ISLAMABAD: The Pakistan Muslim League-Nawaz (PML-N)-led coalition government presented the ‘election year’ budget for the fiscal year 2023-24 on Friday, amid serious economic challenges and protracted delay in the 9th review of the International Monetary Fund (IMF) programme.

Finance Minister Ishaq Dar presented the second budget of the coalition government with an outlay of Rs14.46 trillion and a budget deficit of Rs6.923 trillion or 6.5 percent of the GDP consequent to projected Rs13.320 trillion current expenditure against Rs9.2 trillion FBR revenue for the next fiscal year.

The provincial surplus has been projected at Rs650 billion and the overall primary balance of Rs380 billion or 0.4 percent of the GDP.

Dar claimed that a tax-free budget is being presented with relief to the agriculture sector, IT and IT-enabled services, SMEs, industrial export, and overseas Pakistanis to encourage business in the country. He said that 3.5 percent GDP growth target has been set and despite elections that are going to be held, the government devised a responsible budget instead of an election budget.

Key highlights of budget 2023-24

The FBR tax collection has been projected at Rs9.2 trillion with a provincial share of Rs5,276 billion and the federal government share of Rs6,887 billion including non-tax revenue of Rs2,963 billion.

The current expenditure has been estimated at Rs13.320 trillion with an interest payment of Rs7,303 billion, defense Rs1,804 billion, emergency and others Rs200 billion, grants Rs1,464 billion, subsidies Rs1,074 billion, pensions Rs761 billion, running of civil government Rs714 billion and net lending of Rs190 billion.

The Public Sector Development Programme (PSDP) of Rs950 billion included Rs490 billion for infrastructure, Rs86.4 billion for energy, Rs263.6 billion for transport and communication, Rs99.8 billion for water, Rs41.4 billion for physical planning and housing, Rs241 billion for social sector, Rs22.7 billion for health, Rs81.9 billion for the Higher Education Commission (HEC) and Rs90 billion for the Sustainable Development Goals (SDGs).

An amount of Rs200 billion would be spent through public-private partnership projects. He said K-4 greater water supply scheme for Karachi would get Rs17 billion.

The provincial PSDP has been projected at Rs1,559 billion.

The finance minister said there is a proposal to increase half a percent in tax of commercial importers, 10 percent tax is being imposed on bonus shares of listed and non-listed companies and 0.6 percent withholding tax on non-filers’ cash withdrawal transactions from banks and one-off 0.2 million withholding tax on permits on foreign domestic workers, and 10 percent tax on foreign currency outflows for non-filers and increase from one percent to five percent for filers.

How experts view the upcoming budget announcement

He said tax exemption of Fata and Pata is being extended for one year and Tier-I definition for the covered area is being abolished.

He said the government has announced the withdrawal of capping of fixed duties and taxes on the import of old and used vehicles above 1300cc, and imposed 15 to 30 per cent regulatory duty (RD) on glass to protect the local industry and to encourage digital payment, 15 percent tax is being reduced to five.

Dar has announced a 30 percent ad-hoc relief allowance in the salary of government employees of grade-17 and above and 35 percent for grade 1-16.

Duty station daily allowance is being increased by 50 percent, additional charge/current charge allowance is being increased from Rs12,000 to Rs18,000, orderly allowance is being increased to Rs25,000 and special conveyance allowance for disabled is being increased to Rs4,000, and constant allowance/attendant (military) is being increased to Rs14,000 from Rs7,000 etc.

The proposed increase is 17.5 percent in pensions, and the EOBI pension to Rs10,000 from Rs8,500 and while the minimum wage has been increased to Rs32,000 in the Islamabad Capital Territory.

A loan write-off scheme for widows is being introduced for up to Rs1 million loan and the limit for the National Savings Scheme (NSS) Shuhada accounts is being increased to Rs7.5 million.

The government unveiled incentives for agriculture – an increase in the limit of agricultural loans to Rs2,250 billion, allocation of Rs30 billion to shift 50,000 agricultural tubewells to solar energy, exemption of tax and duties on import of seeds and abolishment of customs duty on the import of saplings, for combine harvesters all taxes and duties are being removed, rice seeder, etc, exempted from taxes and duties and for agro-industry a scheme is being launched for concessional loans with Rs5 billion.

Agro-based industrial units to be set up in rural areas having annual turnover of Rs800 million and will be exempted from all taxes for five years. Rupees 10 billion for mark-up subsidy for PM youth, business and Rs10 billion for small farmers’ loans at low mark-up rate.

The government announced a concessional rate of 0.25 per cent to increase IT exports till June 2026, exempted freelancers from sales tax registration and returns on exports up to $24,000 per year, issuance of a simple single-page income tax return, IT and IT-enabled services to import hardware and software worth up to one percent of their exports without tax, contingent to a ceiling of $50,000 per year, issuance of automated exemption certificates for IT-services and IT exporters, announced to grant IT sector status of SME and announced to establish venture capital fund with Rs5 billion to provide loans to newcomers in the field. The existing rate of sales tax on the IT services has been announced to reduce from 15 percent to five percent in the ICT area and banks that would give loans for the promotion of the IT sector, will get 20 percent concessional tax.

The government has announced a concessional tax facility of 20 percent to the banks providing loans to construction, agriculture, and SMEs and this facility would be available till 2025, turnover threshold for the SMEs is increased from Rs25 crores to Rs80 crores and Rs10 billion allocated for the Premier Youth Loan Programme, etc.

The government has also announced measures to promote exports including the establishment of an export council, exemption of sale tax for promotion of exports of minerals and metals on any local purchase, minimum tax on all listed companies reduced from 1.25 percent to one percent, regulatory duty of five percent on locally-produced synthetic filament yarn is being abolished, while the customs duty on pet scrap is being reduced from 20 percent to 11 percent and manufacturing of milling machinery, rice mill machinery and machine tools are also being exempted from customs duty.

The existing final two percent tax on the purchase of immovable property by overseas Pakistanis through remittances is being abolished final tax of two percent, a new diamond card is being launched for those who send remittances of more than $50,000 annually, and for this category non-prohibited bored license, preferential access to Pakistani embassies and fast track immigration at airports etc.

Dar also announced 10 per cent reduction in tax liability or Rs5 million whichever is lower for a builder and 10pc reduction or Rs1 million whichever is lower for an individual for own construction of house.

The BISP Rs450 billion is being allocated for low-income group. Pakistan Baitul Mall would be allocated Rs4 billion and 10 percent RD on used cloth is being abolished.

He said coal power plants are being encouraged and batteries of solar panels and inverters raw material are being exempted from custom duty.

Copyright Business Recorder, 2023