Where the budget fits

A look at the ‘relief measures’ made available to the people in this fiscal year’s budget.

RELIEF MEASURES

• Capital Gains Tax (CGT) rates to be 12.5 per cent for securities held up to 12 months and 10 per cent for securities held for 12 to 24 months. Securities held for more than 24 months to be exempt from CGT.
• Corporate tax rate reduced to 20 per cent if the investment is in a new industrial undertaking or a construction or housing project to be set up by 30th June 2017 and at least 50 per cent of the total project cost in the form of equity through Foreign Direct Investment.
• For non-residents, if one member of the joint venture is a company, it should be taxed separately at the applicable rate while the individuals should be taxed as an Association of Persons separately.
• Concessions for encouraging tunnel farming by removing customs duty on import of plastic coverings and mulch film, anti-insect net and shade net. Sales tax on high irrigation equipment and equipment for green house farming to be exempted.
• Corporate tax rate to be reduced by one per cent which will be 33 percent for tax year 2015.
• Withholding Tax on marriages and functions to be reduced from 10 to 5 per cent.
• Tax liability of disabled persons having income up to Rs 1 million by 50 per cent.
• Federal Excise Duty to be withdrawn from those provinces which have imposed GST on Telecom Services, the rate to be reduced from 19.5% to 18.5% and Withholding Income Tax on telephone services to be reduced from 15% to 14%.

Income Support Levy Act to be repealed

INCOME TAX

• Airlines to collect 3 per cent Advance Tax on sale of first class and club/executive class air tickets if the passenger is a compliant taxpayer and 6 per cent tax if the passenger is a non-compliant person. Economy class passengers to be exempt.
• An Adjustable Advance Tax on purchase of immovable property at the rate of one per cent for compliant taxpayers and 2 per cent for non-compliant persons.
• Properties with value less than Rs 2 million and schemes introduced by the government for expatriate Pakistanis to be excluded from this provision.
• The rate of adjustable capital gains tax on sale of immovable property to be enhanced from 0.5 to 1 per cent for the non-compliant persons.
• Advance Tax on Electricity Bills over Rs 100,000 per month at rate of 7.5 per cent from domestic electricity consumers.
• Five per cent additional adjustable advance tax to be deducted on payment of dividend and interest. The additional tax on interest not to be deducted in case of people earning income on interest up to Rs 500,000.
• Non-compliant to pay additional tax on cash withdrawals at 0.2 per cent rate, additional tax on booking with manufacturers or registration of vehicles.
• Non-compliant to pay a higher rate of tax at the time of registration and payment of token tax on motorcars and SUVs.
• Distortions and inequities in the mutual fund industry and other corporate entities to be removed.
• An alternative corporate tax at 17 per cent rate to be imposed on accounting income. Companies to be taxed at ACT or corporate tax whichever is higher and the facility of carrying forward ACT up to 10 years and exclusion of exempt income.
• Anomaly of taxation of bonus shares by companies and bonus units of mutual funds and modarbas which was different than that of dividend, to be corrected.
• Tax rate on services to be enhanced as 8 per cent in corporate cases and 10 percent in other cases.
• Existing rates of tax deduction or collection in certain cases such as commercial importers, resident and non-resident contractors, service providers, exporters, petrol pump operators and commission agents to be applicable only in case returns are filed by them otherwise they shall be charged higher rate of tax.
• The Foreign Institutional Investors to be brought under withholding tax regime to broaden tax net.
• Obtaining of National Tax Number a compulsory condition for seeking commercial/industrial electricity and gas connections.

SALES TAX AND FEDERAL EXCISE

• No new tax to be imposed in case of sales tax and federal excise duty.
• Simplified Sales Tax Regime for Retailers Tier-I: The retailers of first tier comprise who:
• operate as part of national and international chain stores;
• operate in air-conditioned shopping plazas;
• have machines for credit or debit cards; or
• have monthly electricity bills in excess of Rs 50,000.
• These retailers will be required to pay sales tax in the normal regime and to keep electronic cash register of approved-specifications in order to record their transactions.
• Retailers having electricity bills of less than Rs 20,000 in a month shall to be charged only 5 percent of the bill as sales tax on retail sales, while those with higher bills shall be charged 7.5 per cent as sales tax on retail sales.
• Import of finished goods of five major export-oriented sectors -textiles, leather, carpets, surgical and sports goods these sectors to be charged to sales tax at standard rate.
• Withholding tax on steel sector to be collected through their electricity bills at one rupee per unit of electricity as the rate of electricity to be revived from Rs 4 to Rs 7 per unit.
• Increase in Taxes on Tobacco: Taxes on tobacco to be increased as specified in the Finance Bill.

CUSTOMS

• Exporters Facilitation: A consolidated Export Facilitation Scheme to be introduced after broad-based consultation with exporters.
• Maximum rate of tariff and tariff slabs of 30 percent to be abolished bringing down the number of slabs to 6 and the highest tariff to 25 percent. Luxury items to be subjected to regulatory duty equivalent to the above facility.
• Zero percent slab in tariff to be substituted by 1 per cent. Petroleum products, fertilizers, and all food items to be kept at zero per cent rate.

RELIEF MEASURES FOR GOVERNMENT EMPLOYEES, PENSIONERS AND LABOUR

• A 10 per cent ad-hoc relief for all federal government employees from 1st July 2014;
• A 20 per cent increase from employees in Grade-1 to 15 drawing fixed medical allowance of Rs 1,000 per month;
• A 5 per cent increase in conveyance allowance to those employees working in Grade-1 to 15;
• Post of superintendent to be upgraded from Grade-16 to Grade-17;
• One pre-mature increment for employees of Grade-1 to 4.
• Minimum wage rate for labour class to be increased from Rs.10,000 to Rs.12,000.
• Minimum pension for government employees Rs 6,000 and a 10 per cent increase in pension to all retired federal government employees.