The federal cabinet has approved the supplementary finance bill (mini-budget) 2021 paving the way for increase in the General Sales Tax (GST) on 150 items including computers and smartphones.
The mini-budget and the State Bank of Pakistan (SBP) Autonomy bills will be tabled in the National Assembly later in the day.
The NA session has been scheduled to begin at 4pm Thursday. The opposition parties have vowed to block both bills.
Prime Minister Imran Khan chaired the cabinet meeting which approved the supplementary finance bill. Some of the coalition partners had earlier expressed reservations over the bill.
Finance Minister Shaukat Tarin briefed the cabinet members about the supplementary finance bill.
Immediately after the cabinet meeting, Prime Minister is chaired the parliamentary party meeting of his Pakistan Tehreek-e-Insaf (PTI) and its coalition parties, SAMAA TV’s Abbas Shabir reported.
The mini-budget will abolish several tax exemptions, leading to an increase in the prices of 150 items.
Rs1300 billion tax exemptions have been extended to various sectors for many years including Rs578 billion in sales tax exemptions, and the mini-budget will withdraw tax exemptions of Rs350 billion worth, SAMAA TV’s Shakeel Ahmed reported.
Sales tax would be imposed on the 150 items in question, he said.
Imported smart phones could be taxed at the rate of 17% while the tax rate on imported vehicles could be increased to 17% from the current 12.5%.
The government plans to withdraw the incentive on electric vehicles (EVs) which will be taxed at the rate of 17%, Shakeel Ahmed revealed.
The sales tax on electric vehicles is currently set at 5% as a part of the government policy to promote clean energy.
Imported infant formula (baby milk), imported food items including biscuits and cheese, computers, and cosmetics will also become expensive.
Under the mini-budget a withholding tax of 10% will also be introduced on IT related products. This, coupled with the sales tax, could lead to a sharp increase in the prices of computers. However, Federal IT Minister Aminul Haq on Wednesday said that he has opposed taxes on computers.
The government also plans to increase income tax on phone calls to 15% from the current 10%.
Mini-budget impact
- Computer and tablet PCs to see a drastic rise in their prices after the GST is increased to 17% and a withholding tax is introduced at the rate of 10%
- Imported smartphones will become expensive with GST increased to 17%
- Tax on phone calls will be increased to 15% from the current 10%
- Imported vehicles will be taxed at the rate of 17% instead of current 12.5%
- Electric vehicles (EVs) too will cost more as the government increase GST to 17% from 5%
- Imported infant formula (baby milk) to become more expensive
- Imported food items including biscuits and cheese will cost more, but the government believes only the rich consume them.
- Women will be paying more to look beautiful as tax goes up on imported makeup products.
Economist Abid Sulehri says the mini-budget may also hurt the middle class but the rich would be paying more.
“When exemptions of GST will be given back, some things will become expensive. The impact on the common man depends on your definition of common man. The cell phone had brackets. The expensive smart phones will become even more expensive with a higher duty. We have seen in the last six months that the the completely built units and the luxury cars have become more expensive. But this does not impact the basics for the common person,” he said speaking on SAMAA TV.
“The upper class will pay more. If they want a Rs2 crore car, they will pay maybe Rs10 lakhs more and can.”
Sulehri also said that the mini-budget would not affect the prices of medicine.
Explainer: What is the mini-budget?
The government has introduced the supplementary finance bill to meet certain conditions set by the International Monetary Fund (IMF). It needs to pass the bill before January 12 when the IMF Executive Board will give the final node to a $1 billion loan tranche for Pakistan.
Under the deal with the IMF, the government has revised its tax revenue target from Rs5829 billion to Rs6100 billion.
from SAMAA https://ift.tt/3FFPwyl
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