The Budget 2024-25 introduces significant modifications to the Customs Act 1969. These changes encompass the exemption of certain commodities, the evaluation of the regulatory system, the assessment of the exemption system, and the imposition of extra customs duty on localized auto components. The legislative amendments encompass the incorporation of precise definitions for “Nuclear Material” and “Radioactive Material” to facilitate the enforcement of the National Nuclear Detection Architecture (NNDA) regime. Additionally, they involve the creation of the Directorate General of National Targeting Centre (NTC) and the addition of the Intelligence Bureau (IB) to the roster of government agencies obligated to aid Customs in investigations.
The proposed budgetary measures for the Sales Tax Act 1990 consist of several changes. These include removing certain exemptions and zero ratings and reducing or fixing rates. Mobile phones will be subject to standard taxation. The reduced sales tax rate for supplies made by POS retailers dealing in leather and textile products will be increased from 15% to 18%. A withholding regime will be implemented for lead, coal, scrap of paper and plastic, silica, iron and steel scrap. The exemption granted to ex-FATA/PATA will be gradually phased out. Additionally, the Board will be able to determine the minimum price of goods falling under the Third Schedule.
The Budget 2024-25 introduces several notable changes, including modifications to the legal requirements concerning assessment and audit, the transformation of the zero-rating of petroleum goods into an exemption, and the adjustment of the default surcharge rate to line with the SBP’s policy rate of KIBOR plus 3%.
The tax rates for self-employed individuals, partnerships, and employees have been adjusted, with a maximum annual income threshold of Rs.600,000. Individuals not filing taxes are subject to increased tax rates, resulting in elevated business expenses and a stronger incentive to submit their tax returns. A revised tax rate is implemented for individuals submitting their tax returns after the deadline. The proposal suggests progressive tax rates on property acquisitions and sales, with individuals classified as filers, late-filers, or non-filers.
Currently, profit from selling securities is subject to a fixed tax rate of 15% for individuals who file their taxes, while non-filers are taxed at regular rates. Dividend income from mutual funds has increased from 15% to 25%. Export income is subject to standard tax rates, with a minimum tax of 1% applied to the collection of export proceeds.
The enforcement measures against those who fail to file have been enhanced, including imposing penalties for non-compliance. Penalties and prosecutions are suggested for those who must disclose essential details, submit incomplete information in tax filings, or refrain from filing returns upon discontinuing their firm. Entities that need to properly disclose key details or submit incomplete information in their tax returns may face penalties and prosecutions.
Ultimately, the tax rates for individuals who do not receive a salary, those who file their taxes late, and those who do not file their taxes have been adjusted to guarantee fair taxation and adherence to tax regulations.
The FY 2024-25 budget proposal incorporates numerous tax laws and regulations modifications. The process of converting the exemption certificate, which allows for the avoidance of withholding tax, into a reduced rate certificate is being implemented to ensure proper documentation of the value chain. The tax rate on profit from debt for those who have not filed their taxes is increasing from 30% to 35% to raise the financial burden on those who do not comply with tax regulations. The scope of withholding tax on the supply chain is being expanded to encompass all economic sectors, including distributors, dealers, wholesalers, and retailers. The Board has the authority to determine the minimum value for tax calculation during the import process.
The tax collecting method for motor vehicles has been modified from based on engine capacity to a percentage of the vehicle’s worth. The proposal aims to eliminate the exemption on subsidy payments based on the principle of horizontal equity. The current 1% tax on the supply of cigarettes by distributors may be increased to 2.5%. It is suggested that 25% of a brand’s advertising budget be divided with a non-resident collaborator who additionally gets a royalty payment from Pakistan.
The planned increase in the default surcharge rate for late payment will be set at the KIBOR rate plus an additional 3% per annum. The relief measures consist of a five-year exemption from income tax and withholding taxes for the FATA/PATA territories. Additionally, the period for adjusting unadjusted business losses for Pakistan International Airlines Corporation Limited (PIACL) has been extended from 6 to 10 years.