Budget 2020-21: Positive Takeaways for Pakistan’s Economy

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pakistan budget 2020-21

The Federal budget 2020-21 was presented today in National Assembly. The total budget expenditure is estimated at Rs. 7.2 trillion, 11% down from previous year. The budget for this year is overshadowed by relief measures to general population in light of COVID-19 pandemic. While the budget highlighted increased fiscal deficit for FY2020 due to current prevailing conditions of economy, there were several positive impressions of the budget on different sectors and economic aspects.

Following announcements form budget has a positive implication for related sector, industries or public.

  • Government allocated additional Rs. 70 billion for COVID-19 related measures.
  • Increase in budget for Ehsaas Program by Rs. 20 billion.
  • To control government expenses, no raise in salaries of government officials is announced.
  • The Federal Public Sector Development Program (PSDP) was raised by 15% to Rs. 650 billion.
  • No new taxes or increase in taxes regarding GST, Capital Gains tax, Dividends, Corporate tax, Super tax, Turnover tax and Sales tax.
  • Withholding tax on foreign remittances is removed to improve remittances that was previously 2% for non-filers and 1% for filers.
  • 0% Customs duty on COVID-19 related imports and lifesaving drugs.
  • Exemption on import duty of 2% for edible oils and seed oils.
  • Federal Excise Duty on cement bags has been reduced from Rs. 2 to Rs. 1.75 per bag.
  • Regulatory duty on Hot Rolled Coils of Iron and Steel reduced from 12.5% and 17.5% to 6% and 11%.
  • Reduction of Customs Duty on scrap to 0%.
  • Exemption of Customs Duty on raw material for beverage can manufacturers.
  • Capital Gain Tax on immovable property has been reduced.
  • Withholding tax on cash withdrawal to extent of Foreign remittances is exempted.
  • Exemption of 100% Withholding rates for non-residents.
  • Reduction of Sales tax from 14% to 12% for organized retail sector to encourage online registration with FBR through Point of Sales.
  • Rs. 110 billion subsidies for electricity consumers that have consumption below 300 units.
  • Allocation of Rs. 124 billion subsidies for WAPDA.
  • Tariff subsidy of around Rs. 3 billion for tube wells.
  • Allocation of Rs. 230 billion for Social protection sector.
  • Government borrowing from banks to be raised to Rs. 916 billion.
  • Inflation target for 2021 is set at 6.5%.
  • Rationalization of sales tax on Potassium Chlorate from Rs. 70 to Rs. 80 per kg in order to stop illicit manufacturing of match boxes.
  • Increase in rate of Federal Excise Duty to 100% of retail price for cigarettes to discourage smoking habits.
  • Increased Federal Excise Duty of 7.5% on locally manufactured and 25% on imported double cabin 4 by 4 vehicles.
  • Reduction in custom duty of 40 raw materials for different industries to promote local production.
  • Under National Tariff Policy 2019, rationalization of tariffs by reducing custom duty from 11% to 3% and 0% on 90 tariff lines.

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