ISLAMABAD, June 7: Despite the talk of no new tax being levied in the next year’s national budget, the cost of living is expected to rise as a result of several adjustments in the tax structure. Dawn has learnt that imposition of 2.5 per cent excise duty on import and production of cars, jeeps, television sets and air-conditioners, and two per cent sales and income tax on all retailers have been proposed to raise Rs16 billion.
Finance ministry sources said a decision had been taken to exempt garments, hosiery, leather, shoes and sports and surgical goods from sales tax. The government will withdraw the sales tax exemption on computer software. The exemption on computer hardware was withdrawn in the current budget.
The excise duty on cigarettes is being rationalised to the lowest slab of 44 per cent but regional tax rates and federal excise duty will be raised.
The government has decided to abolish the threshold limit for retailers and levy two per cent tax on all retailers, including jewellers.
Tax on services has been planned, including imposition of 15 per cent excise duty on international air travel in lieu of specific rates. The government will collect Rs1,500 and Rs2,500 excise duty from the passengers of economy and business classes, respectively, travelling from Gulf, Africa and the sub-continent. Passengers from Europe and the United States will pay Rs 2,500 and Rs4,000 for economy and business classes, respectively.
The sources said the Central Board of Revenue planned to levy one per cent non-adjustable excise duty on construction of commercial and residential projects.
The government has decided to levy 7.5 per cent excise duty on commission charged by stockbrokers and four per cent duty on contractual construction work.
It has decided to extend the scope of excise duty on leasing business and non-fund financial services provided by banking and non-banking financial companies. The CBR has identified 38 non-fund banking services which have not been taxed, including collection of utility bills, fax, commission, transfer agency fee, same-day clearing charges and accounts closure charges.
The CBR will extend the list of items subject to sales tax on retail prices basis at manufacturing stage. It has decided to withdraw the sales tax concessions for iron and steel industry and fertilisers. The production of melters will be assessed by 750 units of electricity instead of 800 units and re-rollers at 110 units instead of 130 units. An increase in sales tax for in the sector is also likely.
A five per cent excise duty will be imposed on advertising agents.
According to an official document, the Water and Power development Authority and the Karachi Electric Supply Company are being regularly subsidised on account of tariff differential and tariff discount, but these subsidies are not being counted toward output value.
It has been suggested that input tax adjustment on subsidy component as well as on T&D losses, at least to the extent not covered in power tariff or to the extent over 10 per cent, should be disallowed.
“Although there is a possibility of some increase in power tariff (about seven per cent as roughly estimated by the KESC), yet it is understood that both WAPDA and KESC will not have any locus standi to argue with or convince the government to forego the correct application of GST laws indefinitely,” it says.
