How will the new budget affect you?
Islamabad: Despite the federal government presenting a tax-free budget, it has proposed supportive measures under the federal excise (FED) and sales tax that will eventually affect the purse of citizens.
While most of the recommendations are related to improving the document and streamlining various tax regimes, the government has also imposed some new fines.
2020-21 Budget offers tax relief
For example, to fight the coronavirus epidemic, the government has provided relief from sales tax on certain health-related items and equipment. In healthcare-related steps, it has provided relief on the import of dietary foods for use by children suffering from inherited metabolic syndrome.
Another important proposal in the budget is to reduce sales tax on mobile phones manufactured in the country, as per the mobile manufacturing policy. It is expected that smartphones manufactured in Pakistan will be seen in this new policy.
The government has also proposed to withhold the tax to the extent of foreign remittance on cash withdrawal.
For retailers, the government has relaxed the NIC’s position in a major demand. The budget proposes that retailers can transact with buyers of 100,000 or less value without obtaining NIC. This amount was earlier 50,000 and this led to a lot of differences between the retailers and the government.
Similarly, the organized retail sector which is integrated with the Federal Board of Revenue through its sales will benefit from a lower sales tax rate of 12% compared to 14% who have not integrated.
As cement manufacturers are facing unfavorable conditions due to coronovirus epidemic, the FED on cement has been reduced from Rs.2 per kg to Rs1.75 per kg.
The government has lowered tax rates “to encourage and motivate economic activity in the real estate sector” for tax rates applicable to property holding periods and capital gains taxes.
The government’s budget proposals state that plots and constructed property are being bifurcated to determine the period of capital gains, that is, the holding period is limited to 4 years for the taxation of capital gains on disposal of immovable property. is.
The government is also lowering rates on capital gains arising from disposal of real estate.
On the other hand, the government has decided to increase the FED on several items. The rate of FED on cigars, cheroots (bidis), cigarill and cigarettes has been increased from 65% to 100% of their retail price.
The increase in the rate of FED on the filter rod was increased to Rs. 0. Re5 to Re1 per filter rod has also been proposed, while the rate of FED on caffeinated energy drinks has been set at 25%.
Those who have gone from smoking to vaping will also be affected by the new taxes. The government has proposed FED on e-liquids of electric cigarettes at Rs 10 per ml.
The government has also proposed an increase in FED on double cabin vehicles, suggesting 7.5% ad validity in the case of locally manufactured double cabin vehicles and 25% in the case of imported ones.