The government on Tuesday presented its first budget with total the outlay of Rs 7.022 trillion for the fiscal year 2019-20, registering growth of 30% against the revised budget of Rs 5.385 trillion for the current fiscal year 2018-19 and setting an ambitious Rs 5,555 billion target for the FBR – a 25 percent increase or Rs 1.12 trillion in additional taxes from the previous year.
State Minister for Revenues Hammad Azhar presented the budget in the National Assembly, amid strong protest by the opposition parties. The minister said that total federal revenues had been estimated at Rs 6.717 trillion, which was 19 percent higher than the previous year’s revenues of Rs 5.661 trillion. The collection of revenue by the Federal Board of Revenue (FBR), he said, was estimated to be recorded at Rs 5.555 trillion, which was 12.6 percent of the Gross Domestic Product (GDP).
The increased FBR revenue would be supported by a Rs 346 billion increase in direct and Rs 773 billion rise in indirect taxes from the previous budget, which would mean Rs 407.7 billion in additional sales tax revenue, Rs 363 billion increase in income tax collection, Rs 265.5 billion rise in customs duty, and a rise of Rs 99 billion in federal excise duties as compared to the previous year.
The minister of state said that out of the total revenue collections, an amount of Rs 3.255 trillion would be distributed among the provinces under the 7th National Finance Commission (NFC) Award, which was 32 percent higher than the current year’s share of Rs 2.465 trillion.
He said the net federal revenues for the upcoming fiscal year had been estimated at Rs 3.46 trillion against the revenues of Rs 3.07 trillion during current fiscal year, which was 13% higher. Similarly, he said the federal budget deficit would be Rs 3.56 trillion, whereas the provincial budget surplus was estimated to be at Rs 423 billion for the year 2019-20.
In the Federal Budget 2019-20, minimum taxable income was reviewed and set at Rs 0.6 million and Rs 0.4 million per annum for the salaried and non-salaried folks, respectively. In this regard, 11 taxable slabs at progressive tax rates from 5 percent to 35 percent were introduced in the budget for salaried people with income of more than Rs 0.6 million per annum. Further, eight taxable slabs at tax rates from 5 percent to 35 percent were introduced for non-salaried people with income of more than Rs 0.4 million per annum.
Azhar explained that the Finance Act 2018 had earlier significantly relaxed the minimum taxable income for both the salaried and non-salaried classes – revising it upwards from Rs 0.4 million to Rs 1.2 million. This, he said, had led to a major decrease in the receivables by Rs 80 billion.
It is noteworthy that the minimum taxable income is usually based on the per capita income and examples of such leniency are not common, he noted.
Separately, non-filers were no longer restricted from purchasing property and could buy real estate worth more than Rs 5 million, he mentioned. The corporate tax had now been fixed at 29 percent for two years, the minister announced. “This has been done in light of the country’s current economic conditions as well as success in bringing it down from 35 percent to 29 percent over the period from fiscal year 2014 to 2018,” he said.
Azhar went on to say that prior to Finance Act 2014, the corporate tax rate was 35 percent. This, however, was brought down each year by one percent, bringing it effectively to 30 percent, he said, adding that in accordance with the prior proposal, it was to be decreased from 30 percent in 2018 to 25 percent in 2023.
Meanwhile, the opposition members staged a strong protest in between the budget speech of the minister. The opposition legislators carried placards and wore black armbands in the budget session, which was attended among others by Prime Minister Imran Khan and Adviser on Finance Dr Hafeez Shaikh. The opposition members surrounded the speaker’s dais and shouted slogans like “IMF budget unacceptable”. They also tore down the budget copies. In reaction, the treasury members also came forward, causing friction between the two sides. PTI’s Shahid Khattak and Pakistan Muslim League-Nawaz’s Murtaza Javaid Abbasi were seen pushing each other.
The government suggested an increase in taxes on cooking oil, ghee, sugar, juices and soft drinks, cigarettes, compressed natural gas (CNG), liquefied natural gas (LNG), cement and cars. Apart from these, taxes on marble, gold, silver, diamonds and jewellery have also been increased.
Sugar is likely to go up by more than Rs 3.5 per kg after increasing the tax on it. During his budget speech, Azhar said the 8 percent sales tax on sugar had been increased to up to 17 percent, and added that duty on cooking oil, ghee and drinks with sugar had also been increased to 17 percent.
The new budget suggested imposing 10 percent identical tax on milk, cream and powdered milk. The budget also suggested a 17 percent sales tax on semi-processed and cooked chicken, mutton and fish products.
The government imposed 2.5 percent tax on vehicles up to 1000cc, 5 percent on automobiles from 1001cc to 2000cc, and 7.5 percent on vehicles with more than 2000cc horsepower.
The government increased CNG price for Region-1 from Rs 64.80 to Rs74.04 per kg, whereas for Region-2 it was increased from Rs 57.69 to Rs 69.57 per kg.
Similarly, the federal excise duty on the import of LNG was increased to Rs 10 per MMCFD.
The budget imposed 17 percent sales tax on marble industry, besides increasing federal excise duty on cement from Rs 1.5 per kg to Rs 2 per kg.
According to the state minister for revenue, federal excise duty on upper slab of cigarettes had been increased from Rs 4,500 to Rs 5,200 per 1,000 sticks. He said the lower two slabs had been merged with a duty of Rs 1,650 per 1,000 sticks. A decrease in taxes on a few items was also suggested in the new budget. The government suggested ending 3 percent value addition tax on import of mobile phones.
Apart from this, it suggested ending value addition tax on all petroleum products imported by oil marketing companies.
Budget features
A ration card scheme is being introduced, while 60,000 women will be given access to mobile phones.
Rs 1,800 billion allocated for development programmes (PSDP), while Rs 950 billion set aside for federal PSDP.
Civil budget decreased from Rs 460 billion to Rs 437 billion.
Defence budget will remain at Rs 1.150 trillion.
Tax net will be increased as only 2,000,000 people in Pakistan file tax returns, of which 600,000 are employees.
Rs 45.5 billion have been allocated for Karachi’s development programme.
Rs 40 billion will be given in subsidy for gas and electricity.
Interest-free loans will be provided to 80,000 deserving people every month.
BISP stipend increased from Rs 5,000 to Rs 5,500.
Rs 421 billion allocated for pension.
Rs 12 billion allocated for agricultural programme.
10 percent ad hoc relief for armed forces’ employees.
Pensions increased by 10 percent.
Employees of Grades 1-16 given 10 percent increase in salaries.
Employees of Grade 17-20 given five percent increase in salaries.
No increase in salaries for government employees from Grades 21 to 22.
Rs 2,891 billion set aside to pay interests.
Rs 70 billion allocated for water reservoirs.
Minimum wage set at Rs 17,500.
Ministers agree to voluntary 10 percent cut in salaries.
Rs 63.5 billion allocated for special areas, including merged districts of Khyber Pakhtunkhwa, Azad Jammu and Kashmir and Gilgit-Baltistan.
Rs 75 billion allocated for equitable regional development in order to accelerate development of less developed areas
Rs 22 billion set aside for 10-year development plan of merged districts.
Rs 128 million allocated for conservation and promotion of rich and diverse cultural heritage of Pakistan.
Rs 28,646 million allocated for Higher Education Commission.
Rs 912 billion allocated for provincial annual development plans.
General sales tax on goods will remain unchanged and will stand at 17 percent.
Food items supplied to bakeries and restaurants will be taxed at 4.5 percent.
Sales tax will be increased on diamond, gold and silver jewellery.
Inflation targets set at between 5 and 7 percent.
Textile machinery and parts will be exempt from duties.
Steel duties will also be reduced to 5 percent to help razor exporters.
Medicinal ingredients will be given a 3 percent import duty exemption.
Duty on different types of paper will be reduced from 20 percent to 16 percent.
Property can’t be registered in the name of non-filers.
Those who will provide jobs to new graduates will be given tax rebates.
Tax on services will be introduced.
Aviation Division will get Rs 1,266.5 million for fiscal year 2019-20.
Rs 100 million earmarked for Board of Investment.
Rs 39.986 billion set aside for Cabinet Division.
Climate Change Division will get Rs 7579.2 million.
Rs 100 million earmarked for Commerce Division.
Rs 248.3 million fixed for Communication Division (other than NHA).
Rs 24.457 billion set aside for Pakistan Atomic Energy Commission.
Rs 301.47 million earmarked for Pakistan Nuclear Regulatory Authority.
Rs 581.812 million set aside for Petroleum Division.
Rs 7,963.517 million allocated for Planning, Development and Reform Division.
Rs 200 million set aside for Poverty Alleviation and Social Safety Division.
Rs 16 billion will be given to Railways Division.
Rs 1,000 million allocated for Religious Affairs and Interfaith Harmony Division.
Science and Technological Research Division will get Rs 7,407.361 million.
