The Pakistan Fiscal Budget for 2024-25 introduces a series of substantial tax changes aimed at boosting government revenue and addressing sector-specific challenges. The new budget imposes higher taxes on the automobile industry, mobile phones, electronics, and real estate while also increasing salaries and pensions for government employees. Our blog explores the key changes and their anticipated impact on various sectors, highlighting the government’s strategy to balance fiscal responsibility with economic growth.
Impact on Automobile Industry
Motor Vehicle Registration Advance Tax: Engine Capacity to As Per Vehicle’s Price
In a significant move, the registration advance tax for motor cars will now be based on the price of the car instead of its engine capacity. This change aims to make the tax system more equitable, reflecting the actual value of the vehicles rather than just their engine size.
| Engine Capacity | Current Tax Rate | Proposed Tax Rate | Average Vehicle Price | Approx. Tax per Vehicle |
| Up to 850cc | Rs. 10,000 | 0.50% | Rs. 2,500,000 | Rs. 25,000 |
| 851cc to 1000cc | Rs. 20,000 | 1% | Rs. 4,000,000 | Rs. 40,000 |
| 1001cc to 1300cc | Rs. 25,000 | 1.50% | Rs. 4,500,000 | Rs. 67,500 |
| 1301cc to 1600cc | Rs. 50,000 | 2% | Rs. 6,000,000 | Rs. 120,000 |
| 1601cc to 1800cc | Rs. 150,000 | 3% | Rs. 7,500,000 | Rs. 225,000 |
| 1801cc to 2000cc | Rs. 200,000 | 5% | Rs. 9,000,000 | Rs. 450,000 |
| 2001cc to 2500cc | 6% | 7% | Rs. 12,500,000 | Rs. 875,000 |
| 2501cc to 3000cc | 8% | 9% | Rs. 15,000,000 | Rs. 1,350,000 |
| Above 3000cc | 10% | 12% | Rs. 50,000,000 | Rs. 6,000,000 |
Withdrawal of Tax Exemptions on Imported Hybrid Cars
The government has decided to withdraw tax exemptions previously available for imported hybrid cars. This measure is expected to increase the cost of these vehicles, potentially affecting their sales and market penetration in Pakistan. On the contrary, it can also help boost the locally assembled hybrid cars.
Withdrawal of Tax Exemptions on the Import of Luxury Electric Vehicles
The subsidy on the import of luxury electric vehicles priced over $50,000 has been discontinued. As per the Finance Minister, people who can afford vehicle over $50K can also afford to pay higher taxes.
Impact on Mobile Phones & Electronics
Mobile Phone: 18% Flat Sales Tax
A flat sales tax rate of 18% has been imposed on mobile phones. This uniform tax rate aims to streamline taxation but might increase the overall cost of mobile phones for many consumers.
Sales Tax on Computers and Laptops Doubled from 5% to 10%
The sales tax on computers and laptops has been doubled from 5% to 10% (as reported by a media outlet). This significant increase might affect the affordability of these essential gadgets, potentially impacting students and professionals who rely on them.
Subsidy Provided for Solar Panels
To promote green energy, the government has introduced a subsidy on the import of raw materials, equipment, machinery, and plants for the manufacturing of solar panels, inverters, and batteries. This initiative is expected to reduce the cost of solar power systems, encouraging more people to switch to renewable energy sources.
Impact on Real Estate
Real Estate Capital Gain Tax: Filers vs. Non-Filers
The capital gain tax on real estate will now be collected without the limitation of the holding period. For filers, the tax rate is set at 15%, while non-filers could face a tax rate of up to 45% as per slabs. This move aims to increase government revenue and encourage more people to become tax filers.
Immovable Property Withholding Tax
The withholding tax on immovable property has been revised. The current rates are 3% for filers and 6% for non-filers. The proposed changes are specified for filers (3%-4%), non-filers (10%-20%), and late filers (4%-6%) as reported by a media outlet, indicating a restructuring of the tax rates. (Stay tuned for the official figures).
5% FED on New Plots and Residential and Commercial Properties
A Federal Excise Duty (FED) of 5% has been imposed on new plots and residential and commercial properties. This new tax could increase the cost of acquiring property, impacting the real estate market.
Cement FED Rate: Rs.2/kg to Rs.3/kg
The FED rate on cement has been increased from Rs.2 per kilogram to Rs.3 per kilogram. This hike is expected to raise the cost of construction, potentially affecting the real estate and construction industries.
Impact on Jobs
Salary Increases for Government Employees
Salaries for government employees in different grades have been increased as follows:
- Grade 1-16: 25% increase
- Grade 17-22: 20% increase
Retired Employees Pension: 15% Increase
Pensions for retired employees have been increased by 15%. This increment aims to provide better financial support to retirees.
Minimum Salary: Rs.37,000
The minimum salary has been set at Rs.37,000, reflecting an effort to improve the living standards of workers across various sectors.
Income Tax on Salaried Class
New income tax slabs have been introduced for the salaried class. For the individuals earning up to Rs.600,000 per year, there is no change. Here is the breakdown as reported in the media:
- Up to Rs.600,000: 0%
- Rs.600,000 to Rs.1,200,000: 5%
- Rs.1,200,000 to Rs.2,200,000: Rs.30,000 + 15% of the amount exceeding Rs.1,200,000
- Rs.2,200,000 to Rs.3,200,000: Rs.180,000 + 25% of the amount exceeding Rs.2,200,000
- Rs.3,200,000 to Rs.4,100,000: Rs.430,000 + 30% of the amount exceeding Rs.3,200,000
- Above Rs.4,100,000: Rs.700,000 + 35% of the amount exceeding Rs.4,100,000
Income Tax for Non-Salaried Individuals: Up to 45%
Non-salaried individuals will now face a maximum income tax rate of up to 45%. This change aims to ensure a fairer distribution of the tax burden among different income groups.
Others
Advance Tax for Businesses: Non-Filers
The advance tax rate for businesses, specifically non-filers, has been increased from 1% to 2.25%. This measure aims to encourage more businesses to comply with tax filing requirements.
Sales Tax on Tier 1 Textile & Leather Retailers
The sales tax on luxury and branded items in the textile and leather retail sectors has been increased from 15% to 18%. This hike is expected to generate more revenue from the high income group.
Duty Increased on the Import of Steel & Paper
The import duty on steel and paper has been increased. This change could lead to higher costs for industries relying on these materials, potentially affecting the overall market prices of related products.
Conclusion
The Pakistan Budget 2024-25 marks a significant shift in the fiscal policy landscape with new and increased taxes across several sectors.The automobile and electronics industries face higher costs, while the real estate sector encounters increased capital gains and withholding taxes. Despite the increased financial burden on businesses and consumers, the budget aims to enhance government revenue and promote economic stability. The changes show the government’s attempt to solve financial problems and promote long-term growth, but they significantly can impact various sectors.
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