By Staff Reporter
ISLAMABAD: President Arif Alvi on Monday signed an ordinance further raising taxes on tobacco products to generate additional revenue of Rs38 billion ahead of the International Monetary Fund’s crucial board meeting on Pakistan’s bailout funding.
The government promulgated Tax Laws Second Amendment Ordinance 2022.
The Federal Excise Duty on un-manufactured tobacco has been enhanced from Rs10 per kg to Rs390 per kg. The government enhanced the tax rate on Tobacco processing to fetch Rs2 billion. The government also increased tax on locally manufactured cigarettes.
The Federal Excise Duty on locally manufactured cigarettes has been enhanced from Rs5,900 per 1,000 sticks to Rs6,500/1,000 sticks for Tier-1 and from Rs1,850/1,000 sticks to Rs2,050/1,000 sticks for Tier-2 cigarettes.
Officials said the tax authorities have proposed an almost 50 percent less increase in the taxation rate related to tobacco but the Prime Minister Shehbaz Sharif jacked it up by 100 percent to collect additional taxes from the tobacco sector.
The Fixed Tax Scheme introduced for retailers (other than tier-I retailers) on commercial electricity connection has been withdrawn with effect from July 1, 2022 and the previous regime (prevailing prior to Finance Act 2022) has been restored.
The move indicates ruling coalition of the Pakistan Muslim League government is incentivizing its vote bank as traders are considered major supporters of the party holding street power in major urban centers of Punjab.
The government had imposed a fixed tax on retailers in the last budget to collect Rs 42 billion through electricity bills. But it bowed down after a tweet from Mariam Nawaz Sharif.
The government has been empowered to make any future scheme and determine its modalities including tax rate or amount and the date when it will be implemented for retailers to collect tax on commercial connections. Till the new scheme is announced by the government, the previous regime prior to Finance Act, 2022 will remain in force.
The advance tax rates on passenger transport vehicles have also been rationalized. Passenger transport vehicles, goods transport vehicles, and vehicles of foreign diplomats and foreign diplomatic missions have been exempted from the levy of Capital Value Tax. Exemption on allowance and perquisite paid or allowed outside Pakistan by the government to its citizen for services rendered outside Pakistan, withdrawn earlier through Finance Act, 2022 has been restored with effect from July 1, 2022.
Exemption on income derived by Kuwait Foreign Trading Contracting and Investment Company or Kuwait Investment Authority being dividend of the Pak-Kuwait Investment Company in Pakistan has been restored as per sovereign agreement.
The subsidy provided by the federal or a provincial government on natural gas to consumers, including RLNG, has been granted a Sales Tax exemption. Sales Tax exemption available to the local supply of single cylinder agriculture diesel engines of 3 to 36 HP, which was withdrawn vide Finance Supplementary Act, 2022 has been restored.
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