ISLAMABAD - The incumbent PTI government has taken taxation measures worth Rs512 billion in the annual budget for next fiscal year 2019-2020, which will fuel inflation in the country.

The government has set challenging tax collection target for the Federal Board of Revenue (FBR) at Rs5.55 trillion for the next fiscal year as against expected collection of Rs4 trillion in outgoing year. In order to achieve the mammoth tax collection target, the government has introduced tax measures of Rs512 billion. The FBR has taken additional measures worth Rs200 billion income tax, Rs200 billion in general sales tax and remaining Rs112 billion in federal excise duty and customs duty. The massive taxation will increase the inflation.

The government has decided to impose a standard rate of 17 percent sales tax on the five export-oriented sectors - textile leather, carpets, surgical and sports goods to mobilise Rs90 billion, additional revenue in the budget for next fiscal year.

The government has rescinded SRO.1125 thereby abolishing zero rating for the five sectors which is in line with the staff level agreement with the International Monetary Fund (IMF).

Federal Excise Duty (FED) of Rs5,200 on every 10,000 cigarettes will be imposed. This would help increase the tax revenue from Rs114 billion in outgoing fiscal year to Rs147 billion in next fiscal year. Similarly, the government has also imposed 2.5 percent FED on cars upto 1000 CC. Meanwhile, there will be 5 percent FED on cars from 1001CC to 2000CC. It further recommended that cars which are more than 2000CC in capacity see an FED of 7.5 percent imposed.

The government has also proposed to increase FED on cement, cold drinks and LNG. In order to generate revenue, rate of FED on aerated waters is proposed to be increased from 11.5 percent to 14 percent. Cement is chargeable to federal excise duty @ 1.5 per kg. It is now proposed to increase federal excise duty on cement to Rs. 2 per kg.

It has recommended increasing rate of FED to 17 percent on edible oils / ghee /cooking oil. Presently sugar is subject to sales tax at 8 percent. In order to generate much needed revenue, it has proposed that the sales tax rate on sugar may be enhanced to 17 percent. Presently, FED on LNG is payable at Rs17.18 per 100 cubic meters. The government has proposed to increase FED on LNG bringing it to same level as for local gas. It has proposed that gold in jewellery may be taxed at 1.5 percent, diamond at 0.5 percent and making charges at 3 percent, with input adjustment available only in respect of gold. 

The government has also increased the rate of additional customs duty for non-essential items. In other revenue generation measures, any amount in cash or fair market value of any property including immovable property would be treated as gift.

The government has also reversed tax concessions extended by the PML-N government to benefit high-earning salaried and non-salaried individuals. Minimum taxable income for salaried class has been reduced to Rs0.6 million per annum from Rs1.2 million per annum. There would be 11 progressive tax slabs ranging from 5 to 35 percent proposed for salaried class. On taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000, there would be 5 percent income tax of the amount exceeding Rs. 600,000. Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs1,800,000, an income tax worth Rs30,000 plus 10 percent of the amount exceeding Rs1,200,000. Where taxable income exceeds Rs1,800,000 but does not exceed Rs2,500,000, there would be an income tax worth Rs90,000 plus 15 percent of the amount exceeding Rs1,800,000. Where taxable income exceeds Rs2,500,000 but does not exceed Rs3,500,000, the amount of income tax would be Rs195,000 plus 17.5 percent of the amount exceeding Rs2,500,000. Where taxable income exceeds Rs3,500,000 but does not exceed Rs5,000,000, the income tax would be Rs370,000 plus 20 percent of the amount exceeding Rs3,500,000. Where taxable income exceeds Rs5,000,000 but does not exceed Rs. 8,000,000, the income tax would be Rs670,000 plus 22.5 percent of the amount exceeding Rs.5,000,000. Where taxable income exceeds Rs8,000,000 but does not exceed Rs12,000,000, income tax would be Rs1,345,000 plus 25 percent of the amount exceeding Rs8,000,000. Where taxable income exceeds Rs12,000,000 but does not exceed Rs30,000,000, the amount of income tax would be Rs2,345,000 plus 27.5 percent of the amount exceeding Rs12,000,000. Where taxable income exceeds Rs30,000,000 but does not exceed Rs50,000,000, income tax would be Rs7,295,000 plus 30 percent of the amount exceeding Rs30,000,000. Where taxable income exceeds Rs75,000,000, income tax would be Rs21,420,000 plus 35 percent of the amount exceeding Rs75,000,000.

Currently commercial imports are subject to 3 percent value addition tax which has unnecessarily increased the tax burden. Therefore, it is proposed that 3 percent value addition tax on import of mobile phones maybe withdrawn. This measure would also ensure rationalisation of tax on import of mobiles.