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Parliament Likely to Approve Rs. 170 Billion Mini-Budget Tomorrow

Following the approval of the federal cabinet’s mini-budget of Rs. 170 billion, the government has decided to seek approval of the Supplementary Finance Bill 2023 from both the Senate and the National Assembly tomorrow (Wednesday).

According to sources, the government has the authority to impose regulatory duties and additional customs duties (ADCs) on the import of luxury/non-essential items through statutory regulatory orders (SROs) with immediate effect, without waiting for the president to sign the Tax Laws Amendment Bill 2023.

If the Supplementary Finance Bill 2023 is referred to the Senate Standing Committee on Finance, the process will take a few days until the Bill is signed by the president. If, on the other hand, any executive order is unanimously passed by the National Assembly, the Bill’s effective date could be February 15, 2023. It has been decided that both houses will vote on the bill on February 15th, followed by the president’s assent. In this case, the Senate Standing Committee on Finance will not be referred to the Supplementary Finance Bill 2023.

However, after receiving cabinet approval, the Federal Board of Revenue (FBR) is legally empowered to issue notifications to change the duty structure at the import stage.

Typically, the president’s assent would make the sales tax and excise measures effective the next day. Tariff rationalisation can be accomplished through notifications. Except for withholding taxes, income tax measures become effective on July 1.

According to sources, the flood levy would be replaced by regulatory and additional customs duties.

According to sources, the Tax Laws Amendment Ordinance, 2023, which will be promulgated in order to impose additional taxes totaling Rs. 170 billion, will include a one percent increase in the standard rate of sales tax from 17 percent to 18 percent, as well as withholding tax on non-filers’ banking transactions.

The proposed federal excise duty (FED) increase on sugary drinks would generate Rs. 60 billion. The proposed withholding tax on non-filers’ banking transactions will generate nearly Rs. 45 billion in revenue.

According to sources, the FBR has calculated a revenue impact of Rs. 65 billion during the fiscal year 2022-23 (FY23) by raising the standard rate of one percent sales tax from 17 to 18 percent.

To generate additional revenue in the’mini-budget,’ the FBR has proposed raising the federal excise duty (FED) on imported and locally-assembled motor vehicles through the promulgation of the Tax Laws Amendment Ordinance. The proposed revenue-generating measure is to rationalise the FED’s rates on imported and locally assembled motor vehicles. The FED on cigarettes would also be raised in the mini-budget, according to sources.

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