ISLAMABAD: Federal Board of Revenue (FBR) Chairman Amjed Zubair Tiwana informed a Senate panel on Saturday that 18 percent general sales tax (GST) had been proposed on packaged food products for the next fiscal year, including pulses, rice and others items.

However, he clarified that there would be no GST on unprocessed and unpackaged food items.

Tiwana was briefing the Senate Standing Committee on Finance and Taxation, which continued its day-long meeting at Parliament House here to finalize recommendations on the Finance Bill 2024-2025. The FBR chairman stated that the prices of packaged milk and infant milk have been increased and added that if the companies pass on the benefits to the consumers, a phased GST could be considered for them.

The Senate panel approved the ban on foreign travel by non-filers. The panel rejected the hike in tax rates for the salaried class in its entirety after it was informed by the FBR chairman that the salaried class contributed Rs375 billion to the national exchequer while exporters paid only Rs90-100 billion annually. The retailers, estimated to number around 3.6 million across the country, pay only Rs 4-5 billion in taxes annually. The senators became alarmed at such an unfair tax regime and rejected the increase in tax rates for the wage-earning class as a whole.

The committee members seemed divided over the FBR’s move to treat exporters’ income under the normal tax regime at the earlier tax rate of just 1% of their income. Senator Farooq H Naek of the PPP expressed full support to the FBR’s initiative to bring exporters under the normal regime. He argued that if as a non-salaried class they could contribute up to 45%, why were exporters given such incentives?

Chairman of the committee, Senator Saleem Mandviwalla, who also belongs to the PPP, opposed the FBR’s move arguing that exporters were bringing inflows of dollars and might stop bringing their inflows into the country.

The FBR chairman said it was a fair and equitable tax perspective to hike tax rates for exporters and retailers as the board had estimated that converting exporters to normal regime would generate Rs125 billion in additional revenue. He said the FBR has taken steps to include retailers in the tax net and it is estimated that tax collection from retailers would rise to Rs50 billion in the next fiscal year against the existing level of Rs4 billion on an annual basis.

The FBR chairman informed the Senate panel that the tax slabs for the wage bracket had been revised upwards. He said that for the first bracket, comprising those earning Rs600,000 to Rs1,200,000 annually, the effective tax rate had increased from Rs1,250 to Rs2,500 per month. For the tax bracket earning from Rs1.2 million to Rs2.2 million annually, the tax rate had been increased from Rs11,668 to Rs15,000 per month. For a salary slab from Rs2.2 million to Rs3.2 million per annum, the tax rate was increased from Rs28,750 to Rs35,834 per month. For a slab of Rs3.2 million to Rs4.1 million, the tax rate was increased from Rs47,000 to Rs58,000 per month.

He said the International Monetary Fund (IMF) had demanded uniform tax rates for salaried and non-salaried classes and imposed higher rates of 45% tax. “We continued to hold intensive discussions with the IMF for three days and convinced them to reduce tax rates for the salaried class,” he added.

PMLN Senator Anusha Rehman also opposed increase in tax rates for the salaried class.

The Senate panel also rejected the FBR’s proposal to charge a flat rate of 15% for filers and 45% for non-filers as capital gains tax on real estate and securities, irrespective of the holding period. It further rejected the proposal to send the parliamentarians’ details to the National Database and Registration Authority (Nadra) for tax collection.

PTI Senator Shibli Faraz said coercive measures would not help widen the tax base. The senators discussed increasing tax rates for non-filers from 15% to 75% on mobile phone use for persons whose names appear in the general income tax order for not filing returns even after receiving notices.