Thursday Jan 06 2022

'Mini-budget' an attempt to bring tsunami of inflation: Senate committee

This undated file photo shows the hall of the Senate of Pakistan, located in the east wing of the Parliament Building, Islamabad. — Senate of Pakistan
This undated file photo shows the hall of the Senate of Pakistan, located in the east wing of the Parliament Building, Islamabad. — Senate of Pakistan

  • Senate standing committee believes finance bill to bring negative impact on masses.
  • FBR gives comprehensive briefing on finance bill to committee.
  • Senator objects inclusion of Tarin's name in tax directory 2019.

ISLAMABAD: The Senate Standing Committee on Finance has termed the "mini-budget" an attempt to bring a tsunami of inflation in the country, The News reported Thursday.

The committee unanimously believed that the finance bill will bring a negative impact on the common man, the publication reported.

"The revenue of the government is being increased at the cost of oppressing the common man," Senator Farooq Hamid Naek said.

The standing committee had met under the chairmanship of Senator Muhammad Talha Mahmood to consider the Finance (Supplementary) Bill, 2021.

At the onset of the meeting, the committee objected to the unconstitutional order of the Senate to finalise the consideration of the finance bill within two days, whereas 14 working days were required to deliberate on the bill as per the constitution.

The committee also decided to give due deliberation on the matter and forward the same request to the Senate chairman to spare enough time to deliberate upon the matter.

FBR chairman gives briefing on finance bill

The Federal Board of Revenue (FBR) chairman, while terming the tax reforms the most significant tax policy reforms in the history of the country focusing on removal of distortions and not on imposing new taxes, gave a comprehensive briefing on the background, salient features of IMF-FBR engagement, changes in the GST regime, changes in income tax, changes in Federal Excise Act, changes in Customs Act and targeted subsidiary items.

The tax system is mechanised to increase revenue with the underlying principle of “collect and spend", the FBR chairman told the Senate panel.

He apprised the committee that the IMF demanded 17% GST across the board and withdrawal of exemptions worth Rs700 billion, but conceded to Rs343 billion.

The FBR chairman informed the committee that the new reforms have deviated from the rule of thumb with the Value Added Tax i.e. 17% GST across the board without any exemptions.

He defended the reduced rates of GST on agriculture tractors, fertilizers, inputs of fertilizers sector, pesticides, used clothing, footwear, and cinematographic equipment.

The FBR chief also defended the imposition of GST on food items — wheat, flour, wheat bran, rice, vegetables, fruits, pulses, fresh poultry, fish and meat (consumed by common man), milk and fat-filled milk, sugarcane, and beet sugar (raw materials), education books and stationery items, etc.

He briefed the committee on the exemptions that the government intends to give to various sectors, which include Rs71 billion on goods and Rs2 billion on commonly used products, Rs160 billion on pharmaceutical products, and Rs112 billion on machinery with GST refundable/adjustable.

The committee was apprised of the present regime of the pharmaceutical sector.

The FBR chairman informed the committee that out of 800 manufacturers, only 453 are registered, Rs35 billion input tax is passed to patients (packing, utilities, etc), Rs530 billion undocumented supply chain, Rs700 billion turnover, and exempt input and output documentation issues.

He informed the committee that the sales tax on the pharmaceutical sector will be imposed at the import stage, with zero-rating of sales of medicines.

The new reforms will also give expeditious payment of refunds (within 1 week) and a reduction in prices, he said.

Directives to DRAP

Meanwhile, the committee gave directives to write a letter to the Drug Regulatory Authority of Pakistan (DRAP) officials to appear before the committee and brief it on the definition of drugs and delineate their categories under the Drug Act.

The committee also wants DRAP to define whether or not "vitamins" fall under the definition of drugs. It further sought details on spurious drugs and unregistered pharmaceutical companies in Pakistan.

The committee unanimously apprehended that changes in the GST regime in particular with regard to pharmaceutical companies would raise the prices of medicines.

Objection to Tarin's inclusion in tax directory

The committee, after receiving a detailed briefing from the FBR chairman on the salient features of the tax reforms, decided to adjourn the meeting till January 6 to give a clause-wise reading to the Finance (Supplementary) Bill, 2021 and give recommendations under Article 73 of the Constitution.

Senator Farooq H Naek also objected to the inclusion of Finance Minister Shaukat Tarin's name in the Tax Directory for parliamentarians for 2019 when he was not a member of the Senate. The chairman FBR replied that if the committee has an objection, his name would be excluded from the Tax Directory.