The federal budget for the fiscal year 2023–24 was cautiously drafted by the coalition government, which is squished between the proverbial rock and hard place of fiscal reforms and the proverbial rock of the unpopular terms of the International Monetary Fund (IMF), months before elections. The budget’s total outlay is over Rs14 trillion.
Before the budget session, the federal cabinet approved the budget 2023-24 in its special meeting, and Prime Minister Shahbaz Sharif signed the budget proposals, after which the national assembly session started under the Speaker Raja Pervaiz Ashraf.
The finance minister criticized the previous PTI-led government for their policies.
Finance Minister Ishaq Dar presented the budget for the next financial year in the National Assembly session, this is the second budget of the coalition government and Prime Minister Shahbaz Sharif.
Key points of the budget
- Budget size Rs14.460 trillion
- GDP target for next financial year at 3.5%
- FBR’s tax revenue estimated at Rs9,200 billion
- Federal non-tax revenue to be Rs2,963 billion
- Rs10 billion allocated for PM Youth Loan
- Abolition of all taxes and duties on import of quality seeds to promote the use of them
- Decision to waive customs duty on raw materials/inputs for machinery required for mining, rice mill machinery and machine equipment
- Decision to allow duty-exempt import of IT equipment for exporters of Information Technology (IT) and related services to equal the value of one percent of their export earnings
- Proposal to extend exemption on machinery and equipment imported from erstwhile FATA areas till June 2024
- Abolition of regulatory duty on second-hand clothes used to provide relief to poor sections of society
- Proposal to remove regulatory duty on devices connected to it to promote information technology
- Removal of regulatory duty on parts of flat panels, monitors and projectors
- Withholding tax rate on import of goods for commercial importers increased by 0.5%
- Proposal to reduce customs duty on non-localized (CKD) of heavy commercial vehicles from 10% to 1%
What will be expensive in the financial budget 2023-24
New taxes of billions of rupees are imposed in the budget. The federal government has set a target of tax revenue of Rs9200 billion in the next financial year’s budget, Rs3759 billion in direct tax and the volume of indirect taxes is Rs5441 billion.
In the budget, the economic growth target for the next financial year is 3.5 percent and the budget deficit is estimated at 6.54 percent.
Progressive tax will be imposed on people with 150 million incomes
The super tax has been named as progressive tax. In the new budget, the tax on shareholders’ income less than Rs150 million annually will be zero.
However, shareholders’ income from 150 to 300 million will be one percent, two percent on income between 200 to 250 million, three percent on income between 250 to 300 million, four percent on 300 to 350 million income, six percent on 350 to 400 million income, eight percent on 400 to 500 million income, besides those who earn extraordinary profits will also be taxed.
Food outside is also taxed
In the Budget 2023-24, sales tax will now be levied on trademark and brand food items. Five percent sales tax will be levied on eating outside food and payment with credit or debit card.
No new taxes for industrial sector next year
Presenting the budget in the National Assembly, Federal Minister Ishaq Dar said that more incentives are planned for the agricultural sector in the budget. He said that no new tax will be imposed for the industrial sector next year, the LSM sector will also improve. He said that the economy was still facing challenges, the target of economic development in the next financial year is 3.5 percent. The limit of agricultural loans is being increased to Rs2250 billion.
30-35 percent hike in salaries of government employees
The cabinet has approved an ad-hoc 30 percent increase in the salaries of government employees in the budget.
The budget has approved a 35 percent increase in the salary of grades 1 to 16, 30 percent increase for grades 17 to 22, and a 17.5 percent increase in pension. While the minimum salary has been approved to be fixed at Rs30,000.
What will be cheaper in the budget?
Great news for those who want to install solar systems
In the budget, duty on parts of solar inverters has been reduced to zero, besides duty on control board, power board and charge controller, AC input and output terminal, and agricultural seeds.
No increase in duty on imports of essential commodities.
In the upcoming budget, there has been no increase in duty on the import of essential items, art cards and board excise duties have been exempted for the printing of the Quran.
The following steps are being taken in the field of education.
- For the Higher Education Commission, Rs65 billion has been allocated in current expenditure and Rs70 billion in development expenditure.
- Rs5 billion are being kept in the budget for the Pakistan Endowment Fund.
- Rs10 billion are being allocated for the late top scheme.
- Rs5 billion are being set aside for the development of schools, colleges and professional sports.
Facility for pharma companies
In the budget, facilities have been given for pharma companies and three more drugs have been included in the duty-free regime for pharma companies.
Customs duty on diapers and sanitary napkins also abolished
Customs duty on diapers and sanitary napkins has also been abolished in the budget, while there will be no customs duty on items and machinery used for solar panels, customs duty on inverters and batteries has also been abolished.
There will be no import duty on IT-related goods
There will be no import duty on IT-related goods, regulatory duty on monitors and projectors has been abolished.
The income tax rate on the IT sector will remain unchanged till the year 2026, tax exemption will be given on the freelancer’s annual income of $24,000. Rs5 billion has been allocated for the Venture Capital Fund, 15% sales tax on the IT sector has been reduced to 5%, and next year 50,000 IT graduates will be produced.
Rs10 billion allocated for small businesses
According to the budget, Rs10 billion have being allocated for small businesses, it is proposed to set up a credit rating agency for SMEs.
Tax rate exemption for business women
According to the budget, laptops will be given to 100,000 people, while Rs5 billion has been allocated to make women independent, and tax rates will be waived for business women.
10% discount on construction enterprise income
In the budget, a 10 percent discount will be given on the income of construction enterprises for the next three years, and it will be applicable to construction projects starting on July 1 and later.
Duty will not be imposed on import of all essential goods
Customs duty has also been waived for capacitors manufacturers in the budget, while the import of powder used in food has been exempted till June 2024, customs duty on goods used in mold and dice has also been abolished, while customs duty on raw materials for rice mill machinery has been abolished, there will be no customs duty on the import of machine tools.
In the budget, duty has also been reduced on import of old sports goods, regulatory duty on flat panels has been abolished and there will be no regulatory duty on silicon steel sheets.
Incentives for the agriculture sector
The budget has also facilitated the agriculture sector, focused on reducing trade facilities and cost of production, and encouraged investment and industrialization. Incentives have been announced for the agricultural sector in the budget, and customs duty on heavy commercial vehicles has been reduced from 10 to 5 percent.
In the budget, Rs30 billion has been allocated to shift 50,000 agricultural tube wells to solar energy, duties on import of quality seeds have been abolished, seeds have been exempted from duties to increase rice production, rice mills and mining machinery have been exempted from customs duty.
Business Agriculture Loan Scheme is being introduced in the budget, for which Rs10 billion has been allocated, loans will be given to small farmers at low profits, and loans of Rs10 billion will be given to them.
Property tax abolished for Overseas Pakistanis
According to the budget, if you buy property for overseas Pakistanis, then the tax has been abolished.
The federal cabinet approved the budget, in a session held just before the budget was presented in assembly.
Earlier, the Prime Minister Shehbaz Sharif said that the government has fulfilled all conditions of the IMF.