Govt to promulgate ordinances for new taxes

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ISLAMABAD – After failing to achieve political consensus on measures to increase revenue, the government has decided to promulgate ordinances to impose flood surcharge, enhanced special excise duty and to withdraw exemptions on fertilisers, leather, surgical and sports goods, carpets, pesticides and on local sale of textile products.
An official source told Pakistan Today that the alternative plan to the Reformed General Sales Tax (RGST) was finalised in a meeting between the Finance Ministry and the Federal Board of Revenue on Tuesday. It was decided in the meeting, the ordinances would be promulgated once the National Assembly session came to an end and before the next Senate session scheduled for early April, he said.
The decision was made after the realisation that the desired political consensus on new revenue measures was not possible in the foreseeable future and the government must move forward to allay international concerns that it was not serious in tackling the issues facing the economy, the source said.
The new revenue measures would help increase revenue collection to Rs 1.6 trillion in the current fiscal year, he added. The government had tabled the RGST Bill, the Flood Surcharge Bill and the Special Excise Duty Bill in parliament in the last calendar year but had failed to muster the political support required to get it passed, the source said.
The imposition of only RGST was controversial as opposition parliamentary parties had not objected to the flood surcharge and increase in the special excise duty rates, he added. The meeting had decided that the imposition of the taxes would help pacify concerns of the International Monetary Fund, and that the opposition’s statements against it could be managed without too much trouble, the source said.
It was also decided in the meeting that the government would levy 15 percent flood surcharge on advance taxes and withholding taxes, the source said. This was a new proposal as the government had initially tabled the bill with the proposal to levy flood surcharge at a rate of 10 percent of the payable tax, and the new proposal also included a deduction of 15 percent withholding tax on the WHT levied items that also include bank transactions, he said.
The effective new special excise duty rate would be 2.5 percent, he added. The meeting was told that sales tax exemptions on five items could be withdrawn with the promulgation of an ordinance. The items which would be liable to 17 percent GST include fertiliser, leather products, pesticides, and cotton products. The meeting decided that all open-ended zero rating and exemption SROs would be tailed in such a manner that their exports would remain exempt but their domestic sales would be taxed.
Only registered taxpayers could take benefit of refunds while there would be no refunds for the unregistered ones. The source said that the textile sector would be taxed on domestically used imported cotton and cotton yarn, while their exports would remain tax-free as before. In order to net the actual domestic sales, he said, the imported cotton and cotton yarn would be taxed at the rate of 17 percent.
Only the registered sales taxpayers could claim refunds against the exported garments. Currently, big textile conglomerates pay only 0.75 percent sales tax on their domestic sales and under the new plan they would pay 17 percent sales tax, he added.

1 COMMENT

  1. By read above article there was no news on tax imposition of wealth tax and tax on agricultural income there should be some taxes to include big tycoons in the tax net otherwise by above impositions this will hurt masses and high taxes at the end have been paid by poor, in means of inflation .
    and Govt have to allocate a handsome amount on energy generation sector not by taking rental power plants or to import low cost oil from india these all are short term for our economy, so have to primarily invest in some long term energy generations projects but firstly those which could be built in shrt terms, like innovative ways.

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