Massive changes introduced in Finance Bill

ISLAMABAD: The government has introduced massive changes in the Finance Bill 2023 by withdrawing certain exemptions, re-imposition/increase in additional customs duties (ADCs)/regulatory duties on imports of luxury items, five percent Federal Excise Duty (FED) on fertilisers, FED on sugary drinks from 10 to 20 percent and proposed to raise income tax on high-income earners.

Sources told Business Recorder the amendments to the Finance Bill 2023 continued late Saturday night at the Federal Board of Revenue (FBR). Practically it is almost a new Finance Bill or an entirely revised Finance Bill 2023. It is also under review whether the one-year tax exemption of duties and taxes granted to the erstwhile tribal areas would continue or not from July 1, 2023.

Sources said that certain tax exemptions which were granted through the Finance Bill 2023 have also been withdrawn through proposed amendments in the Finance Bill 2023. The final list of such exemptions is being finalised late Saturday night at the FBR.

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In budget (2023-24), the Minimum tax liability on turnover for companies listed on the Pakistan Stock Exchange was reduced from 1.25 percent to one percent. The government may withdraw the said concession under the amended Bill 2023.

For salaried and non-salaried higher income brackets, the FBR proposed enhancement of rate by 2.5 per cent.

The government is also considering raising the federal excise duty (FED) on sugary drinks from 10 to 20 per cent.

The regulatory duties imposed through time-bound notifications on the import of luxury items including vehicles and mobile phones were expired on March 31, 2023. The government has proposed to re-impose the RDs/ADCs on the import of non-essential items. In budget (2023-24), the FBR had abolished regulatory duties on a wide range of items including synthetic filament yarn of polyester and second hand clothing.

In budget (2023-24), the government has enhanced the monetary limit of foreign remittance remitted from outside Pakistan from five million rupees to rupee equivalent of US$100,000 for the purpose of section 111(4) which places a bar on asking nature and source of unexplained income/assets. Under the amended Finance Bill 2023, the government may withdraw the said enhanced limit for the overseas Pakistanis.

The government has taken additional taxation measures of Rs215 billion through amendments in the Finance Bill 2023 taking the total taxation measures to Rs438 billion for 2023-24.

The revenue collection target of the Federal Board of Revenue (FBR) has been raised from Rs9,200 billion to Rs9,415 billion for 2023-24. “We will cross Rs7,100 billion by the end of the current fiscal year”, sources said.

Under the amended Finance Bill 2023, the government has imposed five per cent federal excise duty (FED) on fertilisers and the Di-Ammonium Phosphate (DAP) to generate additional revenue of Rs35 billion.

Through the amendments in the Finance Bill 2023, the rate of withholding tax on buying and selling of property may be further raised by one per cent especially for non-filers. The measure is expected to raise an additional amount of Rs45 billion. In budget (2023-24), a two per cent final withholding tax on immovable property purchases by non-resident POC/NICOP holders was waived if purchased with foreign remittances.

The government has also proposed an increase in the income tax rate for salaried class exceeding an amount of Rs200,000 per month. A 2.5 per cent increase in income tax has been implemented for incomes exceeding Rs200,000 per month or Rs2.4 million per year.

The government has also retained all tax measures introduced in a mini-budget in mid-February 2023.

The continuation of taxation measures taken in February 2023 of Rs170 billion would have a revenue impact of Rs680 billion in 2023-24. The FBR has taken new tax measures of Rs223 billion in budget (2023-24). The additional measures of Rs215 billion have been proposed through amended Finance Bill 2023. Therefore, the total revenue impact of all measures including mini-budget would be over Rs1,115 billion in 2023-24.

In budget (2023-24), total taxation measures stood at Rs223 billion and relief measures of Rs23 billion in budget (2023-24). The net impact of the taxation measures comes to around Rs200 billion for 2023-24.

The income tax measures stood at Rs185 billion, whereas, relief measures of Rs10 billion. The net impact comes to Rs175 billion.

The sales tax measures amounted to Rs22 billion, whereas, zero relief measures and net impact of sales tax measures totaled at Rs22 billion.

The customs duty measures totaled at Rs12 billion and relief measures of Rs13 billion, resulting in net impact of relief of Rs1 billion.

The Federal Excise Duty measures of Rs4 billion were taken in budget (2023-24) with no relief measure.

Copyright Business Recorder, 2023