Govt Likely to Remove Rs. 350 Billion Tax Exemptions in FY23 Budget

The government is likely to remove all tax exemptions by the next budget, i.e., for the fiscal year 2022-23 which would entail around Rs. 350 billion additional revenue measures.

Chairman FBR Dr. Ashfaq Ahmed revealed this while briefing the Senate Standing Committee on Finance. “All the subsidies will go in the next budget,” said the Chairman, adding, “these total up to Rs. 700, but we are only removing Rs. 343 billion.” The remaining of which is around Rs 350 billion, he further added.

The Chairman FBR said the reforms were based on “no tax exemptions – only targeted subsidiary”.

Explaining the Finance Supplementary Bill 2021, the Chairman FBR held a longer briefing with tables and points, explaining how misused the subsidies were and how the FBR was moving to plug the gaps.

The Senate Standing Committee on Finance, which met under the chairmanship of Senator Talha Mehmood on Wednesday, termed the Finance Supplementary Bill 2021 as ‘a tsunami of inflation’ in the country.

The committee meeting discussed in detail the pharmaceutical industry, which according to the Chairman FBR, generated a revenue of Rs. 700 billion.

The FBR officials informed the committee that out of 800 pharma manufacturers, only 453 were registered. It said Rs. 35 billion input tax was passed to patients, while there was an undocumented supply chain of Rs. 530 billion, adding that there were Rs. 700 billion turnovers. It also highlighted the exempt input and output documentation issues.

They said the sales tax on the pharmaceutical sector would be imposed at the import stage, adding that the new reforms would also lead to an expeditious payment of refunds (within one week) and a reduction in prices.

The committee expressed apprehensions that the new regime would raise the prices of medicines instead of reducing them. It feared that the money bill would cast a negative impact on the common man with the poor as the prime sufferers.

Senator Farooq Hamid Naek observed that the government revenue was being increased by oppressing the common man. The committee directed the officials concerned to write a letter to the Drug Regulatory Authority of Pakistan (DRAP) to appear before the committee and brief it on the definition of drugs and their categories under the Drug Act while defining whether or not the “vitamins” fell under the definition of drugs. It also sought details from DRAP of the spurious drugs and the unregistered pharmaceutical companies in Pakistan.

The committee, after a detailed briefing of the Chairman FBR on the salient features of the tax reforms, decided to adjourn the meeting till January 6 to discuss the Finance (Supplementary) Bill, 2021 clause-by-clause and make recommendations under Article 73 of the Constitution.

The FBR officials informed the committee that the International Monetary Fund had demanded the imposition of a 17% across-the-board GST and the withdrawal of exemptions at Rs. 700 billion.

The Chairman FBR said the new reforms deviated from the rule of the thumb with the Value Added Tax, i.e., 17% across-the-board GST without any exemptions, and defended reduced rates of GST on agriculture tractors, fertilizers, inputs of fertilizers sector, pesticides, used clothing and footwear, and cinematographic equipment.

FBR also defended the imposition of GST on food items, e.g. wheat, wheat flour, wheat bran, rice, vegetables, fruits, pulses, fresh poultry, fish, meat, milk, sugarcane, and beet sugar (raw materials), and on the educational items including books and stationery.

FBR briefed the committee on the exemptions that the government intended to give to the various sectors, which included Rs. 71 billion on the goods, Rs. 2 billion on the common usage products, Rs. 160 billion on pharmaceutical products, and Rs. 112 billion on machinery with GST refundable/adjustable. “The common man is hoodwinked by the mechanisms of tax devised,” stated Senator Farooq Hamid Naek.

Senator Musadik Masood Malik said the tax reforms were based on the consumption of the consumers and not the income, whereas the Chairman FBR termed the new reforms as the “Zero Impact Budget”.

Regarding the revenue-related measures in the new tax reform policy, the committee was apprised that advance taxes on cellular services, advance taxes on vehicle registration, and advance taxes on foreign TV serials, dramas, and commercials were also imposed. It was further informed that the targeted subsidiary items would benefit the common man by Rs. 19 billion.

Source: Pro Pakistani