Senate Standing Committee on Finance & Revenue concludes deliberation on Finance Bill 2023-2024

ISLAMABAD, June 13 (SABAH): The Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla, successfully concluded its deliberation on the Finance Bill, 2023-2024. During the committee meeting, thorough discussions were held to review the Sales Tax Provisions of the Finance Bill, 2023-2024, with a clause-wise examination of the bill.

The committee carefully evaluated each section of the bill and made several recommendations/decision. Certain sections were accepted, some were rejected, and a few were put on hold for further clarification.

Notably, all sections falling under the ambit of 99D were deferred to allow for additional clarification.

The committee accepted the inclusion of Section 113, which pertains to minimum tax on the income of certain individuals. Additionally, Section 146-D, concerning the recovery of outstanding liabilities under other laws, and Section 152, which allows for applications of exemption certificates related to payments to non-residents, were also accepted.

To encourage exports, the committee approved the proposal in Section 154, which treats sales made to Direct Exporters under the Export Facilitation Scheme, 2021, as indirect exports subject to a reduced tax rate of 1%, as opposed to the higher rate of 4.5% under Section 153(1)(a). Furthermore, Section 154A, related to tax on the export of services, was also approved.

Senator Saleem Mandviwalla emphasized the need to focus on the IT sector, highlighting that it requires incentives and special attention. Federal Minister for State, Aisha Ghaus Pasha, stated that the Finance Minister has held multiple meetings with stakeholders from the IT sector, while Senator Mandviwalla called for allowing them to maintain their accounts outside. Minister Pasha added that the IT sector has been given a 35% allowance, but the committee stressed the urgency of resolving the sector’s issues.

Sections related to “Tax on Bonus Share as Final Tax” were deferred for further clarification.

In addition, the committee accepted Section 230j, which pertains to the creation of the International Center of Tax Excellence. Senator Sadia Abbasi highlighted that the center should not be limited to civil servants but open to all professionals. Section 231AB, which deals with advance tax on cash withdrawals, was discussed, and Senator Saadia rejected the proposal.
Senator Mohsin Aziz questioned the allowance for individuals who are not registered with the Federal Board of Revenue (FBR) to open bank accounts.

Senator Zeeshan Khanzada suggested imposing some taxes on non-filers. After thorough discussion, the committee recommended a 1% advance tax on withdrawals of up to 50,000 rupees, with Senator Mohsin Aziz proposing to decrease the amount to 25,000 rupees with a one percent tax.

Moreover, the committee approved repealing the tax rate of 2% for overseas Pakistanis on the purchase of immovable property. It also recommended fixing the super tax at 8% instead of 10% on income exceeding 500 million rupees and 6% super tax on amounts exceeding 400 million rupees, as opposed to the proposed 8%. The member of the FBR informed the committee that, to encourage the enlistment of companies at the Pakistan Stock Exchange, the minimum tax rate under Section 113 would be reduced from the current 1.25% to 1% for listed companies.

The Senate Standing Committee on Finance and Revenue conducted a comprehensive review of the Finance Bill, along with several proposals aimed at regulating non-essential purchases made online. As a result, the committee accepted the proposal to increase the withholding tax rate from 1% to 5% on payments made to non-residents through debit/credit or prepaid cards, while non-Active Taxpayer List (ATL) individuals will face a higher rate of 10%.

Recognizing the importance of regulating foreign exchange outflow, the committee deemed this proposal necessary to discourage non-essential purchases online and maintain a stable financial environment. By increasing the withholding tax rate, the committee aimed to protect the country’s economy while ensuring a balance in foreign exchange transactions.

In addition to this, the committee also approved the proposal to extend the expiration date of exemptions from the 30th day of June 2023 to the 30th day of June 2024. This extension applies to the income of individuals, companies, and Association of Persons (AOP) residents in the Tribal Areas forming part of the provinces of Khyber Pakhtunkhwa and Balochistan. By providing this extension, the committee aims to support the development and economic stability of the tribal regions, facilitating growth and investment opportunities.

While addressing matters and sections related to exemptions, the committee decided to defer them for further deliberation. This cautious approach reflects the committee’s commitment to thoroughly assess and analyze all aspects associated with exemptions, ensuring that they are appropriately addressed in the Finance Bill.

Furthermore, the committee deferred the matter concerning a proposed 10% increase in the petroleum levy for additional clarification. The Finance Ministry has proposed an amendment to transfer the power of fixing the levy from the parliament to the Cabinet, seeking greater flexibility in the decision-making process. However, the Minister of State for Finance clarified that the ministry does not intend to raise the levy to 60 rupees but seeks the necessary space and flexibility to effectively manage the petroleum levy. The committee deemed it essential to seek further clarification on this matter before making a final decision.

Representatives from different chambers of Pakistan also participated in the Committee meeting. The Chambers were told to submit their recommendations to the committee regarding the Budget 2023-2024 at the earliest and will be taken up in the committee. The Committee will continue its deliberation today (Wednesday).