Sales Tax and Federal Excise Duty
Despite strong criticism from the zero-rated export-oriented sectors including textile, leather, carpets, sports and surgical goods, the government has imposed a standard sales tax rate of 17pc on all items.
The SRO1125, which exempted the sectors from sales tax, has been streamlined to tax the aforementioned sectors.
The sales tax rate on local supplies of finished articles of textile, leather and finished fabric has been raised from 6pc for integrated businesses and 9pc for others to 15pc and 17pc, respectively.
The government has also withdrawn the concessionary rates on gas, electricity and fuel for the exporting sectors whereas the refunds to the sector have also been automated.
Moreover, 10pc tax has been introduced on ginned cotton as well. The FBR expects to raise additional Rs75bn from these measures.
The government has also introduced a standard rate of 17pc on steel sector including the tribal areas to raise Rs25bn for the national kitty. The revision in the tax rates on cigarettes will raise additional amount of Rs35bn. The government has done away with the three-tier system and introduced only two tiers for the tobacco sector.
However, the government has allowed zero-rating on supply for the tobacco exports.
Moreover, tax rate on sugar has been enhanced to 17pc from 8pc to raise additional amount of Rs24bn.
The government has also imposed 17pc tax on items sold in retail packing with brand names including frozen, prepared or preserved sausages and similar products of poultry meat or meat offal; meat and similar products of prepared frozen or preserved meat or meat offal of all types including poultry, meat and fish; fat filled milk, in liquid or powered form; cereals and flours, other than those of wheat and meslin. The revenue from these items is estimated at Rs7bn.
Similarly, government has also added new items to the third schedule to allow payment of sales tax 17pc at the retail price basis. This measure will generate around Rs10bn in revenue. The items included in the third schedule are foams and mattresses meant for consumers, paints & varnishes, electric and gas home appliances such as TVs, fridge, deep freezers, electric fans, air conditioners, recorders, players, electric bulbs, electric irons, washing machines, telephone sets, heaters, ovens, stoves geysers, cooking ranges etc.
Other items include lubricating oil, brake oils, transmission fluids, and similarly, vehicular fluids in retail packing, storage batteries, motor cycles and auto rickshaws. The retail price taxations will also apply to imported goods.
The exemption available to cottage industry is streamlined to generate additional revenue of Rs10bn. Similarly, the government restored the normal procedure for collecting federal excise duty on ghee/cooking oil to raise an additional amount of Rs15bn.
The tax on aerated water waters has been enhanced to 14pc from 11.5pc, which will raise additional revenue of Rs5bn. The government has changed the retail system and withdrawn the turnover tax option.
These measures will help raise Rs10bn from the retail regime. Another Rs2bn will be raised from increase in fixed value of gas supplied to CNG dealers. The federal excise duty was enhanced to Rs2 per kg from Rs1.5.
The move will help pocket extra amount of Rs18bn. The scope of FED has also been enlarged on cars which are expected to raise additional Rs6bn.
The FED on packaged non-aerated sugary/flavoured juices, syrups and squashes has also been increased. Moreover, another Rs3bn will be raised from the increase in FED on LNG sectors.
It is proposed to tax gold in jewellery at 1.5pc, diamond at 0.5pc, and making charges at 3pc with input adjustment.
The standard rate of 17pc has also been introduced on the sale of marbles.
Under the relief measures, the government has withdrawn 3pc value addition on petroleum products and mobile phones, reduced rates on brick kilns, reduce sales tax to 7.5pc from 17pc on food supplies by restaurants, bakeries and caterers etc; reduction of rate on milk powder, removal of ban on export of PMC and PVC to Afghanistan.
Customs Duties
The government has enhanced customs duty to 4pc from 2pc on goods subject to 16pc tariff slabs and from 2pc to 7pc on goods subjected to 20pc and higher tariff slabs including specific rate slabs. No increase was proposed on 3pc and 11pc tariff slabs. This measure alone is expected to yield additional revenues to the tune of Rs38bn for the government.
The withdrawal of exemption on import of LNG will yield revenues worth Rs20bn. These two were the only major revenue measures under the customs head.
Under the relief measures, the government has exempted custom duty on 18 materials and other medicinal items; duties have also been exempted on 1,629 raw materials, chemicals and other items; seven raw material for hemodialysers have also been exempted.
Similarly, tax has been exempted on 12 inputs used in production of home appliances and regulatory duty has also been rationalised on 74 home-appliance sectors; and duty rates on another 66 items have been reduced in the budget.
The regulatory duty has also been reduced on mobile phones, smuggle-prone items and other industrial inputs and tyres.
Published in Dawn, June 12th, 2019