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Thursday, June 13, 2024  
06 Dhul-Hijjah 1445  

Rs14.46tr budget with massive Rs7.57 trillion deficit

Says perpetrators of May 9 should be held accountable for their actions

Finance Minister Ishaq Dar presented Rs14.46 trillion ($50.45 billion) worth of budget in the National Assembly on Friday. The government will target a budget deficit of 6.54% (Rs7.57 trillion) of economic output in the fiscal year starting on July 1, he said, slightly below the current year’s revised estimate of 7%.

“The government has prepared a responsible budget, not an election budget,” he said on the floor of the house.

The ruling alliance has planned to meet its expenses through taxes, internal borrowings, and more than $2 billion from the IMF under the loan programme.

He started his speech by blaming the PTI, the Ukraine war, and the 2022 flash floods for the country’s financial woes. Prime Minister Shehbaz Sharif, Defence Minister Khawaja Asif, and other federal cabinet members were present in the august house.

The deficit target for the fiscal year ending this month had been revised higher, from a previous projection of 4.9%.

The budget needs to satisfy the IMF to secure the release of stuck bailout money for the crisis-struck country, which is due to hold a general election by November.

Around Rs1.8 trillion – out of the total Rs14.46 trillion – would go to defence. It would target debt servicing of Rs7.3 trillion.

Salient features of budget

  • Targets inflation at 21%
  • Total revenue budgeted for FY23 stands at Rs12,163 billion
  • Net revenue comes out at Rs6,887 billion after subtracting provincial transfer of Rs5,276 billion
  • Expense: Rs1,460 billion
  • PSDP: Rs1,150 billion
  • Subsidy on electricity, gas, and other sectors: Rs1,074 billion
  • Exports: $30 billion
  • International trade: Targets exports of $30 billion
  • Estimates debt servicing funds of Rs7.3 trillion
  • Services provided by restaurants including cafes, food (including ice cream), parlours, coffee houses, coffee shops, deras, food huts, eateries, resorts and similar cooked, prepared or ready-to-eat food service outlets etc are proposed to be taxed at 5% if payment is made through debit or credit cards, mobile wallets or QR scanning
  • K-IV project: Rs17.5 billion
  • 30% to 35% increase in salaries of government employees
  • Pensions are also up by 17.5%
  • Monthly salary increased from Rs25,000 to Rs32,000
  • 0.6% tax on bank transactions over Rs50,000 for non-filer; 10% tax on more than Rs500 million of the annual income of shareholders; and zero tax on less than Rs150 million of the annual income of shareholders
  • Defence budget: Rs1,809 billion. Pakistan Army will get Rs824 billion, an increase of Rs81 from the previous year. Rs128 billion for Bahria. Rs18 billion
  • Withdrawal of capping of the fixed duties and taxes on the import of old and used vehicles of Asian Makes above 1300CC

Agriculture

  • Increase agri loans from Rs1,800 billion to Rs2,250 billion
  • Rs30 billion for 50,000 shifting tube wells to solar panel
  • End taxes on import of saplings, seeds
  • Ending duty and taxes on rice seeder, planter, and dryer in order to increase production
  • Scheme for concessional loans, Rs5 billion allocated for it
  • All agro-based units that are industrial in rural areas that have an annual turnover of 800 million, will be exempted from taxes for 5 years
  • Business and agricultural loan scheme: Rs10 billion allocated for concessional loans
  • $6 billion for subsidy on imported urea
  • Loans to farmers at a small interest rate, Rs10 billion allocated for it

IT and freelancers

  • Income tax for freelancers will be 0.25% till 2026
  • If a freelancer brings $24,000 annually they will be exempt from tax returns
  • Companies will able to import hardware, software upto $50,000 without tax
  • Sales tax on IT services which stands at 15% is brought down to 5%
  • IT sector given small and medium enterprise (SME) status and concessional tax will be applicable to them
  • Banks will have 20% concessional taxes (exemption) on providing loans to IT
  • The government will form an Rs5 billion venture capital fund for the IT sector to encourage entrepreneurs
  • Rolling out a scheme to give professional training to 50,000 IT graduates
  • SMEs to be supported through special allocation and SBP loan scheme
  • Export Council of Pakistan will be formed under the PM to see matters of exports only
  • Banks will have a 20% concession on taxes that will provide loans to agri, IT, and SMEs. It will be available for two years. SMEs turnover threshold has been increased from Rs250 million to Rs800 million
  • Rs10 billion allocated for small businesses under the PM scheme
  • Government will bear tax payments up to 20% if SMEs fail to pay loans
  • Tax on young entrepreneurs decreased by 50%
  • Separate credit agency for SMEs
  • Energy projects: Rs86.4 billion
  • Infrastructure: Rs491.3 billion

Metal

  • Metal and mineral sales through online platforms made tax free
  • Tax on listed companies to come down from 1.5% to 1%
  • Custom duty on pet scrap material down to 11% from 20%
  • Capacitators, mining machinery, adhesive tapes, rice mill machinery, machine tools are cleared of customs duty
  • Filament yarn for the textile industry to be made tax free
  • Remittances are equal to 90 % of exports, that is how important overseas Pakistanis are
  • They have a tax worth 2% on something, that is being removed

Concessions for overseas Pakistanis

  • Abolishes 2% tax on buying immovable property in Pakistan
  • Diamond card category added in remittances card. It will be issued to those who will send more than $50,000 worth of remittance to Pakistan. They will have non-prohibited board licenses, greatest passport of Pakistan, preferential access to Pakistan’s embassies and consulates, fast track immigration facilities at airports. A scheme will be launched by SBP to award prizes via a lucky draw to diamond cardholders.

Construction

  • Construction company, for construction of new homes and buildings, to get tax relief of 10% or Rs5 million in their earning
  • It is proposed that 10% tax credit or Rs1 million to those who will construct homes for themselves. It is proposed that it should be applicable to projects after July 31, 2023.
  • More than 40 industries are associated with this sector
  • Tax benefits for Real Estate Industry Trust (REIT) will be extended for another year. So it will be applicable till June 30, 2024

Education

  • Rs65 billion for HEC
  • Rs70 for development expenditure
  • The total of this is Rs135 billion for higher education
  • Setting up Pakistan Endowment Fund, for which Rs5 billion is kept. Under this scholarship and stipend will be given to high school students
  • Rs10 billion for the laptop scheme. 100,000 laptops will be given.

Sports

  • Rs5 billion for the development of sports at schools, colleges, and professional sports

Women empowerment

  • Rs5 billion for women’s empowerment
  • Skill development, easy loans for business, training for business
  • Relief in tax for businesswomen

Youth

  • It is proposed that for the next three years, tax should be reduced by 50% for income earned by youth from businesses under AOP.
  • It will be 2 million for individual or group level and 5 million for company level
  • The age of the owner should be up to 30 years and this programme should start after July 31, 2023.
  • Rs10 billion for the PM youth programme
  • Rs5 billion for trainings under the PM youth programme

BISP

  • 92,000 students to get undergrad salary under the BISP. For this, $6 billion has been allocated.
  • 1.5 million children will be provided services under the BISP nutrition programme. Rs32 billion allocated for it
  • Second-hand clothes have a 10% duty which is not being removed
  • Rs450 billion allocated for low-income families
  • Rs8,750 quarterly will be available for 9.3 million families under the BISP Kafalat programme. The government has allocated Rs346 for it.
  • Stipend prorgamme will be expanded from 6 million to 8.3 million children. It will have 52% girls. Over Rs55 billion has been allocated for it.

USC

  • Rs35 billion allocated for basic items for deserving families
  • Targeted subsidies on flour, rice, sugar, pulses, and ghee

Pakistan Baitul Mal

  • Rs4 billion for treatment and assistance of deserving families

Solar panels

  • Solar panels and their raw materials are exempted from the customs duty

Health insurance for journalists, media workers

Below is the list of products on which duty has been kept at zero

Parts of Lithium Batteries

  • Cells
  • Copper Bar (cell to cell connection)
  • BMS (level 1) Electronic Card
  • Casing
  • Harness Set (Cells Monitoring Wires with tags)

Solar PV Modules Panels manufacturing machinery and equipment

  • Sun Simulator
  • Glass Lifter
  • Tabber Stringer (iv).Hi-Speed Layup Station with ROBOT
  • Motorized Visual Inspection
  • Buffer before Bussing
  • Multi-station for Bussing
  • Centering Conveyor with Visual Inspection
  • Fully Automatic or Semi-automatic Laminator with Centering, Loading & Unloading
  • Automatic Inline Framing Machine
  • Automatic Silicon Dispenser
  • Direction Changer with 90 Degree Rotator
  • Centering Conveyor for Sun Simulator
  • Hi-Pot Test Equipment
  • Electroluminescence (EL) Tester
  • Motorized Conveyor
  • EVA/Black sheet Cutting Machine
  • Ribbon Cutting & Bending Machine
  • Lab Test Equipment
  • Conveyer Belt
  • Laser cutting machine for cell
  • Cell sorting machine & testers

Lithium-ion batteries manufacturing machinery and equipment

  • Weighting kettles
  • Weighting and conveying systems
  • Storage tanks
  • Glue port
  • Transfer tanks
  • Feeder
  • High speed spiral mixer
  • Booster pumps
  • Magnetic filters
  • High speed homogenizer
  • Auxiliary equipment and DCS central control system components
  • Pole piece cathode machine
  • Polo piece rolling machine
  • CNC nibbling machine
  • CNC bending machine
  • Sport welding plant
  • Auxiliary equipment
  • High temperature circulation thermal tester
  • UL 2054 fire testing equipment
  • Pack rotation simulation
  • Free fall tester
  • Battery impact tester IEC
  • UL 1642 flame tester
  • Electromagnetic vibration tester
  • Single wing electromagnetic power drop testing equipment
  • Hydraulic crush testing equipment

Solar Inverters manufacturing machinery and equipment

  • Solder Paste Screen Machine
  • SMT pick and place machine
  • Wave-soldering machine
  • PCB Conveyor Belt
  • SMT Workstation
  • Solder Pot
  • Solder Cleaning Equipment
  • Wire Cutting & Stripping Machine
  • Crimping Machine

Medicines

  • Dextrose Anhydrous Injectable Grade (Pyrogen Free) USP
  • Gefitinib
  • Caspian (Caspofungin 50 mg and 70 mg injection)
  • Bovine Lipid Extract Surfactant
  • Other seeds for sowing

Following IT Related Equipment

  • Laptop computers, notebooks whether or not incorporating multimedia kit
  • Personal computers
  • Other
  • Micro computer
  • Key boards
  • Mouse and other pointing devices
  • Scanner
  • Other
  • CD ROM drive
  • Multimedia kits for
  • Software Export Board
  • Hard disk drives
  • Servers
  • Routers

Imports exempted from duty

  • Specific papers and art cards and board for the printing of Holy Quran
  • Solar panels and import of related machinery
  • Diapers, Sanitary Napkins and Adhesive Tape
  • Mining machinery
  • Rice mill machinery
  • Machine tools
  • Imported seeds
  • Shrimp/prawns for breeding
  • Roasted peanuts
  • Any machinery imported into erstwhile Fata

Products exempted from Sales Tax

  • Contraceptives
  • Agricultural machinery including combine harvesters, dryers for agricultural products, no-till-direct seeders, planters, trans-planters
  • Sales tax in FATA’s newly merged districts
  • import of IT equipment (for exporters)

Reduced duty on imported items

  • Customs duty on Heavy Commercial Vehicles from 10% to 5%
  • Scrap for manufacturers of polyester filament yarn
  • Second-hand clothing, fish, tiles, sports goods
  • IT based system development consultants reduced to 15% from 16%

Dar reiterated that the government hoped to get an agreement with the IMF soon, echoing comments made earlier in the day by Prime Minister Shehbaz Sharif as he addressed his cabinet.

Shehbaz’s government is hoping to persuade the IMF to unlock at least some of the $2.5 billion left in a $6.5 billion programme that Pakistan entered in 2019 and which expires at the end of this month as the country deals with a series of economic and political crises.

The budget would target total tax revenue of Rs9.2 trillion, said Dar, who added there would be no new tax on the industrial sector. The government has targeted total non-tax revenue of Rs3 trillion for 2023/24.

Inflation for the next fiscal year is expected to come in at 21%, the finance czar said.

The finance czar alleged that the PTI government laid “minefields” – a term also used by his predecessor Miftah Ismail for the petrol subsidies announced by ex-PM Khan before leaving office – by giving subsidies on electricity and petrol in violation of the IMF agreement.

The people should realise who damaged the country and saved the country, Dar said as he put all the blame on the PTI.

“Rs5 trillion debt was taken before PTI took over and Rs49 trillion was by the time PTI left,” he said, “The debt increased by 98% in PTI tenure.” He added that God saved Pakistan from going default.

“We did not care for political loss in trying to save Pakistan from default. People must see who saved Pakistan from default and who pushed Pakistan towards it,” Dar said.

He demanded that people who attacked military installations on May 9 – the day when violent protests turned up in the wake of Imran Khan’s arrest – should be held accountable for their actions.

“People like these are not worthy of mercy.”

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