The Supplementary Finance Bill 2021-22 should be re-examined and not implemented without the participation of primary stakeholders, according to the Karachi Chamber of Commerce and Industry (KCCI) and the Leadership of Businessmen Group.
They voiced concerns about the federal government’s implementation of IMF-mandated tax measures through the Supplementary Finance Bill 2021-22, which will not only harm industry and trade but also put an undue burden on the poor and middle class by raising the prices of consumer goods.
They said that the harsh measures had imposed taxes on milk and other daily necessities, making the lives of the poor masses even more difficult.
That’s why it’s suggested that the government and FBR focus on raising Rs340 billion more than unregistered persons rather than increasing taxes on industry and consumers. In fact, closing loopholes like PATA/FATA import exemptions, which were massively abused, can generate significant additional revenue for the government. The materials consist of metals, large quantities of edible oil, and plastics. On top of all that, the government was losing big time on high-value goods like black tea, Iranian edible oil, and auto parts smuggling.
The International Monetary Fund (IMF) can only provide broad guidelines for reducing the fiscal deficit and cannot micromanage the economy.
Because of this, continuing to target tax-compliant industries that are unable to pay more taxes is unjust and unfair. Sales Tax Act Amendment Sec.23 (sub-sec. 1, G) holds vendors responsible for providing a fake CNIC number provided by a customer, whereas prior to the new law sellers were not held responsible for providing a fake CNIC number. More than 50,000 businesses are already registered in the Sales Tax regime.
Additional tax of 3pc on top of the 17 percent sales tax will result in many people leaving the sales tax net, which is tantamount to absolving tax authorities from expanding the tax base.
They claimed that they were being forced to permanently close their doors because of the increase in the sales tax on imported raw materials from 5pc to 10pc. If an individual is paying with cash and paying the statutory penalty, the seller has no right to demand that the individual’s CNIC be verified by the seller.
We have the right to request his CNIC verification since he is paying a 3 percent surcharge. There must be some understanding of the government’s decision to penalize 3 percent of the population for failing to register.
A shortfall of 4.5 to 5.0 million bales was expected despite better crops and an increase in raw cotton output, which would lead to a higher price for finished products from the domestic textile industry.
TERF’s recent incentives have resulted in the importation of a significant amount of textile industry plant and machinery, as well as a significant amount that was in the pipeline. At this point, a rise in sales tax on raw cotton will be counterproductive, so the government should restore the lower rate of 5pc on imports, they said.
As a result of an amendment to the Sales Tax Act 1990, sales tax on plant and machinery has been eliminated, and sales tax at the rate of 17 percent will be charged on imports of plant and machinery (other than those having specific concessional rate or exemption). Industrial expansion and the creation of new industries are the primary goals of all imported machinery and equipment into Pakistan.
It’s counterproductive to impose such a high tax rate due to the benefits of capital investment in plants and machinery. These subsidies must be reinstated because of this.
Because the machinery imported was meant to be used in production, the government must realize that it will not go to waste or be misused.
According to the leaders of BMG and KCCI, the imposition of tax on Tax-Free Export Processing Zones was unquestionably part of a plot to obliterate the businesses operating in these areas.
It was a clear sign of the country’s dependence on the International Monetary Fund, he said, and he insisted that the Amendment Bill’s Section 102 should be repealed immediately, and the Export Processing Zones’ original status should be maintained because it is well-known that obtaining an export rebate or sales tax refund has always been a difficult process for industrialists and exporters.
There is a separate account for the export zone profits, which is why they cannot be taxed as normal income in Pakistan.
Specifically, they pointed out a jump from 10pc to 17pc in the sales tax on branded and packaged milk and dairy products under the 8th schedule.
Under the current market conditions, the sharp increase in the rate of sales tax will have an inflationary impact, and the measure will add an additional burden on consumers.
Milk and dairy products should therefore be subject to a 10pc sales tax rate.
It was argued that the flavored milk had been omitted from the 8th Schedule and that the 17 percent sales tax imposed on locally produced flavored milk was extremely unjust and an anomaly to impose such a high sales tax on a healthy drink for children. To date, flavored milk is made in only three to four factories and is primarily used to replace imported goods.
An increase in retail price and decreased demand will make the industry unprofitable because of the 17 percent sales tax on flavored milk. In order to ensure the availability of flavored milk at reasonable prices and the growth of this industry, they proposed that the exemption be reinstated and flavored milk be included in the 5th schedule of the Sales Tax Act, 1990.
There will be a sales tax on raw materials used in pharmaceutical production because of the FBR’s refunding practices and the increased price of pharmaceuticals, which will be passed along to consumers.
Women who are self-employed and work from home have also been hit with a 17 percent sales tax on household sewing machines. The sales tax exemption for household sewing machines must be reinstated because taxing these machines at 17 percent is unfair and thus makes them unaffordable for women who are self-employed.
Exemption of sales tax on oil seeds for sowing has also been withdrawn, which means that these seeds are now subject to a 17 percent sales tax.
Oil Seeds for sowing can be used to grow high-value crops such as edible oil seeds. Pakistan must import palm oil and other edible oils to meet domestic demand due to a severe shortage of edible oil. It is counterproductive to tax oil seeds for planting at a rate of 17 percent, which is merely a ruse to import edible oil. As a result, oil seeds for sowing should be eligible for the sales tax exemption once again.