Exemptions from taxes on infant formula, red chilies, and iodized salt have been preserved.
Mobile phones, hybrid and electric cars, poultry and cattle, dairy and bread commodities all have higher sales taxes.
ISLAMABAD: During a seven-hour sitting on Thursday night, the Pakistan Tehreek-i-Insaf-led coalition government crushed 16 pieces of legislation, including two contentious acts necessary to satisfy IMF criteria, amid an opposition outcry – both within and outside parliament.
Despite getting both the Finance (Supplementary) Bill 2021 and the State Bank of Pakistan (Amendment) Bill 2021 enacted by the lower house, the government fell four votes short of the 172 votes needed for the prime minister’s election during voting on one of the amendments.
The prime minister, who generally only attends parliamentary sittings at crucial junctures, remained in the house for most of the session’s duration, which lasted until midnight.
Opposition Leader Shehbaz Sharif, Pakistan Peoples Party chairman Bilawal Bhutto-Zardari and former president Asif Zardari also remained in the assembly for most of the session. They initially left the house after the first vote on the amendment but rushed back to their seats when the speaker ordered another physical vote on the opposition’s demand.
The amendment was put to vote by Speaker Asad Qaiser after the opposition challenged his rejection of the same through a voice vote. The house later rejected another amendment moved by opposition members with 163 votes to 146.
Towards the end of the session, opposition members carrying placards gathered in front of the speaker’s dais and raised anti-government slogans after Deputy Speaker Qasim Suri refused their request to defer the State Bank of Pakistan (Amendment) Bill 2021 for a day and put it to vote.
In protest, opposition members refused to move their amendments after Mr Suri turned a deaf ear to their requests on a motion seeking the suspension of rules to take up the SBP Bill without providing the stipulated 48 hours to consider the committee’s report.
Opposition members made an attempt to disrupt proceedings by pointing out quorum, but the chair hastily called for presentation of the bills one after the other so the agenda could be wrapped up before midnight. Under the rules, after the change in the date, a new agenda must be presented.
The opposition also protested the non-laying of Senate recommendations on the finance bill before the house for consideration, with PML-N leader Ahsan Iqbal terming it an “insult to the Senate”.
Mr Iqbal was later seen begging the chair with his hands joined together to not bulldoze the SBP bill.
“If you suspend the rules and bulldoze the bill in the darkness of the night, your name will go down in history among those who conspired to sell the country’s economic sovereignty,” he said.
“Why are we giving an impression that we are doing it on gunpoint,” asked PPP’s Syed Naveed Qamar.
Mr Bhutto-Zardari termed the SBP Bill a threat to national security and questioned why the government was making it binding to have only one bank account for defence expenditures. By doing so, he said they were providing an opportunity to world powers to scrutinise the country’s defence budget and its nuclear programme which, he added, could be the next target.
“Your prime minister has been installed to destroy Pakistan politically and economically,” said Asad Mehmood of the Jamiat Ulema-i-Islam (JUI-F).
However, Defence Minister Pervez Khattak seemed to lose his patience with the process and, at one point, asked the speaker to ignore the opposition and “bulldoze” the bills through.
Earlier in the day, the PPP and the PML-N staged separate demonstrations outside the Parliament House and leaders such as Shehbaz Sharif also addressed the crowds.
The house witnessed a heated debate on the mini-budget when opposition members blasted the government for imposing Rs350bn in new taxes on the dictates of the IMF and accused the regime of surrendering the economic sovereignty of the country.
Unmoved by resistance from main opposition parties, Finance Minister Shaukat Tarin presented six minor amendments to the earlier version of the Finance Bill 2021.
Meanwhile, all the amendments proposed by opposition parties were rejected by the treasury.
The bill, it is believed, will revive the payments stalled under the $6 billion Extended Fund Facility (EFF). So far, Pakistan has received around $2bn under this facility. The IMF originally demanded the withdrawal of Rs700bn tax exemptions.
The IMF board meeting was scheduled for Jan 12, but has now been rescheduled to the end of the month.
Mr Tarin explained to parliamentarians that the withdrawal of tax exemptions worth Rs112bn on machinery and Rs160bn on pharmaceutical sector were adjustable and refundable. He said these were not taxes, which would now be collected at the rate of 17pc on import of machinery and from the pharmaceutical sector.
The minister, however, admitted that tax imposed on those items, which will directly or indirectly hit common people, would raise around Rs71bn for the government kitty.
The minister also disclosed that the government had amended its bill and exempted a number of daily use items, including bakery items, computer laptops and baby food, from additional taxes. He claimed that this was not done at the opposition’s insistence, but rather after consultation with stakeholders.
Exemptions and increases
The new finance bill raises the rate of GST on 42 items from 1-10pc to 17pc, a change that is expected to raise an additional Rs30bn. These include locally manufactured cars, hybrid electric vehicles, import of re-meltable scrap, dairy items sold in branded packaging, branded cereals, silver and gold bars & jewellery and various types of plant machinery.
The government has retained exemption on the sale of baby formula for retail purchases of less than Rs500 per 200 grams. Similarly, the government has retained sales tax exemptions on red chillies and iodised salt.
Seventeen per cent sales tax has been imposed on the sale of food items such as bread, vermicelli, naan, chapatti, sheermal, bun and rusk sold in bakeries, restaurants, food chains and sweet shops falling in the category of Tier-1 retailers. However, these products will be exempt from sales tax at other shops that fall below this category.
Exemptions on zero-rated items, including the import of large ships for repair & maintenance, imported bicycles and imported formula milk, have also been withdrawn.
The finance bill also withdraws tax exemptions on the local supply of 11 items, including bakery items and sweet meats, food served in-flight kitchens, sausages and branded poultry and meat products, locally produced rapeseed, mustard seed (on a par with cotton-seed oil), sprinklers, drip and spray pumps.
However, the government claims that it would mitigate the impact the price increase will have on the public through targeted subsidies.
The sales tax rate on high-end mobile phones costing $200 and above has been enhanced while the fixed sales tax amount has been replaced with a standard rate of 17pc ad valorem. The government expects to raise an additional Rs7bn from this change.
The sales tax on local manufactured hybrid electric vehicles up to 1800cc was approved at the rate of 8.5pc, followed by 12.75pc on vehicles from 1,801cc to 2,500cc.
At the import stage, exemptions were withdrawn on 59 items, which will net the exchequer Rs206bn. These include live animals, birds and eggs, meat from cows, buffaloes, sheep, goats, poultry and fish, vegetables (except those imported from Afghanistan), cereals, fish feed and animal feed, journals and periodicals as well as pharmaceutical raw materials. However, the local supply of all these items is exempted from sales tax.
The government has also withdrawn exemptions on the import of 19 capital goods, which will raise Rs82bn for the government kitty. These include power generation, power transmission, renewable energies like solar, wind, nuclear, mining and extraction of minerals etc.
Tax on the transfer of newly-purchased vehicles has also been increased to discourage the practice of own-money in such transactions.