Karachi, June 18, 2023 – The tax concession provided to retailers and jewelers through the Finance Bill, 2023 has come under scrutiny, with critics arguing that it is aimed at appeasing certain political groups in light of the upcoming general elections.
The Karachi Tax Bar Association (KTBA) recently organized a post-budget seminar to discuss the Finance Bill, 2023, where concerns were raised about the exclusion of retailers with shop areas over 1,000 square feet and jewelers with shop areas over 300 square feet from the definition of Tier-1 retailers.
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Adnan Mufti, Partner at Moore, Shekha Mufti Chartered Accountants, criticized this amendment, as it means that such retailers will not be required to pay sales tax along with their electricity bills. Mufti stated, “The proposed amendment apparently seems to appease the political vital constituencies in the country, while neglecting the economic consequences.”
Mufti further analyzed another amendment in the Finance Bill, 2023, which increased the tax rate for Tier-1 retailers selling textile and leather finished articles from 12 percent to 15 percent. He argued that this amendment relieves the unorganized retail segment from sales tax registration and integration obligations, while penalizing the organized sector (branded products/chain stores) with a higher tax rate. According to Mufti, such a discriminatory policy, coupled with uncertainty, is counterproductive to the economy and penalizes compliant taxpayers.
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Expressing his concerns about the recent budget, Mufti criticized the shortsightedness of the policymakers, noting that numerous recurring amendments have been introduced. He specifically mentioned the reversal of long-awaited documentation measures, such as the condition of having a Computerized National Identity Card (CNIC), which were introduced just a few years ago. Mufti stated, “The broadening of the tax base remains a ‘buzz word’ only, with no practical steps taken. In fact, the reversal of retail tax is a contraction of the tax net.”
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The concerns raised by Adnan Mufti and others at the seminar highlight the potential political motivations behind the tax concessions provided to retailers and jewelers in the Finance Bill, 2023. Critics argue that these amendments not only favor certain groups but also fail to address the broader issues of tax base expansion and documentation. As the country approaches the general elections, the implementation and impact of these tax concessions will undoubtedly remain a subject of debate and scrutiny.
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About Karachi Tax Bar Association (KTBA): Karachi Tax Bar Association (KTBA) is a professional body representing tax professionals, including lawyers and chartered accountants, in Karachi, Pakistan. Its main objective is to promote the understanding and development of tax laws and regulations and to protect the interests of its members. KTBA regularly organizes seminars, workshops, and conferences to facilitate discussions on tax-related matters and provide a platform for professionals to share their expertise and insights.
