‘Mini-budget’ an attempt to bring tsunami of inflation: Senate committee

ISLAMABAD: The Senate Standing Committee on Finance has termed the “mini-budget” an attempt to bring a tsunami of inflation in the country, media reported on Thursday.

The committee unanimously believed that the finance bill will bring a negative impact on the common man, the publication reported.

“The revenue of the government is being increased at the cost of oppressing the common man,” Senator Farooq Hamid Naek said.

The standing committee had met under the chairmanship of Senator Muhammad Talha Mahmood to consider the Finance (Supplementary) Bill, 2021.

At the onset of the meeting, the committee objected to the unconstitutional order of the Senate to finalise the consideration of the finance bill within two days, whereas 14 working days were required to deliberate on the bill as per the constitution.

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 upon the matter.

FBR chairman gives briefing on finance bill
The Federal Board of Revenue (FBR) chairman, while terming the tax reforms the most significant tax policy reforms in the history of the country focusing on removal of distortions and not on imposing new taxes, gave a comprehensive briefing on the background, salient features of IMF-FBR engagement, changes in the GST regime, changes in income tax, changes in Federal Excise Act, changes in Customs Act and targeted subsidiary items.

The tax system is mechanised to increase revenue with the underlying principle of “collect and spend”, the FBR chairman told the Senate panel.

He apprised the committee that the IMF demanded 17% GST across the board and withdrawal of exemptions worth Rs700 billion, but conceded to Rs343 billion.

The FBR chairman informed the committee that the new reforms have deviated from the rule of thumb with the Value Added Tax i.e. 17% GST across the board without any exemptions.

He defended the reduced rates of GST on agriculture tractors, fertilizers, inputs of fertilizers sector, pesticides, used clothing, footwear, and cinematographic equipment.

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

He briefed the committee on the exemptions that the government intends to give to various sectors, which include Rs71 billion on goods and Rs2 billion on commonly used products, Rs160 billion on pharmaceutical products, and Rs112 billion on machinery with GST refundable/adjustable.

The committee was apprised of the present regime of the pharmaceutical sector.

The FBR chairman informed the committee that out of 800 manufacturers, only 453 are registered, Rs35 billion input tax is passed to patients (packing, utilities, etc), Rs530 billion undocumented supply chain, Rs700 billion turnover, and exempt input and output documentation issues.

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

The new reforms will also give expeditious payment of refunds (within 1 week) and a reduction in prices, he said.

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