ISLAMABAD - The incumbent government came up with heavy taxation measures of worth Rs231 billion in Budget 2014-2015 as it increased Federal Excise Duty on cigarettes, cement, foreign air-tickets, chartered flights, professionals and imposed advance tax on immovable property.

"The government has taken fresh taxation measures of worth Rs231 billion in the budget, as it eliminates tax exemption of Rs103 billion and imposes new taxes of Rs128 billion," said Shahid H Asad official spokesperson of the Federal Board of Revenue while talking to The Nation. The government introduced new income tax measures of Rs108 billion, Sales Tax Rs116 billion and Custom Duty Rs4 billion.

The heavy taxation measures would lead to enhance the inflation rate in the country. The government proposed to increase Federal Excise Duty on cigarettes, cement, foreign air-tickets and chartered flights in the Finance Bill 2015. Meanwhile, the government proposed to enhance 3 per cent General Sales Tax (from 14 per cent to 17 per cent) on sunflower and canola seed. It also proposed to collect advance tax at the rate of 7.5 per cent in the electricity bill above Rs100,000.

Similarly, the government imposed one per cent adjustable advance tax on purchase of immovable property for complaint taxpayers and 2 per cent for non-complaint persons. It also imposed three per cent advance tax on the sale of first class and executive class air tickets if the passenger is a complaint taxpayer and five per cent for the non-complaint taxpayer.

Similarly, the government enhanced tax on professionals like doctors, lawyers, and others, usually enjoy high profit margins due to low costs. The government would enhance tax on their services to 8 and 10 per cent for corporate and non-corporate taxpayers respectively from the existing 6 and 7 per cent in case of professionals. The government imposed 17 per cent General Sales Tax on CNG sector.

It also proposed that an advance adjustable income tax, in addition to the tax collectable, be collected from the persons who do not file income tax returns on certain transaction at five per cent, for dividend income, 5 per cent for interest income above Rs500,000, 0.2 per cent for cash withdrawal from banks and 0.5 per cent in case of advance capital gain tax collected from seller of immovable property.

Similarly, the government also eliminated tax exemptions on hundreds of items and proposed to impose one percent duty on the import of live animals/meet like cow, bull, goats and sheep. Similarly, it proposed duty on feed of cats and dogs. Regulatory Duty has been imposed on luxury items like notebooks, laptops and computer appliances. The government also imposed duty on marble granite, precious stones, imported furniture, fans and water dispensers.   

Meanwhile, the government decided to withdraw 10 per cent FED on motor vehicles exceeding 1800cc. FED at the rate of 10 per cent was imposed on motor cars, sports utility vehicles and other motor cars exceeding 1800 cc through Finance Act 2013. Similarly, the government has also decided to withdraw sales tax on local supply of tractors in order to promote farm mechanisation. It also reduced the FED on telecommunication services in view of the scope of telecommunication services with the advent of 3G/4G technologies. The government also exempted the import of plant, machinery and equipment from Gilgit Baltistan, Balochistan, Malakand and Fata to promote industrialisation.

Meanwhile, the government proposed to make the obtaining of national tax number (NTN) a compulsory condition for getting commercial/industrial electricity and gas connections.

The maximum general tariff rates are reduced from 30 to 25 per cent and exemption of duty and taxes on Hybrid Electric Vehicles (HEVs) rationalised: HEVs upto 1800 cc granted 50 per cent exemption of duty and taxes and above 1800 cc granted 25 per cent exemption of duty and taxes. Customs duty on networking equipments increased from 5 per cent to 10 per cent. Fixed amounts of duty and taxes on used vehicles revised upward by 10 per cent approximately. Custom duty on satellite mobile phones reduced from 25 per cent to 10 per cent.

Registration of retailers on two tier system basis whereby (i) retailers part of national and international chains, located in air-conditioned malls having debit and credit machines; (ii) chargeability of the sales tax at 5 per cent in case of monthly electricity bill up to Rs20,000 and at 7.5% of the monthly electricity bill exceeding Rs20,000 enforced through amendment in the Sales Tax Special Procedure Rules, 2007.

The government also proposed to amend the SRO to provide for charging of sales tax at the standard rate of 17 per cent on the import of finished articles of leather and textile. The rate of capital gain tax was to increase from 10 per cent to 17.5 per cent with effect from July 1, 2014. In order to avoid a sharp increase in rate, which might negatively affect markets, the rates have been rationalised, and the CGT rates are proposed to be 12.5 per cent for securities held up to 12 months and 10 per cent for securities held for a period, which is between 12 to 24 months.

Income of Foreign News Agencies is not exempted under the Ordinance. However, payments to these agencies are exempted from withholding Tax. As agencies are not present in Pakistan, their agents do not file returns and income escapes assessment. It is proposed that, exemption from deduction of withholding tax be withdrawn.

The government also enhanced tax and duties on mobiles and other luxuries items. The government would impose Rs150 sales tax on low price mobile phone, Rs250 on normal price and Rs500 on smart phones. The government would additionally impose Rs 250 tax on registration of every kind of cell phone. All mobile operators are directed to maintain IMEI numbers of mobile phones, which would be checked by Inland Revenue of FBR.

Advance tax would be imposed on local manufactured cars and the government has imposed advance tax on vehicles transfers. Rice importers would pay 2 per cent advance tax and 7.5 per cent tax would be imposed on the commission of advertising agents.

The government also imposed Rs10,000 advance tax on the vehicles upto 850cc. Meanwhile, the tax filer would pay Rs20,000 as advance tax on vehicles from 850-1000cc while non-taxpayer Rs25,000. The tax filer would pay Rs30,000 advance tax on vehicles from 1000-1300cc while non-taxpayer Rs35,000.