ISLAMABAD
The government on Monday enhanced the regulatory duty on imported luxury, essential items, furnace oil and metal scarp as agreed with the International Monetary Fund (IMF) in a bid to generate additional revenue to reach the revised tax collection target during ongoing fiscal year.
The Economic Coordination Committee (ECC) under the chair of Finance Minister Senator Ishaq Dar has decided to increase the regulatory duty (RD) on cosmetics, imported food items like chocolates, beverages, mechanical and electrical appliances from five to ten percent.
Pakistan had recently assured the IMF for revenue generation measures to offset the revenue collection shortfall. Therefore, following the commitment, the top economic decisions making body of the government imposed new taxes.
Pakistan and IMF agreed to downward revision of annual tax collection target to Rs 2691 billion from the budegted target of Rs 2810 billion. The Federal Board of Revenue (FBR) is facing massive revenue collection shortfall during current fiscal year, as shortfall surged to Rs 134 billion during seven months (July to January). FBR collected Rs 1336 billion during July-January of FY 2015 as against the target of Rs 1470 billion for the said period. Therefore, the government is taking revenue generation measures to increase its revenue.
The PML-N government has taken third move of increasing tax on several commodities in less than one and half month. The government in the first move increased the General Sales Tax (GST) on petroleum products to 27 percent against the standard rate of 17 percent in two phases, which would generate Rs 28 billion for the national kitty.
Similarly, in the second move, the government imposed 15 percent regulatory duty on the import of steel products, billets, bars and wire rods, 5 percent regulatory duty on cold-rolled coils and galvanised platted sheets, and Rs200 per set duty on cell phones. The second step was taken to generate Rs4 billion in the current fiscal year.
Following the practice, the government increased the Regulatory Duty on packaged foodstuff, chocolates, cosmetics and electric appliances. Sources informed that these items could be around 283 including imported fruits, dairy products, marbles, refrigerators, other electric appliances and wooden furniture. Some of the other items that could be subject to the regulatory duty are imported vegetables, perfumes, cosmetics, toothpaste, shaving products, cooking ranges, ceiling fan, pedestal fan, table fan, exhaust fan, freezers, water dispensers, fully automatic machines, food grinders, fruit mixers, fruit or vegetable juice extractors, hair dryers, microwave ovens, coffee or tea makers, toasters, wooden cabinets, beds, electric table and desk, etc.
Meanwhile, the ECC also decided to levy regulatory duty @ 5pc on import of furnace oil. The decision could deprive masses from expected reduction in power tariff, which was supposed to decrease following reduction in furnace oil in international market. International prices of metal scrap are also showing a consistent declining trend. However, there has hardly been any pass-on effect of the decrease on consumers, as prices of goods manufactured from metal scrap have not come down. In view of fall in prices, it has been decided to levy regulatory duty @ 5pc on import of metal scrap.
The ECC approved higher rates of withholding taxes (WHT) for importers and service providers who are non-filers of Income Tax returns, in order to encourage return filing and documentation in economy. The rates proposed to be revised are in respect of non-filers only. The rates of WHT shall remain unchanged for compliant taxpayers who file their Returns regularly and their names appear on Active Taxpayers List. The distinction of filer and non-filer is being extended to these sectors to increase cost of doing business for non-filers and to encourage compliant-taxpayers.
ECC also considered and approved after a detailed presentation by Ms. Saira Afzal Tarar , Minister of State for National Health Services, Regulations and Coordination, the long standing “Drug Pricing Policy”. The draft policy has been discussed with all stakeholders. The Statutory process will be completed under the rules of the Drug Regulatory Authority.
On a proposal moved by Ministry of National Food Security and Research for enlarging the scope of export of wheat, the export of wheat flour (aatta) was also allowed by the Economic Coordination Committee of the Cabinet. It will be mandatory for the exporters to export one metric ton of wheat flour (aatta) to claim subsidy for equal quantity of wheat procured from the Provincial Food Departments of Punjab and Sindh. In an earlier meeting of the ECC, Punjab and Sindh were allowed to export 1.2 M/Tons of wheat. The chair also directed that the rebate claims of the exporters will be entertained without any delay on the submission of the necessary documents by the exporters.
On the proposal moved by Federal Board of Revenue for withdrawal of sales tax on cotton oil seed cake, the ECC decided that the sales tax currently payable @5pc of the value of Cotton Oil-seed cake will be withdrawn with immediate effect subject to PCGA (Pakistan Cotton Ginners’ Association) agreeing to becoming the withholding agents for collection of 2pc sales tax on cotton seed w.e.f 1st July 2014 as proposed by FBR.
ECC considered and approved after detailed discussions and deliberations the proposed “Textiles Policy 2014-19”. Among others, the key features of the policy include: to double value addition from $1 billion per million bales to $2 billion, to double textile exports from $13 billion to $26 billion, to facilitate additional investment of $5 billion in technology and machinery, to improve fiber mixes in favour of non-cotton i.e 14pc to 30pc, to improve product mix especially in the garment sector from 28pc to 45pc, to facilitate creation of 3 million new jobs and to strengthen textile firms with focus of SME sector by improving their level of compliance with international standards in respect of labour and to enable them to adopt modern management practices.