PPI Original Text (PPI-OT) – Budget FY13 synopsis – Alfalah Securities Limited

Karachi, June 04, 2012 (PPI-OT): Budget FY13 has been focused mainly on tax rationalization although no new tax has been imposed in the budget while keeping the 16% GST rate intact.

According to Alfalah Securities Limited, the Federal budget outlay has been budgeted to be PkR 2.96 tn while a fiscal deficit of PkR 1.105 tn or 4.7% of GDP has been targeted. The government has targeted a GDP growth of 4.3% for FY13 and a Public Sector Development Plan (PSDP) allocation of PkR 873 bn.

The masses have been provided tax relief in salary income by increasing the minimum taxable income by PkR 50,000 to PkR 400,000 and the number of income tax slabs would be reduced to 5 from existing 17 slabs. The salaries and pension of the government employees have been raised by 20% while the allocation for Benazir Income Support Program has been raised to PkR 70 bn from PkR 50 bn, as a populist measure when the elections are just round the corner.

The key tax reforms include:

• FED on cement has been reduced from PkR 500 per M.T to PkR 400 per M.T lower by PkR 100. In order to encourage the use of substitute fuel by the cement industry, the customs duty on scrap of rubber/shredded tyres has been reduced to 10% from 20%.

• Retrospective exemption of FED on services rendered by Asset Management Companies.

• The limit of investment eligible for tax credit has been enhanced to 20% from 15% of the taxable income where the limit of investment in securities or insurance premium has also been raised to PkR 1,000,000 from PkR 500,000. Moreover, the retention period of securities for availing tax credit has also been reduced to one year from three years.

• The minimum tax rate on gross turnover is reduced to 0.5% from 1%.

• Capital Gain Tax (CGT) is proposed to be levied on the sale of property if it is disposed off with in two years period from acquisition.

• The tax has been proposed to be increased progressively in two years to 25% for FY13 and 35% for FY14 from the existing 10% on the dividend received by banks from money market funds and income funds, in order to eliminate the otherwise tax arbitrage available to banks.

• Increase in GIDC of PkR 103 per mmbtu for old fertilizer plants, PkR 159 per mmbtu and PkR 121 per mmbtu for CNG in Region‐I and Region‐II respectively, PkR 30 per mmbtu for IPPs etc.

For further details on Budget please refer to Alfalah Securities Limited’s research report titled “Budget FY13: populist yet unyielding” published on June 01, 2012.

Leave a Reply