ISLAMABAD: The Federal Board of Revenue (FBR) raised a record Rs4.858 trillion in the first 10 months of the current fiscal year, exceeding the target of Rs4.619tr by Rs239 billion, provisional data compiled by the tax body showed on Saturday.

Compared with the revenue collection of Rs3.778tr in the same period in 2020-21, a 28.6 per cent growth was posted in the July-April period. This will provide a cushion to the 13-party coalition government for the continuation of subsidies on petroleum prices in the next two months.

Unprecedented in the FBR’s history to consecutively surpass the monthly collection targets in the first eight months of 2021-22. As a result, no change in petroleum products was made for the next 15 days by the new government as well.

In a major relief to the masses, the PTI government for the first time in the country’s history had reduced the sales tax on all POL products to zero. Similarly, sales tax exemptions were provided on fertilisers, pesticides, tractors, vehicles, and oil & ghee.

Exceeds 10MFY22 target despite massive tax relief, refund payments

Unprecedented revenue growth

An official announcement of the FBR said the ongoing unprecedented and constant growth trajectory in revenue collection has been achieved despite massive tax relief given by the government on various essential items to the common man.

Zero sales tax on all POL products cost Rs45bn in April. Likewise, the revenue impact of sales tax exemptions provided to fertilisers, pesticides, tractors, vehicles, and oil & ghee comes to Rs18bn per month.

Similarly, the tax exemptions on pharmaceutical products also cost Rs10bn in April.

Thus, in aggregate, these relief measures have impacted revenue collection by approximately Rs73bn in April. Furthermore, the political uncertainty and import compression also negatively impacted revenue collection during the month.

Major growth in revenue collections is at the import stage — customs duty, sales tax, withholding tax — mainly because of the unprecedented growth in imports in the first 10 months of the current fiscal year.

The new government has so far reversed only one relief measure of the PTI government to increase the electricity rates for the masses, which the previous government has frozen until June 30.

The revenue collection in April fell short of the target by Rs5bn to Rs480bn. However, the collection rose by 24.9pc from last year’s Rs384bn.

The statistics show that the collection not only fell short of the targets in March and April but also posted a relatively low growth over the last year.

The FBR believes the relief measures announced by the PTI government also have impacted revenue collection. Furthermore, political uncertainty and import compression also negatively impacted the collection in April.

Target revised upwards

The PTI government had already revised upwards the revenue target to Rs6.1tr to keep the budget deficit at a committed place. It, while preparing the budget for the current fiscal year, had assured the IMF of raising Rs5.829tr in FY22 against Rs4.721tr collected in FY21.

Rising inflation coupled with the withdrawal of Rs343bn exemptions and several other measures like an increase in the rates of withholding tax on vehicles, mobile phones and entertainment tax will add revenue to the existing projections. However, no revenue measures were taken on the customs side so far.

The gross collections including refunds and rebate payments increased by 28.7pc from Rs3.981tr during July-April FY21 to Rs5.122tr in 10MFY22.

An amount of Rs264bn was refunded during July-April FY22 compared to Rs203bn paid last year, an increase of 30pc.

Likewise, the refunds disbursed in April totalled Rs35bn registering an increase of 75pc from the same month in 2021. This is reflective of FBR’s resolve to fast-track refunds to prevent liquidity shortages in the industry.

With the rising import bill coupled with an increase in imports of smuggling-prone items on legal channels, customs collection stood at Rs792bn in 10MFY22 as against Rs595bn last year, indicating a hefty growth of 33pc. The annual customs collection target is Rs917bn, which according to customs officials, will not only be surpassed but will come close to Rs960bn even though no policy measures have been taken so far.

The income tax collection in 10MFY22 stood at Rs1.744tr as against Rs1.363tr over the same period last year, indicating a growth of 28pc. Very nominal IT refunds were paid during the months under review as it stood at Rs10bn this year against Rs13bn last year. The income tax collection target was projected at Rs1.682tr which was surpassed in 10MFY22.

Measures paying off

Meanwhile, the sales tax collection jumped to Rs2.064tr from Rs1.596tr in the same period last year, showing a growth of 29pc. The growth came as a result of the highest-ever rise in fuel prices, increase in imports and revival of economic activities during the period under review.

The sales tax target was projected at Rs1.922tr which was also surpassed during the period under review.

The Federal Excise Duty collection was up 15pc to Rs256bn in 10MFY22 as against Rs223bn in the corresponding period last year. However, the collection fell short of the target by Rs10bn.

According to an official statement, the FBR has introduced several innovative interventions both at the policy and operational level to maximise revenue potential through digitisation, transparency, and taxpayers’ facilitation. This has not only resulted in ensuring the ease of doing business but also translated into healthy and steady growth in revenue collection.

Published in Dawn, May 1st, 2022