Higher taxes on property, vehicles, phones, overseas card payments as agriculture equipment, solar panels become cheaper

Federal govt tables Rs9502 billion budget 2022-23 in National Assembly; tax exemption widens for salaried persons, business individuals; govt employees get 15% raise.
Updated 11 Jun, 2022 12:00am

The federal government has tabled the annual budget for the fiscal year 2022-23 in the National Assembly with a total outlay of Rs9.502 trillion, of which Rs7.4 trillion will be financed by taxes and non-tax revenues.

The government will be spending a whopping Rs3.950 trillion, over 41% of the total budget, on the repayment of debt and the payment of interest on loans.

Rs1523 billion have been allocated for the defense budget and Rs800 billion for the public sector development programs (PSDP).

The PMLN-led government has earmarked Rs699 billion for targeted subsidies and Rs1242 billion for grants including the money for Benazir Income Support Program (BISP).

The allocation for BISP has been increased from Rs250 billion to Rs364 billion.

Federal Finance Minister Miftah Ismail presented the budget in the National Assembly.

The government has proposed changes in customs duty, additional customs duty, and regulatory duty on 400 items related to the manufacturing sector.

The minister said that in the outgoing fiscal year, the fiscal deficit was 8.6% of the GDP and the government plans to lower it to 4.9% of the GDP.

He said public debt increased to Rs44.365 trillion in the outgoing fiscal year which was 72.5% of the GDP, though the cap under the law was 60% of the GDP.

In the next fiscal year, the government has set an Rs7,004 billion revenue target for the FBR, while Rs2,000 billion will come from non-tax revenues. The government expects $32 billion in remittances from overseas workers.

Read our in-depth coverage on Federal Budget 2022-23

Tax changes

The government has proposed changes in customs duty, additional customs duty, and regulatory duty on 400 items related to the manufacturing sector, Finance Minister Miftah Ismail told the house.

The finance minister said that on such items the government has revised the regulatory duty regime and either abolished the regulatory duty or reduced it. However, he added that the government has also imposed regulatory duty on several items to protect local manufacturers.

According to the Finance Bill, the sales tax on imported mobile kits of over $100 worth has been increased. The weight rates on imported compressor scrap, motor scrap, and copper scrap have been increased.

Sales tax on fertilizer and farming input has been increased while further tax on non-active taxpayers has been raised, SAMAA TV’s Shakeel Ahmed reported citing the Finance Bill.

Finance Minister Miftah said that under the new budget, the government is planning to exempt the import and local supply chain of solar panels (also known as solar modules) from sales tax.

The PTI government had imposed 17% GST on the sale of solar panels.

Power consumers, using less than 200 units per month will be offered bank loans on easy installments.

The government is also withdrawing sales tax on tractors, agriculture equipment, and the supply of wheat, maize, canola, sunflower, and rice.

It is withdrawing customs duty on agriculture machinery.

The finance minister announced that the government has exempted at least 30 ‘active pharmaceutical ingredients’ from the customs duty, adding that raw material for the manufacturer of first aid bandages has also been granted exemption from customs duty.

Sales tax exemption has also been granted to charity hospitals on their imports. Donations to charity hospitals have also been exempted.

Non-profit and charity hospitals with 50 beds or above will be exempted from tax on electricity and all local supplies.

The government has also imposed levy on imported mobile phones. The prices of imported mobile phones up to $30 will increase by Rs100, from $30 to $100 by Rs200, from $101 to $200 by Rs600, from $201 to $350 by Rs1,800, $351 to $500 by Rs4,000, $501 to $700 by Rs8,000 and over $701 by Rs16,000.

Sr. No Mobile Phones having C&F Value (US Dollar) Rate of levy per set in PKR
1 Up to 30 100
2 Above 30 and up to 100 200
3 Above 101 and up to 200 600
4 Above 201 and up to 350 1800
5 Above 351 and up to 500 4000
6 Above 501 and up to 700 8000
7 Above 701 and above 16000

The prices of a cigarette will also go up by Rs0.20 to Rs0.40.

The dealers of cars and luxury watches will have to pay Rs50,000 fixed tax

The regulatory duty on fiber cable has been increased from 10% to 20%, while the tax rate on the income of banks has been increased from 39% to 45%.

The tax on sale and purchase of property for non-filers has been doubled form 100% to 200%, and that for filers from 1% to 2%. filer increased from 1percent to 2percent.

According to FBR, new taxes worth Rs440 billion have been proposed, while a tax relief of Rs85 billion has been granted. The proposal to impose new custom duties worth Rs28 billion and income tax worth Rs267 billion have been made part of the finance bill.

The salaried class has been provided a relief of Rs47 billion, predominantly on the back of raising threshold for minimum taxable salary from Rs600,000 to Rs1,200,000 per annum.

Federal Finance Minister Miftah Ismail presents federal budget in the National Assembly on June 10, 2022.
Federal Finance Minister Miftah Ismail presents federal budget in the National Assembly on June 10, 2022.

Salaried and trading classes

Government employees will get a raise of 15% while pensioners are getting a 5% raise. The pensioners were given a 10% raise in April this year.

The increase in salaries of government employees will cost Rs71.59 billion to the exchequer.

Private sector employees will also benefit as the government has widened tax exemption for salaried persons by raising the threshold for minimum taxable salary from Rs600,000 to Rs1,200,000 per annum. This means people being paid less than Rs100,000 in salary will be exempted from tax cuts.

Tax exemption benefit has also been extended to business individuals and association of persons (AOPs) by changing the minimum taxable income threshold from Rs600,000 to Rs400,000.

The tax on the profit from three saving schemes, Behbood Savings Certificates, Pensioners Benefit Account and Shuhdas Family Welfare Account, has been reduced from 10% to 5%.

From retailers a fixed sales tax will be collected in electricity bills

A fixed tax regime has been introduced for retailers, and tax would be collected with electricity bills. The retailers will be paying between Rs3,000 and Rs10,000 per month in fixed sales tax. They will be asked no questions by the Federal Bureau of Revenue (FBR) officials, Miftah Ismal assured.

However, people earning over Rs300 million per annum (Rs25 million per month) will be slapped with a new super tax of the rate of 2%.

Read: Federal budget introduces policies to boost Pakistan’s entertainment industry

Property owners

The federal government has proposed a 1% ‘deemed rental income’ tax on property valued at Rs25 million or above.

People who own a property other than the house they live in will be deemed to have received rental income from that property if it is valued at Rs25 million at ‘fair market value’. They will be taxed 1% of the “fair market value” of the property. However, one home owned by everyone will be exempted from this tax.

“All persons who have more than one immovable property exceeding Rs25 million situated in Pakistan shall be deemed to have received rent equal to 5% of the fair market value of the immovable property and shall pay tax at the rate of 1% of the fair market value of the said property,” the finance minister said.

The government has also proposed a 15% tax on capital gain from immovable property in case of a one-year holding period. With every passing year after the holding period the rate will decrease by 2.5% and will drop to zero after six years, the finance minister announced.

This means that if you buy a property and sell it within one year, you will be paying 15% tax, and if you sell in the second year you will be paying 12.5% tax and so on.

The government has also increased the advance tax rate from 1% to 2% for filers and to5% for non-filers.

Vehicles

The ban on the import of vehicles will continue to be in place.

The advanced tax on vehicles with engine capacity of 1600CC or above has been increased. In the case of a vehicle equipped with an electric engine, a 2% advance tax will also be imposed.

The tax will be leveid at the time of registration.

Similarly, the tax rate for non-filers has been increased from 100% to 200%, Miftah said.

Read: What is there for the youth in the budget?

Banking sector

The government has pushed up the tax rate for banking companies from 39% to 42%, but this also includes the supertax.

Payments made outside Pakistan using credit, debit, or prepaid cards will incur advance tax at the rate of 1% for filers and 2% for non-filers.

Cigarettes

Read:Rs800b PSDP focuses on CPEC, infrastructure development

To tackle smuggling and tax pilferage, Ismail said that the government has decided to impose a “track and trace” system for cigarette companies.

So far, the system has been installed in three companies.

Through the implementation of the system, Ismail hoped to raise another Rs50 billion in tax from cigarette companies, taking the total from Rs150 billion to the targeted Rs200 billion.

Business class air travel

Earlier, SAMAA TV’s Shakeel Ahmed reported that business-class air tickets will now cost more as the government is planning to slap Rs40,000 in tax.

samir sardana Jun 12, 2022 09:28pm
GOP should allow high salaried persons earning,say USD 500000 plus,in Pakistan to INVEST in Solar,as Individuals,but in the form of an ENTERPRISE OR A BUSINESS.Then the Solar PV or Heater/Dryer project etc., can qualify for accelerated depreciation,or 100% depreciation,in the 1st year Since the power generation in the 1st year,will be less than the depreciation,there will be a tax assessed loss - which can be set off against the salary,to reduce the tax on salary,or get TDS refund. There will be at least 10000 people in the Top 5 cities of Pakistan (by popilation),above that threshold (as the people in senior management in all large listed companies,will have a C2C,well in excess of that number) To ensure that the direct tax revenue does not dry up - the depreciation set off,can be limited to 20% of the taxable income,and the rest can be carried forward,for 5 years. The certification process is easy,in terms of installation certificates,photos and power generation records - so at year end,GOP will know how much power was generated,how much RFO and Gas was saved - Peak and Non Peak periods,and thus,the USD saved The salary earner can enter into an MOU with a Solar developer to maintain,secure and manage the solar sites Also,the GOP can allow such salaried people to invest as BOI (Body of Individuals) in larger solar projects,so that the business loss of the BOI can be allocated and apportioned to each individual,and the carried forward for 5 years In theory there should be NO LIMIT to offset the tax losses with salary - as the man is taking a technical risk on the project,and each such person,will do an independent appraisal of the SPV,and that will,by itself make the solar tech more popular and viable. OR Solar developers should develop several SPV projects in 1 SPV,and then the tax assessed loss,can be converted into DIVISIBLE TAX CERTIFICATES, WITH A PAR VALUE OF THE ASSESSED LOSS - BUT WHICH ARE TRADEABLE - AND WHICH CAN BE SOLD TO THE HIGH SALARY EARNERS,AT A DISCOUNT,TO OFFSET THE TAX ON THEIR SALARY INCOMES.THAT WAY,THE CAN IS CARRIED BY THE SOLAR DEVELOPER,WHO HAS THE TECH AND MANAGERIAL EXPERTISE,TO RUN THE SPV PROJECT Solar battery packs on rent,to retail households,in prime cities,facing 4-5 hours of power cuuts,or Mom and Pop stores,which need to power 2-3 LEDs and 1 Fan - are no brainers - as well as,mobile solar chargers in areas, where there is no Grid (to charge phones or play govtt ads and campaigns et