Pakistan Federal Budget 2023–24: Highlights

📊 Income Tax Measures

1. Super Tax (Section 4C)

• A progressive super tax has been implemented across all sectors:

  • 1% on income between Rs. 150–200 million

  • 2% on Rs. 200–250 million

  • 3% on Rs. 250–300 million

  • 4% on Rs. 300–350 million

  • 6% on Rs. 350–400 million

  • 8% on Rs. 400–500 million

  • 10% on income exceeding Rs. 500 million​

2. Withholding Tax Adjustments

• Cash withdrawals exceeding Rs. 50,000 per day by non-filers are subject to a 0.6% withholding tax.

• Payments to non-residents via debit/credit cards:

  • Filers: Increased from 1% to 5%

  • Non-filers: Increased from 2% to 10%

• Bonus shares issued by companies are taxed at 10% for filers and 20% for non-filers.​

3. Advance Tax on Foreign Domestic Workers

• An adjustable advance tax of Rs. 200,000 is imposed on employers at the time of issuance or renewal of work permits for foreign domestic helpers.​

4. Incentives for IT and ITeS Sector

• Continuation of a 0.25% fixed tax rate on exports of IT and ITeS for tax years 2024–2025.

• Exemption from sales tax return filing for freelancers with exports up to $2,000 per month.

• Tax-free imports of software and hardware by IT services equal to 1% of their exports, with a ceiling of $50,000.

5. Youth Entrepreneurship Support

• Individuals up to age 30 engaged in entrepreneurship receive a 50% reduction in tax liability for three years.​

6. SME Tax Regime Expansion

• The business turnover limit for manufacturers to qualify for the SME tax regime has increased from Rs. 250 million to Rs. 800 million.

• IT and ITeS are included in the SME definition.​

7. Real Estate Transactions

• A 2% final withholding tax on immovable property purchases by non-resident holders of Pakistan Origin Card (POC) or National Identity Card for Overseas Pakistanis (NICOP) is waived if purchased with foreign remittances.​

8. Windfall Tax Provision

• An additional tax of up to 50% may be charged on the income of individuals or groups due to extraordinary gains from external factors.​

🛍️ Sales Tax Measures

1. Standard GST Rate

• Maintained at 18% for most goods.​

2. Sector-Specific GST Adjustments

• Textile and leather retailers: GST increased from 12% to 15%.

• Mobile phones: Standard 18% GST imposed.

• Branded clothes and shoes: GST increased to 18%.​

3. Sales Tax Exemptions and Withdrawals

• Exemptions extended or granted for:

  • Contraceptives and accessories

  • Plant saplings, combine harvesters, dryers for agricultural products, no-till-direct seeders, planters, trans-planters, other planters, and bovine semen

  • Import of IT equipment by exporters of IT and ITeS registered with the Pakistan Software Export Board

• Withdrawal of exemption on edible products sold in bulk under brand names or trademarks.​

4. Harmonization Measures

• Production, transmission, and distribution of electricity are proposed to be excluded from the purview of sales tax, aligning with the decision of the National Tax Council.​

🏭 Federal Excise Duty (FED) Adjustments

1. New FED Impositions

• Energy-inefficient fans: Rs. 2,000 per fan.

• Incandescent bulbs: 20% ad valorem.

• Cement: FED increased from Rs. 2 to Rs. 3 per kg.

• Acetate tow (used in cigarette filters): Rs. 44,000 per ton.

• Nicotine pouches: Rs. 1,200 per kg.

• E-liquids: Specific rates applied.​

2. Expansion of FED on Services

• Inclusion of royalty and fees for technical services under the scope of FED.​

3. Real Estate Sector

• A 5% FED is imposed on the sale of new plots and properties to generate additional revenue from the real estate market.​

🛃 Customs Duty and Regulatory Adjustments

1. Customs Duty Exemptions

• Exemption of customs duty on the import of machinery, equipment, and inputs for the manufacturing of:

  • Solar panels

  • Inverters

  • Batteries

  • Allied equipment

• Duty-free import of IT-related equipment equivalent to 1% of export proceeds for IT and ITeS exporters.

2. Regulatory Duty Adjustments

• Removal of 10% regulatory duty on the import of second-hand clothing.

• Removal of 5% regulatory duty on synthetic filament yarn of polyester not locally produced.​

3. Petroleum Levy Revisions

• Petroleum Development Levy increased to Rs. 60 per litre on diesel and petrol.

• Proposed maximum levy rates:

  • High-speed diesel oil: Rs. 80 per litre

  • Motor gasoline: Rs. 80 per litre

  • Superior kerosene oil: Rs. 50 per litre

  • Light diesel oil: Rs. 75 per litre

  • High octane blending component: Rs. 75 per litre

  • E-10 gasoline: Rs. 75 per litre

  • Liquefied petroleum gas (produced/extracted in Pakistan): Rs. 30,000 per metric ton​

📈 Economic Targets and Fiscal Measures

• Revenue Collection Target: Rs. 13 trillion, a 40% increase from the previous year.

• Fiscal Deficit: Aimed to reduce from 7.4% to 5.9% of GDP.

• Inflation Control: Inflation projected to decrease to 12% from over 40% in the previous year.

• Privatization Efforts: Plans to privatize Pakistan International Airlines and promote local manufacturing.​