return has been made mandatory for taxpayers falling under Final Tax Regime (FTR).
The Finance Bill, 2020 has proposed amendment to Section 114 of Income Tax Ordinance, 2001.
A new clause (ae) has been inserted to Section 114 to make it mandatory for persons falling under FTR to file annual income tax returns.
After proposed amendment the clause a of Section 114 shall be read as:
(Note amendment in red)
114. Return of income. — (1) Subject to this Ordinance, the following persons are required to furnish a return of income for a tax year, namely:–
(a) every company;
(ab) every person (other than a company) whose taxable income for the year exceeds the maximum amount that is not chargeable to tax under this Ordinance for the year; or
(ac) any non-profit organization as defined in clause (36) of section 2;
(ad) any welfare institution approved under clause (58) of Part I of the Second Schedule;
(ae) every person whose income for the year is subject to final taxation under any provision of this Ordinance;
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Tax amendments to property income introduced
ISLAMABAD: Finance Bill, 2020 has proposed many changes to taxation of property income for tax year 2021.
According to commentary of PWC A. F. Ferguson Chartered Accountants, prior to amendments made through Finance Act, 2019, rental income of non-corporate persons was taxed on a presumptive basis not allowing any deductions and allowances.
The Finance Act, 2019 introduced an option for non-corporate persons deriving rental income exceeding Rs 4 million for taxation on net income basis at the applicable rate.
The ceiling of Rs. 4 million for entitling this regime is now proposed to be done away.
As a result, all non-corporate persons with rental income can now opt to be taxed at par with corporate persons.
In case rental income is computed on net income basis, certain specific deductions are allowed, such as repair allowance, financial charges, insurance premium, local taxes, etc.
In addition to these specific deductions, all other expenditure wholly and exclusive incurred for the purpose of rental income including administration and collection chares, etc. is allowed subject to a threshold of 6 percent of gross rentals.
The threshold of 6 percent is now proposed to be reduced to 2 percent.
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Process for automated scrutiny of income tax returns introduced
ISLAMABAD: An automated scrutiny of income tax returns has been introduced to Income Tax Ordinance, 2001 through Finance Bill, 2020.
For this purpose a new sub-section 2A has been inserted to Section 120 of Income Tax Ordinance, 2001 through the Finance Bill, 2020.
The new sub-section 2A is as:
“(2A) A return of income furnished under sub-section (2) of section 114 shall be processed through automated system to arrive at correct amounts of total income, taxable income and tax payable by making adjustments for—
(i) any arithmetical error in the return;
(ii) any incorrect claim, if such incorrect claim is apparent from any information in the return;
(iii) disallowance of any loss, deductible allowance or tax credit under Parts VIII, IX and X respectively of Chapter III; and
(iv) disallowance of carry forward of any loss under clause (b) of sub-section (1) of section 182A:
Provided that no such adjustments shall be made unless a system generated notice is given to the taxpayer specifying the adjustments intended to be made:
Provided further that the response received from the taxpayer, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such notice, adjustments shall be made.
Provided also that where no such adjustments have been made within six month of filing of return, the amounts specified in the return as declared by the taxpayer shall be deemed to have been taken as adjusted amounts on the day the return was filed and the taxpayer shall be intimated automatically through IRIS.”;
A new sub-section 7 has also been introduced in the section, which states:
(7) For the purposes of this section,—
(a) “arithmetical error” includes any wrong or incorrect calculation of tax payable including any minimum or final tax payable.
(b) “an incorrect claim apparent from any information in the return” shall mean a claim, on the basis of an entry, in the return,—
(i) of an item, which is inconsistent with another entry of the same or some other item in such return;
(ii) regarding any tax payment which is not verified from the collection system; or
(iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction.”