The National Assembly on Friday approved the budget for the coming fiscal year was passed ,it imposed taxes on all potential sources of income, assets, and consumables, forcing citizens to pay an extra Rs1.7 trillion in taxes to fund a government budget that is 30% larger than it needs to be. About Rs200 billion in new taxes were implemented on Friday as part of the Rs1.7 trillion in additional revenue initiatives. This was the first mini-budget before the fiscal year 2024–25 began.
The government of Prime Minister Shehbaz Sharif exempted the income tax on sales of properties by serving and retired military members and bureaucrats, despite making life harder for ordinary citizens with a fresh round of levies. Additionally, the prime minister rejected a plan to tax stock market transactions and instead added a 10% surcharge to the taxes paid by both salaried and non-salaried class members.
The National Assembly raised the effective income tax rates for salaried individuals to 39%, for associations of persons to 44%, and for non-salaried individuals to 50% on the advice of the government, without offering any assistance to either group.The administration implemented new measures shortly before the budget was approved, making it more difficult to go outside the country and to live there. These measures included raising travel charges.
A 10% surcharge was levied by the government on income tax for those earning Rs. 10 million or more annually. As a result, the income tax rates for those who are salaried would effectively rise to 39% and for those who are not, to 50%. After deducting the impact of an odd surcharge, the Association of Persons will pay 40% income tax, and these businesses would pay 44% income tax. The federal excise duty (FED) rate on cement was increased by 100% by the government to Rs4 per kg, which will generate Rs80 billion in revenue on its own in the upcoming fiscal year. The price of cement will rise by at least Rs. 100 per bag as a result.
In order to raise an additional Rs. 15 billion, the government additionally levied a 5% FED on lubricating oil. In order to raise an additional Rs55 billion in revenue for the upcoming fiscal year, the government has also significantly raised the FED rate on tickets for overseas travel. The tax rate has been raised by 150% to Rs 12,500 for the economy class. The new tax per ticket for the business class is Rs 350,000 for the Americas, Rs 105,000 for the Middle East and Europe, and Rs 210,000 for Australia, New Zealand, and the Pacific. The tax rate has been raised by 40%.
The government levied a 3% FED on property transfers or allocations made by filers and a 5% FED on non-filers. In the neighborhood of the Islamabad Capital Territory, the government levied taxes of Rs. 500,000 on farm houses ranging from 2,000 to 4,000 square yards and Rs. 1 million on those larger than 4,000 square yards.
In the same way, a tax of Rs. 1 million has been placed on residential properties between 1,000 and 2,000 square yards, and an additional Rs. 1.5 million on homes larger than 2,000 square yards. The FBR will receive Rs4 billion from the new tax, which was implemented on Friday. Additionally, a 4% stamp tax on the amount of real estate being exchanged in the Capital Territory of Islamabad has been allowed.|
Exemptions from taxes
The National Assembly decided that “a war-wounded person while in service of Pakistan Armed Forces or Federal or Provincial Government or an ex-serviceman and serving personnel of armed forces or ex-employees or serving personnel of Federal and Provincial Government” would not be subject to a withholding tax on the sale or transfer of real estate.
Additionally, the National Assembly authorized the levy of 15% capital gains tax rather than 20% in the event that a stock fund’s dividend payments fell short of capital gains. The administration decided against imposing a 75% tax on the phone calls made by those who did not file.
The former FATA would still be exempt from taxes, but in order to prevent abuse of the program, industrialists would need to provide pay orders rather than postdated checks. For these locations, a Rs 52 billion tax exemption was authorized by the National Assembly.
Azad Jammu and Kashmir’s electricity supply is not subject to the 18% sales tax. Similarly, there is no 18% GST applied to the import of gold, gold imported under the entrustment scheme, cystagon, cysta drops, trientine capsules, and bovine semen.
Tightening noose
The government has expanded the scope of the tax law to include non-resident nationals with a “significant economic presence in Pakistan.” The act of conducting transactions involving goods, services, or property carried out by a non-resident with any person in Pakistan, including the provision of data or software downloads in Pakistan, is defined as having a significant economic presence in Pakistan if the total amount of payments resulting from said transaction or transactions during the tax year exceeds a prescribed amount.
Under Pakistani law, there are also instances of systematic and ongoing soliciting of business activities or interacting digitally with a prescribed number of users in Pakistan, regardless of whether an agreement is signed for such transactions or activities; the non-resident having a place of residence or business in Pakistan; or the non-resident providing services in Pakistan.
Additionally, the government has narrowed the pathways for income tax evasion by amending Section 111, which deals with income that is not explained. A new provision was added, saying that in the year of the discovery of foreign assets, expenses, or income that was hidden,
In addition, the government has levied income taxes ranging from 10% to 15% on the gross proceeds received by builders and developers from the building, development, and sale of residential, commercial, and other types of structures. The FBR would get an additional Rs20 billion as a result in the upcoming fiscal year.
Penalties imposed by the government on telecommunications carriers for not blocking non-filers’ SIMs have been justified. Half of the initial plan has been accepted by the National Assembly, which would result in penalties of Rs50 million for the first default and Rs100 million for each successive default.
18% GST on packaged milk and baby milk was passed by the National Assembly. Additionally, the mobile phones will be billed at the 18% plus 25% sales tax rate. Books and newspapers, however, will continue to be exempt. Charitable hospitals are exempt from sales tax, as recognized by the National Assembly.
The stamp tax of Rs. 1,000 on any document pertaining to a future flow transaction for funds raised by any bank or financial institution was approved by the National Assembly. Any document involving a conveyance, whether in local or foreign currency, will be subject to a duty.
The National Assembly approved a petroleum duty of Rs70 per litre on gasoline, high-octane blending component, and high-speed diesel. This is Rs10 per liter more than the current rates, although it is Rs10 less than the budget proposal. In order to maintain the petroleum levy rate at Rs70 per litre rather than Rs80, the government has reduced the PSDP by Rs250 billion.
The government has let the Abandoned Properties Organization to keep Rs14 billion in public cash, in defiance of the Senate’s advice. The National Assembly authorized an 18% sales tax on imported fruits and vegetables from Afghanistan, as well as on tractors, pencils, drawing supplies, and diagnostic kits.However, the idea to impose a sales tax on books, periodicals, cardiac surgery gear, and most importantly former FATA territories was withdrawn by the government. Additionally, supply of gas and electricity to the charity institutions would remain exempt from sales tax.
Nonetheless, the milk sold by corporate dairy farms now has an 18% GST. Additionally, it has resulted in sales of iron and steel scrap from a producer who also exports reclaimed copper.The eighth schedule has also undergone a few significant revisions. 10% of the sales tax on LPG cylinders and 15% of the revenue from branded stores that are connected to the FBR are still held by the government.
