ISLAMABAD: Property prices are likely to be roiled by a new tax measure, while mobile phone, solar panel and laptop imports will enjoy further relaxation of tax levies.
The new finance bill contains a mix of revenue and relief measures for all sectors of the economy. The government has imposed Rs204 billion worth of new taxes — income tax, customs, sales tax and federal excise duty.
The breakup of the new tax measures shows an amount of Rs145bn worth income tax measures, Rs45bn of sales tax and FED and Rs14bn customs duty. The relief measures announced are worth Rs57bn. Of these, Rs3bn relief was given in customs, Rs24bn in sales tax and FED and Rs30bn in income tax.
The corporate tax rate has been reduced to 31pc; the maximum amount allowed as deductible allowance enhanced to Rs2m from Rs1m; individuals having taxable income less than Rs1m have been give a tax relief equal to 5pc of school fee up to Rs60,000 per child per annum; tax credit for contribution to approved pension fund extended until June 2019.
The minimum tax for large trading houses has been reduced to 0.5pc from 1pc of the entire turnover up to tax year 2019; reduce withholding tax to 3pc from 4pc for fast moving consumer goods distributors on supplies for companies and from 4.5pc to 3.5 for other; minimum tax at the rate of 8pc was also allowed on to providers of IT and IT enabled services; property rent income up to Rs200,000 shall be exempt and income up to Rs2,000,000 shall be taxed in slabs of 5pc, 10pc and 15pc. Income above Rs2,000,000 shall be taxed at 20pc.
In the revenue measures, government introduced advance tax for alternate corporate tax; withdrew minimum tax at the rate of 1pc of turnover for companies declaring gross loss; it is proposed that the maximum taxable holding period for capital gain on securities may be extended from 4 to 5 years. In order to encourage compliance with tax laws, it is also proposed that, for non-filers, higher tax rates of 18pc, 16pc and 11pc for holding period of up to 1 year, 2 years and 5 years respectively may be introduced. Capital Gain on disposal of immovable properties will be taxed at a rate of 10pc if the property is sold within five years of acquisition; exemption has also been withdrawn on profit on term finance certificate; the super tax at a rate of 4pc of income for banking companies and 3pc of income for all others was extended for another year.
Collection of advance tax at the rate of 3pc of turnover from filers of provincial services; increased rate of withholding tax on sale and purchase of property; the rate of tax on dividend in the case of non-filers may be increased from 17.5pc to 20pc; withholding tax on electricity for commercial consumers increased to 12pc from 10pc; an adjustable withholding tax at the rate of 3pc of the value of vehicle be collected by every bank/leasing company etc from non-filers at the time of lease; the withholding tax rate for non-filers from 15pc to 20pc on winning of prize bonds; introduce higher tax rates of 15pc for non-filers receiving dividend from mutual funds; the turnover limit is reduced to Rs10 m from Rs50m for minimum tax of 1pc.
Sales Tax and Federal Excise Duty
Sales tax exempted on the import of laptops and PCs; reduced sales tax to 8pc from 10pc on second hand and worn clothing; 16pc federal excise duty exempted on advertisement on CCTV / cable TV, shipping agents, banking companies, insurancecompanies, cooperative financing societies, modarbas, musharikas, franchise services, stevedores, stock brokers, forex dealers etc; abolished zero-rated status of stationery items; withdrawn the zero-rating on milk and fat-filled milk sold in retail packing; replaced the current FED regime on cement with fixed rate basis at the rate of Rs1 per kg.
The existing sales tax rates of Rs500 and Rs1,000 are increased to Rs1,000 and Rs1,500 for medium and high category mobile phones; small retailers are given an option of a simplified regime of payment of sales tax at the rate of 2pc of their total turnover.
Tax and duty concessions worth Rs15bn have been extended for another year; 5pc duty reduced to 2pc on import of machinery for dairy, livestock and poultry sectors; duty reduced to 2pc from 5pc on import of incubators and brooders and machinery for animal feed stuffs; reduced duty to 2pc from 5pc on import of fish feed pellet machines and water-aerators; duty exemption on import of fish and shrimp feed; exempted duty on cool chain storage and in related capital goods; duty of 7pc on pesticides has been abolished; machinery and equipment for development of silos have also had duty removed.
Various tax credits have been extended to promote employment in the industrial sector. The tax credit of 1pc allowed for every 50 employees in industrial undertaking is now enhanced to 2pc. Now this concession will be made available for 10 years to the industrial undertakings set up by June 2019. The tax credit for making sales to registered persons enhanced to 3pc from 2.5pc. The tax credit for balancing, modernisation and replacement of plant and machinery has been extended until 2019; the condition of availing 100pc tax credit for establishing new industry is lowered to 70pc of equity from 100pc and the last date has also been extended to June 2019.
For the tax credit for expansion of existing plant or new project, the condition of 100pc fresh equity is reduced to at least 70pc. Last date for installation of plant and machinery is also extended to June 2019. The tax exemption on investment in green-field industrial undertakings is extended to June 2019. The textile package has been extended for another year.
Customs duty on 2,300 items has been reduced to 3pc from 5pc. These items mostly include machinery for agriculture, horticulture, construction, poultry, printing, dairy, electronics etc. Exempted regulatory duty on import of bead wire used in tyre manufacturing; duty has been increased on medium density fibre board, cement clinker, methyl acetate, and semi-printed / printed security paper.
Customs duty on imports of parts of LED lights has been reduced from 20pc to 5pc; duty exempted on items like LED bulbs/lights, off-grid portable solar home system etc; customs duty exemption extended on import of solar panels and related components till June 2017; and sales tax has been exempted on import of dumper trucks for Thar Coal.
The customs duty has been increased to 11pc from 10pc on 900 items and to 16pc from 15pc on 508 items. The tariff slabs are being reduced from 5 to 4. The new general slabs will be 3pc, 11pc, 16pc and 20pc; duty exempted on four items, declined on eight items and increased on eight items—almonds, frozen fish, medium density fibre board, cement clinker, semi-printed/printed security paper, live chicken stock and eggs of chicken birds, betel nuts and leaves. The government imposed regulatory duty of 25pc on powdered milk.