RGST, Assets Tax coming in taxation proposals

[Lahore_Real_Estate]

ISLAMABAD: The government plans to impose the RGST, a new Minimum Assets Tax (MAT), tax on all domestic and foreign assets, cut duty on cars, tractors and motorcycles and raise tax exemption limit to Rs350,000 per year, The News has learnt.

These proposals and many others, finalised in the draft budget, will be approved by the federal cabinet on Friday and later presented by the finance minister in the National Assembly.

The News has been able to obtain the copy of the main taxation proposals to be tabled before the cabinet and these show a mix of new taxes and some reliefs. Only minor changes, if any, are expected in the cabinet meeting.

The main taxation proposals are as follows: RGST to be implemented in steps, first with 0, 5 and 16 per cent rates; Minimum Assets Tax on high net worth individuals, including those who are more than self-occupied house owners without exemption; tax on domestic as well as foreign assets; Agriculture Tax (adjustable) after consultation with the provinces and the Ministry of Law.

Defense goods; CNG buses; agricultural machinery, equipment and implements; CNG kit, cylinders, valves; computer software and commercial catalogues tax exemption to be withdrawn and tax imposed at 17%.

Duty on 1,800cc and above (hybrid) luxury cars, arms and ammunition, cigarettes and betel nuts imposed last year, to be withdrawn, including on another set of 390 items (facility to be availed by common importer); Cars and other vehicles (CBU) duty rates to be as follows: 1001cc to 1500cc from 60% slashed to 55%; 1501cc to 1800cc slashed from 75% to 70%; beyond 1800cc (no change); agricultural tractors 15% to 10%; motorcycles from 65% to 60%; CKD kits of cars ad jeeps from 32.5% to 30%; CDK kits of motorcycles from 15% to 10% (all facility to be availed by local producers);

Income-taxable limit of people increased from Rs 300,000 annual to Rs 350,000; Power-generating machinery import duty and sales Tax to be withdrawn; Tax increased to 17% from 16% on fertilizer, machinery, tractors, plant, machinery and pesticides; Exemption withdrawn and 17 percent tax imposed on buses, trucks, dumpers, trailers, prime movers and road tractors; Five percent tax imposed on the zero-rated items like textile; carpets; leather; sports goods and surgical goods; Health, food, education goods to remain exempted; There will be no extension in 15% surcharge on income tax and in special excise duty of 1.5 percent; Customs duty on 22 pharmaceutical raw materials to be slashed from 20% to 5%; Income Tax on non-residents to be 10% and no return-filing is required; Tax to be imposed on income of individuals from government securities at 10%; Dividend income of an asset management company from investment in government securities 40%; income of a banking company as interest on investment in government securities 40% as separate bloc of income.

The rate of tax on cash withdrawal has been reduced from 0.3 percent to 0.2 percent; Investment rebate in initial public offerings-IPO: increase in limit of investments in shares by individuals from 10% to 20%; Increase in tax for new corporate sector tax entity’s credit reduced from 15% to 5%; for investment in shares of IPOs insurance/ takaful and voluntary pension Rs300,000 to Rs500,000 (all these steps taken for promoting investment in banking sector); Regulatory Duty to be imposed on sugar in place of Sales Tax; Extension for facility of minimum tax on turnover to VPS.

Officials elaborated that the new MAT Tax on high net worth people will be extracted on assets out of untaxed income; there will be no exemption except on one self-occupied house. There will be no discretion on valuations and district collector’s assessed rate will be applicable. Tax credit for income tax paid/agriculture tax paid shall be admissible.

The theme of the budget, as per the available document, will be Tax On Property, reviving the economy, and promoting investment, power generation, prizes on sales tax receipts, effective monitoring and risk-based audit, improving tax-compliance, agriculture tax, sales tax on services, and capital formation.