Budget 2023-24: What additional taxes have been imposed?

ISLAMABAD: The government has slapped additional taxes of Rs223 billion, including withholding tax of 0.6% on cash withdrawal from banks, expanding super tax across the board, and has proposed securing legal powers to bring up to 50% windfall gains profit into the tax net, The News reported.

In total, the Federal Board of Revenue (FBR) will fetch additional revenues of Rs903 billion through the continuation of taxation measures taken through the mini-budget last February 2023, which will add Rs680 billion in a whole financial year while additional revenue measures will fetch Rs223 billion.

The FBR has given tax relief of Rs23 billion on all four taxes, so the net additional revenues of Rs880 billion will be materialised in the next financial year.

In order to collect the Rs9.2 trillion revenue target in the budget for 2023-24, the government will achieve nominal growth of 24.3%, including a real GDP growth rate of 3.5% and inflation at 21%.

The measures taken in the mini-budget of last February 2023, as well as net additional taxation measures, will jack up tax collection in the next budget up to the desired level of Rs7.2 trillion for the outgoing fiscal year.

Under the proposed amnesty scheme, the FBR also jacked up the threshold on foreign remittances to be increased from Rs5 million to $100,000 or equivalent in the tax year in order to cater to fluctuations in the exchange rate.

The withdrawal of cash exceeding Rs50,000 would fetch Rs14 to 15 billion in the national kitty.

Waiver was announced for a 2% final withholding tax on the purchase of immovable property for nonresident individual POC/NICOP holders where the immovable property is acquired through foreign remittances remitted from abroad.

The government imposed Federal Excise Duty (FED) on energy-inefficient fans at the rate of Rs2,000 per fan and incandescent bulbs at the rate of 20% (according to the value).

The scope of FED on services is proposed to be enhanced by adding royalties and fees for technical services.

Through the withdrawal of exemption, the government imposed an 18% sales tax on edible products sold in bulk under brand names or trademarks.

The FBR raised enhancement in a reduced rate of sales tax from 12% to 15% on supplies made by the Point of Sale (POS) tier-1 retailers dealing in leather and textile products.

For electric power transmission, services are proposed to be taxed at 15% in Islamabad Capital Territory (ICT).

The FBR proposed to increase withholding tax on foreign payments through credit cards/ debit cards.

For foreign domestic workers helping in Pakistan, the FBR has proposed an Rs200,000 adjustable advance tax from employers at the time of issuance/ renewal of work permits.

In a technical briefing given by FBR Chairman Asim Ahmed along with his team at the FBR headquarters on Friday after the announcement of the budget, it was stated that the Super Tax would be imposed on all sectors instead of selected sectors.

When asked about exact revenue estimates through the imposition of windfall gain tax, the chairman replied that only a legal provision was proposed to get powers for slapping windfall gains tax on those sectors earning extraordinary profits.

He said that they had worked it out, but no decision was made on when this tax would be imposed. The rationalisation of Super Tax under Section 4C would be applied to all persons across the board on income above Rs150 million as insertion of additional three new income slabs of Rs350m to Rs400m, Rs400m to Rs500m, and Rs500m above to be taxed at 6%, 8%, and 10%, respectively.

The government slapped a 0.6% advance adjustable withholding tax on non-filers on cash withdrawals exceeding Rs50,000.

The government jacked up withholding tax rates by 1% on the supply of goods other than the sale of rice, cottonseed, or edible oils, on rendering of services — including service subject to a concessionary tax rate of 3% but excluding electronic and print media advertising services and on the execution of contracts, excluding sportsperson.

It imposed 0.5% increase in withholding tax rate for commercial importers on the import of goods falling in Part III of the Twelfth Schedule to the Income Tax Ordinance 2001.

Now the withholding would be 6%.

The government did not bring any change in the tax rate of 1% on capital goods imported by commercial importers.

The rate of withholding tax will remain unchanged at 2% on raw materials imported by industrial undertakings. The rate of raw materials imported by commercial importers will also remain unchanged at 3.5%.

The government imposed 10% final withholding tax on the issuance of bonus shares by a company and 20% for non-filers.

The FBR has increased the withholding tax rate from 1% to 5% on payments to non-residents through debit/ credit or prepaid cards and 2% to 10% for non-filers.

The government imposed additional tax at the rate not exceeding 50% on income profit and gains of a person or class of persons on account of extraordinary gains due to exogenous factors.

The FBR proposed removing the cap from 1,300cc to 1,800cc old and using Asian market vehicles on duty and taxes.

Earlier, it was charged from 1,800cc but now the old vehicles from 1,300cc to 1,800cc will have to pay duty and taxes.

The government proposed Regulatory Duty from 15 to 30% on six tariff lines. The FBR has proposed to remove the 10% regulatory duty on the import of second-hand clothing.

It proposed to remove 5% RD on synthetic filament yarn of polyester not locally produced. It proposed changes in the definition of smuggling to enable Customs to conduct anti-smuggling operations within the territorial limits of the country.

For harmonisation of GST on goods and services, the production, transmission, and distribution of electricity are proposed to be excluded from the purview of sales tax in accordance with the decision of the National Tax Council.

The FBR proposed exemption of customs duties on specific papers and art cards and boards for the printing of the Holy Quran, incentives for the Pharma sector, manufacturing of solar panels, inverters and batteries, exporters of IT and IT enabled services, raw materials of diapers, sanitary napkins and adhesive tape and reduction of Customs duty from 10% to 5% on non-localised (CKD) of Heavy Commercial Vehicles (HCVs).

The FBR has jacked up a 1% increase in withholding tax rate on supplies, contracts, and services in the budget 2023-24.

The increased 1% withholding tax will be charged from both companies/associations of persons (AOPs) and individual taxpayers.

It proposed that on supplies, in the case of companies, the rate has been increased from 4% to 5%. 

The FBR has also imposed additional taxes of Rs223 billion in the budget for 2023-24 and the major chunk of revenue collection will be obtained through income tax.

The increase in income tax will help collect an additional Rs185 billion but incentives will have an impact of Rs10 billion. So the net addition in income tax will fetch Rs175 billion in the next fiscal year.

In sales tax, the FBR proposed additional measures of Rs22 billion and there is no cost of tax relief. In customs duty, the FBR proposed taxation measures of Rs12 billion but provided more relief to the tune of Rs13 billion, so net addition will be negative Rs1 billion. In case of FED, the FBR has taken additional revenue measures of Rs4 billion with no tax incentive revenue impact. The net addition in all the four taxes will fetch Rs200 billion in the national kitty in the budget for 2023-24.