ISLAMABAD, Pakistan: The Minister for Finance and Revenue Shaukat Tarin on Friday presented the Federal Budget 2021-22 amounting to Rs 8,487 billion at the National Assembly amid the opposition’s noisy protest.
Presenting the Federal Budget 2021-21 in the Lower House of the Parliament, Shaukat Tarin said that the budget focuses on Prime Minister Imran Khan’s vision of a strong and sustainable growth-driven Kamyab Pakistan.
The finance minister said that the main objectives of the budget are to strike a balance between fiscal deficits due to COVID-19 and boosting the growth of the economy besides keeping a primary balance at a sustainable level.
The finance minister said that the gross revenues for the next Fiscal Year 2021-22 have been estimated at Rs 7,909 billion compared to the revised estimate of Rs 6,395 billion for the outgoing Fiscal Year 2020-21, which shows a handsome growth of 24 percent in gross revenues.
The minister said that the Federal Board of Revenue (FBR) revenues are projected to grow by 24 percent from Rs 4,691 billion to Rs 5,829 billion. He said that the non-tax revenues are projected to grow by 22 percent.
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Shaukat Tarin said that the provincial share in federal taxes would increase from Rs 2,704 billion last year to Rs 3,411 billion, meaning an additional Rs 707 billion or 25 percent increase. He added that this should enable the provinces to spend resources on development and critical social sectors like health, education, population welfare, youth, women development, sports, and labour welfare.
After provincial transfers, the net federal revenues are estimated at Rs 4,497 billion compared to Rs 3,691 billion under the revised estimate for last year, showing a growth of about 22 percent.
The overall deficit for 2021-22 is estimated at 6.3 percent as opposed to the revised estimate of 7.1 percent for the current fiscal year. The primary deficit is targeted at 0.7 percent. Despite the COVID-19 pandemic, the government has continued on the path of reduction of primary deficit which he said is a great achievement.
Shaukat Tarin said that the federal development spending is being increased from Rs 630 billion to Rs 900 billion which is an increase of around 40 percent.
The minister said that it is imperative that government expenditures are minimized and their utility is ensured. Therefore, he said that we will continue to be austere throughout the government.
The finance minister said that subsidies are projected at Rs 682 billion up from Rs 430 billion. These mostly comprise due payments of Independent Power Producers (IPPs), tariff differential subsidies, and concessions on food.
The finance minister said that Prime Minister Imran Khan wants to change the course of history by uplifting 4 to 6 million low-income households through a bottom-up approach from next year.
The federal minister for finance announced that every household will be provided Rs 500,000 interest-free business loans. Every farming household will be given Rs 2050,000 interest-free farming loan and Rs 200,000 for tractors and machineries. These families will be provided with low-interest housing loans up to Rs 2 million so that they can build their houses. Every household shall be provided with a Sehat Card and one percent from every household will be provided free technical training. Through this action we are giving a comprehensive package to the low-income group people; a slogan of which was raised by many leaders in the past but nothing was delivered. He said that this is an essential requirement of Imran Khan’s promise of Riyasat-e-Madina.
The finance minister said that the major initiative of the government for social protection and poverty alleviation is the Ehsaas Programme. For this program, Rs 260 billion is being proposed in the next budget which is by far the largest allocation and reflects the vision of the prime minister to help the extremely poor segments of the society.
The finance minister announced the grant of 10 percent ad-hoc relief allowance for all the federal government employees and a 10 percent increase in pensions with effect from next month. The orderly allowance has been enhanced from Rs 14,000 to Rs 17,500. The integrated allowance for employees in the basic pay scale 1 to 5 has been doubled from Rs 450 to Rs 900.
The finance minister said that the minimum wage is proposed to be increased to Rs 20,000 to mitigate the inflationary pressures on the low-income groups.
The minister said that the federal government has fixed a 4.8 percent growth target for the next financial year which would be broad-based as it would encompass all the key sectors of the economy. He said that we intend to undertake a series of measures to achieve six to seven percent growth over the next two to three years.
Shaukat Tarin said that an agricultural transformational plan has been devised to increase productivity. Under the plan, support will be provided from water to seeds, fertilizer, agri-credit, tractors and machinery, commodity warehousing, cold storage, and food processing industry.
The minister said that we are investing in the establishment of Special Economic Zones (SEZs), supporting new exports in the IT sector and agro-based industries to increase our exports. He said that we are endeavoring to make China Pakistan Economic Corridor (CPEC) a platform where industries will be relocated. This, he said, will provide employment opportunities and bolster our exports.
In addition, we will expend earnest efforts in promoting Foreign Direct Investment (FID) in the export sector.
Shaukat Tarin said that a package of tax incentives has especially been designed for the housing schemes undertaken under the Naya Pakistan Housing Authority. He said that the government is providing a subsidy of Rs 300,000 for low-income households to enable them to build their own houses. For this purpose, an allocation of Rs 33 billion is proposed in the budget. He said that banks are participating in a financing programme, which has so far attracted applications of more than Rs billion. Of which, Rs 70 billion have been approved and disbursements have started.
The finance minister said that the government is placing the highest priority to uplift the agriculture sector. He said that Rs 12 billion is being allocated for various agri-related initiatives which include Rs 1 billion for locust emergency and food security projects; Rs 2 billion for enhancing the productivity of rice, wheat, cotton, sugarcane, and pulses; Rs 1 billion for enhancing oil cultivation on a commercial scale and Rs 3 billion for improvement of water courses.
Shaukat Tarin said that a total of Rs 91 billion are proposed in the Budget 2021-22 for ensuring water security, excluding hydel energy generation projects. He said that Rs 57 billion are being allocated for the Dasu Hydropower project, Rs 23 billion for Diamer-Bhasha, Rs 6 billion for Mohmand Dam, and Rs 14 billion for the Neelum-Jhelum hydropower project.
The finance minister said that Rs 118 billion are being allocated in the Federal Budget 2021-22 to ensure energy security.
The minister said that Rs 7.5 billion are being earmarked for 1,000 KVs Islamabad West and Lahore North transmission lines; Rs 8.5 billion for evacuation of 2,160 MW of power from Dasu; Rs 5.5 billion for evacuation of power from Suki Kinari, Kohala, Mahal Hydropower project, and Rs 12 billion for secondary transmission lines in Hyderabad and Sukkur.
The minister for finance said that we will invest in completing the 1,200 MW of coal-fired power projects in Jamshoro for which Rs 22 billion will be allocated. He said that Rs 16.5 billion are being proposed for K-I and K-II in Karachi and fifth extension of Tarbela Hydropower project.
Referring to the special development packages announced for different regions, the finance minister said that Rs 20 billion have been earmarked for the accelerated development plan for Southern Balochistan, Rs 25.4 billion for Karachi Transformation Plan, Rs 40 billion for socio-economic development of Gilgit-Baltistan, and Rs 19.5 billion for development of different districts of Sindh.
The minister said that the government attaches special attention to the development of tribal districts and has increased allocation for them to Rs 54 billion which includes Rs 30 billion for 10 yea development plan.
The finance minister said that the government has made social sector improvement the key priority in areas like health, education, Sustainable Development Goals (SDGs), climate change for which Rs 118 billion have been proposed in the PSDP which includes Rs 30 billion for health, Rs 44 billion for higher education and Rs 68 billion for the achievement of SDGs.
Shaukat Tarin said that US$ 1.1 billion will be spent on importing COVID-19 vaccine besides providing funding for local production of anti-COVID vaccine. He said that it is estimated that over 100 million people will be vaccinated by June 2022. He said that Rs 100 billion have been proposed to meet exigencies related to COVID-19.
The minister said that exemptions given on COVID-19 medical equipment or items have been extended for further six months.
Additional 35 raw materials required in the manufacturing of these items have also been exempted from customs duties so that supply of COVID-19 related medicines be ensured at affordable prices.
The finance minister said that Rs 10 billion have been made for that the Kamyab Pakistan Program. He said that an anti-rape fund is being established with an amount of Rs 100 million.
To undertake a new population census next year, an amount of Rs 5 billion as the federal share has been proposed while a similar amount will be allocated to hold local government elections.
The finance minister said that the federal government will extend financial support of Rs 20 billion to Pakistan International Airlines (PIA) and Rs 16 billion to Pakistan Steel Mills (PSM).
The finance minister announced several tax incentives and exemptions for various sectors to promote business activities and provide relief to the general public.
The minister said that it is proposed that small cars up to 850 CC capacity may be exempted from levy of Federal Excise Duty (FED) besides reducing the sales tax rate from 17 percent to 12.5 percent and withdrawing value-added tax.
Shaukat Tarin said that the government is encouraging the manufacturing and use of electric vehicles. For this purpose, various tax exemptions and concessions are being proposed, which include tax exemption on import of CKD kits for local manufacturing of electric vehicles, reduction in the sales tax rate on locally manufactured electric vehicles from 17 percent to 1 percent, withdrawal of value addition tax on import of electric vehicles and CKD kits.
The FED is being withdrawn on four-wheelers electric vehicles.
The minister said that zero-rating on export on IT and IT-enabled services is being proposed by amending ICT (Tax and Services) Ordinance 2001. He said that the Federal Excise Duty is being withdrawn on industries related to cooking oil, ghee, and steel products in erstwhile FATA and PATA. The FDE is also being withdrawn on juices, which was earlier imposed through Finance Act 2019.
The finance minister said that a cottage industry having an annual turnover of over ten million rupees will no longer be required to register for sales tax.
To facilitate the registered persons and enhancing the ease of doing business, he said that we are allowing constructive payment for adjusting payable and receivable under Section 73 of Sales Tax law.
The finance minister said that the removal of restriction on input tax allowance under the sales tax law has been a major demand from the business community.
However, he said that considering the importance of minimum value addition on the VAT model, it is proposed to eliminate this restriction on the highly regulated corporate sector that is public limited companies listed on Pakistan Stock Exchange. He said that this would be a major breakthrough for major corporatization of the economy and facilitation of the regulated corporate sector.
Shaukat Tarin said that it is proposed to grant an exemption on the import of high-quality art and printing paper for the purpose of printing and publication of the Holy Quran.
Shaukat Tarin said that SEZs are being established throughout the Country and to encourage investment in these zones tax exemption on import of plant, machinery, equipment, and the raw material is being proposed.
The minister said that the government is encouraging the storage of grain and agriculture activity and improve shelve lives of commodities in rural areas. He said that it is, therefore, being proposed to grant an exemption on locally produced silos.
The rate of FED on telecommunication is proposed to be reduced from 17 to 16 percent. He said that we are proposing the withdrawal of FED on merchant discount rate charged on POS by banks so that businesses are encouraged to carry out transactions through POS machines.
The minister said that the government is introducing a number of tax measures as well as concessions for the promotion of the digital economy. He said that we are proposing a new prize scheme for the customers making purchases from tier-1 retailors integrated with FBR. The monthly prizes of Rs 250 million will be disbursed to customers holding system-generated invoices issued by tier-1 retailors through computer balloting.
Shaukat Tarin said that the tax exemption is being given on the import of auto-disable syringes and their raw materials and exemption on oxygen cylinders to mitigate the adverse effects of COVID-19.
Shaukat Tarin said that it is being proposed to bring 30 party sales made through online marketplaces within the purview of sales tax.
The minister said that the FED on mobile phone calls exceeding three minutes, internet data usage and SMS messages is being proposed.
The finance minister said that sugar is being proposed to be included in the third schedule to the Sales Tax Act so that tax is charged on the actual retail price of the product. He said that this measure would not only ensure due payment of tax but also help in putting a more effective price control mechanism.
The minister said that we have carried out an in-depth exercise to review tax exemptions under sales tax and identified number of non-essential items for withdrawal from the purview of exemption. The same exercise has also been done in respect of reduced rates of taxation. This has been done by excluding exemptions currently available for ordinary food, education, and health-related items.
Income Tax Relief:
The finance minister said that it is being proposed that 12 withholding tax provisions may be omitted as part of income tax relief measures. These are related to banking transactions, the Pakistan Stock Exchange, margin financing air travel services, international transactions through debit and credit cards, and extraction of minerals.
The withholding tax on mobile phone services has been reduced to 10 percent for the next financial year. The withholding tax on the oil field, warehousing, security, logistic, telecommunication, and collateral management services will be reduced to three percent from eight percent.
To alleviate the difficulties faced by the stock market in the past two years, it is proposed that the rate of capital gain tax be reduced to 12.5 percent from 15 percent.
The minister said that it is proposed to rationalize the minimum tax through three different types of interventions. These include gradually reducing the general tax rate from 1.5 percent to 1.25 percent and enhancing the threshold for individuals and associations of persons to pay a minimum tax on the turnover basis from Rs 10 million to Rs 100 million.
It is proposed that no tax may be collected on the import of books, journals, agriculture equipment, and motor vehicles in Completely Built Unit (CBU) condition up to 850 CC.
Shaukat Tarin said that Small and Medium Enterprises (SMEs) having turnover exceeding Rs 100 million and up to Rs 250 million shall pay tax at the rate of 0.5 percent of their turnover or 15 percent of their taxable income at their own option.
The finance minister said that all services receipts, which are brought to Pakistan through the banking channel, shall be taxed at a reduced rate of 1 percent under the final tax regime and no question thereafter shall be asked about it.
The minister said that SEZ enterprises will be exempted from minimum tax for tax year 2021 and onwards.
To promote innovation, technology, and entrepreneurship, special tax incentives have been proposed for Special Technology Zones.
The finance minister said that regulatory duties on import of mobile phones are being increased.
Similarly, regulatory duties on import of tyres are also being enhanced to encourage and protect the local industry.