3. Economic Overview
Pakistan’s economy faces considerable challenges. Floods in summer 2010 hit agricultural
output and damaged transport and communication. Still high inflation, though recently falling,
may well accelerate. Fiscal developments are worrisome: a partial increase in electricity tariffs,
delays in carrying out revenue-increasing measures, broad tax exemptions for residents flood
affected areas, and continued heavy fiscal support to state-owned enterprises adds to pressures
on the fiscal deficit. The current account balance is improving, but capital and financial inflows
continue to decline. Still, despite devastation and economic distress, growth will likely stay
positive.
Pakistan’s economic performance in FY2011 reflects largely the same structural weaknesses that
contributed to its FY2008 macroeconomic crisis. Energy shortages and security issues held the economic
rebound for FY2011 to 2.4%, slowing growth for FY2009–FY2011 to an average of only 2.5%, well below
the 8% needed to create jobs for the predominately young population. Little recent progress has therefore
been made in raising per capita incomes or reducing poverty. Delays in implementing policy measures
and fiscal management practices necessary for macro stability have undermined investment in
infrastructure and production capacity.
Agriculture Industry Services GDP
%
6.8 8.0
5.8
3.8 6.0
3.7
2.4 4.0
1.2
2.0
0.0
-2.0
2006 2007 2008 2009 2010 2011
Services sector grew by 4.1 percent as against 2.9 percent last year. The main contributors to this growth
are public admin and defence (13.2 percent), and social services sector (7.1 percent). The former
because of 50 percent pay rise for government servants and higher defence spending, the later because
of logistics support and flood generated social activities. The contribution to economic growth is
spearheaded by the services sector with 90 percent stake while only 10.0 percent contribution came from
the Commodity Producing Sector (CPS).
The performance of the Large Scale Manufacturing (LSM) sector during July-March remains
victim of operational constraint on account of energy/gas shortages and devastating effects of flood
2010. It is evident from the fact that the momentum in growth was upset in the initial months of current
fiscal year. The construction, petroleum refining, cotton textile and agro-based industries were strongly
affected.
TJIF Budget Overview 3
4. Economic Overview
FY2011 also saw a fourth consecutive year of declines in investment in large-scale
manufacturing. Overall, the steady decline in total gross fixed investment as share of GDP from
20.5% in FY2006 to 11.8% in FY2011 will crimp future growth prospects. Private savings have
similarly declined, owing in part to the failure of key asset rates to keep pace with inflation,
leading to either negligible or negative real returns.
The agriculture has lost significant growth momentum as its growth slowed down to 2.7
percent in the decade of 2000s as against 4.4 percent in 1990s and 5.4 percent in the 1980s. The
structural problems and lack of mechanization remained main impediment of growth. Major crops
remained the victim of natural calamities during the last few years and three out of last four years
witnessed negative growth in the major crop sector.
Fixed Investments
% of GDP
25.0
20.0
15.0
10.0
5.0
0.0
2006 2007 2008 2009 2010 2011
Fiscal Indicators
Fiscal balance deteriorated in 2009-10, and some adjustment is expected in fiscal deficit but it is far off
than target. Key reforms for revenue mobilization have to be delayed owing to peculiar internal and
external pressures. It widened fiscal imbalance from 5.3percent of GDP in 2008-09 to 6.3 percent in
2009-0 against the target of 4.9 percent. The additional burden on expenditure was not supported by
commensurate increase in revenues, but weaker economic activity constricted revenue generation
process.
Expenditures Revenues Fiscal deficit
% Of GDP
22.2
20.8 19.9 20.5
18.4 18.0
14.1 15.0 14.6 14.5 14.2 14.3
2006 2007 2008 2009 2010 2011
-4.3
-4.4 -7.6 -5.3 -3.7
-6.3
TJIF Budget Overview 4
5. Economic Overview
The merchandise trade deficit has improved and declined from $12.3 billion to $12.1billion in
July-April 010-11. Substantial increase of 27.8 percent in exports outstripped otherwise buoyant
growth of 14.7 percent in imports, which caused the trade deficit to improve by 2.2 percent.
Pakistan’s current account balance shrank by 121.6 percent in the first ten months of 2010-11.
Inflation
During the current fiscal year 2010-11 an upward trend persisted in all indices used to measure various
kind of inflation. CPI inflation averaged at 14.1 percent, WPI 23.3 percent and SPI inflation increased at
18.2 percent for July-Apr 2010-11which is higher than the corresponding period of last year. The
underlying factors for this spike are; rising international oil prices, spike in textile products prices and
shortages of key consumer items in the market.
% 25.0
20.0
15.0
General
10.0
Food
5.0
Core Trimmed
0.0
Current Account Indicators
The current account balance turned to surplus $748 million from deficit of $3456 million in the comparable
period of last year. Current account absorbed extra ordinary commodity and oil price shocks without
impacting exchange rate or reserve accretion. This is mainly because of higher inflow of worker’s
remittances and sharp reduction in trade of goods and services deficit. Foreign direct investment flows
continued their downward path in response to infrastructure and security concerns, with communications,
transport, and power accounting for much of the decline.
% of GDP
25.0
20.0
15.0
Exports
10.0
Imports
5.0
Trade balance
0.0
Current account balance
-5.0 2007 2008 2009 2010 2011 P
-10.0
-15.0
TJIF Budget Overview 5
6. Economic Overview
Gross reserves improved, benefiting from International Monetary Fund (IMF) releases under a
stand-by arrangement, rising to $17.1 billion by end-April 2011. The nominal exchange rate
depreciated by 6.3%, but inflation—high relative to trading partners’—lifted the real exchange
rate by 1.0%.
Public Debt and Interest Payments
Pakistan’s public debt (excluding guarantees) as a share of GDP continued to climb in FY2011.
Government domestic debt amounted to 37.0% of GDP, including commodity debt and liabilities of SOEs.
External debt rose to 28.2% of GDP, including 0.6% of GDP in external liabilities of SOEs. Interest
payments due on domestic debt represent a heavy burden, accounting for 2.5% of GDP in FY2011, or
43% of FBR revenue. External debt amortization payments, excluding amounts owed to the IMF, are
relatively stable for FY2010–Y2013 at about $3.3 billion. Amounts due for FY2012 and beyond will be
raised substantially by repayment obligations to the IMF.
% of GDP
70.0 5.0
% of GDP
4.5
60.0
4.0
50.0 3.5
3.0 Domestic public debt
40.0
2.5 External debt and liabilities
30.0 2.0
Domestic interest payment
20.0 1.5
1.0 Foreign interest payment
10.0
0.5
0.0 0.0
2008 2009 2010 2011
.
TJIF Budget Overview 6
7. SIGNIFICANT AMENDMENTS
Income Tax
Tax deducted on rendering of services is treated as minimum tax for companies also.
Withholding on cash withdrawal from banks is reduced from 0.3% to 0.2%.
Minimum tax under section 113 can now be carry forward to 5 years instead of 3 years
Dividend received by banking company from its own AMC is now taxed at 20% instead of 10%.
Minimum threshold for taxation for individual is increased from Rs. 300,000 to Rs. 350,000.
Nonresident tax payers having permanent establishment is Pakistan could not avail the facility of
advance ruling on any specific transaction.
th
Instead of quarterly statement monthly statement for goods & services is to be filed on 15 of every
month.
Instead of quarterly statement for salaries an annual statement is required to be filed by the employer.
Limit on tax credit on investment in shares of listed company is increased from 10% to 15% and Rs.
300,000 to Rs. 500,000.
Tax credit is allowed for life insurance premium paid to life insurance company.
Maximum Limit of Rs. 500,000 for annual contribution to voluntary pension scheme is now removed
and the tax credit can be claimed for higher amount.
Tax credit on equity investment on new projects by company is allowed.
Tax credit for enlistment of company is increased from 5% to 15% percent.
Sales Tax and Federal Excise
Reduction in the rate of sales tax from 17% to 16%.
Reducing overall the scope of federal excise duty and completely eliminating special excise duty.
Review of federal excise duty regime by reducing the number of goods liable to federal excise.
Reduction in the quantum of excise duty on cement and withdrawal of excise duty on white cement.
Reduction in the rate of federal excise duty leviable on aerated beverages from 12% to 6% to provide
a level playing around vis-à-vis its substitute like fruit juices, etc.
Abolition of federal excise duty levied on services provided by property developers or promoters.
TJIF Budget Overview 7
8. Immediate full adjustment of sales tax paid on import or local purchase of capital goods has been
allowed.
The value addition tax levied on commercial importers is being enhanced from 2% to 3%, which is
levied and collected at import stage.
Exemption of sales tax on cement/concrete blocks and bricks has been withdrawn
The sales tax leviable on sugar at import and local supply stage has been withdrawn and federal
excise duty @ 8% is being levied on aforesaid stages.
The federal excise duty leviable on filter rods for cigarettes has been rationalize from Rs.1/- per filter
rod to 20% ad val.
The Federal Excise Duty on unmanufactured tobacco is being enhanced from Rs.5/- per kg to
Rs.10/per kg.
Proposal to disallow auto revision of sales tax return available under rule 14A of the Sales Tax Rules,
2006.
TJIF Budget Overview 8
9. PROPOSED CHANGES IN INCOME TAX ORDINANCE, 2001
Definition- Section 2
The concept of provisional assessment was introduced through Finance Amendment Ordinance 2009
and the same was inserted by Finance Act 2010 but the provisional assessment was not included in
definition of assessment. The Finance Bill 2011 now seeks to add the “provisional assessment” in the
definition of “assessment” as defined in clause 5 of Section 2.
The bill seeks to introduce concept of “Collective Investment Scheme” through insertion of clause 11C to
the Section 2.
Income from Business- Section 18
Presently the fair market value of benefit and perquisite derived by a person in relation of business is
treated as income from business. Now the Finance Bill seeks to enlarge the definition of “benefit”
whereby benefit includes any benefit derived by way of waiver of profit on debt or the debt itself under the
State Bank of Pakistan, Banking Policy Department Circular No. 29 of 2002 or in any other scheme
issued by the State Bank of Pakistan is also treated as income from business.
Tax Credit for investment in shares – Section 62
Finance Bill 2011 recommends the following changes in section 62 that relates to tax credit for investment
in shares of new shares of listed companies:
The non-resident person is now not entitled to claim tax credit under this section.
The minimum holding period for investment is increased from 1 year to 3 years.
The maximum contribution is increased from 10% to 15% of taxable income.
The maximum limit is increased from Rs.300,000 to Rs.500,000.
Tax credit for insurance premium paid to life insurance companies – Section 62
The Finance Bill 2011 proposes new tax credit for resident tax payer who is deriving income from
business or salary. According to the proposed amendment a resident person is entitled to claim tax credit
on life insurance premium paid to life insurance company registered with SECP.
Tax credit for contribution to an approved pension fund – Section 63
Presently a person is entitled to claim tax credit for contribution to an approved pension fund however
there is a maximum limit of Rs.500,000 or 20% of person’s taxable income. The Finance Bill 2011
proposes to remove the upper limit of Rs.500,000.
Tax credit for enlistment – Section 65C
Finance Bill 2011 proposes to increase tax credit for listing of new companies in any registered stock
exchange in Pakistan from 5 percent to 15 percent.
TJIF Budget Overview 9
10. Tax credit for equity investment – Section 65D
A new section is proposed to be introduced wherein a tax credit equal to 100 percent of tax payable shall
be allowed for equity investment by companies. The following are the prerequisites for claiming tax credit
under this section:
Tax credit is available to companies only.
Credit Is allowed if new industrial undertaking is established for manufacturing in Pakistan or
investment is made for purchase and installation of plant and machinery, for the purpose of
balancing, modernization and replacement of the plant and machinery, already installed therein, in an
industrial undertaking setup in Pakistan and owned by it.
Investment is made from 100 percent equity financing.
We feel that further clarification is required to clarify whether tax credit is allowed to the total profit of the
company if investment in BMR is made which is not a significant portion of total plant assets.
Unexplained Income or Assets- Section 111
Presently, where any unexplained income, assets or expenditure incurred have been discovered and the
person offers no explanation for such income, assets or expenditure or the explanation offered by the
person is not satisfactory in the Commissioner’s opinion such amount is liable to be taxed to the extent it
is not adequately explained.
The bill propose to insert clause(d) after clause (c) to the sub-section (1) of section 111, whereby the
scope of unexplained income is extended to the suppression of any production, sales or any amount
chargeable to tax and suppression of any item of receipt liable to tax in whole or in part.
Minimum Tax- Section 113
Presently, where minimum tax under section 113 exceeds the actual tax payable, the excess amount of
tax paid can be carried forward and adjusted against tax liability for three years immediately succeeding
the tax year for which the amount was paid. Now the bill seeks to enhance the time limit for adjustment of
minimum tax against actual tax liability from three year to five years.
The bill also seeks to enhance the scope of turnover through insertion of gross sales in the definition of
turnover as defined in clause (a) sub-section (3) of section 113.
Return of Income- Section 114
In order to expand the tax base the bill proposes mandatory fling of return of income by holders of
commercial or industrial connection of electricity where the amount of annual bill exceeds rupees one
million.
In order to facilitate documentation, the bill also proposes filing of return in case of an individual having
income between Rs. 300,000 to Rs. 350,000 although the income of individual is not liable to tax.
The bill further proposes to enhance the requirement for attachment of the following documents along
with return of income:
due payment of tax as per return of income; and
wealth statement as required under section 116
TJIF Budget Overview
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11. Wealth Statement – Section 116
Presently, subsection (2) of section 116 requires that every resident taxpayer filing return of income for
any tax year whose last declared or assessed income or the declared income for the year, is Rs. 500,000
or more shall furnish a wealth statement and wealth reconciliation statement for that year along with such
return.
The Finance Bill 2011 now proposes to enhance the limit from Rs. 500,000 to Rs. 1,000,000 for
individuals and member of association of person (AOP) whose share of income from AOP is RS. 1.0
million or more shall file wealth statement and wealth reconciliation statement along with return of income
filed by AOP.
Appeal To The Commissioner Appeals- Section 127
Finance bill 2011 proposes that the provisional assessment passed under section 122C is not appealable
before Commissioner of Appeal.
Appointment of The Appellate Tribunal – Section 130
Presently, the single member of Appellate Tribunal can dispose of the appeal where the amount of tax or
penalty does not exceed Rs. 5.0 million. However, the Finance Bill 2011 proposes to reduce this limit to
Rs. 1.0 million.
Disposal of Appeals By The Appellate Tribunal – Section 132
Presently, the appellate tribunal has a power to dismiss the appeal in case of default by any of the party
on the date of hearing. However, the Finance Bill 2011 proposes to curtail the power of dismissal by the
appellate tribunal.
Advance Tax on Capital Gain – Section 147 (5b)
Presently, the advance tax on capital gains is payable to Commissioner within 7 days after the close of
each quarter. Now the Finance Bill proposes to extend the time to 21 days from 7 days.
Taxability of Profit on Debt – Section 151
Presently, the profit on debt other than profit on Provincial and Federal Government Securities is final tax
on income of persons other than companies. The Finance Bill 2011 now proposes to include the profit on
Provincial and Federal Government Securities under final tax regime as well.
Withdrawal of Balance under Pension Fund – Section 156B
Presently, the amount received from pension fund balance in excess of 25% of person’s accumulated
balance at or after the retirement age is taxable. However the bill proposes to increase this limit to 50%.
Statements – Section 165
At present quarterly statements for tax deduction under section 149 (being deduction of tax from salaries)
and 165 (for tax deduction other than salary) is required to be filed. However, the bill proposes to remove
the requirement for filing of quarterly statements in case of tax deduction under section 149. Through the
TJIF Budget Overview
11
12. proposed amendment only annual employer statement is now required to be filed by 31 August each
year.
In case of tax deduction for payments other than salaries, the requirement of quarterly filing is proposed
to be removed and the requirement of filing monthly statements by the 15 day of the month following the
reporting month has now proposed to be re-introduced.
The bill also proposes that the annual employer statement would be required to be filed in case of
payment of salary below threshold limit between Rs. 300,000 to Rs. 350,000.
It is also proposed that the CNIC and NTN of the recipient should be mentioned in the monthly
withholding tax statements.
Advance Ruling – Section 206A
Presently, every nonresident person can obtain advance ruling from the federal board of revenue
regarding the application of the Income Tax Ordinance, 2001 before entering into any specific transaction.
The Finance Bill 2011 now proposes to exclude the permanent establishment of nonresident person from
the ambit of this facility.
Cash Withdrawal From A Bank – Section 231A
The Finance Bill 2011 proposes to reduce the rate of tax deduction Rs.0.3% to Rs. 0.2%.
Withholding tax on payment of goods and services – Section 153
The Finance Bill 2011 proposes that the tax deducted at the rate of 6 percent on services would be
treated as a minimum tax for companies also. Previously, tax deducted on services was treated as a
minimum tax for individual and association of persons only.
Further this section has been redrafted for clarification purposes since there have been many
amendments made in this section in previous years, which had created ambiguities and lacunas.
First Schedule
After the proposed increase of the exemption limit from Rs. 300,000 to Rs. 350,000 the proposed tax
rates are as under:
Business individuals
Sr. # Taxable Income Rate of tax
1 Where taxable income does not exceed Rs.350,000 0%
2 Where the taxable income exceeds Rs.350,000 but does not 7.50%
exceed Rs.500,000
3 Where the taxable income exceeds Rs.500,000 but does not 10%
exceed Rs.750,000
TJIF Budget Overview
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13. 4 Where the taxable income exceeds Rs.750,000 but does not 15%
exceed Rs.1,000,000
5 Where the taxable income exceeds Rs.1,000,000 but does 20%
not exceed Rs.,1,500,000
6 Where the taxable income exceeds Rs.1,500,000 25%
Salaried individuals
Sr. # Taxable Income Rate of tax
1 Where taxable income does not exceed Rs.350,000 0%
2 Where the taxable income exceeds Rs.350,000 but does not 1.50%
exceed Rs.400,000
3 Where the taxable income exceeds Rs.400,000 but does not 2.50%
exceed Rs.450,000
4 Where the taxable income exceeds Rs.450,000 but does not 3.50%
exceed Rs.550,000
5 Where the taxable income exceeds Rs.550,000 but does not 4.50%
exceed Rs.,650,000
6 Where the taxable income exceeds Rs.650,000 but does not 6.00%
exceed Rs.750,000
7 Where the taxable income exceeds Rs.750,000 but does not 7.50%
exceed Rs.900,000
8 Where the taxable income exceeds Rs.900,000 but does not 9.00%
exceed Rs.1,050,000
9 Where the taxable income exceeds Rs.1,050,000 but does 10.00%
not exceed Rs.1,200,000
10 Where the taxable income exceeds Rs.1,200,000 but does 11.00%
not exceed Rs.1,450,000
11 Where the taxable income exceeds Rs.1,450,000 but does 12.50%
not exceed Rs.1,700,000
12 Where the taxable income exceeds Rs.1,700,000 but does 14.00%
not exceed Rs.1,950,000
13 Where the taxable income exceeds Rs.1,950,000 but does 15.00%
TJIF Budget Overview
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14. not exceed Rs.2,250,000
14 Where the taxable income exceeds Rs.2,250,000 but does 16.00%
not exceed Rs.2,850,000
15 Where the taxable income exceeds Rs.2,850,000 but does 17.50%
not exceed Rs.3,550,000
16 Where the taxable income exceeds Rs.3,550,000 but does 18.50%
not exceed Rs.4,550,000
17 Where the taxable income exceeds Rs.4,550,000 20.00%
Seventh Schedule
Dividend income from bank’s own asset management company (AMC)
In order to take benefit of reduced taxation on dividend income many banking companies are placing their
assets with AMCs instead of directly investing their funds.
The tax on dividend from AMCs is 10% whereas if these funds are directly invested tax @ of 35% is
chargeable. In order to curb this practice, the Finance Bill 2011 now proposes to increase the rate to 20%
from 10% on dividend income received by banking company from its asset management company.
However the dividend income from other AMCs are continue to be taxed at the rate of 10 percent and this
avenue of tax avoidance is still available.
Provision on advances to SME and consumers
At present the provision against advances to SME and consumers is allowed at the rate of 5% of
advances. The carry forward of additional provision was not allowed.
The bill now proposes to allow carry forward of additional provision to succeeding years. Further the bill
proposes that if the actual provision on advances to consumers and SME is less than 5% then actual
provision is allowable instead of 5%.
TJIF Budget Overview
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15. PROPOSED CHANGES IN SALES TAX ACT, 1990
Reduction in Rate of Sales Tax - Section 3
The Finance Bill 2011 proposes to reduce the rate of sales tax from 17% to 16% along with withdrawal of
various exemptions provided through earlier notifications.
It may be noted that the rate of sales tax was enhance from 16% to 17% by Finance Act 2010.
Admissibility of Input Sales Tax Paid on Fixed Assets or Capital Goods – Section 8B
Through the Finance Act 2007 Section 8B was introduced whereby, the adjustment of input tax is
restricted upto the 90% of the output tax to the registered person and the input tax paid on capital goods
and fixed assets is allowed in twelve (12) equal monthly installments.
The bill now seeks to substitute the first proviso of sub section 1 to allow immediate adjustment of sales
tax on fixed assets or capital goods paid on import or local stage to mitigate the cash flow issues and to
ensure timely and quick adjustment of input tax paid.
De-Registration, Blacklisting And Suspension of Registration – Section 21
Presently the Commissioner after having satisfied that the registered person has committed tax fraud or
issued fake invoices can suspend the registration of any such person.
The bill now seeks to introduce the new sub-section to section 21, whereby the invoices issued by the
registered person during the period of suspension shall not be acceptable for the purpose of refund or the
input tax credit against the invoices issued by him. The new sub-section further provides that if such
person would be declared guilty of issuing fake invoices through a self-speaking appealable order passed
by the Commissioner, the invoices issued by such person before or after the suspension shall be
rejected.
Revision of Special Returns – Section 26 & 27
The bill seeks to amend section 26 whereby the registered person filing special return under section 27
will be able to revise the same under section 26 subject to the same conditions as applicable to the
normal returns.
Further, amendment has also been made to rule 14-A , whereby the registered person was allowed auto
revision by paying additional amount in execs of original return, the board now seeks to withdraw such
facility vide SRO 487(1) 2011. Through the amendment the registered person can now only revise its
return after obtaining approval form the Commissioner Inland revenue.
Condonation of Time Limit – Section 74
The bill seeks to insert explanation to section 74, whereby Federal Board of Revenue is empowered to
condone the time limit in time bound cases dealt by the authorities of Inland Revenue.
Enhancement of Value Addition at Import Stage
Through SRO 482(I) 2011, the value addition sales tax levied on commercial importers is being enhanced
from 2% to 3%, which is levied and collected at import stage.
TJIF Budget Overview
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16. Sales Tax on Sugar Import And Supply
(SRO. 1(3) STM/2004 (Pt-11) dated 23 August 2009)
The sales tax leviable on sugar at import and local supply stage has been withdrawn and federal excise
duty @ 8% is being levied on aforesaid stages.
Sixth Schedule
The following sales tax exemptions are proposed to be withdrawn by the Finance Bill 2011. After
the proposed amendments sales tax @ 16% shall be chargeable on the following goods:
Serial Description Heading Nos. of the First
No Schedule to the Customs Act,
1969 (IV of 1969)
41. Computer software. 8523.2990, 8523.4010,
8523.4090, 8523.5990 and
8523.8090
42. Ambulances, fire fighting vehicles, waste 87.02, 87.03, 8704.2200,
disposal trucks, brake down lorries, special 8704.2300, 8705.3000 and
purposes vehicles for the maintenance of 8705.9000
streetlights and overhead cables.
43. Aircrafts 8802.2000, 8802.3000 and
8802.4000
44. Ships of gross tonnage exceeding 15 LDTs, 8901.2000, 8901.3000 and
excluding those for recreational or pleasure 8901.9000
purpose.
62. Defence stores, whether manufactured Respective headings
locally or imported by the Federal
Government against foreign exchange
allocation for defence, including trucks,
trailers and vehicles falling under PCT
heading 87.04 of the First Schedule to the
Customs Act, 1969 (IV of 1969), specially
modified for mounting defence equipments,
their parts and accessories for supply to
Armed Forces.
64. Spare parts and equipment for aircraft and Respective headings
ships covered by serial number 43 and 44
above.
TJIF Budget Overview
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17. 65. Equipment and Machinery for pilotage, Respective headings
salvage or towage for use in ports or airports.
66. Equipment and Machinery for air navigation. Respective headings
67. Equipment and machinery used for services Respective headings
provided for handling of ships or aircrafts in a
customs port or Customs airport.
68. Such plant and machinery as is notified by Respective headings
the Federal Government in the official
Gazette but if imported, these shall be
entitled to exemption from sales tax on
importation if these are not manufactured in
Pakistan.
69. Tractors, bulldozers and combined Respective headings
harvesters; and components (which include
sub-components, components, sub-
assemblies and assemblies but exclude
consumables) imported in any kit form and
direct materials or assembly or manufacture
thereof, subject to the same conditions as
are envisaged for the purposes of exemption
under the Customs Act, 1969 (IV of 1969).
70. Import and supply of fully dedicated CNG 8702.9010 and 8702.9090
Euro-2 buses whether in CBU or CKD
condition.
Table 2
(Local Supplies only)
Serial No Description Heading Nos. of the First Schedule to
the Customs Act, 1969 (IV of 1969)
5. Supply of other such agricultural Respective headings.
implements as may be specified
in a notification to be issued by
the Federal Government in the
official Gazette.
TJIF Budget Overview
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18. WITHDRAWAL OF EXEMPTION THROUHG SROs
Following SROs have been withdrawn: Reference
SRO 1240(I) 2005 dated 16 December 2005: SRO 480(I)2011
Withdrawal of exemption on dumper, Trucks for use on
highway. (The SRO was applicable up to 30 June 2011).
SRO 542(I) 2006 dated 5 June 2006:
Withdrawal of exemption on Agriculture machinery.
SRO. 275(I) 2008 dated 12 March 2008:
Withdrawal of exemption on CKD kits and Agriculture diesel
engine.
Withdrawal of Zero Rating facility available to manufacturer cum importer through SRO
1161(I)/2007 dated 30 November 2007:
Description of SRO 485(I) 2011
Description of Heading or sub-
goods to be
raw Materials heading Nos.
manufactured
Diapers of HS Super 3906.9090
Code 5601.1040 Absorbent
Polymers 3920.1000 and
3920.9900
Poly Back Sheet 3506.9190
5603.1100 and
Hot Melt Adhesive 5603.1200
Non-Woven,
whether or not
impregnated,
coated, covered or
4803.0000
laminated of
manmade filaments.
Toilet or facial tissue
stock, towel or
napkin paper of a
kind used for
household or
sanitary purpose
TJIF Budget Overview
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19. (non-pours) Frontal
Tape
Pre-Laminated Tape
3919.9090 and
Fluff Pulp 3920.9900
3919.1090 and
Spandex Bare Yarn 3920.9900
4703.2100
5402.4900
Withdrawal of Zero Rating on following items available through SRO 549(1) 2008 dated 11 June
2008:
SRO 486(I) 2011
Dedicated CNG buses and all other buses meant for
transportation of forty or more passengers whether in CBU
or CKD condition (PCT Heading 87.02);
Trucks and dumpers with G.V.W. exceeding 5 tonnes (PCT
Heading (87.04);
Trailers and semi-trailers for the transport of goods having
specifications duly approved by the Engineering
Development Board (PCT Heading 87.16);
Road tractors for semi-trailers, prime movers and road
tractors for trailers whether in CBU condition or
in kit form (PCT Headings
8701.2010, 8701.2020, 8701.2030,
8701.2090, 8710.9030, 8701.9040,
8701.9050 and 8701.9060);
TJIF Budget Overview
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20. PROPOSED CHANGES IN FEDERAL EXCISE ACT, 2005
FED On Cable Operators SRO 484 (I)2011
Presently cable operators are required to pay Rs. 8 per subscriber
per month being a FED. The bill now seeks to abolish such duty.
FED On Franchise Fee Or Technical Fee Or Royalty, Franchise SRO 488 (I) 2011
Agreement
Presently every person or a company availing any rights through any
franchise agreement is required to pay 10% FED on the value of
taxable services. However, a rate of 5% was mentioned in rule 43 A
whereas the rate of 10% was mentioned in the first schedule.
Through SRO 488(1) 2011 dated 03-06-2011 the anomaly is sought
to be removed.
SRO 489(I) 2011
Withdrawal Of SED On Import And Local Manufacturer
It may be noted that SED was introduced vide finance Act 2007 @
1% and later enhanced to 2.5%. Now it is withdrawn to reduce the
quantum of taxation on all items including those used by the middle
and lower middle class of population. Enforced through amendment
in Federal Excise Act, 2005 and withdrawal of SRO 655(I)/2007,
dated 29.06.2007, effective from the 1st July, 2011.
Reduction Of FED On Cement
The rate of excise duty on cement has been reduced from Rs.
500/MT from Rs. 700/MT. Further, excise duty on white cement has
been abolished to encourage construction industry.
Enforced through amendment in Table-I of First Schedule to the
Federal Excise Act, 2005, effective from the 1st July, 2011.
Reduction Of FED On Aerated Water Beverages
The rate of federal excise duty on aerated beverages has been
reduced from 12% to 6% to provide a level playing around vis-à-vis
its substitute like fruit juices, etc. which has also been reduced from
10% to 6%
Enforced through amendment in Table-I of First Schedule to the
Federal Excise Act, 2005, effective from the 1st July, 2011
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21. FED On Property Developers Services
The bill seeks to abolish the Federal excise duty levied on services
provided by property developers or promoters to reduce the level of
taxation which will in turn reduce the quantum of taxation on housing
sector already subject to levy of Capital Value Tax
Enforced through amendment in Table-II of First Schedule to the
Federal Excise Act, 2005, effective from the 1st July, 2011.
Federal Excise Duty On Cigarettes
Revision in the upward limit of duty slabs to enhance the burden of
Federal Excise Duty on locally produced Cigarettes, according to the
to the following schedule:
Locally produced, if retail price 65% of the retail price
exceeds Rs. 21/10 cigarettes
Locally produced, if retail price Rs. 6.04/10 cigarettes
exceeds Rs. 11.50/10 cigarettes plus 70% per
but does not exceed Rs.21/10 incremental rupee or
cigarettes part thereof
Locally produced, if retail price Rs. 6.04/10 cigarettes
exceeds Rs. 11.50/10 cigarettes
Enforced through amendment in Table I, of First Schedule to the
Federal Excise Act, 2005, effective from the 4thJune, 2011.
The Federal Excise Duty leviable on filter rods for cigarettes has
been rationalize from Rs.1/- per filter rod to 20% ad val.
Enforced through amendment in Table I of First Schedule to the
Federal Excise Act, 2005, effective from the 4th June, 2011.
The Federal Excise Duty on unmanufactured tobacco is being
enhanced from Rs. 5/- per kg to Rs.10/- per kg.
Enforced through amendment in Table I of First Schedule to the
Federal Excise Act, 2005, effective from the 4th June, 2011.
TJIF Budget Overview
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