17pc tax on number of items proposed; Shaukat Tarin dismisses inflation fears

• Govt withdraws Rs343bn sales tax exemptions
• Finance minister says sales tax on machinery and pharma adjustable, refundable
• Terms SBP autonomy essential for the overall growth of the economy
• Tax exemption retained on basic food items
• Bill proposes advance income tax on screening of foreign TV drama serials
• Tax on transfer of newly purchased vehicles increased to discourage own-money
ISLAMABAD: Finance Minister Shaukat Tarin presented in the National Assembly on Thursday the Finance (Supplementary) Bill 2021 envisaging withdrawal of sales tax exemptions worth Rs343 billion on machinery, pharma, and imported food items.
The bill also proposes an increase in rates of federal excise duty, income tax, and sales tax on services in the federal capital territory. Mr. Tarin explained that sales tax on machinery and pharma sector is adjustable and refundable. He said the levy of 17 percent sales tax on several hundred items, which would directly or indirectly affect the people, would raise around Rs71bn for the national kitty. The withdrawal of tax exemptions includes Rs31bn on luxury goods and Rs31bn on business goods. Irfan Khan“Elites, not the common man, are beneficiary of these exemptions,” Mr. Tarin said,
adding that tax exemptions of Rs343bn had been benefiting various interest groups for the past 70 years. “We have targeted only those items which are used by the elites.”
However, Mr. Tarin said the levy of 17pc sales tax on some specific items would raise Rs2bn, adding that the tax on these items would only affect ordinary people. “We have only increased the cost of imported luxury items,” he said, adding that the local supply of most items remained unchanged.
The minister explained that withdrawal of tax exemptions worth Rs112bn on machinery and Rs160bn on the pharmaceutical sector is adjustable and refundable. He did not consider these as taxes which will now be collected at the rate of 17pc on import of machinery and from the pharma sector.
The bill proposes a 17pc sales tax on a number of items that were earlier exempted from the tax. The government terms these products as luxury items which include import of live animals, steak meat, fish, vegetables, high-end bakery items, branded cheese, imported sausages, high-end cellphones, and import bicycles. At the same time, a number of items are proposed in the bill for a targeted subsidy to minimize the impact of 17pc sales tax. These include oilcake, animal feed, poultry feed, maize seed (for corn oil), and cottonseed (for oil mills). Other items that will now attract a 17pc tax on imports are magazines and fashion journals.
The targeted subsidy plan of Rs33bn has been proposed to protect any segment of the population which may get affected even indirectly by the withdrawal of some exemptions, etc. Source: dawn.com