The government also decided to scale down customs duty slabs from five to four and abolishing rate of 5 percent in the coming budget. The slab rate of 5 percent will be reduced to 3 percent which will have a far-reaching impact on the overall industry and for the machinery sector. Now the new slabs of customs tariff will be 3 percent, 11 percent, 16 percent and a fourth slab of 20 percent. “We have made efforts to neutralize its revenue impact,” said a top official of the government while talking to The News here on Sunday. Through the withdrawal of tax exemptions and Statutory Regulatory Orders (SROs) in the Finance Bill 2016-17, the government plans to fetch Rs50 to Rs60 billion maximum in the upcoming budget. The government finds it really difficult this time to select SROs which will be abolished in the next financial year because it can have a negative impact on industry and the overall growth prospects of the country. Now the space for abolishing SROs exists on the income tax side but it is really difficult to remove such exemptions. On Sales Tax, the FED and Customs side, there was not much space available so the government is finding it difficult to remove the next series of exemptions in line with the IMF programme.

The government is going to rely on enhancing tax rates for non-filers as the rate of capital gains tax on real estate will go up in the coming budget. The government is also considering jacking up the tax rate on registration of vehicles and token fees in the coming budget, especially for non-filers in a bid to make their life miserable. The Finance Ministry has rejected the proposal to impose a fixed tax on marriage halls as a consensus could not be evolved among the stakeholders.On the dairy sector, especially with packaged milk, the government is considering 10 percent tax but it has not yet decided finally as currently three different proposals are under consideration including granting exemptions, zero rating and finally imposing 10 percent additional tax on packaged milk. The government, the sources said, is not going to make any major change in tax on stock market players as the government does not want to create hindrance for its booming trends. However, their demands for reducing the tax burden would not be fulfilled in the upcoming budget.

The tax proposal for imposing tax on builders has been finalized on the basis of per square meter which will be made part of the next finance bill. In the insurance sector, the tax rate may go up in the coming budget. The government also finalised tax proposal for slapping fixed tax for retailers in the upcoming budget. The government also finalized fixed taxation regime for marble sector and steel melters by removing legal lacunas in the way which will be made part of the next budget. The government also decided to apply sales tax at the rate of zero-percent on five export oriented sectors i.e. textile, leather, carpets, surgical and sports goods from next budget.The major stakeholders held a meeting with the Finance Minister on Sunday after which textile tycoons told this scribe that that the government accepted the demands of the textile sector regarding SRO.1125.

The government will abolish 3 percent and 5 percent sales tax at different stages, which would be replaced with zero percent sales tax in budget. Firstly, the government has agreed to zero-rate five major export sectors including textile, leather, carpets, surgical and sports goods in budget (2016-17). Secondly, zero-rating regime would be applicable on all stages of imports/supplies except retail stage. Thirdly, sales tax would be applicable at the retail stage but input could not be claimed at this stage. Fourthly, it has also been decided that the zero-rated sectors would not be entitled to claim sales tax refunds on packing material. Thirdly, it has been agreed to restore the SRO.1125 to its original status as zero-rating regime applicable in the past. Earlier, the FBR had proposed that under SRO1125 for five leading export-oriented industries including textile, leather, carpets, surgical and sports goods, sales tax be raised from 3 to 5 percent on input/raw materials goods including yarn and fabrics and enhance sales tax from 5 to 10 percent on the local finished goods.

When the top official was asked about the envisaged target of Rs3,621 billion for the next budget, the official said that initially the envisaged target was fixed at Rs3,601 billion, which was jacked up to Rs3,621 billion on insistence of the IMF. To a query regarding difficulties in removal of exemptions, the official said that the IMF was very happy with the performance of the FBR as the tax machinery was going to deliver by fully materializing its envisaged target of Rs 3,104 billion for the outgoing fiscal year. Regarding a mechanism to fix the FBR’s target for upcoming budget, the official said that the tax machinery would be expecting Rs363 billion with nominal growth of 11.7 percent (GDP growth 5.7 percent plus inflation 6 percent) over the FBR’s target of Rs3,104 billion for end June 2016 and then the FBR will have to take additional measures of Rs154 billion to achieve its desired target of Rs3,621 billion in the next financial year.

Source:https://www.geo.tv