KARACHI - Sindh Chief Minister Syed Qaim Ali Shah Friday unveiled Rs686.179 billion tax-free deficit budget in provincial assembly for the fiscal year 2014-15.

Total receipts are projected at Rs672,118.5 million whereas total expenditure is estimated to be Rs686,179.4 million, resulting in deficit of Rs14.06 billion.

Speaker Agha Siraj Durrani presided over the budget session. This is the second budget of PPP government led by Qaim Ali Shah, which is facing criticism for worst law and order and poor governance in the province.

Qaim Shah, who also holds the portfolio of finance minister, announced 10 percent increase in salary for all the government servants in Grade 1-15 who would also enjoy fixed medical allowance of Rs1,000 per month, besides getting 5 percent increase in conveyance allowance.

A 10 percent increase will be allowed in pensions to all retired Sindh government employees. The minimum pension has been proposed to increase by Rs1000, to make it Rs6,000 per month.

Estimated revenue receipts from Divisible Pool for the fiscal 2014-15 are 381.4 billion. Receipts under Straight Transfers are estimated at Rs82.6 billion and those under grant to offset losses of abolition of OZT are estimated at Rs10.3 billion. Provincial own receipts are estimated at Rs125.1 billion. This includes Rs107.1 billion of tax and Rs18 billion of non-tax receipt. The target for non-tax receipts has been reduced in view of ongoing ban on disposal of state land.

The Expenditure for the new fiscal has been estimated at Rs436.090 billion, which is 22 percent higher than the budget estimates of Rs355.9 billion for the outgoing financial year. The CM in his speech said the estimate for Capital Expenditure is Rs34.7 billion as compared to outgoing years’ estimate of Rs31.3 billion.

He said in addition to the increase in wage bill of the government, the major reason for enhancement in our current revenue expenditure is significant increase in non-salary budget of education and health, a huge allocation for payment of electricity dues and inclusion of grants and subsidies for public utilities and universities; all of which was aimed at improving service delivery for the citizens.

Shah said that he was immensely pleased to announce that they have proposed to reduce the standard rate of Sindh Sales Tax on Services from 16 percent to 15 percent from July 1, 2014. This measure of cut in tax will provide substantial relief to our taxpayers and citizens and we expect reciprocal cooperation from the taxpayers for better compliance.

However, he said that with a view to rationalising the sales tax structure; equating the tax base in Sindh with that in Punjab and the Khyber Pakhtunkhwa, and removing certain tax anomalies and distortions; he is proposing to levy Sindh sales tax on the services which are already liable to sales tax in other provinces but are not yet taxable in Sindh.

These services are technical, scientific and engineering consultants, tour operators (Haj and Umrah tour packages shall remain exempt), manpower recruiting agents, share transfer agents, property dealers, fashion designers, interior decorators, rent-q-car, automobile dealers and laundries and dry cleaners.

Syed Qaim Ali Shah said three major services, namely the education services mostly in private sector; the services provided or rendered by hospitals, medical and dental practitioners and pathological/ radiological/ diagnostic laboratories; and road transport services, have huge potential for tax revenue-yield but are exempt from the levy of sales tax. Several taxpaying sectors complain of the discriminatory tax treatment on the ground that they pay Sindh sales tax on their services but the aforesaid 3 major sectors are not taxable.

Therefore, he said, it is proposed to levy sales tax at a reduced concessionary rate of 5% on the expensive and costly services provided by educational institutions, doctors, and laboratories charging exorbitant fee of charges, generally born by affluent persons. Similarly, the intercity road transportation of goods in Sindh or from Sindh shall also be levied to Sindh sales tax at a reduced rate of 5 %. However, the levy in these sectors will only be made in line with the ability to pay principles and in areas where such levies do not impact the poorest sector of society.

In other taxes and levies administered by Board of Revenue and Excise and Taxation Department, the CM proposed, revisions of rate of Stamp Duty on Affidavit, Memorandum of Agreement, Bank Guarantee, Bill of Lading, Letter of Credit and Bond. Rates of these items were last revised 10 to 20 years ago.

Withdrawal of Exemption granted to Co-Sharer @ 1%. Now Co-Sharer may pay 2% of Stamp Duty as chargeable on conveyance; currently, 2% Stamp Duty of the value of the immovable property is being charged. It is proposed to include movable property for charging the said stamp duty. Revisions of rates of stamp duty on gift instrument has also been proposed. Relief will be provided to legal heirs as they will have to pay on fourth of stamp duty whereas others will have to pay stamp duty of sale deed.

It is proposed that in Article 21 (lease) new category of open plot is to be included. Moreover, exemption in (term of different slabs of stamp duty) to different categories is proposed to be abolished and everyone will have to pay 1% of stamp duty. Owners of open plot will also pay stamp duty.

Enhancement of storage fee on the storage of rectified spirit in warehouses, enhancement of transfer fee on motorcycle and commercial vehicles; enhancement of life time tax on motorcycles/scooters has also been proposed.

He said in order to improve tax administration, enhance capacity of the government to collect taxes more efficiently, to plug in tax leakages, broaden the tax base and improve the financial management of the province, the Sindh government has prepared a Reforms Plan for resource mobilisation. This plan will be implemented from July 1, 2014 for the next three years.

For this purpose a Tax reform Unit will be established in finance department, which will maintain linkages with all tax collecting agencies, legislatures, academia and major stakeholders like chamber of commerce & industries, and professionals. Further automation will be introduced and through better management and administration provincial tax receipt will be increased from current Rs91.37 billion to Rs200 billion in next three years.