ISLAMABAD: Prime Minister Shehbaz Sharif-led coalition government’s Finance Minister Muhammad Aurangzeb has unveiled a Rs8.5 trillion or 6.9 percent deficit federal budget for the next fiscal year and called for the need to shift to a market-driven economy.
The finance minister, after an unusual delay in the session consequent to the coalition partner, Pakistan People’s Party (PPP), threatening not to attend the session for not being taken into confidence on provincial projects in the PSDP, said that he was feeling honoured to present the 2024-25 budget as he recounted that the government has been engaged with the International Monetary Fund (IMF) for a new Extended Fund Facility (EFF) programme to build on the economic gains achieved under the nine-month SBA as well as to bring about reforms in tax, energy sector and SOEs, and to take the privatization process ahead.
Govt all set to present over Rs18trn budget today
He called for structural reforms to get out of the low growth cycle and correct the incentives such as shifting the government-determined economy to a market-driven economy and to bring about improvement in regulatory and climate investment.
- Total size of proposed budget is Rs18.9trn
- 3.6pc GDP growth set
- Rs13trn tax revenue target set, a 38pc increase from last year’s target
- Rs3.5trn non-tax revenue target set
- Govt seeks to secure Rs30bn thru privatisation
- Petroleum levy increased by Rs20 on petrol and diesel, Rs25 on superior kerosene oil, light diesel and high-octane, e-10 gasoline
- Imports of raw materials used in solar panels, inverters and lithiumion batteries manufacturing have been zero-rated
- BISP allocation raised by 27pc
- Finance minister Aurangzeb says a ‘homegrown’ agenda is being pursued
- According to him, a new IMF Programme is critical to avoiding default
- Key objectives for the upcoming fiscal year include bringing the public debt-to-GDP ratio to sustainable levels and prioritising improvements in the balance of payments position
He said structural factors led to economic challenges and a home-grown reforms programme and political consensus can only turn around the economy and needed growth for employment creation.
The government has unveiled federal budget of Rs18.877 trillion with a 6.9 percent overall budget deficit and Rs12.97 trillion Federal Board of Revenue (FBR) tax collection, Rs7.438 trillion would be transferred to the provinces leaving the net income of the federal government at Rs9.119 trillion including Rs3.587 trillion non-tax revenue.
The primary deficit has been estimated at one percent of the GDP for the next fiscal year, GDP growth of 3.6 percent and inflation at 12 percent.
The finance minister said that the reduction in fiscal deficit through an equitable tax system by improving government income and reducing unnecessary expenditure would be a priority, besides SOEs’ restructuring and privatisation.
He deplored the low tax-to-GDP ratio and promised to bring the undocumented economy into the tax net.
The government has allocated Rs1.5 trillion for federal PSDP including Rs100 billion PPP for the next fiscal year with Rs824 billion for infrastructure, (energy Rs253 billion, Rs279 billion for transport and communication, Rs206 billion for water sector) and Rs280 billion for the social sector.
The government has earmarked Rs2.122 trillion for defence, civil administration Rs839 billion, Rs1.014 trillion for pension, and subsidy Rs1.363 trillion for gas, electricity and others.
Rs1.771 trillion grants for Benazir Income Support Programme (BISP), AJK, GB and the merged district of Khyber-Pakhtunkhwa, HEC, Railways, remittances and for the promotion of IT have been earmarked.
The government has proposed a 25 percent increase in salaries of grade1-16 employees, a 20 per cent increase in the salaries of the officers of grade 17-22,an increase of 15 per cent in pensions, and has fixed minimum wage at Rs37,000.
The government has allocated Rs593 billion for BISP for the next fiscal year and Rs5 billion for mark-up and risk-sharing scheme for farm mechanisation for the agriculture sector.
He assured improvement in the power sector through transmission and distribution as well as the privatisation of nine Discos and stated that Rs253 billion have been allocated for the power sector, Rs79 billion for the IT sector, and Rs7 billion for the digitisation of the FBR.
The government has allocated Rs86.9 billion for the promotion of remittances and the amount would be used for the reimbursement of TT changes, Sohni Dharti, and other schemes besides the introduction of Mohsin card.
Rs13.78 billion are being allocated for the export refinance scheme under EXIM Bank for an increase in exports and the SBP would provide Rs539 billion for export credit, and SME credit is being increased to Rs1.1 trillion from Rs540 billion with Rs100 billion increase in the next fiscal year.
The government is also allocating Rs4 billion for E-bikes.
The finance minister also promised that the tax policy principle would be an increase in the tax base by bringing the undocumented economy into the tax net through digitisation as well as by an increase in the tax rate for the non-filers on transactions.
The government has proposed tax collection on vehicles at the price of vehicle instead of engine capacity and proposed a rate of default surcharge to be aligned with the SBP’s policy rate of KIBOR+3 per cent.
The government has withdrawn zero rating and exemption on some items and proposed a standard rate of 18 percent GST for tier-1 retailers of branded textiles and leather goods.
The government has proposed a standard rate of 18 percent on mobile phones, and a withholding sales tax regime on scrap of coal, paper, plastic and copper.
The government has exempted iron and steel scrap from sales tax.
The government proposed federal excise duty of Rs44,000 on per kg Acetate tow to discourage the informal sector and FED on cement has been increased to Rs3 per kg from Rs2 per kg and five percent FED has been proposed on residential as well as plots and commercial properties.
The government has announced to withdraw exemptions on import of hybrid vehicles, as well as on luxury vehicles, besides withdrawal of duty on the import of glass as well as increase in duties on steel and paper goods ball bearings to increase domestic industry.
The government extended income tax exemption to the residents of FATA and PATA up to June 30, 2025.
The government has decided to maintain income tax exemption up to Rs0.6 million and also proposed that there would be no increase in the maximum slab in the salaried class but some changes in tax slabs have been proposed.
However, the maximum tax rate of 45 percent is being proposed for non-salaried slabs with some changes in the slabs of salaried class.
A tax rate of 15 percent has been proposed on capital gains from the disposal of immovable property for filers and up to 45 percent rate for non-filers.
A capital gains tax on the sale of securities at 15 percent for filers and for non-filers a maximum rate of 45 percent have been proposed. Different rates of withholding tax on immovable properties for late-filers of returns have also been proposed.
FED at the rate of five percent is proposed on immovable residential, commercial properties, and plots has been proposed.
Scope of advance withholding tax on retailers, wholesalers, and supply chain is proposed to be increased from one per cent to 2.25 per cent. Withdrawal of zero rating and reduced tax rate exemptions have been proposed.
Copyright Business Recorder, 2024
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