ISLAMABAD, Apr 27 (APP):The Pakistan Muslim League-Nawaz (PML-N) government Friday made history by presenting its sixth consecutive federal budget for the fiscal year 2018-19 with total outlay of Rs5.932 trillion, providing substantial relief to the masses and paving way for realizing the objectives of inclusive and sustainable economic growth through a vast array of measures.
“It is my honour to present today the sixth budget of the PML(N) government to this Parliament. It is indeed a historic moment for the nation and the Parliament to celebrate,” Federal Minister for Finance, Revenues and Economic Affairs, Dr Miftah Ismail said while delivering his budget speech at the National Assembly.
“Despite challenges, we have achieved a highest growth in 13 years, low inflationary environment, and overall macro-economic stability,” he added.
Presenting the budgetary proposals for FY 2018-19, he spelled out major economic benchmarks for upcoming fiscal year, including the real GDP targeted to grow at 6.2%, setting target of inflation below 6 percent, tax to GDP ratio to 13.8% and budget deficit to 4.9%.
The budget also aims to contain net public debt at 3.2 % of GDP, with foreign exchange reserves to remain at $15 billion besides announcing continuation of social protection programmes while FBR tax revenue target has been proposed at Rs.4,435 billion.
After transfer to provincial governments, the net revenue of the Federal Government is estimated at Rs 3,070 billion in 2018-19 as compared to revised estimates of Rs 2676 billion in the current financial year.
Miftah said, the government macroeconomic policy aims to address the imbalances of external account, while protecting economic growth.
Over the medium-term he proposed to continue reduction of fiscal deficit, maintain a cautious monetary stance, and embark upon next generation of reforms for strengthening investment climate, export promotion, and energy sector.
Total federal expenditure for 2018-19 is budgeted at Rs 5932 billion, compared to the revised estimates of Rs4857 billion for 2017-18, showing an increase of 8 percent.
The minister announced a 10 percent ad-hoc relief allowances to civil and armed forces employees and also proposed 10 percent increase for pensioners across board.
The size of Public Sector Development Programme (PSDP) for FY 2018-19 has been put at Rs2043 billion including Rs1030 billion for federal PSDP and Rs1013 billion for provinces.
The resource availability during 2018-19 has been estimated at Rs4,917.2 billion against Rs4,713.7 billion last year while the net revenue receipts for 2018-19 estimated at Rs3070.4 trillion indicating an increase of 4.9% over budget estimates of 2017-18.
The defence budget has been proposed at Rs.1,100 billion against the revised budget of Rs.999 billion in the 2017-18.
The Prime Minister’s Youth Scheme will continue and for this purpose, Rs.10 billion have been allocated.
The minister also announced uniform rate of GST on all fertilizers, reduction in GST on agriculture machinery from the current 7 percent to 5 percent, enhancing cotton production and quality, tariff subsidy on agriculture tube wells.
The Government is proposing setting up an Agriculture Research Support Fund with an initial allocation of Rs.5 billion and Agriculture Technology Fund.
The minister said the tax rates on individuals have been reduced and complete tax exemption has been given to people who earn upto Rs.1,200,000 per year or Rs.100,000 per month.
This exemption limit, which was previously Rs.400,000 per year has been increased three times to Rs.1,200,000 per year. Tax will be levied at the rate of 5 percent for income between two and 400,000 monthly. People earning above 400,000 monthly will be taxed at the rate of 15 percent.
Miftah said another new programme “100 100 100” will be launched to ensure 100% Pakistani children are enrolled in schools.
Other notable programmes include Rs 10 billion to address the problem of child stunting, Rs 35 billion for Railways with a plan to increase the speed of trains from Peshawar to Karachi by 3 times from 55 km to 160 km by hour by 2021.
The government in five years added 12,230 MW to the national grid and will invest a further Rs 138 billion in power sector while Rs 310 billion will be spent on construction of motorways.
The minister said that Rs 44.7 billion is proposed for AJK and Gilgit Baltistan and Rs 24.5 for Federally Administered Tribal Areas (FATA).
Rs 10 billion has been approved to implement a ten year development plan for FATA and Rs 90 billion for rehabilitation of millions of people who had to leave their homes in the areas of military operations.
The government is enhancing PSDP allocations for Higher Education Commission to Rs 57 billion and will allocate Rs 37 billion for primary health programmes and Rs 10 billion for youth programme. Rs 137 billion are proposed for development of Gwadar port.
Highlighting achievements of the government before the parliament, Miftah said that government achieved GDP growth of 5.4% which was the highest growth rate in last 10 years while this year growth is projected at 5.8% which is the highest in last 13 years.
He said that the size of the economy expanded from Rs.22,385 billion in FY2013 to Rs.34,396 billion in FY2018, while per capita income increased from Rs.129,005 in 2013 to Rs.180,204.
He said agriculture sector has shown the highest growth in the past 18 years of 3.8% owing to government initiatives. The Industrial production grew by 5.8%, which is highest growth in a decade while the services sector, which includes banking, retail, transportation etc. witnessed a remarkable growth of 6.4%, highest in decade.
Miftah said, inflation has been curtailed to less than 5 percent in the past five years, compared to 12 percent between 2008-13.
He said in FY2013, fiscal deficit was 8.2% of GDP which has now reduced to below 5.5% of GDP while in FY2013, FBR tax collection was Rs.1,946 billion which is now projected to increase to Rs.3,935 billion, a two times increase in 5 years.
The policy rate came down from 9.5% in June 2013 to 5.75% in 2017, which was lowest in many decades.
Exports from the country have increased by 13% in the first nine months of this year and 24% in March on shipment basis while imports during the first nine months increased by 17% when compared with the same period last year. Higher imports are mainly driven by an increase in import of POL products, machinery and raw materials.
Foreign Direct Investment increased to $2.7 billion in FY2017 from $1.3 billion in 2013. During the first nine-months of the current fiscal year, it has increased to $2.1 billion as against $1.9 billion during the same period last year.
Remittances by Pakistani’s abroad jumped from only $13.9 billion in 2013 to $19.3 billion last year. This year In-Sha-Allah, we expect to end the year at more than US$20 billion which will be a record for Pakistan.
The foreign exchange reserves increased from US$6.3 billion to US$19.4 billion by October 2016.
He said a total of US$223 billion were invested in the economy from both domestic and foreign sources over the five years as compared to US$140 billion during 2008-13.
He said, during the last sixty-six years of Pakistan’s history, a total of 20,000 megawatts of generation capacity was added. In a short-term of five years, we have added 12,230 megawatts of new generation capacity.
Federal Minister for Finance, Revenue and Economic Affairs, Miftah Ismail while presenting tax proposals for the upcoming fiscal year said that in order to encourage compliant tax payers, selection for audit in respect of all three taxes; Income Tax, Sales Tax and Federal Excise Duty, has been made risk based and a case shall not be audited more than once in three years for each tax.
He said, previously grant of stay by the Commissioner (Appeals) was subject to payment of 25% of tax liability, the condition has now been relaxed, and the payment is proposed to be reduced to 10%.
Announcing tax relief measures, he said that in order to ensure declaration of property transactions at actual market rate and discourage whitening of black money through investment in the real estate, the property transactions are proposed to be recorded on the value declared by the buyer and the seller while the FBR notified rates are proposed to be abolished.
At the federal level, a one percent adjustable advance tax from the purchaser on the declared value is proposed to replace the existing withholding tax on sellers and purchasers.
It is proposed that the non filers may not be permitted to purchase property having declared value exceeding four million rupees.
The provinces have been requested to abolish the provincial rates for the collection of stamp duty and to collect a total of one percent tax under stamp duty and capital value tax on the value declared by the buyer and the seller.
In order to deter under-declaration and consequent loss of revenue, it is proposed that FBR may hold a right to purchase any property within six months of registration by paying a certain amount over and above the declared value which may be 100 percent in the fiscal year 2018-2019, 75 percent in the fiscal year 2019-2020 and 50 percent in the fiscal year 2020-2021 and thereafter.
The minister also announced gradual reduction in the rates of super tax which was imposed in 2015 for rehabilitation of internally displaced persons and also announced rationalization of corporate tax rate from 30% in tax year 2018 to 25% in tax year 2023. The corporate tax rate will be 29% in tax year 2019 and will be reduced by 1% each year up to tax year 2023.
He also announced rationalization of tax rate on import of coal and exemption to welfare institutions.
Talking about the revenue measures, he said in order to increase the cost of doing business higher for non-filers, higher rates of tax withholding for non compliant taxpayers are being proposed.
The withholding tax rates on sale of goods for non filers are proposed to be increased from existing 7% to 8% in the case of a company, and from existing 7.75% to 9% in non-corporate cases.
The minister said that due to enhancement of the taxable limit of income to Rs.1.2 million, the number of filers will be substantially reduced and this will also result in loss of revenue. A nominal income tax may be imposed @ Rs.1000 for income between Rs.400,000 to Rs.800,000 and @ of Rs.2000 for income between Rs.800,000 to Rs.1,200,000
Talking about sales tax relief measures, he announced exemption from sales tax and customs duty on paper for printing of holy Quran and exemption from value addition tax on import of LNG and proposed that rate of sales tax may be reduced from 17% to 12% on import of LNG and supply of RLNG.
The minister also announced exemption from sales tax for dairy, livestock and agriculture and proposed reduction in rate of sales tax to 3% across the board on all fertilizers. He proposed that the rate of sales tax on supply of natural gas to fertilizers plant for use as feed stock, presently chargeable @ 10%, may be reduced to 5% to cater to cash flow issues of fertilizer manufacturers in view of reduction in rate of sales tax on fertilizers.
To promote fish farming, 10% duty on sales tax on fish feed is being removed.
Similarly, sales tax is being exempted for preparation of fans and animal feed of dairy farms. In addition, sales tax on agriculture machinery is proposed to be reduced from 7% to 5%. These proposed measures are expected to go a long way in promoting our agriculture, dairy, and livestock sectors.
He also proposed that exemption on 21 types of computer parts imported by manufacturers may be granted and proposed zero-rating for stationery to promote local stationery sector and reduce the prices of local stationery items.
To enhance documentation and base of sales tax, further tax is proposed to be increased from existing 2% to 3%. This will not only discourage undocumented economy, but it will also result in revenue increase, he added.
Federal excise duty on locally produced cigarettes has been proposed to be enhanced in respect of Tier-1, TIER-2 and TIER-3 to Rs 3964, Rs 1770 and Rs 848 per thousand cigarettes respectively.
Talking about customs duty, the minister proposed Customs Duty of 3% on import of bulls meant for breeding purposes be withdrawn.
Presently available concessionary rate of Customs Duty on the import of Feeds meant for livestock sector may be further reduced from 10% to 5% and fans meant for use in dairy farms be allowed at concessionary rate of 3% to members of the Corporate Dairy Association.
For providing relief to health sector, the minister proposed that 3% Customs Duty on import of the microfeeder equipment be withdrawn.
To provide relief to cancer treatment in Pakistan, the Government has exempted drugs from customs duties at import stage. However the sole exception was Tasigna on which customs duty @ 5% is proposed to be withdrawn.
He also proposed that the rate of customs duty @11%, on corrective eyesight glasses be reduced to 3%.
To provide incentive to exports, an inter-ministerial review has identified certain raw materials, used in export related sectors.
The minister, therefore proposed that the existing rate of Customs duty on raw materials falling under 104 PCT codes are being exempted whereas in respect of 28 PCT code the Customs Duty rates are being reduced.
He also announced withdrawal of 11% Customs Duty on Synthetic filament tow of acrylic or modacrylic (PCT 5501.3000) is being withdrawn by inclusion in the Prime Minister Export Package.
He also proposed many measures to sustain domestic manufacturing sector. It is essential that inputs not available locally are provided and made available at the optimal rates keeping in view the availability of domestically compatible substitutes.
For the pormotion of tourism, the minister proposed that customs duty on import of Pre-fabricated structures complete rooms, not locally manufactured, be reduced from 20% to 11% for setting up of new hotels / motels in hill stations (including AJK and Gilgit Baltistan), coastal areas of Baluchistan.
He said that the government remains committed to introducing alternative energy in all walks of life with a view to reduce dependence on consumption of fossil fuel.
He proposed that 16% customs duty on charging stations for electric vehicles may be withdrawn and proposed custom duty on import of electric cars to be reduced from 50% to 25% in addition to exemption from regulatory duty of 15%.
He proposed that Import of CKD kits for assembly of domestically produced electric cars be fixed at 10%.
In order to meet the revenue targets for FY 2018-19, revenue measures will be required to be taken so as to maintain the overall fiscal deficit within the predicted limit.
He said, rather than effecting any large scale changes in the existing tariff slabs to meet this objective, a more restrictive and narrower revenue intervention is predicted.
Accordingly, he proposed that the rate of existing Additional Customs duty may be increased from 1% to 2%. Exception is being provided for plant and machinery, Imports by Privileged Personnel /Organizations, Relief goods, Export Promotion regimes etc.
The minister also announced that the allocation of Benazir Income Support Programme (BISP) is being further increased to Rs.124.7 billion in FY 2018-19 while the BISP beneficiaries who are willing to start their own businesses will be provided with a one-time cash grant of Rs.50,000 to start their own business and become productive members of society.
He said the Relief to Widow Borrowers scheme will continue in FY 2018-19 with increased limit of Rs. 600,000.
The minister said that over the past five years we have only served the people and rendered our responsibilities sincerity.
“To a large extent we have fulfilled promises that we made with the nation in 2013. Today Pakistan is at a new stage of growth and prosperity. Probably we have been punished for it as well. But no one can sever our relationship with the people,” he added.