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Highlights of Budget 2023-24

Highlights of Budget 2023-24
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June 09, 2023 (MLN): Federal Minister for Finance and Revenue, Senator Ishaq Dar is delivering the budget speech for the financial year 2023-24 in the federal cabinet session.

The budget FY24 is aimed to strike a delicate balance between people-friendly budgetary measures while meeting IMF conditions.

The federal government has set a GDP growth target of 3.5% for FY24 which is a modest target, the budget document revealed.

"Soon the country is heading toward general elections. Nevertheless, the budget for the next financial year was framed as a liability budget rather than an election budget," he clarified. 

The total outlay for budget 2023-24 is over Rs14 trillion as against the budget of Rs9.5tr in FY2022-23.

After thorough consultations, the government has selected the following elements of the real economy through which the country can return to the path of development in the shortest period of time.

The priority drivers of growth in the budget proposals are as follows:


The agriculture sector is the backbone of the country's economy. The following measures are proposed for this sector in the next financial year: Increase the agricultural credit limit from 1800 billion to 2250 billion in the current financial year.

To convert 50,000 agricultural tube wells a year to solar energy 30 billion rupees have been allocated.

Quality seeds are the basis of a good harvest. In order to promote the use of quality seeds in the country, all taxes and duties on their import are being abolished.

Likewise, customs duty on the import of saplings is being abolished.

Due to climate change, the harvesting period is becoming less and less. Also, if the farmer has raised the third crop, it is important to handle the ripe crop as soon as possible.

This requires Combine Harvesters. To promote the use of combined harvesters, it is proposed to exempt them from all duties and taxes.

Rice planters, seeders, and dryers are also proposed to be exempted from duties and taxes to increase rice production.

Agro-Industry has the potential to revolutionize the rural economy. In the budget, an amount of Rs. 5 billion has been allocated for provision of a concessional loan to the Agro-Industry. 

The real value addition of agricultural products is in their processing, this can also reduce the possibility of wasting products, especially fruits and vegetables. Apart from this, Food Processing Units also provide
employment opportunities.

In this context, it has been decided that Agro-based Industrial Units set up in rural areas with an annual turnover of up to 80 crore rupees will get complete exemption from all taxes for 5 years.

The government has completed all the conditions of the IMF in order to unlock the tranche as soon as possible, he stated. 

Under the PM's Youth, Business, and Agriculture Loan Scheme, small and medium-scale easy loans will be continued, and Rs10 billion as a mark-up subsidy for this purpose in the next financial year.

Rs6bn has been allocated for the next year for subsidy on imported urea fertilizer.

To increase productivity, small farmers will be provided loans at low markups with the participation of provincial governments. A huge sum of Rs10bn has been allocated in this regard.

IT and Enabled Services

IT and IT Enabled Services are the fastest growing sectors of the economy and have a significant share in exports due to the problems in the global economy, this sector also faced difficulties.

However, we are confident that this sector will prove to be an engine of growth in the coming years. Pakistan ranks second in the world in terms of Freelancers doing their business.

The following steps are being taken to address the problems faced by them and to solve the problems of the sector in general:

A concessional rate of income tax of 0.25 percent is applicable to boost IT exports. This facility will continue till June 30, 2026.

Freelancers used to face difficulties in collecting monthly sales tax returns.

To facilitate the business environment, Freelancers have been declared to transfer sales tax registration and returns on annual exports up to $24,000. Also a simple single-page income for them.

IT and IT Enabled Service Providers will be allowed to use their Software and hardware worth one percent of exports and will be able to import tax-free. These imports are capped at $50,000 per year.

For Exporters of IT and IT Services, the Issuance of an Automated Exemption Certificate will be ensured.

The IT sector is being given the status of SMEs, which will give the sector the benefit of concessional income tax rates.

Venture capital is very important for mentoring IT businesses. Venture Capital Fund will be established from government resources to provide business capital from Rs5bn in the budget.

The current rate of sales tax on IT services under ICT is being reduced from 15% to 5%.

To encourage lending in the IT sector, banks will benefit from a concessional tax of 20 percent in the sector.

Professional training will be given to 50 thousand IT graduates in the next financial year.

Small and Medium Enterprises (SMEs):

SMEs are key to the economy. Unfortunately, we have not paid enough attention to their development.

Given that they can contribute to the economy according to their ability. In the budget fiscal year 2023-24. The following steps will be taken for SMEs:

To encourage construction, agriculture, and SMEs, a concessional tax of 20% instead of 39% on the income from such loans to banks providing loans to these sectors for the next 2 financial years. It will be available till June 30, 2025.

SMEs' turnover threshold increased from Rs250mn to Rs800mn by expanding the SMES tax incentives system.

An amount of Rs10bn should be allocated in this financial year for providing subsidized loans to small businesses through PM's Youth Loan Programme which has been Under a scheme of the State Bank of Pakistan.

SME loans can be refinanced at just 6%markup. But banks hesitate to give such loans due to the lack of credit history of SMEs.

It has been decided that to remove this obstacle, the Government of Pakistan will bear the risk of up to 20% of the new loans given in this regard.

SME Assan Finance Scheme is being relaunched. It is proposed to establish a separate Credit Rating Agency for SMEs.

Industrial and export sectors: 

The industrial sector, especially the export industry, is the most important part of the country's economy. The following steps are being taken to promote exports:

The Export Council of Pakistan is being established under the leadership of the Prime Minister of Pakistan. This Council will hold at least one meeting every quarter and take decisions related to exports.

To promote the export of Minerals and Metals, sales tax will be exempted from any local purchase through any Online Market Place.

Export Facilitation Scheme has been launched. Under this, the facilities of exporters will increase. The minimum Tax on all Listed Companies has been reduced from 1.25% to 1%.

To promote the textile industry, the 5% regulatory duty on non-locally produced synthetic filament yarn is being abolished. Thus, the customs duty on Pet Scrap is being reduced from 20% to 11%.

Exemption from customs duty is also being given.

 Overseas Pakistanis:

Remittances are the most important source of foreign exchange, their importance can be estimated from the fact that remittances account for 90% of our exports.

The following incentives will be given to promote remittances through formal channels:

Currently, on the purchase of Immovable Property by Overseas Pakistanis through Foreign Remittance 2% Final Tax is being abolished.

A new diamond card is being issued in the category of remittance cards, which will be issued to those who send remittances of more than $50 thousand annually.

The following privileges will be given for this category.

One Non-Prohibited Bore License, Gratis Passport, Preferential Access to Pakistani Embassies and Consulates, Fast Track Immigration Facility at Pakistani Airports, Big prizes through a raffle to Remittance Card Holders.

The federal government played its due role in the promotion of education. The following steps are being taken in this regard:

For Higher Education Commission Rs65bn has been allocated for Current Expenditure and 70 billion for Development Expenditure.

Pakistan Endowment Fund for financial support in the education sector (Pakistan Endowment Fund) is being established for which Rs5 bn is being kept in the budget. This fund will provide scholarships to high school and college students based on merit.

"Our goal is that no gifted student should be deprived of higher education due to lack of resources," he said.

In the current financial year, the federal government has released the distribution of 100,000 laptops to merit-based deserving students. An amount of Rs10bn has been allocated in the next financial year to continue the same scheme.

Sports are an integral part of education. In the budget, Rs5bn has been earmarked for the development of school, college, and professional sports.

Women empowerment: 

Rs5bn has been allocated for Women's Empowerment in the budget. 

Projects like skill development, loans for business, and training for running a business will be run. Tax rates have also been relaxed for women entrepreneurs.

Department of Energy: 

Pakistan depends on imports for its energy needs. The increase in the price of these imports is a major cause of inflation.

To reduce this cost, our government is determined to promote the use of Pakistani coal and solar energy, he noted. The following steps are being taken in this regard:

Coal-fired power plants are being encouraged to use local coal.

Raw Material Batteries Solar Panel, and Inverters are exempted from Customs Duty. Energy Refined Petrol Products are the major part of Crude Oil requirements.

Many times in the past there have been shortages of these products in the country due to disruptions in the supply chain.

Many times in the past, there have been shortages of these products in the country due to disruptions in the supply chain.

To address such situations, the Bonded Bulk Storage Policy for POL Products is being implemented.

Under this policy, the Foreign Supplier will provide financial resources from the international market for importing Crude Oil and POL Products into Pakistan, which will then be stored in Bonded Bulk Storage.

When necessary, Refinery or Oil Marketing Companies will be allowed to purchase these products from the Foreign Supplier.

Revised targets: 

In the current financial year, the revenue of FBR is around Rs7,200bn. There is a possibility of In the share of provinces will be Rs4,129bn.

The federal government's non-tax revenue is expected to be Rs1,618bn and the revenue of the federation will be Rs4,689bn. The total expenditure is estimated at Rs11,090bn. 

The expenditure under PSDP is likely to be Rs567bn.  About Rs1,510bn will be spent on defense. The total expenditure of the civil government is Rs553bn, Rs654bn on pension. Rs1,093bn in subsidies and Rs1,090bn in grants.

Public Sector Development Program (PSDP):

The development budget plays an important role in the development of the country. Through the development budget, objectives such as increasing the efficiency of the economy, provision better infrastructure, human
development, regional equity, and increase in investment are achieved.

Rs1,150bn has been earmarked for the federal development program for the next financial year.

While the size of the development program of the provinces is Rs1.559bn. Thus, the size of the development program at the national level will be Rs2,709bn.

This amount is only 2.6% of GDP. The PML-N in its previous tenure had raised the volume of development expenditure to about 5% of GDP.

Last four years Due to the destruction and destruction of the development resources have been reduced to half.

On the other hand, the developmental needs of the country have increased manifold. This situation requires that the development expenditure should be spent on the most important priorities of the country.

Salient features of the proposed PSDP for FY 2023-24:

They can be complied with by 2024. 52% of PSDP has been earmarked for attracting foreign direct investment and providing state-of-the-art infrastructure.

In the infrastructure sector, the proposed allocation for transport and communication is Rs267bn which is 28% of the total volume, the allocation for the water sector is Rs100bn (11%).

The proposed allocation for the energy sector is Rs89bn which is 9% of the total allocation), and the proposed allocation for Physical Planning and Housing (PP&H) is Rs43bn i.e. 4% of the total allocation.

Rs108bn have been proposed for the balanced development of different regions of Pakistan, out of which Rs57bn have been earmarked for the merged districts (NMDs) of Khyber Pakhtunkhwa, Rs32.5bn for AJ&K and
Rs28.5bn for Gilgit-Baltistan.

Water Resources:

Last year, Rs12bn was provided for the completion of Mohmand Dam while Rs10.5bn is being allocated for this project in the next financial year as well.

Similarly, a provision of around Rs59bn will be ensured on a priority basis for Dasu Hydropower Project of 2160 MW capacity. Rs20bn will be provided for Diamir Bhasha Dam.

Other important projects include Rs4.8bn for the 969 MW Neelum Jhelum Hydropower Project, Rs4.45bn for increasing the capacity of Tarbela Hydropower, and Rs2.6bn for the rehabilitation of Warsak Hydroelectric Power Station.

These projects have the potential to provide water for the agricultural sector and generate affordable electricity.

Along with this, an amount of Rs17.50bn will also be provided for the K4 Greater Water Supply Scheme to improve the drinking water supply in Karachi.

Transport and Communication:

Rs161bn has been kept in the development budget for highways and other communication facilities. Communication facilities give people access to markets, industry, and commerce to develop and provide employment to millions of people.

The government has already completed mega transport and communication projects which have provided motorway facilities to millions of people. He has also presented a comparison between PTI and PDM governments. 

Social Sector:

Pakistan is striving to achieve SDG targets. An amount of Rs90bn has been proposed for this purpose in the next financial year.

No New Tax: 

It is important to note that this year no new tax is being imposed as the government is trying to give more relief to the people in the country.

The effort is to increase employment opportunities and facilitate business. By which foreign exchange reserves can increase.

Revenue Measures of Income Tax:

It is proposed to increase the tax rate of 19% to increase the income from these transactions to the government. It will be applied to AOP Individuals and Companies.

Moreover, it is proposed to increase the rate of the Concessionary Tax on services by 1%. The proposal will not apply to rice, cottonseed, edible oil, print and electronic media, and sports persons.

Rationalizing the Rates and Scope of Super Tax under Section 4C. Imposing a tax on the rich is the guiding principle of Pakistan's Taxation Policy. Therefore, the super tax was imposed on high-income earners in the 2022 Tax Year.

Its rate was gradually increased from one to four percent. Apart from this, Super Tax has been imposed at the rate of 10% on fifteen businesses and sectors with high income.

The minimum income limit for the implementation of Super Tax has been set at Rs150mn. Super Tax has been changed to Progressive Taxation. It is proposed to gradually increase its tax rates.

Withholding Tax on Bonus Shares issued by companies: 

Some companies issue bonus shares instead of paying cash dividends to avoid tax.

Therefore, for the purpose of collecting tax on In-Kind Dividends Listed and non-listed companies are being taxed at the rate of 10%.

Cash Withdrawal Tax from Bank of Non-ATL Persons:

Taxation of Cash Withdrawal is an important document to document the economy.

Therefore, in order to document the cash withdrawal by non-ATL persons and increase their transaction costs, a tax of 0.6% is being levied on cash withdrawals of more than fifty thousand rupees.

Withholding tax on employment of Foreign Domestic Workers: 

Currently, more or less 3 thousand foreign nationals are working as helpers for rich families in Pakistan.

On average, each domestic helper is paid up to $6,000 per year.

WHT is going to be levied at the rate of Rs200,000 in a Tax Year on the amount paid to domestic workers.

Discourage the Outflow of Foreign Currency:

Foreign Exchange Reserves not only need to be increased but the government has to close the loopholes that become the reason behind its sharp reduction.

In order to discourage the outflow of Foreign Currency Banking Channels Credit/Debit Cards, the current rate of Withholding Tax on Filers is being increased from 1% to 5% while on Non-Filer this rate will be 10%.

Federal exercise and sales tax:

The GST on Tier-1 Retailers of Textiles and Leather Products is being increased from 12% to 15%. Primarily, this tax will be levied on valuable apparel and products of Branded Textiles and Leather.

This tax is imposed on the section of society that can afford to buy such expensive items. 

Duties and taxes on vehicles:

Duties and taxes were capped in 2005 on the import of old and used Asian Make vehicles up to CC 1800.

Now the capping of duties and taxes on vehicles above CC 1300 has continued.

On the demand of the Glass Manufacturers Association, to protect Localized Glass, a regulatory duty of 15% to 30% is being imposed on the import of various types of such glass.

To encourage digital payments in the Federal Territory of Islamabad, the tax rate on credit card payments on restaurant services is being reduced from 15% to 5%.

Relief Measures for Government Servants, Pensioners, Fixed Income Persons etc.:

  • The following existing allowances are also being increased:
  • official travel and overnight stay outside Duty Station
  • Allowance and Mileage Allowance.
  • additional charge/ current charge/ deputation allowance
  • orderly allowance
  • Special Conveyance Allowance for Disable
  • Constant attendant allowance (Military)
  •  Driver allowance of authorized pensioners is being increased in the pension of government employees

The minimum pension of government employees is being increased to Rs12,000. Meanwhile, the EOBI pension is proposed to be increased from Rs8,500 to Rs10,000.

Schemes were launched in the last two periods of Prime Minister Muhammad Nawaz Sharif's budget 2000-1999 and 2017-18 to help widows of debtors.

With respect to the financial year 2023-24, the deposit limit in the Shahada account of House Building CDNS has been increased from 5mn to 7.5mn.

The minimum wage has been increased from 25 thousand to 30 thousand rupees in the range of ICT Finance Corporation is being introduced for the debtor widows.

Under this, the outstanding debts of these widows are up to Rs1mn.

 Behbood Saving Certificates, the deposit limit has also been increased from Rs5mn to Rs7.5mn.

"Pakistan is going through a difficult situation and due to this the present government had to take difficult decisions to avert the default," he added.

The budget deficit remained the significant reason behind the collapse of the economy. 

Prime Mister Shehbaz Sharif has introduced austerity measures to reduce the budget deficit. 

During the period of 2013-2018, under the PML-N government, Pakistan’s GDP grew from 3.9% in FY13 to 6.1% in FY18, taking the total GDP of the country to $356.8 billion in FY18 from $258.9bn in FY13.

However, the PTI-led government struggled to continue this growth, with GDP remaining at 6.1% in FY22, totaling $375.5bn with a mere increase of $18.7bn.

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Posted on: 2023-06-09T18:14:50+05:00