Categories: Economy

The FY25 budget proposal

Discover the FY25 Budget Proposals which encompass a range of measures aimed at enhancing government revenue and promoting tax compliance. While adjustments in advance taxes on vehicle purchases may impact sales negatively, they are expected to bolster government income. Tax increases across sectors like banking and the economy seek to diversify revenue streams, albeit with potential hindrances to growth. Real estate reforms target increased tax revenue and discourage unproductive investments, while steel sector reforms aim to simplify compliance procedures, offering positive prospects for the industry.

The FY25 Budget Proposals:

CategoryProposalImpactComment
AutosAdvance tax on (purchase/transfer) of goods and passenger transport vehicles to be collected at the rate of 10% (at least) of the vehicle’s value.NegativeIntroducing a 10% advance tax on vehicle transfers may dampen auto sales but could bolster government revenue.
AutosIncrease the annual advance tax for vehicles of 2000cc and above to Rs. 500,000 for non-filers and raise the advance tax on their purchase to 24%.NegativeAbolishment of Advance tax on foreign payments by filers through credit cards
BankingIncrease in Advance tax on foreign payment by non-filers through credit cards to 20%PositiveWhile it discourages foreign spending by non-filers, it also broadens the tax base and increases government revenue.
BankingTax on Agriculture Income, Non-Corporate Businesses, Service Providers, Builders and Construction AssociationNegativeEncourages the outflow of foreign exchange through international spending
EconomyRaise WHT on cash withdrawal from banks by non-filers from 0.6% to 0.9%PositiveEnhance government revenue, encourage tax compliance, and reduce cash transactions
EconomyIncrease in Advance Income tax on electricity bills issued to non-filers/unregistered industrial and commercial connections to 30%PositiveCan diversify revenue and increase fiscal capacity.
EconomyIncrease in Advance Income tax on electricity bills, exceeding Rs. 200,000 monthly, issued to non-filers domestic connection to 20%NegativeBurdens industries with higher operational costs, reducing profitability and hindering growth.
EconomyIncrease in Extra Sales tax on retail and marriage halls to 25% (if the bill exceeds Rs. 100,000) and 30% (if bill exceeds Rs. 200,000)PositiveEncourages tax filing among individuals and boosts government revenues.
EconomyIncrease in Extra Sales tax on retail and marriage halls to 25% (if the bill exceeds Rs. 100,000) and 30% (if the bill exceeds Rs. 200,000)NeutralMarginally affects the cost of importing machinery
EconomyAdvance income tax on gas bills issued to non-filer Industrial/Commercial connection holders of 20%NegativeBurdens industries with higher operational costs, reducing profitability and hindering growth.
EconomyAdvance income tax on Int business class tickets instead of FED (75K-250K based on routes)PositiveDiscourages the outflow of foreign exchange through international spending
Economy18% GST on petrol and dieselNegativeExemption from CGT on the sale of immovable property is held for 4-6 years, but only for those who have declared the property upon acquisition.
Import oriented sectorsIncrease advance income tax on the import of machinery by 1%NeutralCould adversely affect import-oriented sectors by increasing production costs and reducing competitiveness. This may lead to a decrease in pharmaceutical sales due to higher prices.
Import oriented sectorsIncrease advance income tax on the import of raw materials by industrial undertakings by 0.5% and commercial importers by 1%NegativeThis may result in a decline in sale volumes and an increase in inflation, creating a tough second-round impact
PharmaceuticalsGeneral Sales Tax of 10-18% on MedicinesNegative
Real EstateWHT of 0.5% on immovable property (including agricultural land) on value evaluated by the FBR.PositiveMay help the government in increasing tax revenues along with discouraging investment in unproductive sectors
Real EstateIncrease in Advance tax on sales of immovable property above 450 sq yards in Urban Areas by non-filers to 10.5%NegativeMay negatively impact government revenue
Real EstateIncrease in Advance tax on sales of immovable property above 450 sq yards in Urban Areas by non filers to 10.5%PositiveMay help government in increasing tax revenues along with discouraging investment in unproductive sectors
SteelAbolish the 4% further tax on sales to non-registered persons and the CNIC requirement for selling to unregistered persons.PositiveSimplify compliance procedures, impacting steel companies positively
Source: Newsflows, IIS Research

:

  • Advance taxes on vehicle purchases could deter sales but boost government revenue.
  • Tax increases in various sectors aim to enhance fiscal capacity, though some may hinder growth.
  • Changes in banking transactions aim to broaden the tax base and promote compliance.
  • Real estate adjustments target increased tax revenue and discourage unproductive investments.
  • Steel sector reforms focus on simplifying compliance procedures for positive impact.
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