ISLAMABAD: A Special Cabinet meeting was convened on 30th December, 2021 to discuss and approve the Finance (Supplementary) Bill, 2021. Chairman Federal Board of Revenue (FBR) explained the salient features of the Bill. In his presentation, he emphasized upon the importance of General Sales Tax (GST) reforms.
The Chairman apprised the Cabinet that IMF had demanded Rs. 700 billion of tax and imposition of 17% GST across the board. However, Team FBR managed to negotiate tax exemptions worth Rs. 343 billion and defended the productive and marginalized sectors of society. While explaining the salient features of proposed Finance (Supplementary) Bill, 2021, he clarified that commodities of daily use by common man like food items, dairy products, clothing were being kept tax-free in the domestic market. Similarly, import/supply of rice, wheat, meslin, local supply of other grains, fruits, vegetables, beef, mutton, poultry, fish, eggs, sugar cane, beet sugar, and imported vegetable and fruits from Afghanistan are also retained as tax-free. Moreover, milk and fat-filled milk have also been kept as tax-free.
Chairman FBR further elaborated in his presentation to the Cabinet that various items which might somehow attract adverse impact of tax reforms, have been identified for targeted subsidy. He added that input adjustment shall remain available to all taxable business inputs and assured expeditious sales tax refunds to business and industry on import of raw material and capital goods including pharmaceutical sector. He further explained that Pharmaceutical firms have been equated with exporters for purposes of release of refunds within 72 hours. Therefore, pharma firms will now be able to claim refunds on GST paid as input tax on packaging material, utilities etc. which they previously could not – having price tag of Rs. 35 billion. Expectedly, the prices of medicines in the retail market should come down, approximately by 20%.
He highlighted the breakup of total withdrawn tax exemptions of Rs 343 billion and said they can be broken into 3 main segments. These segments are Pharmaceutical with Rs.160 billion, Plant and Machinery Rs.112 billion, and goods Rs. 71 billion. It was clarified that Rs. 272 billion of above tax expenditure on account of machinery and pharma is refundable/adjustable. Only Rs 71 billion tax exemptions on goods is the net imposed tax and this tax includes tax on luxury goods Rs 31 billion and Rs 31 billion on business goods. Only a meagre amount of Rs. 2 billion is related to goods which may affect common man for an elaborate targeted subsidy plan of Rs 33 billion has been proposed to protect any segment of population which may get affected even indirectly by the withdrawal of some exemptions etc.
He further clarified that FED on imported and locally manufactured/assembled vehicles is proposed to be increased on the recommendation of Tariff Policy Board and Ministry of Commerce. Advance tax on cellular services is proposed to be increased from 10% to 15% while Withholding Taxes are proposed on foreign produced TV serial/dramas and advertisements with foreign actors. Tax on transfer of newly purchased vehicles has been increased to discourage on-money. Exemptions available to REIT have been extended to special purpose vehicles setup under a REIT.
It is pertinent to mention that various issues including pharmaceutical sector, plant & machinery came under discussion in the Cabinet meeting. The Cabinet members raised their concerns about inflationary impact of withdrawal of GST exemptions. Finance Minister explained the dynamics of these withdrawals and assured the cabinet that the inflationary impact will be minimal and further added that due to adjustment of inputs on account of utilities and packaging material etc, the prices of pharmaceutical products will come down. Similarly, adjustment/ refund is available on any input paid on plant and machinery, he added.
A question was also raised regarding increase in advance tax on cellular services. Finance Minister explained that this increase was necessary to cover the revenue loss due to loss of FE on mobile phone calls that was enacted in Finance Act, 2021.
Meanwhile, Afghanistan Revenue Department (ARD) and Federal Board of Revenue (FBR) concluded second round of negotiations on Double Taxation Agreement (DTA) between Pakistan and Afghanistan. The four-member delegation of Afghanistan Revenue Department (ARD) was on visit to Pakistan, which commenced from 27th December, 2021.
The inaugural session was presided over by Qaiser Iqbal, Director General (International Taxes), FBR who welcomed the delegates and hoped that the proposed DTA between the two brotherly countries would go a long way in fostering economic relationships and would also contribute to the development of both the countries. The negotiations were conducted in the most cordial and friendly atmosphere. Both the delegations discussed all the outstanding issues of the first round of negotiations held in Islamabad from 28th to 30th March, 2016. Both the sides presented and appreciated each other’s respective positions. However, it was agreed that the un-resolved issues would be discussed and finalized in the third round of negotiations to be held in Kabul, Afghanistan on mutually agreed dates.
The Afghan delegation was led by Esmatullah Salimi, Revenue Audit Director, ARD and included Abdul Wali Noori, Technical Deputy Director-General, ARD, Nida Mohammad Seddiqi, Legal Services Director, ARD and Najeebullah Ahmadzai, Advisor to Ministry of Finance. The Pakistan delegation was headed by Qaiser Iqbal, Director General (International Taxes), FBR and included Barrister Nowsherwan Khan, Chief (International Taxes) and Hira Nazir, Secretary (Tax Treaties & Conventions), FBR.
Meanwhile, as a sequel to E-Kutcheries held regularly to comply with the directions of the Prime Minister of Pakistan, Chairman Federal Board of Revenue (FBR)/Secretary Revenue Division, Dr. Muhammad Ashfaq Ahmed held yet another Weekly E-Kutcheri at FBR (HQs) on Friday to listen to the complaints and concerns of taxpayers. This is the fourth week of holding E-Kutcheri by the Chairman FBR after he decided to hold it on every Friday to expedite redressal of grievances of taxpayers. He listened to the complaints of the taxpayers and issued on-spot directions for immediate resolution of complaints. He also advised the taxpayers to visit their nearest RTO and Collectorate of Customs for redressal of any problem confronted by them.
The Chairman FBR appreciated the suggestions put forth by the taxpayers and assured them that their valued input would be duly considered for formulation of tax policies and initiatives for taxpayers’ facilitation. He reaffirmed that FBR was making all out efforts to facilitate the taxpayers. The Chairman FBR has already issued specific directions to all Field Formations for according top priority to the grievances and concerns of female taxpayers and those belonging to remote and marginalized areas of Pakistan. Needless to add that the weekly E-Kutcheri being held by Chairman FBR on regular basis will not only contribute significantly to the timely redressal of the grievances of taxpayers but it will also keep a strong check on the performance of the Field Formations.
Chairman FBR has already instructed all field formations to resolve the outstanding issues of taxpayers and made it clear that any negligence in this regard will not be tolerated.