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KEY FEATURES OF PROPOSED FEDERAL BUDGET 2023-24

Federal Budget 2023-24

The budget for fiscal year 2023-24 is heavy on financing expenditures by accumulating debt, as more than 50 percent of it will be consumed on debt servicing.

Relief:

  • Substantially increase in remittance from outside Pakistan without any questions asked on the source. The budget proposes that the limit be increased from Rs. 5 million to Rs30 million.
  • To facilitate small and medium enterprises (SMEs) in obtaining loans from banks. The government would take on 20pc risk for loans to SMEs. This change was proposed in an already existing scheme of State Bank of Pakistan for SMEs to get their loans refinanced at a 6pc markup. As the banks were hesitant in providing them with loans, because of credit history.
  • Granting the status of cottage industry to IT services and professionals working in Pakistan for foreign companies (exporting IT services). As a result, freelance exporters will be exempted from filing sales tax return.
  • Caps on fixed duties and taxes on the import of used vehicles above 1300ce of Asian makes has been removed. This means refurbished cars¬† of 1300cc from Japan and China, , will likely get more expensive. (Smaller cars, such as Mira and Alto, would remain unaffected by this measure).
  • To promote digital payments through debit/credit cards, mobile wallets or QR scanning at restaurants, the tax rate has been reduced from 15pc to 5pc. (dining out has been made cheaper if you opt for electronic payment method).
  • Government`s solarisation initiative, exemption on customs duty on raw material used in production of solar energy products. It will cater essential components such as inverters, solar panels, and batteries. (product cost for solar energy will go down for the average consumer)
  • Exemption of customs duties on raw materials of diapers and sanitary napkins. On the other hand, customs duty is also exempted on import of shrimps/ prawns/juveniles for breeding in commercial fish farms and hatcheries.
  • Removal of regulatory duty on second hand clothing and exemption of sales tax on contraceptives and accessories.
  • Waiver of 2pc final withholding tax on purchase of immovable property for nonresident individual (NICOP/ POC holders) where immovable property is acquired through foreign remittances from abroad.
  • Ten per cent reduction in tax liability or Rs. 5m (whichever is lower), for builders and 10pc reduction or Rs. 1m (whichever is lower), for construction of own house for three years.

Tax Revision / Imposition of New Taxes:-

Conversely, there were some moves which are likely to hurt the common man`s pocket:

  • Exemption of sales tax on edible products sold in bulk under brand names or trademarks has been withdrawn.
  • Increase in sales tax from 12pc to 15pc on supplies made by point of sale (POS) retailers, primarily dealing in leather and textile products.
  • Electric power transmission services are proposed to be taxed at 15 pc.
  • Re-imposition of 0.6pc advance adjustable withholding tax on cash withdrawal for non-active taxpayers.
  • Hike in withholding tax rate, from 1pc to 5pc, on foreign payments, This measure will discourage dollar outflows from the country, making all international e-commerce transactions more expensive.
  • Imposition of Rs 2,000/-, federal excise duty on inefficient energy fans per unit and wire filament bulbs at 20 pc of value.

Written by Sd/-

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