National Assembly announces Federal Budget 2020-21

June 12, 2020 (MLN): Minister of Industries and Production, Mr. Hammad Azhar has begun the presentation of budget for Fiscal Year 2020-21 in the federal cabinet session, under the presidency of the Prime Minister Imran Khan.

According to the official document released by the Finance Ministry, the budget 2020-21 has the following salient features:

  • The total outlay of budget 2020-21 is Rs 7,294.9 billion. This size is 11% lower than the size of budget estimates 2019-20.
  • The resource availability during 2020-21 has been estimated at Rs 6,314.9 billion against Rs 4,917.2 billion in the budget estimates of 2019-20.
  • The net revenue receipts for 2020-21 have been estimated at Rs 3,699.5 billion indicating an increase of 6.7% over the budget estimates of 2019-20.
  • The provincial share in federal taxes is estimated at Rs 2,873.7 billion during 2020-21, which is 11.7% lower than the budget estimates for 2019-20
  • The net capital receipts for 2020-21 have been estimated at Rs 1,463.2 billion against the budget estimates of Rs 831.7 billion in 2019-20 reflecting an increase of 75.93%.
  • The external receipts in 2020-21 are estimated at Rs 2,222.9 billion. This shows an decrease of 26.7% over the budget estimates for 2019-20.
  • The overall expenditure during 2020-21 has been estimated at Rs 7,294.9 billion, out of which the current expenditure is Rs 6,345 billion.
  • The development expenditure outside PSDP has been estimated at Rs 70.0 billion in the budget 2020-21.
  • The size of Public Sector Development Programme (PSDP) for 2020-21 is Rs 1,324 billion. Out of this, Rs 676 billion has been allocated to provinces. Federal PSDP has been estimated at Rs 650 billion, out of which Rs 418.7 billion for Federal Ministries/Divisions, Rs 100.4 billion for Corporations, Rs 3 billion for Earthquake Reconstruction and Rehabilitation Authority (ERRA), and 7 B for COVID responsive and Other Natural Calamities Program.

Hammad Azhar stated that the budget deficit would be 7% of the overall GDP. The government will strive to pull the economy out from a 0.4% contraction in GDP caused by the coronavirus, and shall target 2.1% growth for the upcoming year, he added.

The Federal Government has recommended giving a Rs. 200 billion subsidy to the power sector.

Due to the economic crisis triggered by the coronavirus crisis, civil servants' pays and pensions will be unchanged from last year in the Budget 2020-21.

Agriculture is targeted to grow 2.8%, Industrial sector is expected to grow 0.1%, and the services sector is expected to 2.6%.

The size of Public Sector Development Programme (PSDP) for 2020-21 has been set at Rs1.3 trillion.

The budget also includes two projects to supply gas to special economic zones being set up in Rashakai in KP and Dhabeji in Sindh, which will cost approximately Rs1.5 billion.

The state has earmarked nearly Rs. 26 billion for 17 CPEC projects. 

FATA electricity subsidy has been earmarked at Rs10 billion. While Rs 132 billion subsidy has been recommended for those home users who consume less than 300 units of electricity.

The allocation under the head of Economic Affairs in the budget has been projected at Rs. 71.7 billion.

The Government has allocated Rs. 100 billion for emergency funds and Rs. 75 billion for hospitals.

The Minister said that no new tax has been implemented in this budget owing to the adverse impact on the economy created by COVID-19.

The Government has also reduced customs duty on 40 raw materials of various industries.

The Government has allocated Rs. 64 billion for HEC, Rs. 25 billion for improvement in remittances and Rs. 1 Billion for E-Governance.

Furthermore, Rs. 200 billion have been earmarked for daily wagers, Rs. 3,700 billion for federal expenditure, Rs. 180 billion for subsidies and Rs. 40 billion for Pakistan Railways.  

To curb the impact of Coronavirus on the economy and control its spread, the government has allocated Rs. 70 billion.

The State has set aside Rs. 30 billion for educational sector, and Rs. 10 billion for the control of locust attack in the country.  

Similarly, Rs. 6 billion have been allocated for environmental change, Rs. 24 billion for Sustainable Development Goals, Rs. 250 billion for social sector and Rs. 12 billion for the food sector.    

Government has lowered tax rate to 0.5% for Hotel industry from April to September to boost their operations, which has been impacted severely due to the pandemic. 

The target for Current Account Deficit has been set at 4.4% for the Fiscal Year 2021.  

Federal Government has granted exemption to health related items and equipment through SRO which is going to expire on June 19, 2020. In the present circumstances vis-à-vis COVID-19, the said period is being extended for another three months starting from the 20th June 2020.

The government has proposed to increase the minimum threshold of supplies by retailers for obtaining CNIC of the buyers from Rs 50,000 to 100,000.

The federal government has allocated Rs 47.8 billion under the Public Sector Development Programme (PSDP) for the ongoing and new schemes of Cabinet Division for the fiscal year 2020-21.

The government has allocated Rs80 million in Public Sector Development Programme (PSDP) 2020-21 for one ongoing scheme of the Board of Investment (BOI) for the industrial promotion and investment in the country.

The federal government has allocated Rs 1.5 billion for the two ongoing schemes of the Defense Production Division under the Public Sector Development Programme (PSDP) 2020-21.

For health-related purpose, the govt has increased the rate of FED on cigars, cheroots, and cigarillos and cigarettes from 65% to 100% of the retail price; increase in the rate of FED on filter rods from Rs 0.75 to Rs 1 per filter rod.

Likewise, the government has allocated Rs. 53.8 million under PSDP for seven various projects of Narcotics Control Division.

The government has budgeted total expenditures of Rs7,136 billion, of which Rs6,345 billion will be spent under the current expenditures head and Rs792 billion under the development head.

In the wake of the worsening effect of COVID-19 and reduction in the production of cement, it has been proposed to reduce FED on cement from Rs. 2 per kg to Rs. 1.75 per kg.

The Federal Board of Revenue (FBR) has been given a target of Rs4.963 trillion for tax collection and Rs. 1.108 trillion for non-tax revenues.

The government has allocated Rs 2.6 billion for the ongoing and new projects of Maritime Affairs Division under PSDP. Moreover, Rs. 4.9 billion have been earmarked for SUPARCO under PSDP.

Rs. 100 for million have been assigned for monitoring and evaluating units for Ehsaas Programme, while Rs. 2 billion have been alloted for the Kamyab Jawan Program. 

The government has set aside Rs. 2.496 trillion for interest payments for the next year.

On imports of capital goods, the State has proposed to lower the tax rate from 5.5% to 1% for ease of doing business.

To augment efforts towards simplification of the withholding tax regime, the withholding tax provisions for the following have been deleted:

  1. Collection of advance tax on education-related expenses remitted abroad,
  2. Tax on steel melters and composite units,
  3. Withdrawal of balance under pension fund,
  4. Tax on local purchase of cooking oil or vegetable ghee by certain persons,
  5. Advance tax on functions and gatherings,
  6. Advance tax on cable operators and other electronic media,
  7. Advance tax on dealers, commission agents and arhatis etc,
  8. Advance tax on the insurance premium, Advance tax on tobacco

This measure would reduce the cost of the compliance of taxpayers, enhance the control of FBR over the withholding tax regime and would be pivotal in promoting ease of doing business.

In order to promote ease of doing business and reduce compliance cost for taxpayers running businesses the threshold per transaction delineated is being increased from Rs. 10,000/- to Rs. 25,000/-.

The threshold of the requirement of paying salaries through crossed cheque or direct transfer of funds to the bank accounts of employees is being increased from Rs. 15,000/- per month to Rs. 25,000/- per month.

To facilitate public listed companies, an amendment is being made to enable the Commissioner issues exemption certificate within fifteen days of the filing of the application, failing which the certificate will be automatically issued through the system.

To augment efforts for ease of doing business by banks a uniform rate of 15% is being specified on profit on debt. However, tax shall be deducted @ of 10% if the recipient of profit furnishes a certificate to the pair of profit that his income from profit on debt during the year is upto rupees 500,000.

The holding period for taxation of capital gains on disposal of immovable property has been restricted from 5 to 4 years.

The Minister has said that there will be no increase in the stock of public guarantees.

Moreover, he said that inflation will be brought down to 6.5% during the year.

Government has also proposed a lower tax rate for mobile making/assembler companies.

Copyright Mettis Link News

Posted on: 2020-06-12T16:24:00+05:00

35227