KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has identified over two dozen anomalies and policy changes in the federal budget 2024-25.

FPCCI Senior Vice President Saquib Fayyaz Magoon, the focal person for budget anomalies, said most issues relate to the general sales tax (GST).

Giving some examples, he said the local supply of raw materials and packing materials, components, sub-components, assembly and sub-assembly for the manufacturers has been subject to sales tax.

Medical equipment, diagnostic kits, healthcare devices, etc., have also been subject to sales tax. All stationery items and pharma raw materials have been deleted from the 8th schedule, i.e. from 1 per cent and are now chargeable at the standard rate of 18pc.

Mr Saquib said this measure would increase the cost of doing business, badly affect the industry, make it uncompetitive against imports and contribute to increased inflation.

Federal Excise Duty (FED) of 5pc is proposed on commercial properties and the first sale of residential properties.

He said the FED is a federal subject which cannot be levied on properties, which is a provincial subject. This proposal is ultra vires to the constitution. Moreover, this will significantly increase the cost of housing and the commercial sector.

The tax rate for salaried individuals remains capped at 35pc, whereas non-salaried individuals, non-corporate sector, SMEs, etc., will bear an increase up to 45pc. He said that in the backdrop of SMEs’ liquidity shortage, this measure is going to further shrink their cash flow, thus adversely impacting their expansion and innovation.

The government imposed an 18pc sales tax on pasteurised milk, which had been exempted before. Now, the exemption is available only to unbranded milk, which is also called open milk in general parlance.

This way, companies producing safe and healthy milk will lose their market share and this measure will discourage investment, expansion and innovation in this and allied sectors, he lamented.

As per Section 38 of Sales Tax, anyone involved in fraudulent activities is currently punishable with 10 years bailable imprisonment. In budget FY25, a new “Section 25AB” is inserted — anyone involved in fraudulent activities is punishable with 10 years on non-bailable imprisonment.

He said it would be grossly misused and a source of corruption, harassment of the business community, and discouraging new investment. Moreover, the provision relating to investigative audit should be withdrawn.

Mr Saquib said exporters would now be subject to pay standard income tax instead of the previous practice of withholding 1pc income tax as full and final liability, as they have been shifted to an adjustable minimum tax regime.

The mandate of the inland revenue department (income tax) would be enhanced multifold, especially in the backdrop of rampant corruption. It will negatively impact the country’s exports.

Published in Dawn, June 23rd, 2024