Budget 2023-24 Pakistan Summary

Last Updated on: 26th June 2023, 05:27 am

Budget 2023-24 Pakistan Summary

The federal government has just announced the budget for the 2023-2024 financial year. There is a plethora of new relief measures for the IT and real estate industries, as well as updated tax rates for cash withdrawals and imports. These are the highlights of the 2023-2024 budget.

Guiding Principles

• No increase in import duties on essential goods
• Trade facilitation and facilitation of doing business
• Promote industrialization and investment
• Incentives for the agricultural sector
• Promote efficiency and energy saving
• Promotion of information technologies (IT) and computer services

Relief Measures

• Exemption from duties on certain papers and art cards and boxes for printing the Holy Quran.
• Incentives for the pharmaceutical sector by including an additional active substance and 03 drugs in the existing tax-free regime.
• An incentive for the manufacture of solar panels and related equipment by exempting import duties from imports of machinery, equipment and accessories.
• An incentive for exporters of information technology (IT) and IT-related services by allowing duty-free importation of IT-related equipment up to 1% of the value of their export earnings.
• Reduction of tariffs and additional tariffs on imports of intermediate/manufactured goods under 10 PCT codes.
• Exemption from tariffs on the raw materials diapers, sanitary napkins and adhesive tape.
• Concession of tariffs on raw materials/inputs for manufacturers of capacitors.
• Reduction of tariffs from 10% to 5% on non-localized heavy-duty vehicles (HCV) (CKD).
• ACD exemption for importation of raw materials for hemodialysis liquids/powders.
• Extension of exemption for machinery and equipment imported from former FATA zones until June 2024.
• Continuity of the import concession for flavoring powders for food preparation for snack manufacturers until June 2024.
• Duty exemption on organic solvents and thinners for manufacturers of butyl acetate and dibutyl orthophthalates.
• Reduced tariffs on imports of pet waste for polyester filament yarn manufacturers.
• Exemption from tariffs on raw materials for the manufacture of molds and dies.
• Exemption from tariffs on raw materials/intermediate consumption for mining machinery.
• Exemption from tariffs on raw materials/intermediate consumption for rice milling machines.
• Exemption from tariffs on raw materials/intermediate consumption for machine tools.
• Harmonization of Part (V) of the Fifth Appendix of the Customs Law with the Automotive Industry Development and Export Policy (AIDEP) 2021-26.
• Exemption from tariffs on seed imports to encourage growth in the agricultural sector.
• Exemption from duties on imports of prawns/prawns/juvenile fish intended for farming in commercial fish farms and hatcheries.
• Duty exemption for roasted peanuts used in the manufacture of ready-to-eat complementary foods (RUSF) by World Food Program certified manufacturers.
• Increase tariffs on calcium carbide from 3% to 11% to protect local industry.
• Abolition of regulatory duties on second-hand clothing to relieve the poor.
• Reduced regulatory rates at 151 PCT codes for used clothing, fish, tiles and sporting goods.
• Abolishing the regulation of computer equipment to promote the information technology sector.
• Elimination of regulatory tariffs on non-locally produced polyester synthetic filament yarns.
• Abolition of regulatory obligations for parts of flat screens, monitors and projectors.
• Elimination of regulatory obligations for silicon steel sheets.
• RD exemption for special steel rounds and unalloyed bars.
• Increase/embargo of statutory tariffs on imports of glassware to protect local industry.
• To prevent the use of inefficient tungsten incandescent lamps, a 20% RD is imposed on these lamps and their parts.
• The export regulation duty on molasses exports has been increased from 10% to 15%.

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Additional

• Creation of separate PCT codes for smartwatches.
• Creation of separate PCT codes for wooden ferrules for matches.
• Modification of the description of PCT CODE 2501.0021.
• Modification of the description of the PCT CODE 8544.6010.
• Changes to localized PCT code descriptions for auto parts.
• (38) Conversion of the specific CD tariff for caustic soda into an ad valorem tariff.

Income Measures

Abolition of the ceiling of fixed duties and taxes on the importation of Asian brands of end-of-life and used vehicles over 1300cc under SRO 577(I)/2005 by eliminating serial numbers 4, 5 and 6 of this SRO.

Changes in Law

• It is proposed to redraft the definition of smuggling to allow customs authorities to carry out anti-smuggling measures within the country’s territorial borders.
• It has been proposed to add provincial levies and Khasadar Force to the list of government agencies responsible for assisting customs in anti-smuggling operations in Khyber Pakhtunkhwa and Balochistan.
• It is proposed to tighten penal provisions related to the crime of smuggling of basic necessities.
• It is proposed to tighten the criminal provisions related to the crime of smuggling prohibited and prohibited goods.
• In order to reduce the congestion of border customs offices, it is proposed to shorten the obligatory deadline for submitting the goods declaration after the goods have arrived at the border customs office.
• In order to facilitate trade, it has been proposed to increase the storage period of perishable food from one month to three months.
• The penalty for documents not found in the shipment will be abolished.
• In order to facilitate trade, the sanctions procedure for documents that are not uploaded electronically with the goods declaration will be accelerated.
• In order to reduce customs clearance time and avoid human interaction, the defendant is offered the opportunity to participate in the arbitration through the customs computer system.
• To assist passengers traveling in a group who are unable to check in their own baggage, the representative of the passenger group is authorized to check in the baggage on behalf of the group members.
• In order to control the loss of income, it is proposed to increase penalties for any attempt to evade duties and taxes in violation of laws and procedures.

The proposed sales tax budget measures for fiscal year 2023-24 are:

Relief Measures

• Extension of the NMD sales tax exemption (FATA/PATA) by another year until June 30, 2024.
• Granting a sales tax exemption for contraceptives and accessories.
• Granting tax exemption for the sale of young plants, harvesters, crop dryers, no-till seeders, seeders, transplanters, other seeders, and bovine semen.
• Granting VAT exemption on import of IT equipment by IT and ITS exporters registered with the Software Export Board of Pakistan.

Income Measures

• Abolish the sales tax exemption for groceries sold in bulk under brand names or registered trademarks.
• Improvement of a reduced sales tax rate from 12% to 15% on supplies from retail outlets selling leather and textile products.

Rationalization Measures

• It is proposed to remove store space requirements for Tier 1 retailers.
• Proposing to change the name of the Digital Billing and Analytics Branch to the Digital Initiatives Branch.
• It is proposed to expand the scope of prosecution by replacing “packets of cigarettes” with “commodities determined by the Chamber”.
• It is proposed to amend Article 12.xxv) of the Fifth Appendix and replace the current description with “Other drawing, layout or calculation tools (geometric box) (PCT position 9017.2000)”.
• It is proposed to improve the scope of point No. 21 of the fifth Annex by providing a zero rate for exporters registered under the Export Facilitation Scheme 2021 by inserting the word “products”.
• Explanations on the exemption from sales tax on transfusion sets without aluminum packaging that are imported in a consignment with blood bags can be found on p. no. 121 of table 1 of the sixth appendix.
• The omission of pages 159 and 160 from Table 1 of the Sixth Appendix is proposed as superfluous as the temporary derogation already applies on 31.12. has expired.

Harmonization Measures

According to the decision of the National Tax Board, it is proposed to exclude the production, transmission and distribution of electrical energy from the scope of sales tax.

The proposed budgetary measures related to the ICT (Service Tax) Order 2001 for the financial year 2023-24 are as follows:

Relief Measures

Services provided by restaurants, including cafeterias, dining halls (including ice cream parlors), cafeterias, canteens, takeaways, restaurants, resorts and similar catering establishments, prepared, prepared or ready to eat etc. They offer a 5% tax when paying by debit or credit card, mobile wallets or QR reading.

Income Measures

It is proposed to tax electricity transmission services at 15%.

Rationalization Measures

• Granting craft company status to the independent exporter of computers and computer services. These independent exporters are not required to file VAT returns.
• It is proposed to lower the tax rate for IT systems development consultants from 16% to 15%.
• It is proposed to bring the scope of computer services and IT services into line with the scope provided for in the Income Tax Regulations 2001 as proposed by the Ministry of Information Technology.

Income Measures

• Streamlining Section 4C super tax to apply to all persons at all levels with income above Rs 150 (million): Insertion of three new additional income bands from Rs 350 (million) to Rs 400 (million). 400 (m) to 500 rupees (m) and rupees. 500(m) above are taxed at 6%, 8% and 10% respectively.
• Reintroduction of a pre-adjustable 0.6% withholding tax on non-ATLs on cash withdrawals.
• 1% increase in withholding tax rates for the supply of goods other than the sale of rice, cottonseed or edible oils, for the supply of services, including services subject to a reduced rate of 3%, but excluding advertising services in electronic and printed media and via the Execution of non-sporting contracts.
• 0.5% increase in withholding tax rate for commercial importers on imports of goods listed in Part III of the Twelfth Schedule to the Income Taxes Regulations 2001.
• Reintroduction of 10% withholding tax on bonus share issuance by a company (20% for non-ATL).
• Increase of withholding tax rate from 1% to 5% on payments to non-residents with debit/credit cards or prepaid cards. (2% to 10% for non-ATLs).
• Charge an adjustable input tax of Rs. 200,000 at the time of issuance of the work permit/visa for employing an expatriate domestic worker.
• Imposition of an additional tax not exceeding fifty percent on the income, profits and gains of any person or group of persons in respect of exceptional gains due to exogenous factors.

Relief Measures

• Maintain a preferred fixed tax rate of 0.25% for IT and ITeS exports for fiscal years 2024, 2025 and 2026.
• Automated issuance of a payment exemption certificate to a non-resident within 30 days of application.
• The requirement to file a VAT return to benefit from a preferred flat tax rate of 0.25% for IT and ITeS exports has been removed.
• Raising a manufacturer’s turnover cap from Rs. 250 million to Rs.
• Reduction of the tax rate of 20% on the income of the banking company for additional advances to the IT and ITeS sector instead of the normal tax rate of 39%.
• Raise the money limit for foreign remittances originating outside of Pakistan from Rs.5 crore to the equivalent of Rs.100,000 under Section 111(4), which prohibits requesting the nature and source of income/assets that are not explained.
• Exemption from the 2% withholding tax on real estate purchases for non-resident POC/NICOP holders if the real estate is acquired through foreign transfers from abroad.

Also Read: Budget 2023-24: Federal Cabinet Approves Salary Increase Of Up To 35% For Govt Employees