ISLAMABAD - The government has claimed to have given massive taxation relief of Rs 184.4 billion to the people in the budget for the year 2018-19 that would cost Rs 91.17 billion to the national kitty in terms of less revenue collections.

The government has given taxation relief of Rs 184.4 billion as against the new taxation measures of Rs 93.32 billion, which would result in Rs 91.17 billion revenue shortfall for the Federal Board of Revenue (FBR). The government has set the tax collection target of FBR at Rs 4,435 billion for the next fiscal year as against Rs 3,935 billion in the outgoing year.

The government has increased duties on cement, cigarettes, auto parts and soybean oil. It has proposed to levy 30 percent regulatory duty on export of waste and scrap of copper. It has also suggested levying regulatory duty at the rate of Rs 175 set on CKD/SKD kits of mobile phones. The government also proposed to levy 10 percent RD on CKD/SKD kits of specified home appliances. This move would increase the cost of imported electronic, including fridges, washing machines and others. It has also increased additional customs duty from 1% to 2% federal excise duty on locally produced cigarettes as proposed in respect of TIER-1 to Rs 3,964 from Rs 3,740, on TIER-2 to Rs 1,770 from Rs 1,670 and on TIER-3 to Rs 848 from Rs 800 per 1,000 cigarettes, respectively. Similarly, federal excise duty on cement is being increased from 1.25 per kg to Rs 1.50 per kg.

The government has also tightened the noose around non-taxpayers. Non-filers would not be allowed to purchase property whose declared value exceeds Rs 4 million. Similarly, non-filers would not be permitted to purchase new motor vehicles manufactured in Pakistan or new imported vehicles. The withholding tax rates on sale of goods for non-filers are proposed to be increased from existing 7 percent to 8 percent in the case of a company and from existing 7.75 percent to 9 percent in non-corporate cases

The government has also decided that super tax would continue, which was imposed in 2015 on the rich for the rehabilitation of internally displaced persons. It continued in 2016 and 2017. Super tax is currently being charged at 4% on banking companies and 3% on non-banking companies having income greater than Rs 500 million. It is proposed that super tax should be continued for the financial year 2018-19, but the rate should be reduced by 1% per year for both banking and non-banking companies.

The government has also proposed to reduce corporate tax rates for individuals and AOPs from 30% in tax year 2018-19 to 25% in tax year 2023. The corporate tax rate will be 29% in tax year 2018-19 and will be reduced by 1% each year up to tax year 2023. It has also suggested to reduce the withholding tax on non-cash banking transactions from non-filers to 0.4 percent from 0.6 percent on a permanent basis.

The government has also recommended reduction of tax on import of coal to 4 percent from 5.5 percent for companies and 6 percent for persons in order to decrease cost of production. In order to promote Real Estate Investment Trust, the rate of tax on dividends issued to unit holders by REIT is proposed to be reduced from 12.5% to 7.5%.

Marriage halls, banquet halls, commercial lawns etc. are mandated to collect 5% of the bill in respect of functions under Section 236D of the ordinance. In order to improve and streamline the collection of this tax, marriage halls are now required to collect either 5% of the bill or Rs 20,000 per function in major cities and Rs 10,000 per function in the remaining cities, whichever is higher.

No gain or loss is taken to arise on the disposal of an asset by reason of a gift of the asset under sections 37 and 79 of the ordinance i.e. it is treated as a non-recognition event, therefore, no liability for capital gain tax arises. No such recognition shall now be restricted to gifts given to relatives of an individual as defined in Section 85(5) of the Income Tax Ordinance, 2001.

Due to enhancement of the taxable limit of income to Rs 1.2 million, the number of filers will be substantially reduced. This will also result in loss of revenue. A nominal income tax may be imposed at the rate of Rs 1,000 for income between Rs 400,000 to Rs 800,000 and at the rate of Rs 2,000 for income between Rs 800,000 to Rs 1.2 million.

In order to provide concession to printers/publishers of the holy Quran, exemption from sales tax and customs duty is proposed. This exemption will be available to federal and provincial governments as well as registered publishers of the holy Quran. It is proposed that value addition tax at the rate of 3% on import of RLNG may be removed. To address cash flow issues of gas distribution companies, it is proposed that rate of sales tax may be reduced from 17% to 12% on import of LNG and supply of RLNG.

Urea is chargeable to sales tax at the rate of 5%, DAP at the rate of Rs 100 per 50 kg bag and other fertilizers like NP, NPK, SSP, CAN are also charged reduced fixed rates of sales tax. To promote agricultural growth, reduction in rate of sales tax to 3% across the board on all fertilizers is proposed. It is further proposed that the rate of sales tax on supply of natural gas to fertilizers plant for use as feed stock, presently chargeable at the rate of 10%, may be reduced to 5% to cater for cash flow issues of fertilizer manufacturers in view of reduction in rate of sales tax on fertilizers. Likewise, 5% sales tax on LNG imported by fertilizer manufacturers for use as feed stock is also proposed to be withdrawn.