A pro-people, business friendly and growth oriented federal budget for fiscal year 2021-22 with a total outlay of 8,487 billion rupees has been announced.

Presenting the budgetary proposals for the next fiscal year in the National Assembly on Friday, Minister for Finance Shaukat Tarin said the budget focuses on Prime Minister Imran Khan's vision of a strong and sustainable growth driven Kamyab Pakistan.

The Finance Minister said the main objectives of the budget are to strike a balance between fiscal deficits due to COVID-19 and boosting growth of economy besides keeping a primary balance at a sustainable level.

He said the gross revenues for the next fiscal year have been estimated at 7909 billion rupees compared to revised estimate of 6395 billion rupees for the outgoing fiscal year. This shows a handsome growth of 24 percent in gross revenues. The Minister said the FBR revenues are projected to grow by 24 percent from 4691 billion rupees to 5829 billion rupees. Non-tax revenues are projected to grow by 22 percent.

Shaukat Tarin said the provincial share in federal taxes would increase from 2704 billion rupees last year to 3411 billion rupees. This means an additional 707 billion rupees or 25 percent increase. He said 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 4497 billion rupees compared to 3691 billion rupees under the revised estimate for last year. This shows 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 current fiscal year. Primary deficit is targeted at 0.7 percent. Despite COVID-19, the government has continued on the path of reduction of primary deficit, which he said is a great achievement.

Shaukat Tarin said the federal development spendings are being increased from 630 billion rupees to 900 billion rupees, which is an increase of around 40 percent.

He said it is imperative that government expenditures are minimized and their utility is ensured. Therefore, he said, we will continue to be austere throughout the government.

He said subsidies are projected at 682 billion rupees up from 430 billion rupees. These mostly comprise due payments of Independent Power Producers, tariff differential subsidies and concessions on food.

POVERTY ALLEVIATION

The Finance Minister said Prime Minister Imran Khan wants to change the course of the history by uplifting four to six million low income households through bottom-up approach from next year. He said every household will be provided 500,000 rupees interest free business loans. Every farming household will be given 2050,000 rupees interest free farming loan and 200,000 rupees for tractors and machineries. These families will be provided with low interest housing loans up to two million rupees 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; slogan of which was raised by many leaders in the past but nothing was delivered. He said this is an essential requirement of Imran Khan's promise of Riasat-e-Madina.

The Finance Minister said the major initiative of the government for social protection and poverty alleviation is the Ehsaas Programme. For this program, 260 billion rupees are being proposed in the next budget, which is by far the largest allocation and reflects the vision of the Prime Minister to help the extreme poor segments of the society.

EMPLOYEES

The Finance Minister announced the grant of ten percent adhoc relief allowance for all the federal government employees and ten percent increase in pensions with effect from next month. The orderly allowance has been enhanced from 14,000 rupees to 17,500. The integrated allowance for employees in basic pay scale one to five has been doubled from 450 rupees to 900 rupees.

The Finance Minister said the minimum wage is proposed to be increased to twenty thousand rupees to mitigate the inflationary pressures on the low income groups.

GROWTH

The Finance Minister said the government has fixed 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 we intend to undertake a series of measures to achieve six to seven percent growth over the next two to three years.

The Minister said an agricultural transformational plan has been devised to increase productivity. Under this plan, support will be provided from water to seeds, fertilizer, agri-credit, tractors and machinery, commodity warehousing, cold storage and food processing industry.

He said we are investing in establishment of Special Economic Zones, supporting new exports in IT sector and agro-based industries to increase our exports. He said we are endeavoring to make 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 in export sector.

Shaukat Tarin said a package of tax incentives has specially been designed for the housing schemes undertaken under the Naya Pakistan Housing Authority. He said the government is providing a subsidy of 300,000 rupees for low-income households to enable them to build their own houses. For this purpose, an allocation of 33 billion rupees is proposed in the budget. He said banks are participating in a financing programme, which has so far attracted applications of more than one billion rupees. Of which, seventy billion rupees have been approved and disbursements have started.

FOOD/WATER

The Finance Minister said the government is placing highest priority to uplift the agriculture sector. He said 12 billion rupees are being allocated for various agri-related initiatives. These include one billion rupees for locust emergency and food security projects; two billion rupees for enhancing productivity of rice, wheat, cotton, sugarcane and pulses; one billion rupees for enhancing oil cultivation on commercial scale and three billion rupees for improvement of water courses.

Shaukat Tarin said a total of 91 billion rupees are proposed in the budget for ensuring water security, excluding hydel energy generation projects. Fifty-seven billion are being allocated for Dasu Hydropower project, 23 billion rupees for Diamer-Bhasha, six billion rupees for Mohmand Dam and 14 billion rupees for Neelum-Jhelum hydropower project.

ENERGY

The Finance Minister said 118 billion rupees are being allocated in the budget to ensure energy security. He said 7.5 billion rupees are being earmarked for 1000 KVs Islamabad West and Lahore North transmission lines; 8.5 billion rupees for evacuation of 2160 MW of power from Dasu; 5.5 billion rupees for evacuation of power from Suki Kinari, Kohala, Mahal Hydropower project, and 12 billion rupees for secondary transmission lines in Hyderabad and Sukkur. He said we will invest in completing the 1200 MW of coal-fired power projects in Jamshoro for which 22 billion rupees will be allocated. 16.5 billion rupees are being proposed for K-I and K-II in Karachi and fifth extension of Tarbela Hydropower project.

REGIONAL DISPARITIES

Referring to the special development packages announced for different regions, the Finance Minister said 20 billion rupees have been earmarked for accelerated development plan for Southern Balochistan, 25.4 billion rupees for Karachi Transformation Plan, 40 billion rupees for socio-economic development of Gilgit-Baltistan and 19.5 billion rupees for development of different districts of Sindh. He said the government attaches special attention to the development of tribal districts and has increased allocation for them to 54 billion rupees. This includes 30 billion rupees for 10 yea development plan.

SOCIAL SECTOR

The Finance Minister said the government has made social sector improvement the key priority in areas like health, education, sustainable development goals, climate change for which 118 billion rupees have been proposed in the PSDP. This includes thirty billion rupees for health, forty four billion rupees for higher education and sixty eight billion rupees for achievement of SDGs.

VACCINATION

Shaukat Tarin said 1.1 billion dollars will be spent on importing COVID-19 vaccine besides providing funding for local production of anti Covid vaccine. He said it is estimated that over one hundred million people will be vaccinated by June next year.

One hundred billion rupees have been proposed to meet exigencies related to COVID-19.

INITIATIVES

The Finance Minister said ten billion rupees have been earmarked for Kamyab Pakistan Program. He said an anti-rape fund is being established with an amount of one hundred million rupees.

To undertake a new population census next year, an amount of five billion rupees as federal share has been proposed while a similar amount will be allocated to hold local government elections.

He said the federal government will extend financial support of twenty billion rupees to PIA and 16 billion rupees to Pakistan Steel Mills.

TAX INCENTIVES

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 it is proposed that small cars up to 850 CC capacity may be exempted from levy of federal excise duty besides reducing sales tax rate from 17 percent to 12.5 percent and withdrawing value added tax. He said the government is encouraging manufacturing and use of electric vehicles. For this purpose, various tax exemptions and concessions are being proposed, which include tax exemption on import of Completely Knocked Down (CKD) kits for local manufacturing of electric vehicles, reduction in sales tax rate on locally manufactured electric vehicles from 17 percent to one percent, withdrawal of value addition tax on import of electric vehicles and CKD kits. Federal Excise Duty is being withdrawn on four wheelers electric vehicles.

He said zero rating on export on IT and IT-enabled services is being proposed by amending ICT (Tax and Services) Ordinance 2001.  He said federal excise duty is being withdrawn on industries related to cooking oil, ghee and steel products in erstwhile FATA and PATA. FDE is also being withdrawn on juices, which was earlier imposed through Finance Act 2019.

He said a cottage industry having annual turnover of over ten million rupees will no longer be required to register for sales tax.

To facilitate the registered persons and enhancing ease of doing business, we are allowing constructive payment for adjusting payable and receivable under Section 73 of Sales Tax law.

He said removal of restriction on input tax allowance under sales tax law has been a major demand from business community. However, considering the importance of minimum value addition on VAT model, it is proposed to eliminate this restriction on highly regulated corporate sector that is public limited companies listed on Pakistan Stock Exchange. This would be a major breakthrough for major corporatization of economy and facilitation of regulated corporate sector.

Shaukat Tarin said it is proposed to grant exemption on import of high quality art and printing paper for the purpose of printing and publication of Holy Quran.

Shaukat Tarin said special technology zones are being established throughout the country and to encourage investment in these zones tax exemption on import of plant, machinery, equipment and raw material is being proposed.

He said the government is encouraging storage of grain and agriculture activity and improve shelve lives of commodities in rural areas. He said it is, therefore, being proposed to grant exemption on locally produced silos. Rate of FED on telecommunication is proposed to be reduced from 17 to 16 percent. He said we are proposing 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 the government is introducing a number of tax measures as well as concessions for promotion of digital economy. He said we are proposing a new prize scheme for the customers making purchases from tier-1 retailors integrated with FBR. The monthly prizes of 250 million rupees will be disbursed to customers holding system generated invoices issued by tier-1 retailors through computer balloting.

Shaukat Tarin tax exemption is being given on import of auto disable syringes and their raw materials and exemption on oxygen cylinders to mitigate adverse effects of COVID-19.

TAX

Shaukat Tarin said it is being proposed to bring thirty party sales made through online market places within the purview of sales tax.

He said FED on mobile phone calls exceeding three minutes, internet data usage and SMS messages is being proposed.

He said sugar is being proposed to be included in the third schedule to the Sales Tax Act so that tax is charged on actual retail price of the product. This measure would not only ensure due payment of tax but also help in putting a more effective price control mechanism.

The Minister said 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 it is being proposed that twelve withholding tax provisions may be omitted as part of income tax relief measures. These are related to banking transactions, Pakistan Stock Exchange, margin financing air travel services, international transactions through debit and credit cards and extraction of minerals.

Withholding tax on mobile phone services has been reduced to 10 percent for the next financial year. Withholding tax on 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 it is proposed to rationalize the minimum tax through three different types of interventions. These include gradually reducing general tax rate from 1.5 percent to 1.25 percent and enhancing threshold for individuals and associations of persons to pay minimum tax on turnover basis from 10 million to 100 million rupees.

It is proposed that no tax may be collected on import of books, journals, agriculture equipment and motor vehicles in Completely Built Unit (CBU) condition up to 850 CC.

SECTOR INCENTIVES

Shaukat Tarin said SMEs having turnover exceeding hundred million rupees and up to 250 million rupees shall pay tax at the rate of 0.5 percent of their turnover or 15 percent of their taxable income at their own option. 

He said all services receipts, which are brought to Pakistan through banking channel, shall be taxed at a reduced rate of one percent under final tax regime and no question thereafter shall be asked about it.

The Minister said 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.

COVID INCENTIVE

The Minister said exemptions given on COVID-19 medical equipment or items have been extended for further six months. Additional 35 raw materials required in manufacturing of these items have also been exempted from customs duties so that supply of COVID-19 related medicines be ensured at affordable prices. 

DUTIES

The Finance Minister said 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.