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Home Business

Ishaq Dar tables mini-budget to unlock IMF funding

by News Publishing
February 16, 2023
in Business, Finance
Reading Time: 3 mins read
0
Financial crisis worsens as govt directs AGPR to stop salaries
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In order to meet the last prior actions previously agreed upon with the International Monetary Fund (IMF) to secure early disbursement of approximately $1.2 billion in installments, Finance Minister Ishaq Dar on Wednesday introduced the Finance (Supplementary) Bill, 2023, in both houses of the parliament. This bill outlines tax measures to raise an additional Rs170 billion in the following four and half months.

Through statutory regulatory directives, two measures—raising the federal excise duty (FED) on cigarettes and boosting the general sales tax (GST) rate from 17 to 18pc—were put into effect right away. The Federal Board of Revenue (FBR) anticipates that these two actions will bring in Rs115 billion.

The finance bill, generally known as the mini-budget, also proposes increasing GST from 17pc to 25pc on 33 categories of goods covering 860 tariff lines — including high-end mobile phones, imported food, decoration items, and other luxury goods. However, this raise will be notified through another notification.

The excise charge on cement has been hiked from Rs1.5 to Rs2 per kg through the budget bill, a move that is expected to bring in an additional Rs6 billion.

To generate an additional Rs10 billion for the government, the excise duty on carbonated/aerated beverages was hiked from 13 to 20 percent.

To generate an additional tax of Rs4 billion, a new excise tax of 10% was proposed on non-aerated drinks such juices, such as mango and orange.

The government would receive an additional Rs10bn in tax revenue from the rise in excise duty on business, first, and club class airline tickets. On the cost of airline tickets, a 20 percent tax has been proposed.

The government has proposed new taxes on various functions and events held at hotels, restaurants, clubs, community places, and other venues. A 10% withholding tax will be imposed on these gatherings, with the aim of raising Rs1bn to Rs2bn. To improve transparency, a 10% withholding tax on off-market sales and purchases of shares has also been proposed. The sales tax on completely built mobile phone imports has been increased to 18% for phones costing between $200 to $500, and to 25% for mobile sets worth $500 or more.

The increase in sales tax on luxury items, including food imports, such as confectionary, frozen fish, preserved fruits, and chocolates, will lead to additional revenue of Rs4bn. The budget also includes tax increases on various items, including home appliances, shoes, carpets, furniture, and musical instruments. These measures were proposed to meet the requirements agreed upon with the IMF, which included increasing electricity and gas rates and allowing a free-floating exchange rate.

The BISP welfare scheme’s handouts are proposed to increase from Rs360bn to Rs400bn to offset the budget’s inflationary impact. The National Assembly and Senate will review and vote on the bill, which is expected to pass into law by Monday or Tuesday. The IMF has set a deadline of March 1 for the implementation of these measures, and the bulk of the tax measures, worth Rs115bn, were already implemented on Feb 14 through SROs.

Tags: IMFIshaq DarlatestMini budget
News Publishing

News Publishing

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