• BY: MUHAMMAD UMAIR ZEB (FINANCE AND TAX ANALYST)
  • Govt unveils Rs9.5 trillion federal budget for 2022-23
  • Salaries of govt officers increased by 15%; pensions 5%; Rs740b new taxes proposed

With one eye on the International Monetary Fund and the other on voters, Finance Minister Miftah Ismail on Friday proposed a Rs9.5 trillion inflationary budget amid a daunting challenge to meet ambitious targets.

Key Highlights of the direct and indirect taxes as well as tax breaks to different sectors can be view below.

INCOME TAX

REVENUE MEASURE

  1. Increase in tax rate for banks for tax year 2023onwards from effective 39% to 45%.
  2. Increase in tax rate of banking companies on adverse ADR ratio.
  3. Tax on higher earning persons for poverty alleviation for tax year 2022 and onwards.
  4. Tax on deemed income from utilized property above Rs. 25 Million including luxury farmhouses and exclusive of one self-occupied house.
  5. Increase in rate 1% to 2% on sale and purchase of property for filers.
  6. Increase in rate from 100% to 250% in case of purchase of property by persons who are not active tax payers.
  7. Increase in rate of 200 from 100% in case of purchase of motor vehicles by a person who is not active taxpayers.
  8. Increase in advance tax rate on private vehicles of 1600cc and above.
  9. Level playing field for all classes of assets. Capital Gain on disposal of securities and real estate synchronized along with incentives for vertical growth of cities.
  10. Increase in yearly advance tax rate on tax on passenger vehicles.
  11. Omission of deductible allowance for profit on debt and tax credit for investments in shares, health insurance and pension funds.
  12. Restriction on carry forward of minimum tax in subsequent years.
  13. Omission of exemption on flying allowances and submarine allowance.
  14. Omission of reduced rate of taxation for investment in Government securities.
  15. Withdrawal of Income Tax (Amendment) Ordinance, 2022.

RELIEF MEASURES:

  1. Fixed Tax regime for retailers and specified service providers.
  2. Restriction on frequency of audits to once in four years.
  3. Adjustment of Tax collected on all materials at import stage for industrial undertaking for own use.
  4. Relief on taxation for salaried and business individuals by increase threshold for taxation.
  5. Admissibility of 100% depreciation in first year.
  6. Reduction in tax rate from 10% to 5% on Behbood Certificates.
  7. Withdrawal of withholding tax on educational expenses payments.
  8. Exemption from tax on income of certain non-profit entities.
  9. Reduced rate of 3% on provision of services by REIT management company and NCCIDL.
  10. Withdrawal of withholding tax on rent of machinery.
  11. Exemption from advance taxes to exempt entities.

SALES TAX

REVENUE MEASURES

  1. The scope of further tax has been enhanced to include non-active taxpayers as well.
  2. Regime of other then Tiesr-1 retailer has been streamlined.
  3. Vat has been imposed on compressor scrap, motor scrap and copper cutting scrap even when imported by manufacturers.

RELIEF MEASURES

  1. The condition of CNIC/NTN in case of supply to unregistered person have been removed.
  2. Sales Tax exemption has been granted on import and supply of all types of seeds.
  3. Sales Tax on tractor is withdrawn.
  4. Exemption has been granted on imports by UN diplomats/diplomatic missions and privileged persons.
  5. Import and supply of solar panels (PV module) has been exempted from sales tax.
  6. Good imported by or donated to non-profit charitable hospitals has been exempted. Furthermore, good supplied to charitable hospitals of fifty beds or more have also been exempted from sales tax.
  7. Temporary Imports have been exempted from the levy of the sales tax.
  8. Made-up jewelry has been made chargeable to 3% fix tax on local supply and 4% fix tax on imports.
  9. Plant and machinery imported by power generation projects that entered into implementation agreement with GOP has been exempted from sales tax.
  10. Rs. 90 per KG is reduced to Rs. 60 per KG on potassium chlorate.
  11. Import by EP Z has been exempted from sales tax.

FEDERAL EXCISE DUTY

REVENUE MEASURES

  1. Rate of FED is enhanced on locally manufacture cigarettes.
  2. Rate of FED is enhanced on club, business and first-class travel by air is enhanced from Rs. 10,000 to Rs. 50,0000.
  3. Rate of FED is enhanced on telecommunication services is enhanced from 16% to 19.5%.

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