Finance Minister Ishaq Dar has presented a mini-budget in the Parliament proposing Rs170 billion ($639 million) in taxes in hopes of clearing the way for a stalled loan program. The Finance (Supplementary) Bill 2023 — or the ‘mini-budget’ was presented first in the National Assembly and then in the Senate.
The Mini Budget 2023
The mini-budget intends to raise the GST to 18 percent from 17 percent. The added tax will generate extra revenue of about Rs170 billion ($639 million) during the current budget year ending in July. Meanwhile, the newly imposed budget is bound to skyrocket inflation and
While addressing a press conference, Ishaq Dar emphasized completing the IMF program in hopes of getting the economy and reserves back on its track.
“We will go through it on the weekend. A virtual meeting with the IMF will be held after that on Monday,” he said and further explained that once the MEFP has been finalized, the IMF has its internal process and then a Board meeting is held. And then finally, when approval is given, the [tranche] is disbursed. It is a standard process which can neither be shortened and hopefully they won’t extend it unnecessarily.”
According to Ishaq Dar, “Taxation measures of Rs170 billion will be taken as opposed to the rumours of Rs700-800 billion, and Rs170 billion will have to be recovered within four months in this fiscal year.” Adding that the government would not impose General Sales Tax on oil products.
Taxation Details
The budget includes an increased tax rate on luxury items, first and business-class air travel, cigarettes, and sugary drinks. The revenue will be raised to Rs.170 billion, from which Rs.60 billion will be generated by increasing federal excise duty on locally manufactured cigarettes, Rs.55 billion by increasing the general sales tax to 18%; and Rs,55 billion by increasing excise duty on airline tickets, and sugary drinks and raising withholding tax rates.
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Meanwhile, a 10% withholding adjustable advance income tax will be imposed on the bills of weddings. Alongside, there will be an increase in federal excise duty on cement from Rs.1.5/kg to Rs.2/kg; GST increase from 17% to 18%. The Benazir Income Support Program (BISP) budget has also increased to Rs400b from Rs360b. The step was taken to help those living below the means since they are the first ones to get affected by rising inflation.
While addressing the session, the finance minister discussed the need to adapting a simple lifestyle mentioning that the cabinet would also like to do the same. According to him, two major issues including, fiscal deficit and current account deficit have plagued the economy.
“We are committed to controlling and reducing both these deficits. Through the IMF program, our foreign exchange reserves will increase, the rupee will stabilize, our exports and remittances will also improve and issues regarding the opening of LCs will also cease.”
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