ISLAMABAD: The government has proposed to increase withholding tax on mobile telephone calls from 10 to 15 percent.
The Finance (Supplementary) Bill, 2021 tabled before the National Assembly on Thursday has also proposed to double withholding tax (Rs100,000-Rs400,000) on persons who sell locally-manufactured vehicles within 90 days of delivery of such vehicles, even if, they are registered.
According to the details released by the Federal Board of Revenue (FBR) on Thursday, the FBR chairman explained the salient features of the bill to the Special Cabinet meeting held on Thursday to discuss and approve the Finance (Supplementary) Bill, 2021.
In his presentation, the FBR chairman clarified that the Federal Excise Duty (FED) on imported and locally-manufactured/assembled vehicles is proposed to be increased on the recommendation of the Tariff Policy Board and the Ministry of Commerce.
Advance tax on cellular services is proposed to be increased from 10 percent to 15 percent, 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 own-money. Exemptions available to the REIT have been extended to special purpose vehicles setup under a REIT.
The FBR chairman apprised the cabinet that the IMF had demanded Rs700 billion of tax and imposition of 17 percent GST across the board. However, team FBR managed to negotiate tax exemptions worth Rs343 billion and defended the productive and marginalised sectors of society.
While explaining the salient features of the proposed Finance (Supplementary) Bill, 2021, he clarified that commodities of daily use such as 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 break-up 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.
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.
Under the Finance (Supplementary) Bill 2021, Federal Board of Revenue (FBR) has clarified that the “digital means” electronic or digital payments as defined by the State Bank of Pakistan (SBP).
A new Directorate General of Digital Invoicing and Analysis will be established.
The government has proposed to levy advance tax on TV plays and advertisements. Any licensing authority certifying any foreign TV drama serial or a play dubbed in Urdu or any other language, for screening and viewing on any landing rights channel, shall collect advance tax at the specified rates.
Any licensing authority certifying any commercial for advertisement starring foreign actor, for screening and viewing on any landing rights channel shall collect advance tax at the rates specified.
The tax required to be collected under this section shall be minimum tax in respect of income arising from such drama serial or play or advertisements.
The rate of tax to be collected under section 236CA shall be Rs.1,000,000 per episode on the foreign-produced TV drama serial or play; Rs.3,000,000 foreign-produced TV play (single episode) and the rate of tax would be Rs 500,000 per second on the advertisement starring foreign actor.
This article was originally published in Business Recorder on December 31, 2021.
