Ishaq Dar, Federal Minister for Finance and Revenue, introduced the Finance (Supplemental) Bill, 2023, on Wednesday, announcing various amendments that include taxation measures totaling Rs170 billion (approximately $640 million), as Islamabad seeks to persuade the International Monetary Fund (IMF) to restart its bailout program.
The finance minister began his address by criticizing the tenure of the Pakistan Tehreek-e-Insaf (PTI) government, arguing that a national committee be formed to investigate the failures that have cost the country’s economy.
Some of the amendments include:
FED on first- and business-class air travel would be imposed at 20% or Rs.50,000 (whichever is higher).
introduction of a 10% adjustable withholding tax on wedding venues
Increase in FED on cigarette and sugary drinks has been proposed.
FED on cement will be raised from Rs1.5 per kg to Rs2 per kg
Luxury goods would be subject to a GST hike from 17% to 25%, and other goods are subject to an 18% GST. Daily necessities including wheat, rice, milk, legumes, and meat are exempt from the price hike.
A $40 billion increase in BISP brings the overall allotment to $400 billion.
Dar stated that the taxing measures will aid in reducing the budget deficit and further stated that the cabinet members will also adopt an austerity stance to aid the nation during this difficult economic period.
At a time when its foreign exchange reserves have critically declined, covering less than a month’s worth of imports, Pakistan has been enforcing a number of prior criteria agreed upon with the Washington-based lender in the goal of resuming the delayed bailout program.
The National Assembly meeting occurs as virtually new IMF-Pakistani government negotiations begin. The two parties are trying to come to a deal that will release funds that is necessary to keep the cash-strapped nation viable.
Backround:
The two sides were unable to come to an agreement last week, and an IMF mission that had been in Islamabad for 10 days of talks left with the promise that negotiations would carry on.
On Tuesday, Dar during his meeting with President Dr.Arif Alvi apprised the premier that the government wants to raise additional revenue through taxes by promulgating an ordinance.
President Alvi suggested, however, that it would be more appropriate to consult the parliament about this and that a session be summoned right away to ensure that the measure is passed without delay.
Alvi wants Dar to pay the additional Rs170 billion in taxes via bill.
Tuesday’s Federal Cabinet meeting adopted the Finance Supplementary Bill 2023, which adds new levies on expensive goods and raises the general sales tax by 1%. (GST).
The Finance Supplementary Bill 2023 was adopted at the Cabinet meeting on Tuesday, which was presided over by Prime Minister Shehbaz Sharif. The Federal Cabinet was given a detailed briefing regarding the reforms to be carried out in the context of the 9th review of the International Monetary Fund’s EFF.
The gathering was informed that as a result of these measures, there will be higher taxes on luxury goods and an increase in the general sales tax of 1%.
Additionally, the government doubled the Federal Excise Duty on cigarettes starting on February 14, 2023, to kick off the implementation of the mini-budget late Tuesday night.
In order to collect Rs310 billion in consumer income over the next six months (January-June 2023) and reduce the circular debt in the gas industry, the government increased gas rates for domestic users by up to 124% on Monday.
In a meeting, the Oil and Gas Regulatory Authority (OGRA) informed the ECC that on June 3, 2022, it granted ERR for both gas companies for the fiscal year 2022–2023.
According to the determination, SNGPL and SSGCL needed a combined Rs.261 billion and Rs.285 billion in revenue for the fiscal year 2022–2023, but the OGRA refused to accept the revenue shortfall from the prior year.
The increase in gas prices was one of the prerequisites Pakistan had to meet in order to continue with the IMF programme.
