ISLAMABAD: The first day of Senate Standing Committee on Finance meeting witnessed a heated debate on the Finance Supplementary Bill 2021, with a unanimous opinion that the proposed revenue measures will bring a tsunami of inflation in the country.

The bill, which was laid before the house on Jan 4 with a ruling from the Senate chairman to finalise the recommendations at the earliest, was taken up by the committee on Wednesday. The meeting was chaired by committee chairman Senator Talha Mahmood.

At the outset, the committee raised objections to the `unconstitutional’ order of the house to finalise the consideration of the bill within two days. The committee recalled that 14 working days were required to deliberate on the Bill as per the constitution.

The committee decided to commence with a clause-wise discussion on the Bill after a briefing by the Federal Board of Revenue (FBR) on the tax reform policy. The committee also decided to give due deliberation on the matter and forwarded the same request to the Senate chairman to spare enough time to deliberate upon the matter.

Committee irked by ‘unconstitutional’ order to finalise its consideration of bill within two days

PPP Senator Farooq Hamid Naek said the government wanted to increase revenue at the cost of the common people. It was unanimously agreed that imposition of GST at import stage will lead to an increase in prices of medicines. The committee unanimously believed that the money bill will bring a negative impact on the common man with the poor as the prime sufferer.

Chairman FBR Ashfaq Ahmed gave a detailed policy briefing over the proposed measures, which he termed corrective measures to remove distortions from the tax system. He termed these measures historical with the aim to remove distortions instead of imposing new taxes.

Mr Ahmed said the reforms were on the basis of “No tax exemptions –only targeted subsidy”. The tax system is mechanised to increase the revenue with the underlying principle of “Collect and Spend”. The FBR apprised the committee that the International Monetary Fund demanded 17 per cent GST across-the-board and withdrawal of exemptions at Rs700 billion but conceded only at Rs343bn.

He said exemptions on several sectors were defended including reduced rates of GST on agriculture tractors, fertilisers, inputs of fertilisers sector, pesticides, used clothing, footwear and cinematographic equipment. The GST on food items were also defended which included wheat, wheat flour, wheat bran, rice vegetables, fruit, pulses, fresh poultry, fish and meat, milk and fat filled milk, sugar cane and beet sugar as well as educations books and stationary items etc, the FBR chairman briefed.

The committee was apprised of the present regime of the pharmaceutical sector. The FBR informed the committee that out of 800 manufacturers only 453 are registered and Rs35bn input tax passed to patients (packing, utilities etc) while the bulk of Rs530bn was undocumented supply chain. The sector had Rs700bn turnover and faced input and output documentation issues.

The FBR said that sales tax on pharmaceutical sector will be imposed at the import stage, with zero-rating of sales of medicines. The new reforms will also give expeditious payment of refunds within one week and reduction in prices.

The committee gave directives to write a letter to the Drug Regulatory Authority of Pakistan (DRAP) to appear before the committee and brief on the definition of drug and delineate their categories under the Drug Act as well as define whether or not “vitamins” fall under the definition of drugs. The committee also sought details by the DRAP on spurious drugs and unregistered pharmaceutical companies in Pakistan.

The committee unanimously apprehended that the changes in the GST regime in particular with the pharmaceutical company will raise the prices of the medicines.

The committee chairman said sales tax refund to be restored within 72 hours as claimed by the FBR should be diligently monitored and anyone anywhere in the country victimised to the claimed refund can charge its claim in the Senate committee for redressal.

The committee apprehended that the new regime will raise the prices of the medicines than to reduce it. “The common man is hoodwinked by the mechanisms of tax devised,” said Senator Naek while lamenting that the reforms in the money bill are at the cost of the general public.

PML-N Senator Musadik Masood Malik while analysing the tax reforms said that it was based on the consumption of the consumer and not the income which is a dilemma for the middle class society whereas the chairman FBR termed the new reforms as the “Zero Impact Budget”.

The committee was apprised that the targeted subsidy items will benefit the common man by Rs19bn and import by Rs14bn.

The meeting was attended by Senators Saleem Mandviwalla, Sherry Rehman, Mohsin Aziz, Zeeshan Khanzada, Dilawar Khan, Anwar ul Haq Kakar, Saadia Abbasi and Faisal Saleem Rehman.

Published in Dawn, January 6th, 2022