More services to be taxed in Sindh

1
188

A number of services were brought into the existing tax net as the Sindh government on Monday unveiled a Rs 617.212 billion deficit budget for the financial year 2013-2014.
The new fiscal plan, presented in a desk-thumping Sindh Assembly by Chief Minister Qaim Ali Shah, who also holds the portfolio of finance minister, envisaged a deficit of Rs 21.637 billion. This deficit is against FY13’s revised gap of Rs 16.510 billion that was budgeted at Rs 7.166 billion in the finance bill in June last year.
The provincial government estimated its annual revenues and expenditures at Rs 595.575 billion and Rs 617.212 billion, respectively.
The Pakistan People’s Party (PPP)-dominated Sindh Assembly, which reassembled with a 75-minute delay at 4:15pm under the chairmanship of Speaker Agha Siraj Durrani, also witnessed oath-taking of three newly-notified lawmakers- Dr Seemab, Waqar Shah and Haider Ali Shah Shirazi. Of the three lawmakers, the first two took the solemn oath in Urdu and the third one in Sindhi.
Along with the Sindh Finance Bill 2013, the government also laid revised estimates for the budget of 2012-13.
In a bid to expand its existing “insufficient” and “limited” sales tax base, the Sindh government, in the new budget, proposed removal of existing exemptions, increasing the rate of tax and including in the tax net “more items in the services sector”.
Announcing not to increase the “standard” 16 percent rate of GST, the Sindh government tends to tax services of advertising agents, security agencies (by 10 percent), commodity brokers, marriage halls and lawns located on plots sized above 800 square yards, event management and public bonded warehouses.
The federal government’s one percent increase in GST to 17 percent was termed by the chief minister as an “extra tax,” the impact of which would be inflationary.
“This loss of revenue shall be sustained in order to provide relief to the ordinary consumers of Sindh through taxable services,” Shah said on the 1 percent hike in GST on services his government, unlike the PML-N-led federal government, was not imposing.
The new services to be taxed are beauty parlors (to be taxed at “reduced” rate of 10 percent) having an annual turnover of up to Rs 3.6 million. In addition, race clubs would also be taxed.
The constructors, on recommendation of Sindh chapter of the Constructors Association of Pakistan, are proposed to be taxed by 4 percent sans any input tax adjustments.
The Sindh government also proposed an increase of 0.90 and 0.95 percent in the Special Development and Maintenance of Infrastructure tax which previously was being charged at a rate of 0.80 and 0.85 percent.
“It is proposed to enhance the rate of tax… on various slabs of imports to facilitate additional funds to the government for meeting the cost of maintenance of infrastructure,” the chief minister said.
The areas where taxes were proposed to be withdrawn include Bed Tax of 7.5 percent. “Hotels would continue to pay only the Sindh sales tax on their services,” the chief minister said.
The property tax on the annual rental value of the buildings and lands was also suggested to be increased from 20 to 25 percent in FY14. From the new fiscal year, traders (importers and retailers) of “potable liquor” would have to pay Rs 0.8 million and Rs 0.5 million instead of Rs 0.6 million and Rs 0.35 million on account of licensing, respectively.
The Sindh government also proposed “certain legislative arrangements” to provide specificity and clarity in law.
Some contractual services, specified in the new finance bill, would also be liable to sales tax.
Internet and broadband services would now be liable to pay tax as the new budget proposed to withdraw the existing exemption. Internet services of up to Rs 1,500 monthly would remain exempted to benefit students and households.
Collection of utility bills by NADRA would also be exempted from taxation on the pattern of banks.
These new fiscal measures are proposed to be taken to “supplement the national efforts for achieving the NFC-desired tax-to-GDP ratio of 15 percent by the terminal year 2014-15,” Shah said. Also, these would help his government tax the province’s services sector “equitably,” he added.
“The provincial tax administration needs to be reformed and the tax base needs to be appropriately expanded,” he declared.

SALIENT FEATURES OF THE NEW BUDGET:

The government has allocated what Shah called a historically high Rs 185 billion to be used under the head of Annual Development Program (ADP). Total provincial development expenditure has been envisaged at Rs 229.937 billion, of which Rs 185 billion would be spent as ADP, Rs 29.557 billion as Foreign Project Assistance (FPA) and Flood Emergency Reconstruction Project, Rs 15.379 billion on account of other federal grants.
The current revenue and current capital expenditures have been projected, respectively, at Rs 355.973 billion and Rs 31.302 billion for FY14.
On the receipts side, the government expects to receive Rs 529.195 billion as current revenue receipts consisting mainly of federal transfers. The revenue assignment, straight transfers and grants to offset losses of abolition of Octroi Zilla Tax (OZT) are estimated to be fetching Rs 332.93 billion, Rs 67.12 billion and Rs 8.95 billion for the provincial government, respectively.
The Sindh government projected its tax and non-tax receipts (other than on services) at Rs 49.370 billion and Rs 28.812 billion. The GST on services is envisaged to add Rs 42 billion to the provincial kitty.
Under current receipts, including local repayments and loans, DPC/SWAP, World Bank, European Commission Grant and ADB funding, the government expects to receive over Rs 18.442 billion. Also, the government expects to receive Rs 44.937 billion as in other federal grants during FY14.
Budget documents also show a carryover cash balance of Rs 5 billion on the receipts front. The receipts and disbursements under the head of provincial public accounts have been estimated at Rs 8 billion.
To make the fiscal plan popular, at least among government employees, the government announced for a salary raise of 10 to 15 percent. Lower graded employees, from 1 to 15, would fall in the 15 percent slab while those working in 16 or above grade would get 10 percent increase.
Also, the government set a minimum amount of monthly pension for the retired government servants at Rs 5,000. A 10 percent increment has been announced in the pension.
“The focus of this budget is to ensure optimal utilisation of (available) resources,” the chief minister told legislators.

1 COMMENT

Comments are closed.