Budget 2021-22: What is getting cheaper and what will cost more?

Published June 11, 2021
A man counts money at his shop in Karachi.— AFP/File
A man counts money at his shop in Karachi.— AFP/File

As the Budget 2021-2022 was presented in the National Assembly on Friday, one thing was clear: the government was aiming to please as much of the population as it could.

Earlier in the day, Prime Minister Imran Khan had said "everyone would be happy" with the budget and the reduction of taxes on several industries seemed to reflect that.

The budget included exemptions and relief measures for nearly all industries, and new businesses and products being brought into the tax net seemed far fewer in comparison. The automobile sector was a heavy beneficiary with tax exemptions for small cars and four-wheelers.

However, not all of it was good news for the average consumer, especially with the imposition of federal excise duty (FED) on cellular services and e-cigarettes.

Here Dawn.com takes a look at what items will get cheaper and what will get more expensive in the new fiscal year that will start on July 1.

Cocoa paste and butter

Regulatory duty on the import of cocoa paste, butter, and powder will be reduced. This could mean a reduction in the prices of chocolate products and other baked goods. If you like to indulge, it's probably going to cost you less – at least monetarily.

A man gives a chocolate demonstration in this file photo. — Reuters
A man gives a chocolate demonstration in this file photo. — Reuters

Automobiles

Small cars:

Locally manufactured cars having an engine capacity of 850cc or less will be exempted from value-added tax (VAT) while the sales tax on these cars will also be reduced from 17pc to 12.5pc.

Additionally, four-wheelers will also be exempted from federal excise duty. So, if you were looking to buy a new ride for yourself, it's going to be easier on your wallet than you expected.

Situationer: Carmakers ignore middle-class buyers

Electric vehicles:

Imports of electric vehicles will be exempted from value-added tax while the sales tax on locally produced electric vehicles will be one per cent.

'On money' on car sales:

The government will also impose a tax on "on money" for vehicles that are disposed of without registration. "On money" or premium refers to a process whereby impatient buyers with excess cash in hand happily pay extra money to car dealers for instant delivery instead of waiting for months on end.

A file photo of a Toyota showroom. — Dawn/File
A file photo of a Toyota showroom. — Dawn/File

Mobile services

The federal excise duty on mobile phone calls that are longer than three minutes has been set at Rs1 per call, Rs0.1 on every SMS and Rs5 on every GB of internet data. The budget document states that the decision is being taken to "reap reasonable revenue" from the telecom sector and would result in "mild taxation of a broad spectrum of the population".

The decision on mobile services, if implemented, would affect over 98 million people. — AFP
The decision on mobile services, if implemented, would affect over 98 million people. — AFP

However, hours after the budget was presented, Energy Minister Hammad Azhar denied the FED would be applied to internet data, saying the prime minister and the federal cabinet had not approved it.

"It will not be included in the final draft of the Finance Bill (budget) that is placed before parliament for approval," he tweeted.

The decision, if implemented, would affect over 98 million people.

E-cigarettes

Electronically heated tobacco products (e-cigarettes) will also be brought into the tax net.

A woman displays a package of e-cigarette, an electronic substitute in the form of a rod, slightly longer than a normal cigarette. — Reuters
A woman displays a package of e-cigarette, an electronic substitute in the form of a rod, slightly longer than a normal cigarette. — Reuters

Telecom

The federal excise duty on telecommunication will be reduced by 1pc from 17pc applicable previously.

Withholding tax (WHT) on telecommunication services will also be reduced to 3pc.

Fruit juices

The budget document noted that the fruit juice sector faced an "adverse situation" due to the pandemic while the prices of fruit juices had also been increased after the imposition of the federal excise duty. In FY22, the FED on fruit juices will be withdrawn.

As temperatures peak this summer, staying hydrated will cost you less!

Electricity

The threshold for withholding tax on the monthly electricity bill for domestic users who are not on the Active Taxpayers List (ATL) will be reduced from Rs75,000 to 25,000.

This means that a consumer whose electricity bill is Rs25,000 or more and who is not on the ATL will have to pay withholding tax.

Banking

The withholding tax on cash withdrawals and on non-cash banking transactions will be removed.

The withholding tax on cash withdrawals will be removed. — Dawn/File
The withholding tax on cash withdrawals will be removed. — Dawn/File

Air travel

The withholding tax on domestic air travel will be ended. This could translate into cheaper air travel domestically.

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