ISLAMABAD: Federal Board of Revenue (FBR) has prepared a mini-budget as per the conditions of the International Monetary Fund (IMF), reversing an Rs350 billion tax relief on multiple products including mobile phones and imported vehicles. According to sources privy to the development, a draft of the proposed mini-budget from the FBR to reverse tax relief has been sent to the law department for a vetting process before tabling it to the cabinet for approval.
“Following cabinet’s approval, the bill will be either tabled before the Parliament or enacted through ordinance,” they said adding that schedule 6 of the Finance bill 2021-22 would be amended for reversing tax exemptions. Detailing the sectors that would be affected after the proposed bill, they said that tax exemptions on mobile phones, stationery, and pack food items will be lifted besides also eliminating sales tax exemption on zero-rated sectors.
Furthermore, a uniform 17 percent sales tax will be applied for all previously exempted sectors, they said adding that taxation on luxury items will be increased besides also imposing an additional tax on imported vehicles. However, the sources said that exemptions on food items and medicines will remain applicable. Pakistan has to approve the proposed tax exemption reversals before the IMF meeting on 12 January 2022.
The development came after Pakistan and the International Monetary Fund (IMF) reached a staff-level agreement on revival of $6 billion Extended Fund Facility (EFF) that was suspended in April this year. “The Pakistani authorities and IMF staff have reached a staff-level agreement on policies and reforms needed to complete the sixth review under the EFF,” read a statement issued by the Fund. “The agreement is subject to approval by the Executive Board, following the implementation of prior actions, notably on fiscal and institutional reforms. Completion of the review would make available SDR 750 million (about US$1,059 million), bringing total disbursements under the EFF to about US$3,027 million and helping unlock significant funding from bilateral and multilateral partners.