News
Wednesday, March 16, 2011
Govt unveils ‘mini-budget’* Govt imposes 15% income tax surcharge, increases FED to 2.5%, imposes 17% GST on tractors
* Measures to generate Rs 45 billion in 3.5 month of FY 2010-11
By Sajid Chaudhry
ISLAMABAD: The federal government on Tuesday imposed a 15 percent income tax surcharge, increased federal excise duty from one percent to 2.5 percent. General sales tax (GST) exemption on tractors has been withdrawn and 17 percent GST has been imposed on tractors with immediate effect.
In this regard, President Asif Ali Zardari has promulgated three ordinances, which have allowed the federal government to impose these taxes. The ordinances would come in to force at once and taxes imposed through these ordinances would stand imposed on taxpayers of the country with immediate effect.
The net impact of the these tax measures is roughly estimated at Rs 45 billion in the remaining three and a half months of the current fiscal year. Income tax surcharge is expected to generate Rs 32 billion, increase in special excise duty will generate additional revenue of Rs 12 billion and withdrawal of GST exemption on tractors will help generate additional revenue to meet the tax collection target of Rs 1.604 trillion during the ongoing fiscal year 2010-11.
Income tax surcharge: The president has promulgated Income Tax (Amendment) Ordinance 2011 and empowered the government to levy 15 percent surcharge on the payable tax of all income taxpayers in the country. The 15 percent income tax surcharge is to remain applicable on incomes from March 15 to June 30, 2011. The surcharge is to be paid, collected, deducted and deposited at the same time and manner as the income tax is paid, collected, deducted and deposited under the Income Tax Ordinance. The issued ordinance further clarified that this surcharge shall not be payable for the tax year 2010 and prior tax years and shall be applicable for the tax year 2011.
The income tax surcharge is to be applicable on the salaries of all the public and private sector employees, corporate taxpayers, all imports, cash withdrawals from banks, electricity, POL products and oil imports, contracts and other withholding stages as explained in the income tax legislation.
Special excise duty: The president has also promulgated the Federal Excise (Amendment) Ordinance 2011, and empowered the federal government to increase the rate of special excise duty on all notified imports and locally produced items subjected to federal excise duty. Prices of cigarettes, POL products, electricity, cosmetics, beverages and other things are to go up immediately.
17 percent GST on
tractors: The president on Tuesday also issued a Sales Tax (Amendment) Ordinance 2011, and empowered the government to levy 17 percent GST on imported and locally produced tractors, fertilisers and pesticides. The facility of zero-rating on plant, machinery and equipment including parts thereof has also been withdrawn. Zero-rating on five major export oriented sectors (textiles, carpets, leather, sporting goods and surgical goods) has been restricted to registered exporters and manufacturers-cum-exporters for export purpose only.GST on sugar: Government will charge 8.5 percent GST on the actual ex-factory price of sugar instead of the existing Rs 28.88 per kilogramme.
The government also notified a 2 percent increase in power tariff on Tuesday and with the issuance of three ordinances and imposition of the income tax surcharge, increase in special excise duty from one percent to 2.5 percent and the withdrawal of GST exemption on tractors, the IMF authorities are expected to visit again in the month of May and might approach their Executive Board in early June for ending the suspension of $11.3 billion SBA and restore the issuance of the Letter of Comfort for obtaining fresh loans from the World Bank and the Asian Development Bank.
Courtesy www.dailytimes.com.pk