June 12, 2008	Thursday	Jamadi-us-Sani 07, 1429

ISLAMABAD, June 11: Taxes proposed to be levied in the budget for 2008-09 are expected to raise an additional revenue of about Rs77 billion.

The increased reliance on indirect taxes — mostly through an increase in the rate of general sales tax (GST), from 15 per cent to 16 per cent, and one per cent special excise duty on all imported and locally-manufactured products — will trigger inflationary pressures and further burden the lower-income groups.

Although the government abolished GST on fertilisers and pesticides, it raised customs duty on 300 items, mostly packed food and electronic appliances, from 25 per cent and 30 per cent to 35 per cent — the highest customs slabs introduced in the budget — and Rs500 tax on import of every mobile set.

The government has, in the meantime, increased the threshold of income tax for salaried taxpayers from Rs150,000 to Rs180,000. But, in case of salaried women, the exemption limit has been enhanced to Rs240, 000 from Rs200,000.

The proposed new tax measures were taken mostly with a view to achieving an ambitious revenue target of Rs1,251.460 billion set for the financial year 2008-09.

Of the total new taxes amounting to Rs77 billion, the government has proposed to raise more than Rs41 billion from GST and excise duty, Rs29 billion from income taxes and Rs7 billion from increase in customs duty, mostly on food items, electronics and mobile phones.

The rate of GST and federal excise duty on provincial services sectors has been proposed to be increased from 15 per cent to 16 per cent.

According to the details, the rate of excise duty on telecommunication has been increased to 21 per cent, on cement it was increased to Rs900 a ton from Rs750. Five per cent excise duty has been imposed on imported and locally-manufactured cars having an engine capacity exceeding 850cc.

Excise duty will be charged at an enhanced rate of 10 per cent from the previous five per cent on banking, insurance, franchises, while all remaining telecommunication services were also brought under the net of excise duty net and 0.75 per cent sales tax will be collected on the value of goods at the import and manufacturing stages of electric goods.

Energy saving lamps have been exempted from GST and crop insurance have been exempted from the levy of 5 per cent federal excise duty. Manufacturing of acetic acid, caustic soda flakes or solid, cotton linter and sequins have also been exempted from excise duty while AJK residents have been allowed refunds on purchase of Pakistani taxable goods.

Sales tax have been withdrawn on medical equipment, apparatus, reagents, disposables, spares and donations supplied to hospitals of 50 beds or more.

The customs duty on cosmetics has been increased from 20-25 per cent to 35 per cent, on electric ovens and cooking ranges to 30 per cent from 20 per cent, on betel leaves increased to Rs200 per kg from Rs150 a kg, from 10 to 15 per cent on sulphonic acid, on CKD/SKD of sewing machine to 20 per cent from 5 per cent, a uniform rate of 30 per cent specified for import of special purpose motor vehicles and duty has been increased on the import of cars and jeeps of more than 1800cc to 100 per cent from 90 per cent. On import of used cars and jeeps, the fixed duty and tax rates have been proposed to be increased by 10 per cent.

However, CNG-run buses have been exempted from customs duty, 18 medicines used for treating cancer and heart problems in addition to rice seeds, energy saving lamps, dredgers, specified solar energy equipments have been exempted from customs duty while power plants imported by Wapda have been ‘temporarily’ exempted from duty.

Under the income tax, no tax on rental income from property will be collected up to Rs150,000 and income from this source is taxed at progressive rates of five, 10 and 15 per cent according to the slab. However, in case of a company, basic exemption of Rs150,000 would not be available and three separate rates has been proposed.

A uniform rate of withholding tax has been proposed on commercial and industrial importers at two per cent, while 10 per cent withholding tax has been proposed on electricity bills exceeding Rs20,000 a month, which would be adjustable. Withholding tax on bills of Rs2,000 and below would be collected at previous rates.

Income tax exemption has been withdrawn on Pakistan Cricket Board.

An amnesty scheme has been introduced on movable and immovable assets on the value of which two per cent tax is being paid for ‘whitening’ the black economy.

Withholding tax at the rate of 10 per cent will be levied on all landline telephone bills exceeding Rs1,000 while one per cent withholding tax has been proposed on all export proceeds. The 10 per cent withholding tax on payment to media companies outside Pakistan is to be treated as final tax.

According to the new tax regime, builders would be required to pay tax at the rate of Rs50 per square foot of a unit’s covered area at the time of sale. However, developers converting land into residential, commercial and industrial plots would be subjected to tax at the rate of Rs100 per square yard at time of sale, which would be treated as the minimum tax.