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Full text of Finance Minister Miftah Ismail’s budget speech

ISLAMABAD:  Newly appointed Finance Minister Miftah Ismail on Friday presented the budget for financial year 2018-19 during a National Assembly session here on Friday.

HERE IS THE FULL TEXT OF HIS SPEECH

Bismillahir-Rehmanir-Rahim

Mr. Speaker,
1. It is my honour to present today the sixth budget of the PML(N) government to this Parliament. It is indeed a historic moment for the nation and the Parliament to celebrate. Despite challenges, we have achieved a highest growth in thirteen years, low inflationary environment, and overall macro-economic stability. I congratulate the nation and the Parliament.

Mr. Speaker,

2. Presentation of the budget 2018-19 is a solemn obligation of the present government. It is incumbent on this Parliament, before its term expires, to debate and pass Annual Budget for next year. Presentation of Federal budget is essential for provinces to estimate Federal fiscal transfers without which provincial
government can neither formulate their budgets nor carry out their business.

Passage of the budget is necessary for financial stability and continuity of government machinery. The next elected Government will be free to make changes  in the budget priorities.

Mr. Speaker,

3. The budget being presented today reflects the vision of Mian Nawaz Sharif and aspirations and hopes of the people of Pakistan who voted for him as their Prime Minister in 2013. His absence today in the House is dearly missed.

Mr. Speaker,

4. I would like to take you back to May 2013 when we inherited a collapsed economy, low growth, high inflation and high fiscal deficit. Foreign Exchange reserves were at a historic low. International default seemed imminent and was widely predicted.

5. Let me remind this House that during the five years preceding 2013, average inflation was 12% and average GDP growth was 2.8%. Even worse, the country was in grip of a protracted energy crisis. There was 12-18 hours of electricity load shedding in urban and rural areas. Our country was facing large scale industrial shutdowns and labour layoffs. My farmer brothers did not have electricity to run tube
wells. My sisters in urban areas did not have gas to heat hearths and cook food for
their children.

Mr. Speaker,

6. Domestically, terrorism was widespread, and people were not feeling safe in
their houses. Corruption and bad governance was common. Doom and gloom was
pervasive, and nation’s morale was at the lowest.

Mr. Speaker,
7. The PML(N) came into power in 2013 and immediately embarked upon a home-grown agenda. Economy, energy and good governance were the core  elements of that agenda. Under the leadership of Mian Nawaz Sharif we took on the challenges head on. For five years we worked long and hard, took painful decisions
and never allowed our personal interests to be our preference. There has been only one motivation and that is serving the people who are the real masters in a democratic dispensation.

As Abbas Tabish said:

Mr. Speaker,
8. I will now present before this House the main achievements of our
government in the area of economy;
a. Real GDP Growth: Last year, our Government achieved GDP growth of 5.4% which was the highest growth rate in last 10 years. In contrast, the average GDP growth during the period 2008-12 was a paltry 2.8% per annum. For this year our growth is projected 5.8% which is the highest in last 13 years. This places Pakistan among the fastest growing economies.

The high growth rates over the last 5 years have produced unprecedented economic expansion. Size of the economy expanded from Rs.22,385 billion in FY2013 to Rs.34,396 billion in FY2018, while
per capita income increased from Rs.129,005 in 2013 to Rs.180,204.

Alhamdolilah, today Pakistan’s economy is 24th largest economy in the World.

b. Agriculture. Agriculture is the mainstay of our economy. Agriculture sector has shown the highest growth in the past 18 years of 3.8%. All  major cash crops including cotton, rice, and sugarcane have
contributed to this growth. This is the result of prudent policies pursued  by our government during the last five years. In addition a special Kisaan package was announced by Mian Nawaz Sharif in 2015-16.
Under this package, cost of fertilizers and pesticides were reduced, and cheaper credit was made available, and cash support was given to rice and cotton growers.

c. Industry. Industrial production grew by 5.8% this year. This growth is the highest in a decade. It is driven by historically low interest rates and uninterrupted supply of electricity and gas after many long years of
load shedding and darkness. A robust industrial sector is today generating several thousand additional jobs for our youth.

d. Services. Services sector, which includes banking, retail, transportation etc. witnessed a remarkable growth of 6.4%. You will not be surprised now if I tell you that this too is one of the highest in a
decade.

e. Inflation. Inflation is the biggest tax on the poor people of Pakistan. Alhamdolilah, we have been able to curtail average inflation to less than 5 percent in the past five years, compared to 12 percent between
2008-13. In the first nine months of this year, inflation was only 3.8 percent while food inflation was only 2 percent. Over our last 5 years, people have enjoyed an unprecedented period of price stability.

f. Fiscal Deficit:  In FY2013, fiscal deficit was 8.2% of GDP. Our government pursued a policy of financial prudence and fiscal consolidation. During the current year, fiscal deficit will be contained
below 5.5% of GDP.

Public money is a trust and we will continue to spend it prudently.

g. FBR Revenues:  In FY2013, FBR tax collection was Rs.1,946 billion. For the current fiscal year, FBR revenue is projected to increase to Rs.3,935 billion which is two times increase in 5 years. Tax to GDP ratio which was 10.1% in 2013 will increase to 13.2% this year. Such phenomenal increase in tax collection in 5 years is not a small achievement. I want to thank taxpayers of Pakistan for this achievement.

h. Policy Rate of State Bank of Pakistan. Policy rate came down from  9.5% in June 2013 to 5.75% in 2017, which was lowest in many decades. Similarly, mark up rates of Export Refinance Facility was
reduced from 9.5% in 2013 to 3% in June 2016. Mark up rate on Long Term Finance Facility was also brought down from 11.4 % to 5-6%. Unprecedented low interest rates have allowed businesses and
industry to grow and create jobs.

i. Agriculture Credit: Five years ago, credit given to agriculturists was Rs.336 billion. At the end of February 2018, it stood at Rs.570 billion and it is expected to increase to Rs.800 billion by June 2018. In
addition, interest rate of agriculture credit was also reduced significantly.

j. Credit to Private Sector: Credit to private sector has grown by 383
percent, from Rs.93 billion in 2013 to Rs.441 billion by April 2018.
k. Exports. Exports have been a challenging area of the economy due to
both internal and external factors. As a result of concerted efforts,
export package of Rs.180 billion as well as exchange rate adjustments
exports have increased by 13% increase in the first nine months of this
year and 24% in March on shipment basis. We expect this momentum
to continue.
l. Imports. Imports during the first nine months increased by 17%when
compared with the same period last year. Higher imports are mainly
driven by an increase in import of POL products, machinery and raw
materials. These imports are augmenting productive capacity of the
economy for higher export volumes in the future. With the completion
of the CPEC related projects this year and the recent exchange rate
adjustment, imports are likely to moderate.
m. Current Account. Increase in productive imports has led to a widening
of current account deficit to $12 billion in the first nine months of the
current fiscal year. Government has made adequate efforts to finance
this deficit. I am certain that the foreign exchange reserves will be
higher than their current level.
n. Foreign Direct Investment. Foreign Direct Investment increased to
$2.7 billion in FY2017 from $1.3 billion in 2013. During the first ninemonths
of the current fiscal year, it has increased to $2.1 billion as
against $1.9 billion during the same period last year. Increased FDI
reflects confidence of international investors in policies of the present
government.
o. Workers’ Remittances. Remittances by Pakistani’s abroad jumped
from only $13.9 billion in 2013 to $19.3 billion last year. This year InSha-Allah,
we expect to end the year at more than US$20 billion which
will be a record for Pakistan.
p. Foreign Exchange Reserves. When the government took office, the
foreign exchange reserves had depleted to only US$6.3 billion.
Reserves increased to US$19.4 billion by October 2016. However, the
increased trade deficit has impacted the build-up of reserves. Presently
reserves held with SBP stand at $11 billion. The Government is taking
necessary measures to ensure reserve adequacy.
q. Pakistan Stock Exchange. Pakistan Stock Exchange performed
exceptionally well to reach an all-time high of 53,124 points in May
2017 from 19,000 in May 2013. The market capitalisation reached
almost US$100 billion. As a result of political events the stockexchange
plunged to 37,919 in December 2017. However, the index
has recovered to almost 46,000 points.
r. Registration of new Companies. This year 8,349 companies were
registered till March 2018 compared to 5,883 companies in the same
period last year. During the last 5 years 33,285 new companies were
registered as compared to 17,079 registrations between 2008-13.
Registration of such large numbers of new companies reflects
buoyancy of businesses.
s. Increase in Investment. Better governance, business friendly policies
and improved security conditions have brought investors back to
Pakistan. China-Pakistan Economic Corridor is attracting large scale
investments to key sectors of the economy including; energy,
communication infrastructure, transportation, telecommunication, textile
and construction. These investments addressed perpetual bottlenecks
of energy and infrastructure and unleashed the growth momentum. A
total of US$223 billion were invested in the economy from both
domestic and foreign sources over the five years as compared to
US$140 billion during 2008-13.
t. Energy Sector Development. Five years back, electricity was not
available for 16-18 hours to our people and businesses. The biggest
promise we made during the last election to the nation was to eliminate
electricity load shedding which stands fulfilled today. During the last
sixty-six years of Pakistan’s history, a total of 20,000 megawatts of
generation capacity was added. In a short-term of five years, we have
added 12,230 megawatts of new generation capacity. Mian Nawaz
Sharif, my elder brother Khawaja Muhammad Asif and Chief Minister
Punjab Mian Shebaz Sharif worked day and night for this success.
Mr. Speaker,
Structural Reforms during the last Five Years
9. To accelerate economic growth, Prime Minister Shahid Khakaan Abbasi has
lately announced 5-point economic reform package through which taxes have been
lowered. These are the biggest tax-cuts in the history of Pakistan. Some of the key
features of this package are;
a. Tax rates on individuals have been lowered. Complete tax exemption
has been given to people who earn upto Rs.12 lakh per year or Rs.1
lakh per month. This exemption limit, which was previously Rs.4 lakh
per year has been increased three times to Rs.12 lakh per year. Tax
will be levied at the rate of 5 percent for income between two and four
lakhs monthly. People earning above four lakh monthly will be taxed at
the rate of 15 percent. In Pakistan highest tax burden was on the
salaried middle-class which include teachers, doctors, lawyers, nurses,
accountants. Reduced tax rates will significantly lower tax burden on
this class.
b. New initiatives in data-mining are being initiated to identify individuals
who, despite earning taxable income, are not paying their due share in
taxes. Government will now monitor potential taxpayers’ financial
records and issue notices on evidence of tax evasion.
c. Now that tax rates have been reduced and data-mining methods have
been introduced to identify assets, we are providing last chance to
declare undeclared assets held inside the country. Undeclared
incomes earned before 30th June 2017 and held as local assets (gold,
bonds, property etc.) can be regularized on payment of 5% of the value
of the asset. Dollar account holders in Pakistan who have purchased
dollars through undeclared money can regularize them on a payment
of 2%.

d. Protection of Economic Reforms Act in 1992 was intended for
liberalisation of economy and facilitation of foreign investment. This
facility allowed free movement of foreign exchange in and out of the
country without questions being asked. However, this law was misused
by some elements for whitening of black money. We have plugged this
loophole in the law. The law has been amended and now only the filers
can make cash deposit in their foreign currency accounts. However, all
inflows up toUS$100,000/year/person will continue without any
questions from any agency about the source and enjoy tax exemptions.
The FBR will have the right to ask for source of income from people
bringing in more than US$100,000/year/person.
e. We are also allowing people to declare their foreign undeclared assets
at 3 percent and undeclared liquid assets at 5 percent.
f. To check under-declaration of land and property, the state is being
given the power to purchase land and property at 100% of the declared
value within six-months of its registration. Non-filers will be barred from
procuring property above Rs.4 million. FBR rate on property is being
abolished from 1st July 2018 and provinces have been advised to
abolish DC rates. There will be a reduced tax incidence on property
registration, with a maximum of 1% tax for filers. This reform measure
is unprecedented and will help in documentation of the economy.
Mr. Speaker,
Budget Strategy
10. Following are the key targets of our budget strategy:
a. Real GDP growth rate of 6.2%
b. Inflation to remain below 6%
c. Tax to GDP ratio of 13.8%
d. Budget deficit of 4.9% of GDP
e. Net Public Debt at 63.2% of GDP
f. Foreign exchange reserves at $15 billion, and
g. Continuation of social protection programmes.
Mr. Speaker,
11. Our macroeconomic policy aims to address the imbalances of external
account, while protecting economic growth. Over the medium-term we propose to
continue reduction of fiscal deficit, maintain a cautious monetary stance, and embark
upon next generation of reforms for strengthening investment climate, export
promotion, and energy sector. Priority should be accorded to reducing losses in the
public-sector enterprises and expanding tax base.
12. To achieve these goals, the following budget strategy is being proposed:
a. FBR tax revenue target is proposed to be fixed at Rs.4,435 billion
which is to be achieved through tax administration and compliance and
not through any new tax measures. Tax base will be enhanced while
tax rates are being lowered.
b. The Government will continue investments in social protection –
particularly Benazir Income Support Programme and continue
initiatives for marginalised segments of the society through a targeted
subsidy regime. For Benazir Income Support Programme, an amount
of Rs.125 billion is being proposed in the budget, while Rs.179 billion
has been earmarked as subsidies.
c. The Prime Minister’s Youth Scheme will continue. For this purpose,
Rs.10 billion have been allocated.
d. Total size of the PSDP is proposed as Rs.800 billion however,
additional resources of Rs.230 billion will be financed through
autonomous organisation, Public Private Partnership, and other
means. Investments in the water, road infrastructure, electricity sector
and China Pakistan Economic Corridor (CPEC) will be protected.
13. After the 7
thNational Finance Commission (NFC) Award, fiscal space of the
Federal Government shrunk by 10 – 11% while its expenditure could not be reduced.
The provinces received an additional transfer of Rs.2.5 trillion in 8 years which
otherwise could have been spent by the Federal government. The Federal
government also had to allocate substantial resources for special security and
rehabilitation of TDPs.
Special Initiatives 2018-19
Mr. Speaker,
14. Now I will present before the House special measures that we propose for the
next year.
Agriculture Sector
15. Actualising agriculture sector potential is imperative for sustainable higher
GDP growth. Pakistan needs a second green revolution to achieve yield growth
potential, investment in agriculture technology, research and development, cropping
patterns more adaptable to climate change and in changing management and labour
tenure practices.
16. A radical transition of agriculture sector can only be achieved moving away
from subsidy driven approach to a market driven dynamic policy regime. Going
forward Federal Government will leave the business of subsidies to provincial
governments and will focus on building a conducive policy environment for research
and development, productivity enhancement, market access, improvements in
management, labour practices and technology. We are making a beginning by
announcing the following measures:
a. Continuation of Incentives of FY 2017-18: A number of incentives
were announced in Budget 2017-18 including in agriculture credits,
exemption of customs duty on harvesters, removal of GST on imported
sunflower and canola seeds etc. All these incentives shall continue to
be available during 2018-19.
b. Uniform Rate of GST on all Fertilizers: Considering fertilizer as the
critical farm input our government reduced the sales tax on fertilizer
from a high of 17% to 4% on DAP, 5% on Urea and 9-11% on others. I
am happy to announce that from 1st July there will be a reduced
uniform GST rate of 2% on all fertilizers. This will eliminate distortions
in tax regime, further reduce fertilizer prices and promote use of
balanced nutrients.
c. It is also proposed to reduce GST on agriculture machinery from the
current 7 percent to 5 percent.
d. Further concessions in taxes and duties are being proposed for the
dairy and livestock sector. Details will be announced in Part II of this
speech.
e. Enhancing Cotton Production and Quality: Producing high quality
and large quantities of cotton is central to economic growth and
exports. In terms of climatic conditions, water and soil availability
Pakistan enjoys a natural advantage we are 5
th largest cotton
producing country in the World, but in terms of exports textile products
we are ranked amongst the lowest. We need to dramatically improve
both quality and productivity to achieve higher export values. The
subject of cotton has been transferred to Ministry of National Food
Security and Research from the Ministry of Textile Industry.
We are working with provincial governments to formulate and enforce a
policy to halt conversion of cotton growing area into sugarcane growing
area. Plant Breeders Rights Act, which had been facing prolonged
delays over the last 15 years, has been recently enacted by our
government. The Plant Breeders Rights Registry established under this
law will help in producing higher yield varieties of cotton and other
crops locally through availability of better quality seed.
f. Tariff subsidy on Agriculture tube wells: Availability of water is
necessary for crops. Government is presently providing electricity for
agriculture tube well at reduced rates. During 2018-19, this scheme will
continue in these areas where the Provincial Governments agree to
share cost of subsidy on 50:50 basis.
g. Agriculture Research Support Fund: The Government is proposing
setting up an Agriculture Research Support Fund with an initial
allocation of Rs.5 billion. The Fund will provide financial grants for
research and development of modern plant and seed varieties for
achieving higher crop yields. The Fund will be jointly managed by
Finance Division and Ministry of National Food Security and Research.
h. Agriculture Technology Fund: The Government of Pakistan is also
proposing to establish a separate Fund for indigenization of agriculture
technology with an initial allocation of Rs.5 billion. The Fund will be
jointly managed by Finance Division and Ministry of National Food
Security and Research. It will work with partner organizations and
promote indigenization of agriculture technology.
i. Revamping of Agriculture Research Organizations: Ministry of
National Food Security and Research is working on a plan for
restructuring and revamping of research organizations and institutes to
convert them into world class state of the art platforms for research and
development. Necessary financial support will be made available.
Export Promotion
17. During the last five years we took several measures for promotion of textile
and exports. These included reductions in markup rates of LTFF and ERF to historic
lows of 5 percent and 3 percent respectively, duty free import of textile machinery,
uninterrupted supply of gas and electricity for industries, zero-rating of five key
export sectors, and introduction of export package of Rs.180 billion.
18. These were immediate measures to arrest decline in exports. We need to
reset policy framework and move away from quick fixes approach to more robust,
sustainable and market driven policy instruments. Going forward, we plan to
rationalise subsidies and concurrently reduce cost of production. We are making a
beginning through this Budget;
a. Zero-Rating Regime: Five export sectors namely textiles, leather,
sports goods, surgical goods and carpets shall continue to remain in
zero-rated sales tax regime.
b. The government has decided to provide freight support on export of
potatoes. Details will be announced subsequently.
c. LTFF and ERF Rates: Reduced mark-up rates shall continue to be
available as per SBP policy under Long Term Finance Facility and
Export Refinance Facility respectively.
d. Export Promotion Schemes under Textile Policy and Strategic
Trade Policy Framework: Incentives under various schemes of
Textile Policy 2014-19 shall remain available during FY 2018-19.
Ministry of Commerce is also working on Strategic Trade Policy
Framework 2018-23. An amount of Rs.10 billion is being allocated for
various schemes under these policies.
e. Tariff Restructuring: Tariffs on various lines, which are mainly
industrial raw materials, are proposed to be reduced. Details shall be
presented in Part-II of Finance Bill. Tariff Restructuring shall increase
competitiveness of exports and help in reducing the current account
deficit.
f. Export Sector Refunds: The following measures are proposed to
overcome the issue of refunds of exporters:
i. We are moving towards zero rating of import materials for export
sector which will significantly reduce creation of new refund
claims.
ii. Refund claims currently pending will be cleared in a phased
manner over the next 12 months starting 1st July 2018.
iii. After 1st July 2018 all new refund claims will be paid as per the
time stipulated in law and regulations on monthly basis and
there will be no delay.
g. In order to facilitate exports, the government is working on a new
package. Keeping in view the prevailing circumstances, this package
will focus on increase non-traditional and value-added exports.
Financial Sector
19. Remittances. Remittances from overseas Pakistanis are a major source of
foreign exchange earnings. To further encourage remittances through formal
channels, the Government has decided to introduce following incentive in FY2018-
19:
a. Prize Scheme for overseas Pakistanis: All home remittance
transactions sent through commercial banks, exchange companies and
other financial institutions will be included in monthly lucky draws.
Details of the scheme are being finalized and shall be announced
shortly by State Bank of Pakistan.
20. Enhancement in the target of agriculture credit: Access and availability of
credit is very important for small farmers. Our government increased target of
agriculture credit from Rs.315billion in 2013 to Rs.1,001 billion in 2018. For the next
year, this target is being increased to Rs.1,100 billion.
21. Production Index Units: Similarly, keeping in view increase in cost of
agriculture inputs and corresponding demand for credit, value of PIU will be
increased to Rs.6,000. Value of PIU in 2013 was Rs.2,000 which we increased to
Rs.5,000 during the outgoing year.
Film and Drama Industry
Mr. Speaker,
22. In order to revive Pakistan’s film industry, which used to be the third largest in
world in the 1960s, the Government is announcing a fiscal package. The package
will provide an enabling environment for film industry to flourish, and to project
Pakistani culture. The main features of this fiscal incentive packages are:
a. Reduction in custom duty to 3 percent on the import of film & drama
production equipment and sales tax to 5 percent.
b. Establishment of a revolving Fund for promotion of film and drama
industry and to provide financial support to deserving artists.
c. Rebate of 50% in Income tax to companies investing in film projects
will be given for 5years.
d. 50% tax rebate to income derived by foreign film makers from films
made in Pakistan.
23. Further details of film-policy will be presented by my sister Maryum
Aurangzeb in the next few days.
Development of Karachi
24. Karachi is the commercial and trading hub of Pakistan and has a major
contribution in the country’s revenue base. PML(N) Government after coming to
office in 2013 successfully restored law and order in Karachi giving confidence to the
business community and rejuvenating economic activity there. The Lahore, Multan
metros were built by provincial funds, however the Green Line Rapid Transit System
in Karachi is being funded by the Federal Government. In the current financial year,
Rs.16 billion have been spent on this project. The road and bridges are ready, but
the provincial government has not yet been able to issue contract for procurement of
buses. On behalf of the Federal government, I am today offering that if Sindh
government is unable to get busses for Karachi, the Federal Government will do so.
25. It was agreed during the time of the previous government that Federal
government will pay 1/3rd of the cost of K4 water project in Karachi. However, no
money was ever paid, and the project never took off the ground. It was the PML(N)
government that started giving funds for the K4 and Mian Nawaz Sharif also agreed
to pick 45% of the total cost. However, it is taking the provincial government a long
time to complete the project due to which cost over-run have crossed 400%.
Mr Speaker,
26. Karachi is suffering from a severe water crisis. To solve this long-standing
problem, the Federal government is today announcing a new scheme of sea water
desalination plant. This plant will be built by the private sector and will produce 50
million gallons of water a day. In-Sha-Allah it will be my honour to play a role in
solving the water problem for my city. For this purpose, the Federal government will
bridge the viability gap in partnership with private sector.
27. Apart from the above, the Prime Minister has announced a Package of Rs.25
billion for Karachi. This Package includes providing infrastructural and other social
sectors facilities. So far, three projects covering roads and flyovers and up-gradation
of firefighting system has been approved and Rs.3.0 billion has been earmarked
during current financial year. An allocation of Rs.5 billion has been proposed in the
PSDP-2018-19. In addition, on my personal request the Minister for Planning Mr.
Ahsan Iqbal has provided funds for expansion of Karachi Expo Centre.
Childhood Development
Mr. Speaker,
28. Education: We are introducing a new programme to be called 100 100 100.
This is a federal government’s commitment to ensure that 100% Pakistani children
will be enrolled in schools, 100% children will be retained in schools and finally,
InshaAllah 100% will graduate from schools. This is a solemn commitment of not just
of Prime Minister Shahid Khakaan Abbasi but the entire parliament to the children of
Pakistan. Even after 70 years, we the leaders of Pakistan have failed the children of
Pakistan. We have denied them the light of education. No more. Even though
education is a devolved subject, but federal government will help, both financially
and administratively, each and every province to achieve this goal. This is not about
politics and parties. This is a national commitment that I make today to the children
of Pakistan. We will educate you. And we will insist on 100 100 100.
29. Nutrition: Mr. Speaker, as a father of three children I am ashamed to tell you
that 30% of my Pakistani children are stunted due to malnutrition and inadequate
food. This Mr Speaker is a moment of reflection for all of us. No sir, this is a matter of
shame for us. This is no more tolerable.
30. I am today allocating on the instructions of the Prime Minister at least Rs.10
billion for a programme that will end child stunting. But if this programme gets off the
ground quickly and needs more money, I again promise on behalf of the entire
parliament that we will provide through supplementary grants any amount that is
needed to end child stunting. Standing today in front of this picture of babe-e-quam
in this centre of Pakistani democracy I commit, on behalf my Prime Minister and this
Parliament to end child stunting in Pakistan by 2020.
Mr. Speaker,
Development Plan – PSDP
31. During the past five years, our government emphasised on increase in
development spending several times. The PML(N) government spent over Rs.3,000
billion, as compared to around Rs.1,300 billion spent during 2008-13. This is about
230 percent more. I am proud to say that, under the leadership of my brother Ahsan
Iqbal, public money was spent with full fiduciary responsibility, transparency and
financial integrity for the benefit of our people.
32. While PSDP investments were made in different sectors of the economy, I
would like to highlight the China-Pakistan Economic Corridor (CPEC) upfront. Vision
of Mian Nawaz Sharif, CPEC initiative has become a global brand of Pakistan.
CPEC investments are mainly in energy, road and transport infrastructure and
Gwadar. As part of CPEC, our Government initiated road projects that would link
north of Pakistan with Gwadar. Trans-Pakistan corridor of motorways and special
economic zones are designed to provide jobs, enhance manufacturing base, and
increase prosperity and growth. Karachi Lahore Motorway, Thakot Havelian
Motorway, Eastbay Expressway Gwadar, and many other link roads in Gilgit
Baltistan, KPK, Punjab, Balochistan and Sindh are interlinking Pakistan like never
before.
33. As part of CPEC, the Government has also finalized the plan to increase the
speed of trains on Main Line-I from Peshawar to Karachi by 3 times. Current average
speed of trains on ML-I is 55 Km per hour which will be increased to 160 Km per
hour by 2021. The project envisages doubling of track from Karachi to Peshawar and
from Taxila to Havalian. This requires an investment of more than $8 billion. This will
enable people to travel from North to South in 12 hours or even less.
Energy
34. Our government has invested heavily in Energy sector. The PML(N)
government fulfilled its promise of availability of electricity and added generation
capacity of 12,230 megawatts to the national grid. Let me highlight the key
completed projects based on a diverse mix of low cost power generation sources
including coal, RLNG, wind, solar and hydel:
a. 969 MW Neelum Jehlum Hydropower project, a run-of-river
hydropower project, which is an engineering marvel with 90% of the
plant being underground in the high mountainous area
b. Enhancement of Tarbela power station with addition of fourth unit
contributing an additional 1,410 MW of power
c. 3,600 MW of RLNG based power plants in Haveli Bahadur Shah,
Bhikki and Balloki
d. Pakistan’s first super-critical coal fired power plants located in Sahiwal
and Port Qasim Coal (north and south) have started operations
e. 680 MW Chashma Nuclear Power Plants C-3 and C-4 have come
online; and
f. Over 1,000 MWs renewable energy projects with zero fuel costs.
Mr. Speaker,
35. However, these projects are not the end of our investments in the electricity
sector. For the budget year 2018-19 the proposal is to invest Rs.138 billion in power
sector. Key investments in the sector are proposed as follows:
a. Rs.27.5 billion have been allocated for installation of two 600 MW coal
fired power project in Jamshoro, Sindh
b. Rs.76 billion have been allocated for Dasu Hydro Power Project for
Stage-one in district Kohistan, Khyber Pakhtunkhwa
c. Rs.32.5 billion have been allocated for Neelum Jhelum Hydro Power
Project, and
d. Rs.13.9 billion have been allocated for Tarbela Fourth Extension Hydro
Power Project.
Water
Mr. Speaker,
36. I would like to congratulate people of Pakistan on the recent approval of
the construction of Diamer-Bhasha dam at an estimated cost of Rs.474 billion. The
dam will have 6.4 million acres feet live storage capacity and an installed power
capacity of 4,500 MWs. The project will increase national water storage capacity
from 38 days to 45. In the budget 2018-19, the proposal is to allocate Rs.23.7 billion
for the dam. Overall, investment in the water sector is being increased from Rs.36.7
billion in 2017-18 to Rs.79 billion in 2018-19.
National Highways
37. Efficient road network is the key to economic prosperity. While recognizing
this fact the PML (N) government has increased investments for highways from
around Rs. 50 billion in 2012-13 to Rs. 320 billion in FY 2017-18. An amount of
Rs.842 billion were allocated through the PSDP during last 5 years while off-budget
financing of Rs. 500 billion was also arranged by employing innovative PPP modes.
Through this investment 3,655 Km new roads have been added while 1,000 Km new
roads were added by our predecessor in five years at the cost of Rs.123 billion.
38. Travelling experience between Peshawar and Lahore had been revolutionized
by Mian Nawaz Sharif during the 1990s. During the current tenure he has ensured
that the same experience is available throughout Pakistan. His dream of a Trans
Pakistan Motorway is near its fulfilment and by the close of this fiscal year, the length
of the motorways will be around 2,500 kilometres. Some of the key projects that
have been completed include:
a. 58 KMs of Faisalabad-Gojra motorway
b. 136 KMs of Hyderabad-Karachi motorway
c. 56 KMs of Khanewal-Multan motorway.
39. This year, we plan to complete the following key projects;
a. Khuzdar Shahdadkot motorway
b. 230KMs of Lahore-Multan motorway
c. 62 KMs of Gojra-Shorkot motorway
d. 64 KMs of Shorkot-Khanewal motorway
e. 91 KMs of Sialkot-Lahore motorway
f. 57 KMs of Hazara Motorway.
40. The North South connection on the western side is being improved by
constructing high class motorways and highways from Burhan in Islamabad,
Peshawar Motorway to DG Khan and thereon to Quetta via Zhob. This link will be
completed by 2020. Mian Nawaz Sharif has already inaugurated the Gwadar-Quetta
Link that has reduced the travel time between Gwadar and Quetta from more than
24 hours to 8 hours and, for the first time, made the Gwadar Port viable for
Afghanistan and the Central Asian States.
41. In budget 2018-19, an allocation of Rs.310 billion is proposed.
Railways
42. Over the past five years, revenue generation capability of Pakistan Railways
has increased considerably. For budget year 2018-19, in addition to recurrent budget
grant of Rs.35 billion, development budget investment is proposed at Rs.39 billion.
Development of Gwadar
43. The dream to make Gwadar port fully operational for international trade is now
gradually turning into a reality. For the budget year 2018-19 our main aim is to
allocate required resources for the completion of on-going projects such as; Gwadar
airport and its access road network, improving port facilities, development of a
desalination plant for provision of clean-drinking water, upgrade of existing 50 bed
hospital to 300 beds, development of infrastructure for Gwadar export processing
zone, construction of a China-Pakistan Economic Corridor Institute, and construction
of dams. Thirty-one projects for development of Gwadar are part of the proposed
PSDP 2018-19 with an estimated cost of Rs.137 billion.
Human Development
44. While the social sector functions have been devolved to the provinces, the
Federal Government continues to provide funding for higher education, primary
health services, and programmes for youth. For this purpose, we are enhancing
PSDP allocations for Higher Education Commission to Rs.57 billion, for primary
health programmes to Rs.37 billion and for programmes for youth by Rs.10 billion.
The Federal Government is also providing income support to more than 5 million
families, and has also allocated funds for Pakistan Bait Al Maal, and Poverty
Alleviation Fund. In addition, the Federal government is proposing to build 100 sport
stadiums all over the country on cost-sharing basis with the provincial governments.
Health
45. Our government introduced large-scale reforms in the health sector. It is
government’s top priority to provide quality health services to the people.
46. Even after devolution of health function to provinces, the Federal Government
cannot abdicate itself from responsibilities in this sector. For the first time, poor
people are being provided with quality health services through the Prime Minister’s
Health Programme. Under this programme 30 lakh families in 41 districts have been
provide free of cost services in public and private hospitals.
47. The scope of this programme is being expanded to all districts in the country.
This programme would help in achieving targets of Sustainable Development Goals
and Universal Health Coverage.
48. In view of increasing cases of Hepatitis, a National Hepatitis Strategic
Framework has been developed together with the provinces. Prices of Hepatitis
drugs have been brought to the lowest level and its production in the country is
encouraged.
49. Uninterrupted supply of vaccines has been ensured through the vaccination
programme for mothers and children, and its storage and distribution systems are
ISO certified.
50. Production of vaccines in National Institute of Health is made as per
international standards. The production which was earlier un-operational, has been
made operational.
51. Keeping in view the necessity of authentic data in policymaking, an
international standard dashboard has been established at the federal level.
52. For the collection of correct statistics, the government has decided to
undertake international standard survey after every 2 – 3 years.
Childhood disease detection and prevention
Mr Speaker,
53. technology today provides simple and cheap solutions to many important
problems. If trained and provided with the appropriate mobile phone app, teachers
can look into students’ eyes and detect many diseases. This will help detect
diseases at the very inception and allow easy and cheap prevention and cure. This
programme will be started with the poorer districts of Pakistan and will be spread to
all public schools in a few years. At an appropriate time we will also require the
private schools to provide such service. For now I just request the more expensive
schools to provide such service. The federal ministry of National Health Services will
soon start providing guidelines on this subject.
Special Areas
54. For the AJK and Gilgit Baltistan, an amount of Rs.44.7 billion is proposed to
be allocated. For the people of AJK, we announce today a special project of Lipa
Tunnel construction which will facilitate the local population. For FATA, Rs.24.5
billion have been proposed. To bring FATA in the mainstream, a ten-year FATA
development plan with total outlay of Rs.100 billion has been approved. During
2018-19 Rs.10 billion are proposed to be provided.
Peace and Security
55. Alhamdolilah, today Pakistan is more peaceful than it was five years ago. Our
military and para-military apparatus has fought hard and laid their precious lives for
our country. Last hideouts in North Waziristan have been eliminated through
operation Zarb-e-Azb. I would like to salute the Jawans, Officers, civilians who have
laid their lives for our today and future of our children.
56. Millions of people had to leave their homes in the areas of military operations.
We will remember their sacrifices. The government wants to assure them that in this
hour of need we will do our best to provide necessary rehabilitation and
reconstruction facilities. Rs.90 billion have been allocated for this purpose in the
budget 2018-19.
Mr. Speaker,
Budget Estimates 2018-19
57. I would now like to present key numbers for the budget year 2018-19:
a. The Federal gross revenue is estimated at Rs.5,661 billion. As
compared to revised estimates of Rs.4,992 billion in 2017-18, this is
higher by 13.4 percent.
b. This includes FBR tax estimate of Rs.4,435 billion as compared to
revised estimate of Rs.3,935 billion.
c. Out of the total revenues, the provincial governments share is
estimated to be Rs.2,590 billion as compared to Rs.2,316 billion
revised estimates for 2017-18, showing an increase of 11.8 percent.
These resources will be utilized by the provincial governments in
enhancing human development and security of the people.
d. After transfer to provincial governments, the net revenue of the Federal
Government is estimated at Rs.3,070 billion in 2018-19 as compared to
revised estimates of Rs.2,676 billion in the current financial year.
e. Total Federal expenditure for 2018-19 is budgeted at Rs.5,246 billion
compared to the revised estimates of Rs.4,857 billion for 2017-18,
showing an increase of 8 percent.
f. Interest payments for 2018-19 have been budgeted at Rs.1,620 billion
against the revised budget of Rs.1,526 billion for 2017-18.
g. The defence budget is proposed at Rs.1,100 billion against the revised
budget of Rs.999 billion in the 2017-18.
h. Total size of Federal PSDP 2018-19 would be Rs.1,030 billion against
revised estimates of Rs.750 billion.
i. Provincial surplus is estimated at Rs.286 billion in 2018-19 against
revised estimate of Rs.274 billion for 2017-18.
j. Based on the above estimates budget deficit will be 4.9% of GDP as
opposed to 5.5% of GDP of revised budget estimate in the financial
year in 2017-18.
PART II
FBR Tax
Mr. Speaker,
58. Now I present part II of the speech which consists of tax proposals.
Mr. Speaker,
59. Before announcing relief measures specific to individual taxes I want to
mention a few steps that will provide ease of doing business for the taxpayers and
curtail the discretionary powers of the tax collectors.
60. Tax audit of a business involves considerable hassle and cost for the
taxpayer. There are instances of taxpayers being subjected to multiple audits in
successive years. In order to encourage compliant tax payers, selection for audit in
respect of all three taxes; Income Tax, Sales Tax and Federal Excise Duty, has been
made risk based and a case shall not be audited more than once in three years for
each tax. This limitation will apply to selection of audit by the commissioner as well
as FBR. The concept of composite audit will also be introduced to ensure that audit
of tax affairs under all tax laws is undertaken simultaneously to avoid inconvenience
to the tax payers. This approach shall serve as an encouragement for compliant
taxpayers, and decrease the cost of compliance with tax laws.
61. Previously grant of stay by the Commissioner (Appeals) was subject to
payment of 25% of tax liability. The condition has now been relaxed, and the
payment is proposed to be reduced to 10%. It is expected that this will provide
substantial relief to taxpayers who are sometimes burdened with unrealistic tax
demands.
62. Under the current law the decision of the ADRC is neither binding upon the
FBR nor upon the taxpayer. It is proposed that composition of the members of ADRC
maybe changed so that retired judge of a High Court and tax professionals may be
included in the Committee in addition to representatives from FBR.
63. As per the Sales Tax Act, any commissioner or chief commission has
authority to appoint staff at the premises of taxpayer, and monitor sales and
production. Complaints have been received on the misusage of this authority.
Therefore, this authority is being withdrawn from commissioners and chief
commissioners. Now only FBR will use this authority based on evidence of variations
in sectoral averages.
64. Now I shall place before the House further relief and tax measures that are
proposed to be introduced in the current Budget starting with income tax measures
INCOME TAX
RELIEF MEASURES
65. It is widely recognized that a substantial portion of untaxed money is parked in
the real estate sector. Furthermore, the practice of under declaring the value of
properties viz-a-viz their actual market value is rampant. In a bid to address these
challenges to ensure declaration of property transactions at actual market arte and
discourage whitening of black money through investment in the real estate sector the
Prime Minister had announced certain measures in his press conference on April 05,
2018. Accordingly the following measures are proposed to be adopted:
a. The property transactions are proposed to be recorded on the value
declared by the buyer and the seller
b. The FBR notified rates are proposed to be abolished
c. At the Federal level, a one percent adjustable advance tax from the
purchaser on the declared value is proposed to replace the existing
withholding tax on sellers and purchasers. It is proposed that the non
filers may not be permitted to purchase property having declared value
exceeding four million rupees.
d. The provinces have been requested to abolish the provincial rates for
the collection of stamp duty and to collect a total of one percent tax
under stamp duty and capital value tax on the value declared by the
buyer and the seller
e. In order to deter under-declaration and consequent loss of revenue, it
is proposed that FBR may hold a right to purchase any property within
six months of registration by paying a certain amount over and above
the declared value which may be 100 percent in the fiscal year 2018-
2019, 75 percent in the fiscal year 2019-2020 and 50 percent in the
fiscal year 2020-2021 and thereafter.
f. In order to implement the above measures enabling provisions are
proposed to be incorporated in the Income Tax Ordinance, 2001.
Detailed procedure and the date of coming into force of the above
measures are proposed to be notified later.
GRADUAL REDUCTION IN THE RATES OF SUPER TAX
66. Super tax was imposed in 2015 for rehabilitation of internally displaced
persons. It was continued in 2016 & 2017. Various organizations have demanded its
abolition to reduce the effective tax rate. It is currently being charged @ 4% on
banking companies & 3% on non-banking companies having income greater than
500 M. It is proposed that Super tax may be continued for the financial year 2017-18
but the rate may be reduced by 1% per year from financial year 2018-19 for both
banking and non-banking companies.
RATIONALIZATION OF CORPORATE TAX RATE
67. In consonance with the policy to reduce tax rates for individuals and AOPs,
the Government has decided to likewise reduce corporate tax rates from 30% in tax
year 2018 to 25% in tax year 2023. The corporate tax rate will be 29% in tax year
2019 and will be reduced by 1% each year up to tax year 2023.
REDUCTION IN TAX RATE ON UNDISTRIBUTED PROFITS
68. Tax on undistributed profits is charged @ 7.5% on accounting profit if at least
40% of after-tax profits are not distributed within 6 months of the end of the year.
Various professional bodies have insisted on relaxing the requirements to facilitate
businesses in retaining earnings for investments. Therefore it is proposed that tax
may be reduced from 7.5% to 5% and the condition of distributing 40% after-tax
profits may be reduced to 20%.
REDUCED RATE OF TAX ON REIT DIVIDENDS
69. In order to promote Real Estate Investment Trust, the rate of tax on dividends
.issued to the unit holders by REIT is proposed to be reduced from 12.5% to 7.5%.
REDUCED RATE OF WITHHOLDING TAX ON BANK TRANSACTIONS ON NONFILERS
70. Tax @ 0.6% is charged on non-cash banking transactions from non-filers.
The rate is proposed to be reduced from 0.6% to 0.4% on a permanent basis.
INCREASE IN MINIMUM THRESHOLD OF TAX DEDUCTION ON PAYMENT FOR
GOODS AND SERVICES.
71. Under the existing law, tax is required to be deducted on payment for services
exceeding Rs.10,000 and on goods exceeding Rs.25,000. Considering inflation over
the years it is proposed that the threshold for tax deduction be enhanced to
Rs.30,000 on payment for services and to Rs.75,000 on payment for goods.
EXTENSION OF TAX CREDITS UP TO TAX YEAR 2021
72. Currently tax credits are allowed under sections 65B, 65C, 65D and 65E for
establishing a new industrial undertaking, purchase of machinery through equity and
extension, expansion and BMR of machinery. However, in order to give an impetus
to investments the cut-off date for being eligible for these tax credits is proposed to
be extended up to 30.06.2021.
EXEMPTION TO DEEP CONVERSION REFINERIES
73. In order to promote setting up of deep conversion refineries it is proposed that
such refineries with a capacity of minimum 100,000 barrels per day to be installed
anywhere in Pakistan may be exempted from income tax for a period of 10 years.
Further, such exemption may also be extended to existing refineries in cases where
capacity is expanded by installing deep conversion units with capacity of at least
100,000 barrels per day.
RATIONALIZATION OF TAX RATE ON IMPORT OF COAL
74. Currently tax on import of coal is payable at the rate of, 5.5% for companies
and 6% for persons other than companies. In order to decrease cost of production it
is proposed that the rate of tax maybe reduced to 4%.
EXEMPTION TO WELFARE INSTITUTIONS
75. In recognition of the meritorious services being performed by welfare
institutions exemption is proposed to be granted to society for the welfare of suit,
Aziz Tabba Foundation, Saylani welfare international trust and Al-Shifa eye hospital.
REVENUE MESASURES
HIGHER TAX RATES FOR NON-FILERS
76. In order to increase the cost of doing business higher for non-filers higher
rates of tax withholding for non compliant taxpayers are being proposed. The
withholding tax rates on sale of goods for non filers are proposed to be increased
from existing 7% to 8% in the case of a company, and from existing 7.75% to 9% in
non-corporate cases.
RETAINING THE NUMBER OF TAX FILERS
77. Due to enhancement of the taxable limit of income to Rs.1.2 million, the
number of filers will be substantially reduced. This will also result in loss of revenue.
A nominal income tax may be imposed @ of Rs.1000 for income between
Rs.400,000 to Rs.800,000 and @ of Rs.2000 for income between Rs.800,000 to
Rs.1,200,000
SALES TAX
RELIEF MEASURES
Mr. Speaker,
78. Now I shall present relief measures that are proposed to be introduced in the
Sales Tax and Federal Excise law during the current Budget
EXEMPTION FROM SALES TAX AND CUSTOMS DUTY ON PAPER FOR
PRINTING OF HOLY QURAN
79. In order to provide concession to printers/publishers of Holy Quran, it is
proposed that exemption from sales tax and Customs duty. This exemption will be
available to federal and provincial governments as well as registered publishers of
Holy Quran.
EXEMPTION FROM VALUE ADDITION TAX ON IMPORT OF LNG
80. Value addition tax @ 3% is chargeable under Sales Tax Special Procedure
Rules, 2007 to provide relief to this sector it is proposed that value addition tax @
3% on import of RLNG may be removed. To address cash flow issues of Gas
Distribution Companies, it is proposed that rate of sales tax may be reduced from
17% to 12% on import of LNG and supply of RLNG.
EXEMPTION FROM SALES TAX FOR DAIRY, LIVESTOCK AND AGRICULTURE
81. Urea is chargeable to sales tax @ 5%, DAP @ Rs.100 per 50 kg bag and
other fertilizers like NP, NPK, SSP, CAN are also charged reduced fixed rates of
sales tax. To promote agricultural growth reduction in rate of sales tax to 3% across
the board on all fertilizers is proposed. It is further proposed that the rate of sales tax
on supply of natural gas to fertilizers plant for use as feed stock, presently
chargeable @ 10%, may be reduced to 5% to cater for cash flow issues of fertilizers
manufacturers in view of reduction in rate of sales tax on fertilizers. Likewise, rate of
sales tax on LNG imported by fertilizer manufacturers for use as feed stock is also
proposed to be reduced from 5% to 0%.
82. To promote fish farming, 10% duty on sales tax on fish feed is being removed.
Similarly, sales tax is being exempted for preparation of fans and animal feed of
dairy farms. In addition, sales tax on agriculture machinery is proposed to be
reduced from 7% to 5%. These proposed measures are expected go a long way in
promoting our agriculture, dairy, and livestock sectors.
SALES TAX ON COMPUTER PARTS
83. Currently, Personal Computers and laptops are exempt from sales tax.
However, exemption is not available in respect of computer parts. In order to
promote local assembling and manufacturing of laptops and computers, it is
proposed that exemption on 21 types of computer parts imported by manufacturers
may be granted.
ZERO-RATING ON STATIONERY ITEMS
84. Stationery items were zero-rated under Fifth Schedule to the Sales Tax Act,
1990 which was subsequently withdrawn through Finance Act, 2016. It is proposed
that zero-rating for stationery may be restored, to promote local stationery sector and
reduce the prices of local stationery items.
SALES TAX MONITORING THROUGH ELECTRONIC FISCAL DEVICES
85. Supply of finished fabric to and by retailers, to end consumers, and other
supplies of finished fabric including carpets, leather etc. are subject to sales tax @
6%. Similar rate of 6% is applicable on import of ready to use articles of textile and
leather. In order to facilitate and promote automation in addition to revenue
generation, it is proposed that the rate of sales tax @ 6% maybe retained on the
sales for those persons who are integrated with FBR online systems. For others, rate
of sales tax is proposed to be applied @ 9% for both supply of above referred goods
and import of finished goods of textile and leather.
EXCLUSION FROM VALUE ADDITION TAX ON SECOND HAND CLOTHING AND
FOOTWEAR
86. Presently value addition tax @ 3% under the Sales Tax Special Procedure
Rules, 2007 is applicable on the import of second hand worn clothing and footwear
.It is proposed to provide exclusion from value addition tax to the subject items. This
would support lower income groups.
REVENUE MEASURES
INCREASE IN RATE OF FURTHER TAX
87. To enhance documentation and base of sales tax, further tax is proposed to
be increased from existing 2% to 3%. This will not only discourage undocumented
economy, but it will also result in revenue increase.
FEDERAL EXCISE DUTY ON CIGARETTES
88. Federal excise duty on locally produced cigarettes is proposed to be
enhanced in respect of Tier-1, TIER-2 and TIER-3 to Rs 3964, Rs 1770 and Rs 848
per thousand cigarettes respectively.
CUSTOMS
RELIEF MEASURES
89. Now the proposals related with Customs are being presented before the
house:
RELIEF FOR AGRICULTURE, DAIRY AND POULTRY SECTOR
90. The livestock sector continues to be the largest sub-sector of Agriculture in
Pakistan. It provides livelihood and employment to millions in the rural areas of the
country and the commitment of our government to sustain it remains a key aspect
element to alleviate poverty. To sustain the growth in this vital sector of the economy
and provide further relief, it is proposed that;-
a. Customs Duty of 3% on import of bulls meant for breeding purposes be
withdrawn.
b. Presently available concessionary rate of Customs Duty on the import
of Feeds meant for livestock sector may be further reduced from 10%
to 5% and fans meant for use in dairy farms be allowed at
concessionary rate of 3% to members of the Corporate Dairy
Association. This will substantially reduce their cost of inputs and boost
further expansion. In respect of the poultry sector, the concessionary
rate of customs duty on import of growth promoters premix, vitamin
premix, Vitamin B12 (Feed grade) and Vitamin H2 (Feed grade) is
proposed to be further reduced from 10% to 5% for registered
manufacturers of poultry feed.
RELIEF FOR HEALTH SECTOR
91. Health Sector has always been a priority area for the Government. Significant
incentives are already in place to encourage the provision of quality and costeffective
treatment to the patients. Like previous years, this year as well following
measures are being proposed for this Sector;-
a. To tackle the problem of physical and mental stunting in children a food
fortification program in collaboration with international partners is
underway. Under this program, flour mills will mix critical
micronutrients e.g. folic acid, vitamin B12, Zinc etc in the flour being
produced for sale to general public. However to ensure that the
appropriate quantities of such micronutrients are being added to the
flour, it is being proposed that 3% Customs Duty on import of the
microfeeder equipment be withdrawn.
b. To provide relief for cancer treatment in Pakistan, the Government has
exempted drugs from customs duties at import stage. However the sole
exception was Tasigna on which customs duty @ 5% is proposed to be
withdrawn.
c. It is also proposed that the rate of customs duty @11%, on corrective
eyesight glasses be reduced to 3%.
d. Import of machinery & equipment, is allowed duty free to charitable
institutions and hospitals, under the provision of Pakistan Customs
Tariff code 9917. However there is no mechanism for their disposal. To
redress this issue, it is being proposed that if such goods are disposed
of within a period of 7 years of their import, the payment of duty and
taxes leviable thereon shall be on payment of duty and taxes assessed
at time of disposal whereas if disposal is after seven years no taxes
would be payable.
ENCOURAGING VALUE-ADDED EXPORTS
92.
a. To provide incentive to exports an inter-ministerial review has identified
certain raw materials, used in export related sectors. It is therefore
proposed that the existing rate of Customs duty on raw materials falling
under 104 PCT codes are being exempted whereas in respect of 28
PCT code the Customs Duty rates are being reduced.
b. 11% Customs Duty on Synthetic filament tow of acrylic or modacrylic
(PCT 5501.3000) is being withdrawn by inclusion in the Prime Minister
Export Package
c. Leather products are one of the leading export oriented sector of the
country and have significant export potential in the international market.
93. Recognizing this, it is being proposed to withdraw customs duty on import of
tanned hides (including wet blue) by registered leather tanning sector.
IMPORT SUBSTITUTION AND EMPLOYMENT GENERATION
94. Currently finished products and most of the raw materials are importable at
20% duty. It is proposed that for liquid Packaging Industry, the customs duty on
inputs be reduced.
95. Regulatory duty on import of optical fiber cable is to be reduced from 20% to
10%. In addition, duty on fibre optic cable and other raw material be reduced to 5%.
RELIEF TO MANUFACTURING SECTOR
96. To sustain domestic manufacturing sector it is essential that inputs not
available locally are provided and made available at the optimal rates keeping in
view the availability of domestically compatible substitutes. In this regard, the
following proposal are being made:
a. Acetic Acid is not locally manufactured and is a widely used raw
material in various industries including food sector. It is proposed that
CD on Acetic Acid (PCT 2915.2100) may be reduced from 20% to
16%.
b. For promotion of local industry, it is proposed that customs duty on
import of plasters (PCT 2520.2000) may be reduced from 16% to 11%
as it is used for producing Plaster of Paris Bandage.
c. Carbon Black rubber grade is importable at 20% customs duty which is
a raw material for manufacturing of tyres. It is proposed that customs
duty may be reduced from 20% to 16% on import of Carbon Black
rubber grade.
d. Presently, silicon electrical steel sheets are importable for manufacture
of transformers at concessionary rate of 10% customs duty.
Transformers are a critical component of the power transmission and
distribution infrastructure. To assist in up-gradation of the power
infrastructure by reducing domestic manufacturing costs, it is proposed
that concessionary rate of 10%customs duty on silicon electrical steel
sheets for transformers may further be reduced to 5%.
PROMOTION OF TOURISM
97. During the last few years, the quantum of domestic tourism has significantly
increased in areas, which previously were not frequented owing to the security
environment, especially in Northern Areas. While the country is blessed with
excellent tourist spots, the hotel facilities at such locations are dismal or practically
non-existent. While construction of hotels is time-consuming with greater capital
cost, a quick and cost effective solution is available in the form of prefabricated hotel
rooms. It is, therefore, proposed that customs duty on import of such Pre-fabricated
structures complete rooms, not locally manufactured, be reduced from 20% to 11%
for setting up of new hotels / motels in hill stations (including AJK and Gilgit
Baltistan), coastal areas of Baluchistan.
RENEWABLE ENERGY INITIATIVES
98. The government remains committed to introducing alternative energy in all
walks of life with a view to reduced dependence on consumption of fossil fuel. In this
regard, the government intends to continue its drive and the following proposals are
being made;-
a. To promote usage of electric vehicles, which are environment friendly,
an enabling fiscal environment for its related infrastructure is
necessitated. It is, therefore, proposed that 16% customs duty on
charging stations for electric vehicles may be withdrawn.
b. Custom duty on import of electric cars is proposed to be reduced from
50% to 25% in addition to exemption from regulatory duty of 15%.
Import of CKD kits for assembly of domestically produced electric cars
is proposed at 10%.
c. LED is an efficient alternative to save energy. However to further
incentivize domestic manufacturing in Pakistan 5% customs duty on
specified LED parts and components, is proposed to be withdrawn.
Revenue Measures
Mr. Speaker,
99. In order to meet the revenue targets for FY 2018-19, revenue measures will
be required to be taken so as to maintain the overall fiscal deficit within the predicted
limit. Rather than effecting any large scale changes in the existing tariff slabs to meet
this objective, a more restrictive and narrower revenue intervention is predicated.
Accordingly, it is proposed that the rate of existing Additional Customs duty may be
increased from 1% to 2%. Exception is being provided for Plant and machinery,
Imports by Privileged Personnel /Organizations, Relief goods, Export Promotion
regimes etc.

PART III:
Relief Measures
Mr. Speaker,
100. Benazir Income Support Programme (BISP) is the largest safety net
programme in Pakistan. When the present government took over the charge in June
2013, the allocation for BISP was Rs.40 billion to provide cash support to 3.7 million
families. The stipend under the program in 2013 was a mere Rs.3,000 per quarter.
During its tenure, our government not only increased the allocation of funds to
Rs.121 billion during FY 2017-18 but also increased the amount of stipend per family
from Rs.3,000 to Rs.4,834 per quarter. Numbers of beneficiaries have also been
increased to 5.6 million as of December, 2017. The allocation of BISP is being
further increased to Rs.124.7 billion in FY 2018-19.
101. National Poverty Graduation Programme: To assist the ultra-poor and very
poor in graduating out of poverty on a sustainable basis by enabling especially
women and youth to realize their development potential and attain a higher level of
social and economic wellbeing, the government has launched a National Poverty
Graduation Programme for BISP beneficiaries with an amount of more than Rs 9.5
billion (US$ 82.6 million). Under this programme, BISP beneficiaries who are willing
to start their own businesses will be provided with a one-time cash grant of
Rs.50,000 to start their own business and become productive members of society.
102. Pakistan Poverty Alleviation Fund: During the last five years, the present
government arranged more than Rs.20 billion for PPAF. An amount of Rs 688 million
is being allocated for PPFA for FY 2018-19. Besides, PPAF is implementing the
Prime Minister’s Interest Free Loan scheme successfully in 45 districts of Pakistan,
for which the Government has already provided Rs 3.965 billion and further Rs 3.5
billion are being provided for Prime Minister’s Interest Free Loan, PPAF during the
next financial year.
103. Relief to Widow Borrowers: The scheme was launched in 1991 by PML(N)
government whereby the Government committed to pay the loans of widow
borrowers from House Building Finance Corporation (HBFC) up to the value of
Rs.3.5 lakh. This scheme will continue in FY 2018-19 with increased limit of Rs.6
lakh. Appropriate budgetary provision is being made for this purpose.
Mr. Speaker,
104. Our government has consistently provided increase in pay and pensions of
government employees over the last five years. Despite fiscal constraints a further
relief is being provided to government servants and pensioners although the inflation
this year currently stands at 3.8 percent:
a. A 10 percent Ad-hoc relief allowance to civil and armed forces
employees with effect from 1 July 2018.
b. A 10 percent increase is also being proposed for pensioners across the
board.
c. Housing is a serious problem for government employees in major
cities. House rent ceiling is being increased by 50 percent.
d. Similarly, house rent allowance is also being increased by 50 percent.
e. Considering the difficulties of low-paid pensioners, minimum pension is
being increased to Rs.10,000 from the present Rs.6,000. Similarly,
family pension would also get increased from Rs.4,500 to Rs.7,500.
f. Minimum pension of pensioners above the age of 75 will be Rs.15,000.
g. Overtime allowance of staff car drivers and dispatch riders is being
increased from Rs.40 per hour to Rs.80 per hour.
h. The government has also proposed an allocation of Rs.12 billion for
provision of advances to government servants for house-building and
purchase of transport facility.
i. The government is also setting aside an allocation of Rs.5 billion for
Senior Officers Performance Allowance. Details of this will be
announced separately.
105. The total financial impact of the above proposals will be Rs.69 billion.
Mr. Speaker,
106. Over the past five years we have only served the people. We have rendered
our responsibilities with sincerity. If we have been successful, it was due to our
efforts, benevolence of Allah, and support of the people. To a large extent we have
fulfilled promises that we made with the nation in 2013. Today Pakistan is at a new
stage of growth and prosperity. Probably we have been punished for it as well. But
no one can server our relationship with the people.
Mr. Speaker,
107. Pakistan is the sixth large country in the world and a strong rising economy.
The nature has bestowed this country with abundant resources. We have now laid
the foundation of growth. Based on this, our talented daughters and sons can make
this country as one of the greatest. As poet Allama Iqbal said:


Pakistan Paindabad
***

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