ISLAMABAD: In an effort to revive the International Monetary Fund programme, the government has introduced new taxation measures through Finance Act 2023, affecting builders, developers and sales of DAP fertilisers.

These measures include the implementation of advance income tax on builders and developers, as well as the imposition of a 5pc sales tax on DAP fertilisers. These amendments aim to raise an additional Rs215 billion in taxes.

The lower tax rate on salaried class will be 2.5pc while the maximum rate was increased to 35pc from 32.5pc. Ashfaq Tola, Chairman of the Reforms and Resource Mobilisation Comm­ission, conducted an assessment of the impact of revised tax slabs on salary taxation.

The government, under pressure from the IMF, has reversed its previous decisions of June 9 by implementing revised amendments through the Finance Act 2023.

Reforms include revision of tax rates on higher income slabs

According to details, every person deriving income from the business of constructing and selling residential, commercial, or other buildings, as well as developing and selling residential, commercial, or other plots, will now be obligated to pay adjustable advance tax on a project-specific basis. This tax must be paid in four equal instalments throughout the tax year, based on the new notified tax rates.

The government has linked filing of tax return and appearing on active taxpayer list for availing exemption from tax on deemed income under section 7E. Any person involved in registering, recording, or attesting the transfer of any immovable property is prohibited from doing so unless the seller or transferor has fulfilled their Section 7E liability. The seller or transferor must provide evidence of this fulfilment to the relevant person through the prescribed mode.

The exemption that was initially introduced in the budget speech on June 9, allowing overseas Pak­istani buyers or transferees to be exempt from advance tax, has now been reversed. The tax credit provided in the budget speech for construction of houses was also withdrawn.

All types of fertilisers, including DAP, are now subject to a 5pc federal excise duty. Additionally, the government has reversed its previous decision to reduce the sales tax rate on services in federal capital from 16pc to 5pc, and it has been reinstated back to 15pc.

At the same time, the increase in annual turnover limit of SME was also reversed to the level of pre-budget which also include IT or IT enabled services in the definition of SMEs. The tax on windfall income, profit or gain was restricted only to companies, and it will be applicable retrospectively to three years instead of earlier five years.

An alternative dispute resolution committee will be established for cases where the tax liability amounts to Rs100 million or more.

The threshold for zero rating of preparations for infant milk for retail sale has been raised from Rs500 to Rs600 per 200 grams. Additionally, certain exemptions that were initially introduced in the budget speech have been withdrawn. These include exemptions on contraceptives and related accessories, saplings, combined harvester-thresher, dryer for agricultural products no-till-di­r­ect seeder, planters, trans-planters, and other planters. However, the exemption on wheat bran has been allowed retrospectively since July 1, 2018.

Furthermore, the fixed tax of 1pc and restriction on input tax adjustment have been extended to the supply chain in the case of drugs and raw materials of Active Pharmaceutical Ingredients. Previously, the fixed tax regime only applied to importers and manufacturers.

Published in Dawn, June 27th, 2023