Observer Report
Lahore
President Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Mian Anjum Nisar has termed the recently announced federal Budget 2020-21 as conventional budget and said that there is lot to work in post-corona slowdown in the country.
Addressing a press conference here on Monday, which was also attended online by the FPCCI office-bearers of Karachi and Islamabad offices, Mian Anjum Nisar called for amendments in budget before the approval of finance bill in the national assembly.
FPCCI highlighted positive and negative aspects of budget 2020-21.
POSITIVE ASPECTS
1. Exemption of additional custom duties on those tariff lines which are now @ 0% customs duty in tariff.
2. Reduction of custom duty on 40 raw materials of various industries.
3. Tariff rationalization under National Tariff Policy 2019, by reducing customs duty on 90 tariff lines from 11% to 3% and 0%.
4. Reduction in regulatory duty from 12.5% and 17.5% to 6% and 11%, respectively on Hot Rolled Coils (HRC) of Iron and steel falling under PCT codes 7208 and 7225& 7226, respectively.
5. A number of industrial inputs/intermediary raw materials are being allowed concessional import under new serial number of the fifth schedule through IOCO quota determination such as Butyl Acetate, syringes and saline infusion sets, buttons, interlining/buckram and Wire rod etc.
6. Reduction in regulatory duty on smuggling prone items to bring these items under legal imports
7. Regulatory duty on several industrial inputs is also being reduced to decrease their cost of doing business
8. Tariff protection for domestic industry by increasing/levy of regulatory duty on import of those items which are also locally manufactured
9. Incentivizing soap manufacturing industry by reducing rate of Additional customs duty on Palm Stearin.
10. Enhancing scope of concessions available to Special Economic Zones.
11. The minimum threshold of supplies by retailers for obtaining CNIC of the buyers is increased from Rs 50,000 to 100,000;
12. Exemption granted to health related items and equipment through SRO 237(I)/2020 dated 20-3-2020 which is going to expire on 19-6-2020 is being extended for another three months starting from the 20th June 2020.
13. Reduced Sales Tax Rate for other Sector: The sales tax rate on the textile and leather retail sector integrated with FBRs online system is proposed to be reduced from 14% to 12%. This is a positive move and encourages more people to voluntarily join this regime. However, in our opinion, this concession shall be offered across the board to other sector retailers without any discrimination and their genuine technical concern may also be address. This would not only instrumental in building government trust but brought overall transparency in the taxation system.
14. Value added Sales Tax on import of Raw Material: The anomaly arising out of last year’s Finance Act relating to the payment of value-added sales tax on import of industrial raw material by the manufacturer is also addressed in this bill through the proposed amendment in the twelfth schedule. It is important to note due to this ambiguity number of cases were filed in the Sindh High Court which is now supposed to be settled in favour of industries. [Twelfth Schedule Serial # 1]
15. The provision of an audit proceeding through electronic means and video link is also proposed through an amendment under section 25(2) of the S.T.A. 1990. [Section 25(2)]
16. Sealing of Business Premises: By virtue of the proposed amendment the FBR is given harsh powers of sealing the business premises who did not integrate their sales with FBR system within two months until they integrates their business. Previously time limit for integration was for the period of six months. [Section 33]
17. The powers are delegated to the CIR (Appeals) to not admit any documentary material or evidence which was not produced before the first forum i.e. Office of the Inland Revenue without any plausible reason on assessment proceedings. We believe this amendment is unfair and an attempt to jeopardize the right of defense of an aggrieved person. [Section 45B(5)]
NEGATIVE MEASURES
1. Unrealistic Target: The government has announced the budget for fiscal year 2020-21. Preparing a ‘balanced’ budget in the midst of coronavirus epidemic which has already inflicted a Rs 3 trillion loss on country’s Gross Domestic Product (GDP) or economy was no joke. While the government must be praised for setting a modest but realistic growth target for the next fiscal year 2020-21, the revenue collection target appears to be more unrealistic than what was set for fiscal year 2019-20. How could any government generate this amount of taxes (Rs 4.93 trillion) in the absence of a robust economic activity. The reopening of certain sectors of economy will not lead to creating an environment in which government will be able to meet its tax collection target.
2. The budget 2020-21 is a traditional budget, which has no focus on changing economic priorities,”
3. The demand for restoring the zero-rating facility and proposals of the textile export sector have been disregarded.
4. No support/ policy for SMEs the most vulnerable sector under current crisis
5. CNIC issue not resolved
6. Sale tax rate not reduced
7. Corporate tax rate not reduced
8. Turnover Tax not reduced.
9. Further Sales Tax not eliminated.
10. Discrimination in Sales Tax on Commercial & Industrial Importers is not done away with.
11. R.D and Additional Customs Duty is not eliminated.
12. No relief in Income Tax Rate.
13. No specific measures to revive economy.
14. Physical enforcement to check Smuggling: Although duty on smuggling prone items have been reduced but no measure has been proposed for physical enforcement to check smuggling.
15. Although penalties on smuggling have been increased, but it will be continued with the connivance of customs officials, therefore, customs officials be also made accountable for smuggling.
16. No measure is announced to control Pak-Afghan Transit Trade which is continued at mass scale as evident from the fact that raids are being made on big godowns.
17. The FBR should apprise the concerned manufacturers that why the duties on their Raw Material are not reduced.
18. DTRE Scheme has not been simplified.
19. No clear cut policy on demurrage has been announced.
20. No time is fixed for deciding appeals as appeals are pending for decision for the last three years.
21. Rate of Turnover Tax and Withholding Tax for Distributors not reduced
22. Rate of tax for Small and Medium Enterprises (SME) not reduced.
23. Minimum Tax @ 1.5% U/S 113(i) (e) and (2)(c) not reduced
24. The time period of Records keeping of 6 years – section 174 not reduced
25. Non separation of Judicial System from Tax Collection Machinery.
