KARACHI - The reduction in Withholding Tax to 3pc from 4pc for industrial imports excluding commercial is expected to benefit cement, telecom, textiles and auto sectors, The Nation has learnt. Many ambiguities, surrounding the budget of fiscal year 2010, have been cleared as the government seems to have reverted some of the key components of taxation introduced in the budget. The tax amendments announced would benefit industries and the masses to some extent; however, the probability of missing FY10 tax revenue target of Rs1.5tr has increased. Withdrawal of carbon tax on CNG would reduce tax revenue by Rs12b; further, Re0.2/SMS is expected to contribute another Rs5-6b to the tax shortfall whereas import duty revision from 4pc to 3pc is expected to create a shortfall of Rs10b (assuming manufacturing to contribute 40pc to imports) to the revenue target. Considering all the tax amendments on the fiscal front, analyst expect the tax revenue estimates for FY10 to reach Rs1,484 billion, translating into a tax to GDP of 10pc for FY10. However, to encourage the export industry, the government has withdrawn the revision of minimum tax and kept it unchanged as final tax liability. On the expenditures front, the government is scaling up the salary increments from 15pc to 20pc for government employees. Considering the said revisions, experts expect the government to remain firm on the elimination of subsidies, particularly electricity, as the government has reduced the budgeted subsidies for tariff differential from Rs17b to Rs2b (-88pc YoY) for FY10. Governments decision of slashing the Rs6/ltr carbon tax on CNG, and its impact on total tax revenues (0.5 percent of GDP from 0.9pc of GDP) is expected at Rs12b. Since only CNG has been exempted from the carbon tax, economists expect governments already ambitious target of Rs122b (0.8pc of GDP) on other POL products to be lower by another Rs22b due to lower expected consumption through frequent pass-on. The FED on telecom has been increased by 50bps to 19.5pc. The government collected Rs23.5b (at 21pc FED) in 1HFY09, whereas at 19.5pc, this figure is estimated to be Rs22b. Thus, the marginal 50bps increase would not compensate for the withdrawal of the Re0.2/SMS tax as it was estimated to net an amount of Rs5-6b per annum for the government. The replacement of 16pc FED on print media with 5pc customs duty implies non-adjustability which will have a marginal differential in tax liability for the print media. Moreover, the overall impact on the capital market would be positive keeping sectoral impacts in mind. However, the expected meeting of KSE members with Shaukat Tarin and its outcome coupled with the expectation of leverage product by early July-2009 would impact the index positively.