Unfriendly taxation proposals likely to invite agitation

Leaving the people stunned, unexpected and unfriendly taxation measures worth Rs 167 billion in the budget 2013-14 were tabled by the Pakistan Muslim League-Nawaz on Wednesday, which included a GST raise of one percent.

The one percent raise in the GST would directly contribute to the general price hike and inflation across the country.

Another worrying proposal by the government – additional five percent sales tax – other than the standard rate of 16 percent – on unregistered power or gas industrial and commercial consumers with monthly bills in access of Rs 15,000 had been floated.

The PML-N government also proposed a raise in the Federal Excise Duty (FED) on soft drinks from 6 percent to 9 percent.

A 10 percent duty had been proposed on imported and local car manufacturers (above 1,800cc). A tax of Re 1 per kilogramme on locally produced ghee and cooking oil will force people to appear on the roads sooner than later.

On imported seeds, the FED had been proposed up to Rs 4 per kg. Weddings would also be a problem for the general public, as the government had decided to bring the adjustable withholding taxes on hotels/clubs/marriages and hall/restaurants from person arranging the function.

It is natural that the hotel, club or the marriage hall management would maintain the tax payments from their consumers or customers that would directly affect the general public.

Withholding tax worth 0.3 percent on cash withdrawal from banks has also been proposed.

Rather making education tax free or adopting measures to make education across the country cheaper, the PML-N government has proposed an adjustable advance tax of five percent of fee on all educational institutions where annual fee is above Rs 200,000, to be collected by educational institutions at the time of receipt of fee.

The government has enhanced the rate of tax on vehicles as well.

The rate of tax on up to 850cc motor car/jeep increased to Rs 10,000 from Rs 7,500.

Tax on 851cc to 1,000cc enhanced to Rs 20,000 from Rs 12,500. Tax on 1,001cc to 1,300cc surged to Rs 30,000 from Rs 17,500. Tax on car/jeep 1,301cc to 1,600cc soared to Rs 50,000 from 30,000. Tax on car/jeep 1,601cc to 1,800cc has imposed Rs 75,000.

The government proposed Rs 100,000 tax on cars/jeeps of 1,801cc to 2,000cc and Rs 150,000 on cars above 2,000cc.

Duty on betel nuts has been proposed raised from 15 to 20 percent and betel leaves would now cost Rs 300 per kg.

The government also proposed to impose 2 percent ‘further tax’ on supplies to unregistered persons.

The fiscal relief package granted to Khyber Pakhtunkhwa, Federally Administered Tribal Areas would be abolished through the new Finance Bill.

The government has also proposed to charge FED at 16 percent on financial services like banking services. The government has also proposed to withdraw hydraulic cement and services provided or rendered by asset management companies in being withdrawn.

In relief measures, the rates of tax slabs of salaried individuals are proposed to increase to twelve slabs from existing six. There would be no tax on income that does not exceed Rs 400,000 per year. Meanwhile, in the upper slab (12th slab), where the taxable income exceed Rs 7,000,000, the rate of tax would be Rs 1,412,500+ 30% of the amount exceeding Rs 7,000,000.

To promote industrialization and investment in the country, the period of income tax holidays in increase to 10 years from five years.

To encourage hybrid vehicles for conservation of fuel, withholding tax on import on hybrid cars with engine capacity up to 1,200cc has been exempted.

Similarly, withholding tax up to 1,800cc has been reduced by 50 percent and 25 percent for vehicles up to 2,500cc.

To provide relief to corporate sector, the rate of tax for non-banking companies is being reduced from 35 to 34 percent.