Senate panel terms Finance Supplementary Bill tsunami of inflation

ISLAMABAD: The Senate Standing Committee on Finance, Revenue and Economic Affairs on Wednesday termed the Finance Supplementary Bill 2021 a tsunami of inflation in the country.

The meeting of the Senate Standing Committee on Finance, Revenue and Economic Affairs, chaired by Senator Muhammad Talha Mahmood, considered the Finance (Supplementary Bill, 2021) laid in at the Parliament House on Wednesday.

The committee raised objection on the unconstitutional order of the House to finalise the consideration of the bill within two days, whereas 14 working days are required to deliberate on the bill as per the Constitution; therefore, the committee decided to commence clause-wise discussion on the bill after it was briefed by the Federal Board of Revenue (FBR) on tax reforms policy.

The committee also decided to give due deliberation on the matter and forward the same request to the Senate chairman to spare enough time to deliberate on the issue.

The FBR chairman termed the tax reforms the most significant in the history of the country focusing on removal of distortions and not imposing new taxes gave a comprehensive briefing on the background, salient features of the IMF-FBR engagement, changes in the general sales tax (GST) regime, amendments in the Income Tax Act, Federal Excise Act, Customs Act and targeted subsidiary items.

The tax system is mechanised to increase the revenue with the underlying principle of “Collect and Spend”. The FBR apprised the committee that the IMF demanded 17 per cent GST across-the-board and withdrawal of exemptions at Rs700 billion; but the government convinced it on Rs343 billion.

The new reform has deviated from the rule of the thumb with the value-added tax, i.e., 17 per cent GST across-the-board without any exemptions and defended reduced rates of GST on tractors, fertilisers, inputs of fertiliser sector, pesticides, used clothing footwear and cinematographic equipment.

The FBR also defended the imposition of GST on food items, e.g., wheat, wheat flour, wheat bran, rice vegetables, fruits, pulses, fresh poultry, fish and meat (consumed by the common man) milk and fat filled milk, sugarcane and beet sugar (raw materials), educational books and stationary items, etc.

The FBR chairman briefed the committee on the exemptions that the government intends to give to various sectors, which includes Rs71 billion on the goods and Rs2 billion on the common man usage products, Rs160 billion on pharmaceutical products and Rs112 billion on machinery with GST refundable/adjustable.

The committee was apprised that of the 800 manufacturers, only 453 are registered, whereas Rs35 billion input tax has been passed on to patients (packing, utilities, etc) Rs530 billion to undocumented supply chain and Rs700 billion turnover and exemption on input and output documentation issues.

The FBR informed the committee that the sales tax on the pharmaceutical sector will be imposed at the import stage, with zero-rating on sales of medicines.

The new reforms will also give expeditious payment of refunds (within one week) and reduction in prices.

The Senate committee chairman said the sales tax refund to be restored within 72 hours, as claimed by the FBR, should be diligently monitored and anyone anywhere in the country if victimised to the claimed refund can charge its claim in the Senate committee for redressal.

The committee apprehended that the new regime will raise the prices of the medicines rather than reducing it.

Senator Farooq Hamid Naek lamented the reforms in the money bill and said: “The common man is hoodwinked by the mechanisms of the tax devised.”

Senator Musadik Masood Malik, while analysing the tax reforms said that it is based on the consumption of the consumer and not the income, which is a dilemma for the middle class society, whereas the FBR chairman termed the new reforms the “Zero Impact Budget”.

Briefing on the revenue measures in the new tax reform policy, the committee was apprised that advance tax on cellular services, vehicles registration to discourage own money (premium), foreign TV serials, dramas and advertisements have also been imposed.

The targeted subsidiary items will benefit the common man by Rs19 billion and imports by Rs14 billion.

Senators Saleem Mandviwalla, Sherry Rehman, Mohsin Aziz, Zeeshan Khanzada, Dilawar Khan, Anwar ul Haq Kakar, Saadia Abbasi and Faisal Saleem Rehman were also present in the meeting.

Officials from the Ministry of Finance, Federal Board of Revenue, Ministry of Commerce, State Bank of Pakistan and the Ministry of Law and Justice were also in attendance.