Category: Business

During a press conference at the Parliament House on Thursday, Aisha Ghaus Pasha, the Minister of State for Finance and Revenue, announced that the International Monetary Fund (IMF) is not only satisfied with the Pakistani government’s measures to generate an additional Rs170 billion in revenue through the supplementary finance bill, but is also surprised by the speedy implementation of the agreed measures.

The revenue measures, which were agreed upon with the IMF, have already been put in place. Pasha added that the IMF is also engaged with Pakistan’s friendly countries, including Saudi Arabia, the UAE, and China, with respect to the country’s external financing needs and will update the Executive Board accordingly.

The minister further stated that discussions with friendly countries on external financing are ongoing, and progress is being made. Virtual talks with the IMF are expected to be held late Thursday night to discuss the Memorandum of Economic and Financial Policies (MEFP), and the government has submitted further clarification to the draft of the MEFP. Pasha noted that the finalization of the MEFP would not take a long time.

Pasha had earlier briefed the Senate Standing Committee on Finance and shared that the culture of giving subsidies in Pakistan is an old one that needs to end.

Senator Mohsin Aziz suggested that instead of increasing taxes on luxury items, a ban should be imposed on their import to prevent smuggling. Pasha explained that the government had first considered a total ban on luxury item imports, but the WTO, the IMF, and other international agencies were against it.

While agriculture income tax is a provincial matter, Pasha emphasized that the sector needs to contribute to the economy. She also stated that, as part of the austerity measures, a scheme is under consideration to enforce the manufacturing of electric vehicles, and the government is deliberating on the financing mode to bridge the gap. Overall, the government has worked quickly on implementing prior actions and commitments to the IMF program.

The Federal Board of Revenue (FBR) has issued an SRO to increase the standard 17 per cent general sales tax (GST) to 18 per cent, which will collect taxes worth Rs115 billion. The remaining Rs55 billion will be generated through other measures mentioned in the Finance (Supplementary) Bill 2023.

The top tax collection authority stated in the notification that the 18 per cent GST would be applicable to consumer packaged goods, which include various items used in everyday life.

Following the increase in GST, the following items will experience a hike in their prices:

• Biscuits
• Jam
• Jelly
• Noodles
• Edible oil
• Coffee
• Chocolates
• Make-up
• Shampoos
• Creams
• Lotion
• Soap
• Toothpaste
• Hair colour
• Hair removal cream
• Hair gel
• Shaving foam
• Shaving gel
• Shaving cream
• Shaving blades
• Computers
• Laptops
• Electronic gadgets
• Smartphones
• iPods
• TVs
• LEDs
• LCDs
• Juicers
• Blenders
• Other electronic machinery
• Car shampoos
• Car polishes
• Perfumes
• Children’s toys

In addition to the aforementioned actions, the government intends to raise the Goods and Services Tax (GST) on luxury items from 17 per cent to 25 per cent. The Federal Excise Duty (FED) on first and business class air tickets will be increased to either Rs20,000 or 50 per cent, whichever amount is higher.

Marriage halls will be subject to a ten percent withholding adjustable advance income tax, and the FED on soft drinks, sugary drinks, and cement will also be increased.

The Finance (Supplementary) Bill, 2023 proposes to reintroduce advance tax on functions and gatherings, requiring a tax withholding of 10 per cent for filers and 20 per cent for non-filers.

The tax rate will be applied to the total amount of the bill from the individual or entity hosting the function, whether it is in a marriage hall, marquee, hotel, restaurant, commercial lawn, club, community place, or any other location used for such purposes.

If the food, service, or any other facility is provided by another person, the host must also collect advance tax on the payment for such items at a rate of 10 per cent for filers and 20 per cent for non-filers. This tax will be adjustable against income subject to the normal tax regime and refundable if it cannot be adjusted.

The proposed supplementary finance bill has introduced advanced tax on air tickets, marriage halls, hotels, commercial lawns, marquees, and clubs. Additionally, a 10 per cent advance tax will be levied on wedding ceremonies. Duty on business and first-class air travel has also been increased.

The bill also suggests a 10 per cent hike in the tax on the retail price of beverages. Furthermore, the FED on cement will increase from Rs1.5 to Rs2 per kg after a proposed rise of 50 paisas per kg.

The supplementary finance bill has also proposed an increase in the FED on cigarettes.

• The proposed supplementary finance bill suggests a tax of Rs16,500 per 1,000 cigarettes for the tier 1 category, and Rs5,050 per 1,000 cigarettes for the tier 2 category.
• The bill proposes a 10 per cent tax on sugary juices, syrups, squashes, and artificial sweeteners, and an 18 per cent GST on the retail prices of all items.
• Imported mobile phones worth more than $500 will see an increase in GST from 17 per cent to 25 per cent.
• The same 25 per cent rate will be applicable to all luxury goods.
• The bill proposes a levy of 20 per cent or Rs50,000 FED for air tickets.
• No additional tax will be applied to wheat, rice, milk, pulses, vegetables, fruits, fish, eggs, meat, or poultry.
• Real estate or property will not be subject to any tax in the mini budget.
• The document proposes an increase in the monthly stipend for beneficiaries of the Benazir Income Support Program, with the program’s budget increased by 40 per cent.