ISLAMABAD: Major taxation measures taken through the Finance (Supplementary) Bill, 2023 include raise in the standard rate of sales tax from 17 to 18 percent, 25 percent sales tax on the import of luxury items, 10 percent withholding tax at the time of sales of shares of companies, 10 percent withholding tax on functions at marriage halls/hotels, etc, 25 percent sales tax on high-end mobile phones exceeding US$ 500 and increase in Federal Excise Duty (FED) on cement from Rs1.50 per kg to Rs2 per kg.

The government has dropped proposals to raise the FED on imported and locally-manufactured cars and energy drinks.

Under the ‘mini-budget’, the government has imposed 10 percent excise duty on juices/squashes, raised 13 to 20 percent FED on aerated water and increased FED on air tickets of business, first class, and club class. The FED would be 20 percent of the gross amount of ticket or Rs50,000 per ticket, whichever is higher, on air tickets issued on or after the date of commencement of the Bill 2023.

One percent raise in the General Sales Tax (GST) rate from 17 to 18 percent across-the-board will fetch additional tax revenue of Rs65 billion in the remaining four and a half months of the current fiscal year.

New taxation measures of nearly Rs300bn finalised

Sales tax has been increased from 17 to 18 percent on the import of mobile phones where import value exceeding US$ 200 but not exceeding US$ 350 and phone where the import value is exceeding US$ 350 but not exceeding US$ 500.

The FBR has estimated to collect Rs65 billion through increase in the sales tax rate from 17 to 18 percent, Rs60 billion through increased rate of FED on cigarettes, Rs15 billion on sugary drinks, Rs5 billion on cement, Rs5 billion on the fair market value of shares, Rs2 billion on withholding tax on marriage halls/hotels, Rs10-Rs15 billion on imported high-value mobiles and other luxury items, and Rs5 billion on air tickets. The government has imposed an 18 percent sales tax on locally produced coal and 18 per cent on potassium chlorate.

The imported items under consideration for the provision of 25 per cent sales tax may include aerated water and juices, auto completely built units (CBU), sanitary and bathroom ware, carpets excluding Afghanistan, chandeliers and lighting devices or equipment, chocolates, cigarettes, cosmetics and shaving items, tissue papers, crockery, decoration/ornamental articles, dog and cat food, doors and window frames, fish, footwear, fruits and dry fruits, furniture, home appliances CBU, ice cream, jams, jellies and preserved fruits, luxury leather, jackets and apparels, mattress and sleeping bags, frozen or processed meat, mobile phones CBU, musical instruments, pasta etc, arms and ammunitions, shampoos, tomato ketchup and sauces, sunglasses, travelling bags, and suitcases.

The FBR has also obtained powers to increase the sales tax rate on the items specified in the Third Schedule of the Sales Tax Act on which sales tax is charged on the basis of the printed retail price.

Through the proposed Finance (Supplementary) Bill, 2023, sub-sections (6) to (10) in Section 37 of the Income Tax Ordinance, 2001 have been inserted whereby the person acquiring shares of a company, shall deduct advance adjustable tax from the gross amount paid as consideration for the shares @ 10 per cent of the fair market value of the shares [determined as prescribed u/s 101A(4) and not u/s 68] which shall be paid to the Commissioner within 15 days of the payment.

New proviso has been inserted in Section 37A(1) of the Income Tax Ordinance, 2001 to exclude the application of Section 37A on disposal of securities made otherwise than through registered stock exchange and not settled through NCCPL so as to tax the same as per the provision of Section 37 of the Income Tax Ordinance, 2001.

Section 236CB has been inserted to collect advance tax @ 10 per cent on the total amount of the bill from a person arranging or holding a function in a marriage hall, marquee, hotel, restaurant, commercial lawn, club etc.

If the food, service or any other facility is provided by any other person, the prescribed person shall also collect advance tax @ 10 per cent on the payment for such food, service or facility from the person arranging or holding the function, the bill added.

Copyright Business Recorder, 2023