ISLAMABAD: The government has extended exemptions in specific sectors while annou­ncing new tax measures in several areas to generate additional revenue in the coming fiscal year to meet the International Monetary Fund’s criteria.

Finance Minister Muham­mad Aurangzeb announced the new measures in the National Assembly on Friday. These include introducing a capital value tax on property in Islamabad and implementing new tax measures on builders and developers.

The government amended the Finance Bill 2024, which was presented to the National Assembly on June 12. In the amended finance bill, the government reduced the Petroleum Development Levy (PDL) on diesel and petrol from Rs80 to Rs70 per litre but increased it from the existing Rs60.

FED on air tickets

The Federal Excise Duty (FED) rates have been raised from Rs5,000 to Rs12,500, representing a 150 per cent increase for economy and economy-plus foreign travel tickets. The tax rates for other classes were raised by 40pc. The new rates will take effect from July 1.

The FED rate differs for club, business, and first-class flight tickets issued to IATA Traffic Conference Areas 1–3. The FED rate will be Rs350,000 for air tickets to IATA Traffic Conference Areas-1 (North, Central, and South America), Rs150,000 for IATA Traffic Conference Areas 2 (Middle East and Africa), and Rs210,000 for Europe. Air tickets in IATA Traffic Conference Areas 3 (Far East, Australia, New Zealand, and Pacific Islands) will be Rs210,000 from July 1.

Exporters/salaried individuals

Despite opposition, exporters will pay the standard corporate tax rate of 29pc and a super tax where applicable. This is a significant change from the previous 1pc tax on export turnover. Individuals (salaried and non-salaried) and associations of persons earning over Rs10m per year will be subject to a 10pc surcharge on their income tax.

The government has extended the reduced tax rates for hybrid vehicles until June 30 2026, as outlined in the auto policy. The FED on cement has been increased to Rs4 per kg from Rs3. However, the sales tax benefits for erstwhile Fata/Pata have been extended for another year.

The scope of exemption on sales or transfer of immovable property is further widened to include a war-wounded person while in service of Pakistan Armed Forces or Federal or Provincial Government or an ex-serviceman and serving personnel of armed forces or ex-employees or serving personnel of federal and provincial government.

The penalty rate for non-compliant telecom operators was cut to Rs50 million and Rs100 million, respectively. A tax fraud investigative wing will be established within the FBR to detect, analyse, investigate, battle, and prevent tax evasion and fraud. The dividend withholding tax rate was reduced to 15pc from 20pc. The 25 rebate for teachers and researchers was restored.

The sales tax exemption is restored on newsprint and books excluding brochures, leaflets, and directories; exercise books; various cardiology/cardiac surgery, neurovascular, electrophysiology, endosurgery, endoscopy, oncology, urology, gynaecology, disposables and other equipment; supplies and imports of plant, machinery, equipment for installation in tribal areas and of industrial inputs by the industries located in the tribal areas; supplies of electricity to AJK, goods excluding electricity and natural gas supplied to hospitals run by charitable hospitals of beds or more.

The government has also placed the import of gold under the entrustment scheme under SRO 760(I)/2013 under the Sixth Schedule of Sales Tax (exemption from sales tax); import of cystagon, cysta drops and trientine capsules (for personal use only); and bovine semen.

Sales tax on milk

Milk supplied by corporate dairy farms is subject to an 18 sales tax, and lubricating oil is subject to an FED at the rate of 5pc ad valorem. The FED on the minimum price for selling cigarettes at retail (excluding sales tax) has been reduced to 55pc from 60pc.

The finance bill levied a capital value tax on farmhouses and residential homes in the federal capital region. Farmhouses within the geographical borders of the Islamabad Capital Territory would be subject to a CVT rate of Rs500,000 for areas ranging from 2,000 square yards to 4,000 square yards. The CVT will be Rs1 million where the space surpasses 4,000 square yards.

The CVT fee for residential houses inside the territorial borders of the ICT is Rs1,000,000 for areas ranging from 1,000 sq. yards to 2,000 sq. yards, and Rs1,500,000 for areas above 2,000 sq. yards.

The government has also introduced a new tax on the construction and sale of residential, commercial, or other buildings and on the development and sale of residential, commercial, or other plots.

Published in Dawn, June 29th, 2024