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Budget 2022-2023 | A foundation of future growth budget

Everything you need to know about Pakistan’s Budget 2022-2023 and about the foundation of future growth budget.

Salient features

  1. A relief for middle-class taxable income limit raised from 6 to 12 lac.
  2. Minimum tax brackets raised from 4 lakhs to 6 lakhs for small businesses.
  3. Tax on non-productive assets of rich so that the balance is created and direct impact will be the reduction of poverty for poor.
  4. ZERO sales tax on import of solar panels and distribution.
  5. ZERO tax on agriculture machinery and input including tractor, rice, wheat, seeds, and distribution.
  6. Benazir scholarship program is being extended to 10 million students.
  7. HEC development budget increased 67 percent from last year.
  8. 5000 scholarships to Baluchistan students, additional scholarships for coastal areas of Baluchistan, and provisions of funds for state-of-the-art equipment for the education sector.
  9. Vaccination, disease control, and capacity building of health institutions 24 billion.
  10. 15% increase in the salary of Gov. Officials.
  11. Zero load shedding to the industrial feeders.
  12. CPEC projects will be fast-tracked by providing additional funds.
  13. Focused attention on the early start of special economic zones under CPEC.

Budget 22-23 Highlights:

  • DP growth target at 5%
  • GDP is projected at Rs78.3 trillion against Rs67 trillion this year
  • Inflation expected at 11.5% in FY23 against 11.7%
  • Tax-to-GDP to be taken to 9.2% in FY23 against 8.6%
  • The fiscal deficit is to be reduced to 4.9% in FY23 against 8.6%
  • The primary surplus is expected at 0.19% in FY23 against a primary deficit of 2.4%
  • Imports are projected at $70bn in FY23 vs $76 billion
  • Exports are projected at $3 billion in FY23 vs $31.3 billion
  • Remittances estimated at $33.2 billion vs $31.1 billion
  • The current account deficit projected at 2.2% of GDP in FY23 versus 4.1% of GDP
  • Total interest payment of Rs3,144 billion; domestic interest payment: Rs2,770 billion and external interest payment R373 billion
  • Debt ceiling at 60% of GDP
  • Overdue receivables of the petroleum sector are estimated at Rs284 billion, while next year’s allocation has been set at Rs71 billion
  • Five-year tax holiday for film-makers, new cinemas, production houses
  • Fixed income and sales tax on small retailers to be collected with electricity bills
  • 100% depreciation adjustment in the first year of operations for corporates and businesses
  • Advance income tax at import stage to be made adjustable
  • People having more than one immovable property worth more than Rs25 million will be assumed to have 5% rental income on market value, which will be taxed at 1% of this fair market value
  • 15% capital gains tax on immovable property on one year holding period, reducing by 2.5% for every additional year
  • Advance tax on filers to be increased to 2% from the previous 1% on purchase of property (non-filers: 5%)
  • People/companies with income above Rs300 million to pay an additional 2% tax
  • Increased advanced tax on autos above 1600cc
  • Taxation increased on banks to 42% from the previous 39% (including super tax)
  • Credit/debit card payments made outside the country to be taxed at 1% (filers) and 2% (non-filers), adjustable in full-year tax
  • No sales tax on solar panels
  • Annulment of sales tax on tractors, wheat, maize, sunflower, canola, etc.
  • Custom duty eliminated on agriculture machinery
  • Custom duties rationalized on 400 items within the manufacturing sector
  • Tariff rationalized on synthetic yarn (PSF)
  • More than 30 pharma APIs free from custom duties
  • 10% salary increase for government employees
  • Pension increased to Rs530 billion

Summary of Budget 2022-2023

The Finance Bill 2022 is the current coalition government’s first budget, which was announced in particularly poor economic conditions. There has been considerable pressure on the government to undertake some tough fiscal measures as a result of the current account imbalance and shortage in local tax revenue.

At the same time, due to rising inflation and living costs, the government is required to make some meaningful economic measures that will benefit the common citizen.

The budget contains various recommendations targeted at increasing tax revenue

In light of the foregoing, the current budget contains various recommendations targeted at increasing tax revenue in such a way that only the country’s rich or well-to-do are affected and the burden of such taxes are not passed on to the lower strata of society.

  1. Poverty Alleviation tax on persons earning income above Rs 300 million at the rate of 2%.
  2. The general rate of tax on banking companies was enhanced from 35% to 45%.
  3. Deemed rental income concept was introduced to collect 1% tax on the Fair market value of certain immovable properties of resident persons situated in Pakistan.
  4. Capital gains tax provisions relating to immovable properties situated in Pakistan revamped aiming to collect tax on the sale of open plots held for a period of fewer than six years.
  5. Capital gains on immovable properties held outside Pakistan to be taxed at a normal rate irrespective of the holding period
  6. Capital Value Tax at 1% on offshore assets of resident persons exceeding Rs 100 million and 5% on vehicles valuing more than Rs 5 million.
  7. Advance tax from non-filer purchasers of immovable properties enhanced from 2% to 5%
  8. Slab rates for salaried individuals were amended to decrease the effect on low-income employees and increase the incidence of higher-income slabs.
  9. Withdrawal of tax credits on investments in listed securities & insurance policies as well as a deductible allowance on house loans.
  10. Minimum tax carries forward discontinued.
  11. Interest income on government securities to be taxed at a normal rate instead of 10%
  12. The rate of tax on income from Bahbood certificates was reduced from 10% to 5%.
  13. The tax credit is withdrawn on income from the export of software and IT services with 0.25% tax on export proceeds of such services.
  14. Commercial importers are to be taxed under the final tax regime.
  15. 10% withholding tax introduced on fees for international money transfer facilitators
  16. The rate of withholding tax on fees for offshore digital services increased from 5% to 10%.
  17. CNIC condition for taxable supplies to unregistered persons withdrawn.
  18. Definition of resident individual amended to include Pakistani citizens not resident in any other country.
  19. Capital gains tax on disposal of listed securities revised with upward impact on holding period of less than one year
  20. Companies and AOPs required to electronically submit details of their beneficial owners.
  21. Exemption from Islamabad Capital Territory Sales tax introduced on locally rendered IT and IT-enabled services.
  22. Exception available to listed companies on restriction to claim input tax beyond 90% withdrawn.
  23. Further tax under sales tax extended to registered persons not appearing on the Active Taxpayers List.
  24. Sales tax exemption extended on all books imported and locally supplied.
  25. FED on tobacco enhanced.
  26. Telecommunication services in Islamabad are subjected to a higher incidence of FED.
  27. The concept of essential commodities was introduced in Customs law with a proposal to include it in the definition of smuggled goods.
  28. Sales tax exemption re-introduced on import of machinery, equipment, and materials for exclusive use within the limits of Export Processing Zone.
  29. Tax amnesties under promotion package of industries withdrawn.
  30. A simplified tax regime for retailers and certain service providers was introduced.
  31. Alternative Dispute Resolution mechanism revamped.
  32. Withholding tax on education fees and payments for use of machinery abolished.
  33. Reinstatement of withholding tax on remittances through debit or credit cards.

Advance tax on registration of vehicles increased.

Read Pakistan’s Budget 2022-23 & It’s Impact On Real Estate