The mini budget which will be tabled in the Parliament Thursday will result in several items getting expensive as the Pakistan Tehrek-e-Insaf (PTI) government plans to roll back tax exemptions worth Rs350 billion.
Along with the mini budget, the State Bank of Pakistan (SBP) Autonomy Bill will also be presented.
A senior cabinet minister told SAMAA TV that the federal cabinet is scheduled to meet Thursday to approve the mini-budget. The SBP Autonomy Bill has already been approved by the cabinet.
Through the mini budget, the government will roll back tax exemptions worth Rs350 billion. This is part of the prior actions targets set by the International Monetary Fund (IMF) for the resumption of $6 billion programme.
Which items will become expensive?
Tax exemptions would be withdrawn on items including mobile phones, stationery items, packaged foods and make up items.
Mobile phone, imported cars, and cosmetics could become expensive.
Federal IT Minister Aminul Haq has revealed that the mini-budget also proposes 14% tax on computers and tablet PCs. “I would strongly oppose it,” he said.
The government plans to completely withdraw or modify tax exemptions given on items under the schedules sixth, eighth and ninth of The Sales Tax Act, 1990.
Under the act, items are classified in groups called “schedules”. When the government plans to modify sales tax, it does so on all items under a schedule.
A temporary or permanent ban or hiking sales tax from 12.5 percent to 17 percent on imported vehicles is also proposed.
The tax exemptions given to zero-rated sectors (export sector) will also be rolled back. The tax on the import of luxury items will also be raised.
Exemptions on food items and medicine will remain unchanged.
An additional sales tax is proposed at the ex-refinery stage. This tax will be paid by the oil refineries and won’t be charged from the end consumer.
The government has already increased the petroleum development levy to meet the Rs610 billion target in the budget 2021-22.
The federal Public Sector Development Program (PSDP) budget is proposed to be reduced by Rs200 billion.
It was originally budgeted at Rs900 billion for the current fiscal year. The tax collections target for FY22 is also being raised to Rs6100 billion from Rs5829 billion.
According to officials, these changes are being done at the demands of the IMF.
Bill vs Ordinance
Previously, it was reported that the PTI government was wary of tabling the mini budget in the Parliament and considered passing it through a presidential ordinance.
There was a possibility of opposition stalling the legislation if it was tabled in the Parliament.
But, now the government is compelled to bring the bill to the Parliament as the IMF has, in the November’s staff-level agreement, rejected government’s proposal to promulgate an ordinance. It insisted on legislation through the Parlaiment.
The government is working on a deadline as these exemptions need to be reverted before the IMF’s executive board meets on January 12 to decide on the resumption of programme.
What is a mini budget?
Every year, the government presents a budget. It is also called the finance bill or the money bill.
The government needs National Assembly’s approval for money bills. These bills include measures like imposition of new taxes, rolling back or extending tax exemptions, and modifying duties.
But, if during a fiscal year, government feels the need to make urgent fiscal adjustments which can’t wait till the next finance bill, it tables a mini-budget in the parliament.