TC May-Jun 2022 Issue
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TRADE CHRONICLE
Federal Budget 2023 approved with
several amendments to Finance Bill 2022
The National Assembly has
approved the amendment to
Finance Bill 2022 that permits the
government to increase petroleum levy
up to Rs50 per litre. Parliamentarians
have also approved a 10% super tax on
13 high-earning sectors and different
slabs of taxes on a salaried person
making above Rs 600,000 per annum.
• Super tax on specified sectors: The
amended finance bill has proposed
imposition of a one time super tax of
10% for specified sectors with earnings
in excess of Rs300mn for tax year 2022
(FY22). The 15 specified sectors that
will be subject to a one time super tax
of 10% includes Airlines, Automobiles,
Beverages, Cement, Chemicals,
Cigarette & Tobacco, Fertilizer, Iron and
Steel, LNG terminal, Oil Marketing, Oil
Refining, Petroleum & gas exploration
and production, Pharmaceuticals,
Sugar and Textiles.
• Tax rates of 0%-4% under section
4C: The amended bill has proposed
slab wise tax rates for companies under
section 4C of income tax ordinance
and has now been renamed as ‘Super
tax’. Earnings exceeding Rs300mn will
be subject to 4% income tax whereas
earnings below Rs300mn will be taxed
as per the following table from tax year
2022 onwards.
• Capital Gain Tax on Securities:
Government had rationalized tax
rates on capital gains on securities
in budget where CGT rates were
reduced to zero where holding period
exceeded six years encouraging long
term investment. In the amended
finance bill, no change in rates have
been proposed however clarification
is inserted that the reduced rates will
apply only to securities acquired after
July 01, 2022. For securities acquired
on or before 30th June, 2022, rate of tax
shall be 12.5%. Furthermore, rate of tax
for companies in case of Debt will be
subject to 29% tax.
• Tax credit available on Section 63:
Tax credit available under Section
63 for Voluntary Pension scheme
was initially removed from Budget
document which is now been restored.
• Sales tax on APIs reduced to 1%:
The government has reduced sales
tax to 1% from existing 17% on the
import of active
pharmaceutical
ingredients (APIs).
This will be positive
for Pharmaceutical industry.
• Minimum Turnover Tax for OMC
reduced to 0.5% from 0.75%:
Minimum Turnover tax on OMCs has
been reduced from 0.75% to 0.50% for
OMCs which will be positive for the
sector.
• CVT on automobiles reduced to 1%
from 2%: The government has reduced
Capital Value Tax (CVT) from 2% to 1%
on automobiles in an amendment to
the Finance Bill 2022. They have also
changed taxable limit of Rs5mn value
of the car to all cars of 1,300cc and
above. This will be negative for sector.
• Tax Rates on Banking Sector: As per
understanding amended finance bill
has levied a one time super tax of 10%
for tax year 2023 (CY2022) for banking
sector. As per the bill, the corporate
tax rate on banks has been set at 39%
instead of the initially proposed 45%
taking total effective.
Earlier, on June 10, Finance Minister
Miftah Ismail presented an Rs9.502
trillion budget in Parliament for the
next fiscal year with an expected 4.9
percent deficit and stated that the
real challenge for the government is
to achieve growth without the current
account deficit. The government also
announced a 15 percent increase in
government employees’ salaries, and
ad-hoc relief is being merged into the
basic pay and decided to establish a
pension fund with an allocation of
Rs10 billion in the first year. However,
later some amendments were made to
meet the conditionality of from IMF.
He outlined the government’s
approach of giving incentives to the
poor instead of the rich and moving on
to inclusive and sustainable growth.
The growth strategy would be based
on an increase in IT and industrial
sector exports and agriculture,
productivity has to be increased, and
export competitiveness has to be an
improvement.
He said that under the austerity
measures, the government has decided
to impose a ban on the purchase of
vehicles, foreign trips unless necessary,
and purchase of furniture and a cut in
petrol by 40 percent.
May - Jun - 2022
The tax deficit would be reduced to 4.9
percent in the next fiscal year from 8.6
percent in the ongoing fiscal year. The
primary debt of 2.4 percent would be
converted into positive by 0.19 percent
in the next fiscal year. The trade deficit
would be reduced to $70 billion and
exports $35 billion. As a result of this
current account deficit, 4.1 percent
of the GDP would be reduced to 2.2
percent, and remittances are projected
at $33.2 billion for the next fiscal year.
The federal outlay for the next fiscal
year is projected at Rs9,502 billion
with debt servicing of Rs3,950 billion,
the PSDP Rs800 billion, whereas,
Rs1,523 billion have been earmarked
for defence, Rs550 billion for running
the civil government, Rs530 billion for
pension and Rs699 billion for targeted
subsidies while Rs1,241 billion have
been allocated for grants including
the BISP, Bait-ul-Mall and other
departments.
The BISP allocation has been increased
to Rs364 billion for the next fiscal year
and Rs12 billion for the USC to provide
subsidies on essential commodities
with Rs5 billion additional for Ramazan
Package.
The minister said that 90 million
households in the next fiscal year
would benefit from cash transfer
under the BISP Kifalat Programme,
for which Rs267 billion have been
allocated, Benazir Wazaif Programme
would be expanded to 10 million
children with the cost of Rs35 billion.
The government has allocated
Rs9 billion for the undergraduate
scholarship, Rs21.5 billion for the
Benazir Nishonama Programme, and
Rs6 billion for the deserving people in
the Baitul Mal.
The government has allocated a
subsidy of 570 billion for the power
sector and Rs70 billion for the gas
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