Flanked alongside his coalition partners, Finance Minister Ishaq Dar on Friday announced the budget for the fiscal year 2023-24.
The upcoming fiscal year budget is of key importance not only for industrialists and the salaried income group, but also vital to keep the International Monetary Fund (IMF) programme on board, which had earlier said that the “budget should be consistent with program objective”.
Business Recorder looks at what will be the impact of measures announced by the government on the stock market.
“Based on our initial analysis Federal Budget FY24 is neutral for the local stock market,” said Topline Securities, a local brokerage house, in a report on Friday.
The government on Friday announced the re-imposition of 10% final withholding tax on issuance of bonus shares by listed companies.
“This will force companies to avoid announcing investor-favourite bonus shares thereby affecting market trade volume,” said Topline, terming the measure as negative for the stock market.
The brokerage house said the decision to reduce minimum tax liability on turnover from 1.25% to 1.0% for companies listed on PSX is a positive move. “Loss-making and low-margin companies to benefit (from this measure),” said the brokerage house.
Among key measures, Finance Minister Ishaq Dar on Friday announced the rationalisation of Super Tax.
Under section 4C, Super Tax will apply on all persons across the board on income above Rs150 million, and the government has inserted three new income slabs of Rs350 million to Rs400 million, Rs400 million to Rs500 million and Rs500 million above to be taxed at 6%, 8% and 10%, respectively.
Topline termed the move as ‘neutral’.
“In FY24 budget, all companies with income above Rs500 million will be required to pay a 10% super tax. Tax rate for companies above Rs500 million is now 39% meaning that the measure is negative for all other sectors not mentioned in the list last year,” it said.
In an unexpected move, it was learnt that government may impose upto 50% additional tax on any income, profit or gains that have arisen to any person or class of persons due to any economic factor or factors that resulted in unexpected income for any of the preceding five tax years from tax year 2023 and onwards.
The brokerage house termed the move as negative.
Moreover, the government has also decided to extend the income tax exemption for one year i.e. up to 30 June, 2024 for resident persons of FATA/PATA.
Topline termed the extension ‘negative’.
“This exemption is affecting steel rebar producers and it was expected that government may not increase this exemption,” it said.
Dar also announced to incentivise the pharma sector by including one more API and three drugs in the existing duty-free regime. The measure is positive for the pharma sector, said Topline.
The government also announced to continue concessionary fixed tax rate of 0.25% for IT & ITeS exports for Tax years 2024, 2025 and 2026. This is positive for the ITC sector, said Topline.
The decision to extend the exemption for one year granted to a person to profits and gains on sale of immovable property or share of special purpose vehicle to any type of REIT scheme i.e. upto 30th June 2024 is positive for the real-estate sector.
However, the re-imposition of 0.6% advance adjustable withholding tax on non-ATL (Advanced Taxpayer List) persons on cash withdrawal is negative, said Topline.
For the auto sector, the reduction of custom duty from 10% to 5% on non-localized (CKD) of Heavy Commercial Vehicles (HCVs) is a positive development, said the brokerage house.
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