The Pakistani government has launched new taxation measures via the Finance Act 2023 to reinvigorate the International Monetary Fund programme. These changes will impact builders, developers, and DAP fertiliser sales.
The modifications encompass the introduction of an advance income tax on builders and developers and the levy of a 5% sales tax on DAP fertilisers. These steps are predicted to boost tax revenue by an extra Rs215 billion.
The tax rate for the salaried class will be set at a minimum of 2.5%, while the maximum tax rate has been hiked from 32.5% to 35%. Ashfaq Tola, Chairman of the Reforms and Resource Mobilisation Commission, assessed the implications of these revised tax slabs.
Under IMF pressure, the government has overturned its prior June 9 decisions by enforcing these changes through the Finance Act 2023.
Individuals or businesses constructing and selling buildings or property development must now pay adjustable advance tax. This tax will be based on the new tax rates and must be paid in four equal instalments throughout the tax year.
The exemption permitting overseas Pakistani buyers to avoid advance tax has been revoked. Similarly, the tax credit for house construction announced in the budget speech was rescinded.
A 5% federal excise duty now applies to all fertilisers, including DAP. The previously reduced sales tax rate on services in the federal capital, from 16% to 5%, has been restored to 15%.
Several exemptions announced in the budget speech have been withdrawn, but the wheat bran exemption has been extended retrospectively since July 1, 2018.
The fixed tax of 1% and input tax adjustment restriction have been expanded to the supply chain for drugs and Active Pharmaceutical Ingredients’ raw materials.
Read: PM Shehbaz Sharif’s Dialogue with IMF Aims to Secure $1.2 Billion Tranche