Without revising the annual revenue collection target of Rs 4,398 billion for 2018-19, the government will suffer a net revenue loss of Rs 6.8 billion on account of a number of tax relief provided to business community, investors, stock market and filers of income tax returns through the Finance Supplementary (Second Amendment) Act, 2019.
Giving a technical briefing on mini-budget here at FBR House on Wednesday, Dr Hamid Ateeq Sarwar, FBR Member Tax Policy Inland Revenue, said that the total revenue loss on account of relief of income tax, sales tax and federal excise duty provided under the Finance Act stood at around Rs 10.8 billion. The government has imposed taxes of Rs 4 billion so net relief measures will have an impact of Rs 6.8 billion. The major relief has been provided for import substitution in terms of reduction in duties and regulatory duties on raw material for industrial sector.
The FBR has taken income tax measures of Rs 500 million. The net revenue impact of all taxes comes to minus Rs 6.8 billion as a result of relief measures provided under the Act.
He said that no major taxation measure has been taken through the Finance Supplementary (Second Amendment) Act, 2019, but relief has been provided to the filers of tax returns, he said.
Through major relief measures, the government abolished withholding tax on cash withdrawal of Rs 50,000 for filers as this step will cause a revenue loss of Rs 2 to 3 billion in the remaining period of the current fiscal year.
The government allowed non- filers to buy cars of up to 1300cc and abolished regulatory duty on import of hundreds of items on raw materials for industrial sector.
The government also announced fixed tax scheme for small shopkeepers working in Islamabad with possible rate of 0.02 percent of their turnover as pilot project which might be replicated in other parts of the country. The advance tax at the time of auction of franchise rights, from participating teams in national and international sports tournament organized by any Sports Board or entity established by the Government is being abolished.
The government introduced uniform tax on import of mobile phone sets whereby the tax rate was lowered on mobile phone having price up to Rs 100,000 while the tax rate has been increased on mobile sets having a price range of over 150,000.
He said that the FBR has collected Rs 45 billion from banking transactions including cash withdrawals from banks of filers and non-filers last fiscal year. The abolition of withholding tax on banking transactions would cause an estimated revenue loss of Rs 2-3 billion in 2018-19.
To incentivize foreign remittance by overseas Pakistanis, advance tax on cash withdrawal on accounts solely fed by foreign remittances has been exempted, he said.
The sales tax exemption on plant and machinery to Greenfield industries would cause a revenue loss of Rs 10.5 billion. The FBR had suffered annual revenue loss on account of Rs 120 billion from exemption and concessions on the import of all kinds of machines and equipment to different categories, FBR Member Tax Policy Inland Revenue said.
On the sales tax side there is no major taxation measure, Dr. Hamid Ateeq said and added that the Federal Excise Duty is already imposed on imported cars and jeeps of engine capacity exceeding 1800cc at 20%. In order to further discourage the import of such luxury cars and jeeps, it is proposed to enhance the rate of Excise Duty from 20% to 25%, for such cars and jeeps up to capacity 3000 cc and to 30% for cars exceeding 3000 cc. Furthermore, it is proposed to levy Excise Duty at 10% on locally manufactured / assembled cars and SUVs etc with engine capacity exceeding 1800cc. The government would generate Rs 2 billion from the said measure.
Furthermore, it is proposed to levy Excise Duty at 10% on locally manufactured / assembled cars and SUVs etc. with engine capacity exceeding 1800cc
There would be neutral impact on revenue as a result of changes in sales tax slabs on mobile phones. The existing feature-based sales tax slabs on mobile phones in the Ninth Schedule to the Sales Tax Act, 1990, are complicated and also do not differentiate between inexpensive and expensive mobile phones. The current slabs are being replaced with import value based slabs.
FBR Member Customs Tax Policy Muhammad Javed Ghani said that no new tax or duty has been imposed through the Finance Supplementary (Second Amendment) Act, 2019. The duties have been reduced on the industrial inputs, raw materials and relief has been provided through the customs duty and tariff measures, resulting in revenue loss of Rs 6.8 billion.
Major relief included customs duty on industrial inputs covered under (53 tariff lines) is being either removed or reduced and Additional Customs Duty on industrial inputs covered under 22 tariff lines is being removed. This measure will be implemented with effect from March 31, 2019. Moreover, regulatory duty is being removed on input materials (approximately 200 tariff lines) imported under SRO 655(I)/2006 dated 05.06.2006 that are used for manufacturing of auto parts by local vendors, Javed Ghani added.
Regulatory duty leviable on export of lead, lead products, scrap of lead and copper scrap is being removed in respect of exports made under DTRE / Manufacturing Bond Schemes. In order to facilitate exporters, especially SMEs, significant changes are being made in the Export-Oriented Schemes with a view to improving competitiveness of the export sector.
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