ISLAMABAD: The PTI government’s third budget, announced on Friday, aims to reduce the cost of inputs to several industries. It also plans to leverage online transactions and bring them back under the sales tax (ST) net.

Budget 2021-22 offers unprecedented tariffs (CD), S&T and income tax (IT) relief measures for the industrial sector as part of a proposed plan that explains how the government intends to cope with the Rs 1,129 billion hike from the Federal Income Target Board (RBF).

According to the proposed plan, as part of the revenue relief changes announced in the budget bill, the government aims to give 119 billion rupees to industries and individuals. Of these, Rs42bn were given in CD, 19bn in ST and Federal Excise Duty (FED) while Rs58bn in IT.

The IT revenue measures will generate Rs 116 billion, followed by Rs 215 billion from ST & FED and Rs 53 billion from CD measures. The net impact on income will be Rs264 billion after deduction of relief measures.

Official documents suggest that GDP growth at the rate of 5.2% in FY22 will help generate Rs 236 billion while inflation projected at 8.2% will generate additional income of Rs 385 billion . The RBF aims to collect an additional income of 242 billion rupees through execution.

The cumulative impact of all these measures will be 1,127 billion rupees to reach the target of 5.829 billion rupees for fiscal year 22.

Additional revenue measures to raise 383 billion rupees

DEF has been proposed on potassium chlorate, recovered lead and electronically heated tobacco products. The government has proposed to withdraw the EDF on industrial units located in the former FATA / PATA. FED has been reduced to 16pc from 17pc on telecommunications to make doing business easier and relieving the masses.

On Prime Minister Imran Khan’s intervention, the EDF’s mobile and internet use plan, which had been approved earlier at the cabinet meeting, was canceled by a late-night tweet. The RBF estimates show Rs100bn of this levy.

Locally manufactured small cars up to a displacement of 850 cc are exempt from excise duty, as well as a reduction in the ST rate from 17 to 12.5% ​​and an abolition of the value tax added.

Industrial relief measures

The government has either reduced or fully exempted CD, Additional Customs Duties (ADD) and Regulatory Duties (RD) on imports of 584 tariff lines, including fabrics in the textile sector value chain. The estimated loss of income from this major measure is Rs10bn

It was proposed to rationalize CD, ACD and RD on the import of HRC and stainless steel flat rolled products.

The tariff policy council proposed a reduction in CD and ACD on 328 tariff lines related to raw materials, chemicals and intermediates for the chemical, mechanical and leather industry, etc. as part of its tariff rationalization plan. Under this, 241 tariff lines are completely exempt from CD and ACD while CD and ACD on 87 tariff lines are reduced to 3pc from 16pc, 11pc.

To induce pharmaceuticals, CD and ACD were exempted on 358 active pharmaceutical ingredients (APIs), the raw material of AD syringes and Remdesivir.

Reduced CD from 20pc to 16pc and ACD from 7pc to 4pc on uncoated paper and cardboard for the printing and graphic arts industry; exemption on raw materials for vaccines and food additives to incentivize the dairy sector. CD has reduced tariffs by 50pc on 100 tariff lines relating to adventure tourism. The government reduced the tariff from 3pc to 11pc on inputs for the poultry industry.

Out of 2,436 tariff lines, the ACD has been reduced from 7pc to 6pc. These elements are placed under the 20pc CD panel. This slab includes clothing, shoes, processed foods, household appliances and other products.

Regulatory obligation

It has been proposed to tax Rs15,000 as RD on the import of high end mobiles. However, the prime minister did not approve the measure. The income impact of this measure is calculated at Rs16bn.

R&D rates were further increased on 78 tariff lines on importation of non-essential / luxury items to support local industry. This will increase revenue collection by over 11 billion rupees. The net effect of tariff rationalization for the automotive sector is Rs 15 billion.

Increasing the R & D rate on import of tires from 5 to 10% will generate 5 billion rupees. The government imposed RD 10pc on the import of uncoated paper, cardboard, neutral glass tubes, and colored pencils and pencils.

The government levied a 17% sales tax on crude oil and other items by removing the zero rating. This tax will generate 38 billion rupees for the government. A 17% GST imposed on 42 imported food products, including cereals, milk and cream, frozen meat and sausages, fat-filled milk. This will lead to a collection of income of Rs14bn.

A 17pc sales tax imposed on several products like silver, gold jewelry, fat-filled milk, LNG / RLNG to raise 35 billion rupees for RBF. FBR will collect Rs 11 billion from e-commerce and Rs 7 billion from the collection of sales tax on sugar in the retail sector and an additional Rs 8 billion from integrated point-of-sale retailers.

Income tax

The government has proposed 51 billion rupees in new tax measures in the budget. The exemptions and concessions worth Rs 65 billion withdrawn by ordinance are now part of the budget bill. Twelve withholding taxes were removed on banking transactions, air travel, the stock exchange, CNG, petroleum products, international credit card transactions and mineral extraction.

He proposed to introduce a normal tax by removing the global taxation of property income, capital gains and rental income. The government aims to generate Rs 10 billion from these three measures.

Export proceeds from services, which will be taxed at 1 pc, and an additional 20 billion rupees from streamlining procedures and automating business processes for withholding tax monitoring.

He proposed to levy a withholding tax of 7.5% on the domestic electricity bill above 25,000 rupees per month. However, no tax will be levied in the event of its existence on the list of taxpayers. Minimum tax rates reduced from 1.5 pc to 1.25 pc for any person, 0.75 pc to 0.5 pc refineries, 1.25 pc to 0.25 pc fast moving goods sold by retailers and exempt for SEZ / TEZ.

Posted in Dawn, le 12 June 2021