ISLAMABAD: Finance Minister Ishaq Dar presented the budget for fiscal year 2023-24 on the floor of the National Assembly on Friday amid smooth proceedings with the opposition missing from the benches.
Dar said the government had set a modest growth target and despite being an election year, presented a responsible and balanced budget and not a popular one, with a focus on curbing inflationary pressures.
No new taxes, rise in minimum wage
The finance minister announced that the government was imposing no new taxes for the upcoming year, the minimum wage was being raised to Rs32,000 from Rs25,000 and the minimum pension was also being raised to Rs12,000.
Furthermore, Dar announced that the government had decided to give 35 per cent ad-hoc relief in the salaries of federal government employees from grade 1-16 and 30pc to grade 17-22 employees aimed at increasing their purchase power, along with an increase in their pensions by 17.5pc.
Apart from that, some of the notable changes in taxes/duties introduced by the government in budget 2023- 24 are:
Dining out made easier
Dar announced that in a bid to promote digital payments — through debit/credit cards, mobile wallets or QR scanning — at restaurants, the government has reduced the tax rate from 15pc to 5pc.
That means dining out has been made cheaper if one opts for electronic payment methods.
In line with the government’s solarisation initiative, the budget announced an exemption on customs duty on the raw material used in production of solar energy products.
The exemption encompasses essential components such as inverters, solar panels, and batteries, marking a positive step towards promoting renewable energy in the country as the costs of adopting solar energy are likely to go down for the average consumer.
Boost for IT sector
In a bid to boost IT (information technology) exports, a 0.25pc concessional rate of income tax will be intact until June 30, 2026.
Moreover, freelancers earning up to $24,000 per year will also be exempted from sales tax registration and filing tax returns while a singe page income tax return will be introduced for them.
Additionally, IT and IT enabled service providers will be allowed to import duty-free software and hardware valuing 1pc of their total export proceeds.
Dar said the IT sector was being given the status of an industry which would help it in availing concessional income tax rates.
The government also reduced the sales tax rate from 15pc to 5pc for IT services.
The budget proposes withdrawing the capping of fixed duties and taxes on the import of old and used vehicles of Asian makes above 1300cc, which means they can become more expensive now.
Other notable exemptions
Among other notable exemptions in customs duties or relief in sales tax, the budget proposed:
Exemption of customs duties on raw materials of diapers and sanitary napkins.
Exemption of customs duties on import of shrimps/prawns/juveniles for breeding in commercial fish farms and hatcheries.
Removal of regulatory duty on second hand clothing.
Grant of exemption of sales tax on contraceptives and accessories.
Waiver of 2pc final withholding tax on purchase of immovable property for nonresident individual National Identify Card for Overseas Pakistanis/Pakistan Origin Card holder where immovable property is acquired through foreign remittances remitted from abroad.
Ten per cent reduction in tax liability or Rs5m, whichever is lower, for a builder and 10pc reduction or Rs1m, whichever is lower, for an individual for own construction of house for three years.
Conversely, there were some moves which are likely to hurt the common man’s pocket:
Withdrawal of exemption of sales tax on edible products sold in bulk under brand names or trademarks.
Enhancement in reduced rate of sales tax from 12pc to 15pc on supplies made by point of sale retailers dealing in leather and textile products.
Electric power transmission services are proposed to be taxed at 15pc.
Re-imposition of 0.6pc advance adjustable withholding tax on cash withdrawal for non-active taxpayers.
Increase in withholding tax rate from 1pc to 5pc on payment to non-resident through debit/credit or prepaid cards. (Two per cent to 10pc for non-active taxpayers).
Imposition of federal excise duty on energy inefficient fans at Rs2,000 per fan and incandescent bulbs at 20pc of value is proposed.