The total allocation for Pakistan’s national Public Sector Development Program (PSDP) has been set at Rs1,324 billion for the fiscal year 2020/2021, according to budget documents released on Friday. This allocation represents an 18 percent decrease compared to the Rs1,613 billion allocated in the outgoing fiscal year.
(more…)Tag: budget 2020-2021
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Subsidies sharply cut by 40pc for next fiscal year
ISLAMABAD: The federal government has decided sharp cut in subsidies during fiscal year 2020/2021. An amount of Rs209 billion has been allocated as subsidies for next fiscal year as compared with Rs349.5 billion of current fiscal year, showing reduction of 40 percent.
According to budget documents for fiscal year 2020/2021 released on Thursday, a subsidy of Rs124 billion has been allocated to WAPDA/PEPCO during the next fiscal year as compared with Rs201 billion of current fiscal year.
The government allocated subsidy of Rs30 billion to Naya Pakistan Housing Authority. Further an amount of Rs6 billion allocated for fertilizer plant subsidy (Engro, Fatima) during current fiscal year. The government already disbursed subsidy amount of Rs7 billion under this head.
The subsidy to KESC has been reduced to Rs25.5 billion during next fiscal year from Rs59.5 billion of current fiscal year.
The government has granted subsidy amount of Rs43.5 billion through Utility Stores Corporation (USC) during current fiscal year. However, during next fiscal year the government allocated subsidy of Rs3 billion for Ramazan Package through USC.
An amount of Rs7 billion has been allocated as subsidy to PASSCO for wheat operation and wheat stock during next fiscal year. The government granted Rs15.5 billion subsidy under this head during current fiscal year.
The government has allocated no subsidy to National Food Security and Research Division during the next fiscal year.
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FBR assigned 27 percent higher revenue collection target in 2020/2021
ISLAMABAD: Federal Board of Revenue (FBR) has been assigned 27 percent higher revenue collection target for fiscal year 2020 despite challenging economic conditions due to COVID-19.
According to official documents of Budget 2020/2020, the FBR has been assigned revenue collection target of Rs4,963 billion during upcoming fiscal year as compared with expected current revenue collection of Rs3,908 billion during the outgoing fiscal year, which is Rs1,055 billion higher.
The collection target under direct tax has been estimated at Rs2,043 billion during fiscal year 2020/2021 as compared with expected collection of Rs1,623 billion in the current fiscal year, which is Rs420 billion higher.
Under direct tax collection, target for income tax has been estimated at Rs2,037 billion, workers welfare fund at Rs3.2 billion and capital value tax at Rs3 billion.
The collection of indirect taxes has been estimated at Rs2,920 billion during next fiscal year as compared with existing estimated collection of Rs2,285 billion during the current fiscal year, which is Rs635 billion higher.
Under indirect taxes, the collection target of customs duty has been set at Rs640 billion, sales tax at Rs1,919 billion and federal excise duty at Rs361 billion.
Targets for collection of other taxes are included: ICT Rs20.47 billion; Mobile handset levey Rs5.8 billion; airport tax Rs25 million, Gas Infrastructure Development Cess (GIDC) Rs15 billion; National Gas Development Surcharge Rs10 billion etc.
The collection of petroleum levy has been estimated at Rs450 billion for next fiscal year as compared with existing collection of Rs260 billion, which is 73 percent higher.
The target for total tax revenue has been set at Rs5,464 billion during fiscal year 2020/2021 as compared with Rs4,208 billion expected to be collected during current fiscal year.
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Budget salient features related to Income Tax
ISLAMABAD: Federal Board of Revenue (FBR) issued budget salient feature related to income tax presented through Finance Bill, 2020.
INCOME TAX
RELIEF MEASURES
• Deletion of Withholding Taxes
To augment efforts towards simplification of the withholding tax regime, the following withholding tax provisions are being deleted:
Section 236R: Collection of advance tax on education related expenses remitted abroad
Section 235B: Tax on steel melters and composite units
Section 156B: Withdrawal of balance under pension fund
Section 148A: Tax on local purchase of cooking oil or vegetable ghee by certain persons
Section 236D: Advance tax on functions and gatherings
Section 236F: Advance tax on cable operators and other electronic media
Section 236J: Advance tax on dealers, commission agents and arhatis etc.
Section 236U: Advance tax on insurance premium
Section 236X: Advance tax on tobacco
This measure would reduce the cost of the compliance of taxpayers, enhance the control of FBR over the withholding tax regime and would be pivotal in promoting ease of doing business.
• Enhancement of Threshold for Becoming Prescribed Person for Withholding of Tax on Supplies, Services and Contracts from fifty to hundred million rupees and a similar threshold of hundred million rupees is being prescribed for a sales tax registered person to become a withholding agent.
• Reduction in Holding Period and Tax Rates for Capital Gain on Immoveable Property to incentivize and propel economic activity in the real estate sector, the bifurcation of plots and constructed property for determining holding period of capital gains is being done away with i.e. the holding period for taxation of capital gains on disposal of immovable property is being restricted to 4 years. In addition, rates are also being reduced on capital gains emanating from disposal of immoveable property.
• Increase in Threshold of Section 21(l) per transaction delineated under section 21(l) is being increased from Rs. 10,000/- to Rs. 25,000/-. Similarly, the threshold of payments under a single from Rs.50,000/- to Rs.250,000/-.
• Increase in Threshold of Section 21(m) from Rs. 15,000/- per month to Rs.25,000/- per month.
• Enabling Adjustability of Property Expenses for All Individuals/AOPs
• Exempting Withholding Tax on Cash Withdrawal to the extent of Foreign Remittances
• Promoting Investment in Government Debt Instruments through a foreign bank account, a non-resident rupee account repatriable or a foreign currency account.
• Issuance of Centralized Income Tax Refunds
• Hajj Operators to be Exempted from Withholding Tax on Payments to Non-Residents
• Explanation for excluding Vehicles Up to 200cc from the Ambit of Advance Tax
• Advance Tax on Auction of Immovable Property to be Collected in Installments
• Prompt Issuance of Exemption Certificates to Public Listed Companies within 15 days
• Collection of Advance Tax by Educational Institutions not to Apply to Persons on the ATL
• Rationalizing Tax on Imports by shifting from person-specific rates to goods specific rates cascaded according to the type of goods, with tax @1% for capital goods, 2% for raw materials and 5.5% for finished goods irrespective of status of the importer. However, the prevailing concessional rates on certain items such as remeltable scrap of iron and steel, potassic and urea fertilizers, LNG, Gold, Cotton, goods that were importable by manufacturers under the rescinded SRO 1125(I)/2011 dated 31.12.2011, mobile phones etc. are being maintained.
• Agreed Assessment through arbitration by Assessment Oversight Committee
• Strengthening Alternate Dispute Resolution Mechanism
• Taxation Of Resident Shipping Companies as per latest marine policy
PROCEDURAL MEASURES
• Taxpayer’s Profile Automated Adjusted Assessment to rectify computational errors and wrongly claimed credits
• Real-Time Access to Databases of Certain Organizations
• Audit on the Basis of Benchmark Ratios
• Enabling E-Audit
• Strengthening Compliance Regime of Non-Profit / Welfare Organizations
• Electricity Expense to be Treated as an Inadmissible Business Deduction subject to non-disclosure of name of actual user from 01.01.2021
• Disallowance of Business Expenditure Proportionate to Sales Made to Sales Tax Unregistered Persons
• Rationalizing Depreciation Deduction based on the Half Year Rule
• Limiting Interest Deductibility to Foreign Affiliates
TECHNICAL MEASURES
• Rationalization of Cost of Transport Vehicle for Claiming Deduction on Account of Lease Rentals
• Filing of Withholding Statements under section 165 on Quarterly Basis
• Incentivizing and Promoting the Construction Industry
• Tax Exemptions and Concessions for the Gwadar Port and the Gwadar Free Zone
• Incorporation of Relief measures provided through SROs during the COVID pandemic.
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Budget salient features related to Sales Tax, FED
ISLAMABAD: Federal Board of Revenue (FBR) issued budget salient feature related to sales tax and federal excise duty (FED) presented through Finance Bill, 2020.
RELIEF MEASURES
- The minimum threshold of supplies by retailers for obtaining CNIC of the buyers is proposed to be increased from Rs 50,000 to 100,000;
- In wake of COVID-19, the Federal Government granted exemption to health related items and equipment through SRO 237(I)/2020 dated 20-3-2020 which is going to expire on 19-6-2020. In the present circumstances vis-à-vis COVID-19, the said period is being extended for another three months starting from the 20th June 2020.
- Exemption allowed on import of dietetic foods intended for special medical purposes for the children suffering from Inherited Metabolic Syndrome;
MEASURES FOR REMOVAL OF ANOMALIES
3(a) In order to encourage documentation, it has been decided to provide relief to organized retail sector which is integrated online with FBR through Point of Sale system. Their existing sales tax rate is proposed to be reduced from 14 percent to 12 percent
STREAMLINING MEASURES
- Concept of conducting audit proceedings through electronic means introduced;
- Ninth Schedule is proposed to be amended in line with Mobile Manufacturing Policy approved by the ECC of the Cabinet;
- Insertion of the Tax Laws Amendment Ordinance 2019, relating to tax concessions and exemptions to Gawadar Port and Gawadar Free Zone, in the Finance Bill 2020;
- To strengthen the Alternate Dispute Resolution process and to make it more taxpayer-friendly, it is proposed that the taxpayer is allowed to withdraw his case from any court of law or any appellate authority after decision of ADRC. Furthermore, the decision of ADRC, once it is conveyed by the taxpayer to the tax authorities, is binding upon the tax authorities;
- The scope of section 73 is proposed to be widened to cover all registered persons supplying taxable goods;
- Board is empowered to fix minimum production on the basis of single or more inputs and for fixation of wastage;
- Real-time access to information and databases to the Board by various authorities such as NADRA, FIA, provincial excise & taxation departments etc.
SALIENT FEATURES
FEDERAL EXCISE DUTY
The proposed budgetary measures pertaining to Federal Excise Duty (FED) for FY 2020-21 are:
HEALTH RELATED MEASURES
- Increase in the rate of FED on cigars, cheroots , and cigarillos and cigarettes from 65 percent to 100 percent of retail price; increase in the rate of FED on filter rods from Rs 0.75 to Rs 1 per filter rod;
- Levy of FED on e-liquids of electric cigarettes @ Rs 10 per ml.
- Levy of FED on caffeinated energy drinks @ 25 percent;
MEASURES FOR REMOVAL OF ANOMALIES
- Levy of FED @ 7.5 percent ad valorem in case of locally manufactured double cabin (4×4) pick-up vehicles and @ 25 percent in the case of imported ones.
4(a) In the wake of worsening affect of COVID-19 and reduction in production of cement, it has been proposed to reduce FED on cement from Rs. 2 per kg to Rs. 1.75 per kg.
STREAMLINING MEASURES
- Board is empowered to fix minimum production on the basis of single or more inputs and for fixation of wastage;
- The scope of seizure of non-duty paid goods is extended to all products subject to FED besides cigarettes and beverages;
- Real-time access to information and databases to the Board by various authorities such as NADRA, FIA, provincial excise & taxation departments etc.
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Budget salient features related to customs duty
ISLAMABAD: Federal Board of Revenue (FBR) issued budget salient feature related to Customs duty presented through Finance Bill, 2020.
Industrial Relief Measures
- Exemption of additional custom duties on those tariff lines which are now @ 0 percent customs duty in tariff.
- Reduction of custom duty on 40 raw materials of various industries.
- Tariff rationalization under National Tariff Policy 2019, by reducing customs duty on 90 tariff lines from 11 percent to 3 percent and 0 percent.
- Allowing the exemption on import of raw material to those Nashiran-e-Quran also who do not have their own in-house printing facility.
- Reduction in regulatory duty from 12.5 percent and 17.5 percent to 6 percent and 11 percent, respectively on Hot Rolled Coils (HRC) of Iron and steel falling under PCT codes 7208 and 7225& 7226, respectively.
- On the request of various local industries, a number of their inputs/intermediary raw materials are being allowed concessional import under new serial number of the fifth schedule through IOCO quota determination.
• Exemption of custom duties on import of raw materials by manufacturers of Butyl Acetate.
• Exemption of custom duty on import of raw material by manufacturer of syringes and saline infusion sets.
• Exemption of customs duties on import of raw material by manufacturers of buttons.
• Reduction in custom duty on import of raw material by manufacturers of interlining/buckram.
• Reduction of custom duty and exemption of additional custom duty and regulatory duty on import of raw materials by manufacturers of Wire rod
• Exemption of custom duties and regulatory duty on import of machinery, equipment and other project related items for setting up of internet cable landing stations.
• Exemption of custom duties on import of raw material by beverage can manufacturers.
• Reduction in Custom duty and exemption from Additional custom duty on import of raw material by food packaging industry.
Relief to Common Man
- Exemption from customs duties on import of 61 COVID19 related items, which was due to expire on 20th June has been extended due to the continuation of pandemic.
- Exemption from 2 percent ACD on import of edible oils and oil seeds under PM’s COVID19 Relief Package has been extended.
- Exemption of duties & taxes on import of Dietetic Foods for Children with inherited metabolic disorders.
- Exemption of all duties & taxes on import of Diagnostic Kits for Cancer and Corona Virus.
- Exemption of Customs duties on inputs of Ready to use Supplementary Foods (RUSF).
- Exemption of Customs duties on import of life saving drug Meglumine Antimonite for treatment of leishmaniasis.
- Extension up to 2023, in exemption of customs duties on imports for setting up new industries in erstwhile FATA area.
Miscellaneous
- Reduction in regulatory duty on smuggling prone items to bring these items under legal imports
- Regulatory duty on several industrial inputs is also being reduced to decrease their cost of doing business
- Tariff protection for domestic industry by increasing/levy of regulatory duty on import of those items which are also locally manufactured
- Incentivizing soap manufacturing industry by reducing rate of Additional customs duty on Palm Stearin
- Enhancing scope of concessions available to Special Economic Zones.
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Budget 2020/2021 unveiled; no new tax; fiscal deficit estimated at 7pc
ISLAMABAD: Hammad Azhar, Federal Minister for Industries and Production, on Friday presented budget 2020/2021 on floor of house claiming to be a corona-hit budget with no new tax.
The budget 2020/2021 has the following salient features:
The total outlay of budget 2020/2021 is Rs7295 billion. The size is 11 percent lower than the size of budget estimates 2019/2020.
The budget deficit has been estimated at Rs3,195 billion or 7 percent of the GDP for next fiscal year starting July 01, 2020.
The net federal revenue has been estimated at Rs3,700 billion and total expenditures has been estimated at Rs7,136 billion. While it is estimated at the provinces would provide Rs242 billion surplus.
The resources availability during next fiscal year has been estimated at Rs6,315 billion against Rs4,917 billion in the budget estimates of 2019/2020.
The net revenue receipts for 2020/2021 have been estimated at Rs3,699 billion indicating an increase of 6.7 percent over the budget estimates of 2019/2020
The provincial share in the federal taxes is estimated at Rs2,873.7 billion during the next fiscal year, which is 11.7 percent lower than the budget estimates for 2019/2020.
The net capital receipts for 2020/2021have been estimated at Rs1,463 billion against the budget estimates of Rs831 billion in 2019/2020 reflecting an increase of 75.93 percent.
The external receipts in 2020/2021 are estimated at Rs2,222.9 billion. This shows a decrease of 26.7 percent over the budget estimates for 2019/2020.
The overall expenditure during 2020/2021 has been estimated at Rs7,295 billion, out of which the current expenditure is Rs6,345 billion.
The develop expenditure outside PSDP has been estimated at Rs70 billion in the budget 2020/2021.
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FBR bans use of information system till budget announcement
ISLAMABAD: Federal Board of Revenue (FBR) has put a ban on using information system from June 11, 2020 till announcement of budget 2020/2021, which is schedule for June 12, 2020.
In an office order, the FBR said that due to budget announcement on June 12, 2020 restrictions on the access of servers/information system running at FBR Headquarters will come in force on June 11, 2020 from 8:00am till the end of budget speech.
The FBR said that message and engagement features will be disabled and would not be accessible for the internal users of the FBR house.
Users located in the FBR house premises would only be limited in routing/marking their correspondence in the Wings located within FBR House. However, external users such as RTOs/LTUs/Customs collectorates would be able to mark their correspondence to the internal users/Wings of the FBR.
The FBR said that access to the system for correction of disposition list, online application of leave and other facilities will be completely banned for field formations.
However, FBR’s e-Portal/server will remain accessible for authorized users outside FBR headquarter premises but no one within FBR HQ will be allowed to access FBR e-portal during budget exercise.
STARR and Sales Tax systems/services will remain inaccessible for FBR HQ users, however, authorized users/outside FBR HQ premises will be allowed to access the system/servers.
While the local network of PRAL HQ and FBR HQ will remain operational individually, transfer to any files/documents from FBR HQ network to PRA HQ network vice versa will be banned.
Internet services in FBR HQ will remain unavailable in FBR HQ till conclusion of budget speech.
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Budget 2020/2021 to focus on mitigating COVID-19 impact
KARACHI: The government may focus supportive measures in the upcoming budget 2020/2021 in order to reduce the impact COVID-19, analysts said on Tuesday.
Analysts at Arif Habib Limited highlighted the blueprint of the FY21 Budget whereby the key objective of the government is the revival and stabilization of the economy after being pinned down from the ongoing COVID-19 pandemic, via relief and supportive measures for the masses as well as the business community whilst constraining fiscal imbalances and meeting IMF’s revenue collection target.
The government is scheduled to present budget 2020/2021 on June 12, 2020.
They summarized some key expected measures below.
- Counter Coronavirus and ensure social security
a. Allocation of PKR 1.0trn to fight the ongoing COVID-19 contagion with likely allocation to the following:
I. Daily wagers cash allocation,
II. Higher allocation to the Ehsaas program (for vulnerable families),
III. Subsidized electricity for lifeline consumers,
IV. Enhanced allocation to Utility Stores Corporation (USC),
V. Higher allocation for health and food supplies,
VI. Allocation to the National Disaster Management Authority (NDMA), and
VII. Lowering down taxes on basic essential goods.
b. SBP has already introduced several measures to contain the economic fallout post Corona pandemic such as:
1) 525bps cut in interest rate,
2) announcement of a relief package for households, industries and SMEs,
3) Refinancing scheme to support employment and avert layoffs,
4) Relaxation in credit requirement for exports and imports, and
5) Facilitation of new investments via subsidized interest rates for BMR activities.
c. Higher allocation of social expenditure under the federal PSDP.
- Revive economic growth, increase PSDP allocation along with incentives for industries
The government has set GDP target for FY21 at 2.3 percent (FY20 estimated at -0.38 percent primarily due to the coronavirus pandemic)
a. Allocation of PKR 630 billion under the Federal PSDP along with an additional PKR 200 billion under Public Private Partnership Authority (PPPA),
b. Reduction of custom and excise duty by 3 percent on imports of machinery for agriculture and power sector,
c. Removal of additional custom duty on different products to support local production and revive demand, and
d. Removal of import duty on plant and machinery. Cascading duty structure on import of raw materials, intermediate goods and finished goods.
Mobilize revenue measures to achieve the additional collection target for next year
Tall revenue target of the FBR at PKR 5.1 trillion with additional requirement amounting to Rs 575 billion (discussed ahead) could be generated by means of:
a. Amendment in income tax treatment of bad debts, which could generate Rs 100 billion in revenue from the banking sector,
b. Imposition of luxury tax on luxury houses, farmhouses, mansions and bungalows,
c. Imposition of import duty on 60 luxury imported items including cars, ceramics and others,
d. Higher petroleum development levy during FY21, and
e. Administrative and enforcement actions undertaken by FBR.
- Certain expenditures (ex-social spending) to remain uncompromised
The government has set expenditure target for FY21 at Rs 10.4trn
a. Defence expenditure likely to go up to Rs 1.4 trillion,
b. Government is expected to allocate Rs 2.7 trillion for debt servicing in FY21,
c. Federal PSDP allocation will be targeted at Rs 630 billion.
- Scope of documentation drive to be eased and relaxation expected to revive consumer spending
a. Increase limit of providing CNIC conditions from Rs 50,000 to Rs 100,000,
b. Withholding tax on remittances to be abolished,
c. Reduction of 3 percent in further sales tax on supplies to undocumented individuals, and
d. New sectors to be added to the tax net.
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PM directs providing all possible incentives in budget 2020/2021
ISLAMABAD: Prime Minister Imran Khan on Monday directed the authorities to provide all possible incentives in budget 2020/2021 to industry for job creations and moving the wheels of the economy.
The prime minister chaired a meeting to discuss the objectives and considerations for the forthcoming budget 2020/2021.
The meeting was attended by Foreign Minister Shah Mehmood Qureshi, Minister for Industries and Production Muhammad Hammad Azhar, Planning Minister Asad Umar, Finance Adviser Dr. Abdul Hafeez Sheikh, Adviser Commerce Abdur Razzaq Dawood, Adviser Institutional Reform Dr. Ishrat Hussain and senior officials.
Discussing priorities for the forthcoming budget, the prime minister said that every effort should be made to provide all possible incentives to the industry, create jobs for the youth and moving the wheels of economy.
The prime minister stated that the corona pandemic has severely affected upward trajectory of economy towards stabilization and strengthening.
He said that the government, despite its financial constraints, provided unprecedented stimulus economic package to support businesses and industry and to minimize the impact of corona.
He said that the most affected sectors be identified so as to provide those with maximum possible support in the forthcoming budget.
The prime minister directed that the process of cutting unnecessary government expenditure should be expedited at all levels including the federal government as well as provincial governments.
Prime Minister Imran Khan stressed upon the need for reviewing the existing system of provision of subsidies to make them target-oriented and ensuring their optimum utilization.
He said that the present situation calls for expediting reform process in critical sectors so as to reduce burden on national exchequer and provide relief to the masses.
The prime minister also directed adviser finance to apprise the people of Pakistan about the current economic situation and the strategy being followed by the government to cope with the challenges.
Finance Adviser Dr. Abdul Hafeez Sheikh apprised the meeting about the overall state of economy and the philosophy, objectives and considerations for the next budget 2020-2021.
Dr. Hafeez Sheikh also dilated upon various constraints of economy, especially in wake of corona pandemic, that has obliged the government to further focus on providing incentives to the industry for its revival and growth, cutting unnecessary government expenditure, rationalize subsidies and expedite reform process in critical sectors.
Various proposals were discussed in detail to stimulate corona-affected economy, especially ensuring greater participation of the private sector in the development process and promoting public-private partnership to complement public sector development program.