Tag: Senate Standing Committee on Finance

FBR imposes 18% GST on packaged food items to boost revenue

The Federal Board of Revenue (FBR) has announced the imposition of an 18 per cent General Sales Tax (GST) on packaged food items, including formula milk.

The announcement was made during a meeting of the Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla. Amjad Zubair, Chairman of the FBR, informed the committee that the GST will be applied to all packaged items sold at departmental stores and large retail outlets, but will not affect unpackaged food items sold at general stores.

In response to concerns raised during the meeting, the committee recommended a reduction in the GST rate on formula milk due to its critical importance for infant health. Chairman Zubair acknowledged the significant tax revenue generated from formula milk and expressed the government’s willingness to consider a reduction in tax rates if companies agree to lower their prices.

The committee also addressed the issue of unregistered outlets selling formula milk, recommending that these outlets be blacklisted to ensure compliance with tax regulations.

It is notable that this move aligns with a demand from the International Monetary Fund (IMF). During recent talks with Pakistani authorities for a new loan agreement, the IMF recommended increasing the general sales tax to 18 per cent.

The IMF mission observed that Pakistan’s current sales tax collection system faces challenges, with the federal government collecting tax on commodities and the provinces on services. The IMF suggested that sales tax collection should be centralized under the federal government and that GST exemptions be eliminated.

This development is part of broader efforts to streamline Pakistan’s tax system and enhance revenue collection as the country seeks financial assistance from international lenders.

June 15, 2024
Govt adds new radio fee and increases TV charges in electricity bills

The government has recently made a decision to introduce additional charges for the public in their electricity bills. These charges will include a fee for both television and radio services. This resolution was reached during a meeting of the Senate Standing Committee on Finance, with Salim Mandviwala as the chair.

Finance Ministry officials presented a briefing, outlining that the electricity bills will now include a fee of Rs50 for television and radio services combined. Specifically, Rs35 will be allocated for the Pakistan Television (PTV) fee, while Rs15 will be directed towards the radio fee. The Ministry of Information has prepared a summary in support of this initiative, and the funds collected from users will be utilised to cover the salaries of radio employees.

The motivation behind this decision stems from the federal government’s efforts to address the financial crisis faced by Radio Pakistan. To support the struggling Pakistan Broadcasting Corporation (PBC), commonly known as Radio Pakistan, additional charges will be imposed on electricity consumers. The Ministry of Information has proposed an extra Rs15 levy on consumers’ electricity bills, with Rs35 allocated to the state TV fee and the remaining Rs15 to assist Radio Pakistan.

The Senate Standing Committee’s recommendation for this course of action was based on the urgent need to alleviate the financial difficulties experienced by current and retired PBC employees.

This issue has been a longstanding challenge for over a decade. In fact, an earlier proposal in February sought a separate “radio fee” of Rs500 for all vehicles (excluding motorcycles) during their registration, with the intention of generating an annual additional revenue of Rs15 billion to support Radio Pakistan financially. The proposal was discussed during a sub-committee meeting led by Irfan Siddiqui from the ruling PML-N.

July 20, 2023
Pakistan suspends cryptocurrency services to combat illegal transactions

The Pakistani government announced on Wednesday that it will suspend cryptocurrency services provided over the internet in the country in order to prevent illicit digital currency transactions.

According to Geo, the State Bank of Pakistan (SBP) and the Ministry of Information Technology have already begun the process of prohibiting cryptocurrencies, complying with the directives.

During a briefing to the Senate Standing Committee on Finance, Dr Aisha Ghaus Pasha, the Minister of State for Finance and Revenue, emphasised that cryptocurrency will never be legalised in Pakistan.

She revealed that the Financial Action Task Force (FATF) has imposed restrictions on the matter, stating that the condition set by FATF is that cryptocurrency will not be legalised.

Supporting Pasha’s stance, Sohail Jawad, the Director of SBP, stated that crypto transactions carry high risks and will therefore never be granted permission in Pakistan. He explained that cryptocurrency is a virtual currency with over 16,000 types currently in existence. Additionally, he mentioned that the market, which was valued at $2.8 trillion, has now shrunk to $1.2 trillion.

Senator Saleem Mandviwalla from the Pakistan Peoples’ Party (PPP) expressed concerns over the billions of dollars invested in the market. In response, the SBP official reassured him by mentioning that the Federal Investigation Agency (FIA) and the Financial Monitoring Unit (FMU), a financial intelligence unit aiding Pakistan in combating terrorism financing and money laundering, are actively addressing these concerns.

Pakistan has witnessed a surge in cryptocurrency trading and mining, as evidenced by the growing interest in related social media videos and online exchange transactions.

Although the government had previously banned trading and mining of virtual currencies in April 2018, cryptocurrency mining continues to thrive in the country, despite the closure of several mining farms.

Most exchanges operate discreetly through undisclosed partners, evading regulatory oversight. Nevertheless, the government persists in its efforts to curtail crypto trading activities.

May 17, 2023
SBP governor says import restrictions will be eased after completion of IMF review

During a briefing to the Senate Standing Committee on Finance, State Bank of Pakistan (SBP) Governor Jameel Ahmed projected that the current account deficit for the ongoing fiscal year would be $7 billion, which is lower than the budgetary target of $10 billion. He attributed the lower deficit to measures taken to control imports, which he said could not continue for a longer period of time. Ahmed stated that import compression would ease after the completion of the International Monetary Fund (IMF) review.

Ahmed also mentioned that the low inflows due to the delay in the IMF review, higher commodity prices in the international market, and the Ukraine-Russia war are major reasons behind pressure on the external account and an increase in inflation. However, he clarified that an increase of 300 per cent basis points in the policy rate was not made on the demand of the International Monetary Fund (IMF), and that the Staff Level Agreement (SLA) is close to being finalized with the Fund.

Regarding the outflow of $2.4 billion on account of debt repayment in the first half of the current fiscal year compared to $6.3 billion inflow for the same period a year ago, Ahmed said that the decline in inflows was due to the pending review of the IMF program. He hoped that budgeted inflow would materialize after the completion of the review in the second half, thereby increasing foreign exchange reserves.

Ahmed also mentioned that the pressure of inflation will remain for two to three months and the average inflation this year will be 26.5 per cent. He added that remittances have decreased by $2 billion and are projected at $29 billion for the ongoing fiscal year against over $31 billion for the last fiscal year. There was also a decline of 7.4 per cent in exports as the country did not have exportable goods due to flood and a decrease in the export of rice. Vegetables and fruit exports have also declined by 48 and 37 per cent respectively.

According to The News, the committee expressed concern over the fluctuation of the dollar and said that it was the responsibility of the regulator to maintain the actual price of the dollar and take measures against black marketing and smuggling. The committee sought details of the amount of dollars smuggled to Afghanistan in the recent period. The committee members recommended seriously addressing the issue of the difference between the dollar rate in the open market and the inter-bank. The chairman of the committee recommended that instead of rupee trade with Afghanistan, either be replaced with the dollar or barter trade because trade with Afghanistan in rupee is also contributing to the external account pressure.

Senator Mohsin Aziz highlighted that the remittances, the FDI, and the exports have been on a decline, whereas the country’s debt was increasing. He also said that imports compression and policy rate were hurting the industry and exports, and exporters are unable to compete in the global market with regional players due to government policies.

In response to the issue of refusal of LCs to importers of pharmaceutical ingredients, the SBP said it was fully supporting the import of above articles and imports of pharma industry have considerably increased in the month of February and the first seven days of March 2023.

March 9, 2023