Govt imposes Rs115bn taxes

ISLAMABAD: The government slapped Rs115 billion taxation measures through a notification issued by the Federal Board of Revenue (FBR) after President Dr Arif Alvi refused to promulgate an ordinance for unveiling a mini-budget in order to comply with the International Monetary Fund (IMF) conditions.

The standard rate of General Sales Tax (GST) has been jacked up from 17 to 18 percent with effect from February 15, 2023. The Federal Excise Duty (FED) on cigarettes has also gone up.

After getting approval from the federal cabinet on a mini-budget in the shape of Tax Laws Amendment Bill 2023, the FBR issued the Statutory Regulatory Order (SRO) for hiking the GST rate from standard 17 percent to 18 percent and increasing the Federal Excise Duty (FED) on cigarettes in order to fetch an additional Rs115 billion out of Rs170 billion agreed to by the government in line with the IMF conditions.

However, top official sources disclosed that the government also approved the GST on hundreds of high-end luxury items at the rate of 25 percent but it will be introduced through the Tax Amendment Bill 2023, which would be laid down in the parliament on Wednesday (today).

The FBR slapped enhanced the GST rate on all those imported luxury items which were banned by the Ministry of Commerce sometime back in order to make imports more expensive. The enhanced rate of GST on some locally made luxury goods has also been proposed.

The government has abandoned the imposition of the Flood Levy due to stiff resistance by the IMF.

Despite adopting this route for slapping Rs115 billion in taxes on an immediate basis with effect from February 15, 2023, with the consent of the federal cabinet, the IMF’s staff-level agreement might get delayed, as the government has summoned the National Assembly session today at 3.30 pm and the Senate at 4.30 pm to lay down the Tax Amendment Bill 2023.

Minister for Finance Ishaq Dar was scheduled to announce the salient features of the mini-budget through a televised speech at 9.25 pm but after changing the course of action, his scheduled presser was cancelled at the last hour.

Dar told two reporters outside the Ministry of Finance Tuesday night after attending the federal cabinet meeting he had requested the president to promulgate an ordinance but Alvi declined. He suggested to the government that the bill should be introduced for imposing taxes.

Dar informed the president that there were taxation issues involved and that the government could not wait for 8 to 10 days more because certain measures would have a financial impact but the president refused to entertain the request.

He said that the government adopted the other route and directed the FBR to issue an SRO for jacking up the GST rate from 17 to 18 percent, while the FED on cigarettes would be jacked up. He refused to share the exact rate and advised patience till the issuance of a formal notification to this effect.

The FED on beverages, sugary drinks and juices would be increased from 13 to 20 percent and it would be made a part of the Tax Amendment Bill 2023, which will be laid down in the Parliament (today). The minister hoped that the staff-level agreement would be signed within this week. Earlier, a statement from the President's Secretariat said Federal Minister for Finance and Revenue Senator Ishaq Dar called on President Dr Arif Alvi and apprised him about the progress in talks with the IMF and that all modalities had been agreed upon.

The president appreciated the efforts of the government in negotiating an agreement with the IMF and assured that Pakistan would stand by its commitments.

The minister informed the president that the government wanted to raise additional revenue through taxes by promulgating an ordinance. The president advised that it would be more appropriate to take the parliament into confidence on this important subject and that a session be called immediately so that the bill was enacted without delay.

After this announcement, the federal cabinet met under the chairmanship of PM Shehbaz Sharif in which it was decided to slap Rs115-116 billion in taxes through an SRO by the FBR while the remaining taxation measures of Rs55 billion would be introduced through a money bill before the parliament.

Some sources say the government will make a last-ditch effort to convince the IMF for laying the bill before the parliament and will ask the Fund mission chief to strike a staff-level agreement with the commitment that the parliament would grant its approval till the IMF’s executive board meeting. A representative of a giant multinational tobacco company said the proposed increase in the excise rates seemed to be a deliberate attempt to scuttle the legit industry and help illicit players dominate the tobacco market.