The federal budget for the next fiscal year (FY2024-25) is likely to be presented on June 7, with an estimated total expenditure of Rs 16,700 billion, sources said on Monday. The initial estimate for expenditures on interest and loans is Rs 9,700 billion, while the initial estimate for subsidies is Rs 1,500 billion. Sources said that the estimate for tax revenue is over Rs 11,000 billion, with direct taxes expected to contribute Rs 5,300 billion and federal excise duty expected to contribute Rs 680 billion. Sales tax is likely to generate over Rs 3,850 billion, while customs duty is expected to generate over Rs 1,100 billion, sources said. The initial estimate for non-tax revenue is Rs 2,100 billion, with petroleum levy expected to generate Rs 1,100 billion. The federal budget deficit is expected to be around Rs 9,300 billion, sources added. Earlier, sources said that Pakistan government will likely end tax exemptions in the FY2024-25 budget on IMF’s demand.

The government is also considering imposing a sales tax on tractors and pesticides, potentially leading to price hikes for these essential agricultural products. Currently, under the Sixth Schedule of the Sales Tax Act, pesticides and their active ingredients registered by the Department of Plant Protection are exempt from sales tax. Tractors, including road tractors for semi-trailers, are also zero-rated for sales tax. However, budget planners are discussing the removal of these exemptions and introducing a lower rate of sales tax on both tractors and pesticides in the upcoming fiscal year. This could significantly impact farmers, increasing the cost of agricultural equipment and pesticides and potentially leading to a considerable burden on those who rely on these products. Commercial importers are likely to be slapped with withhold tax in the upcoming budget, which is expected to generate Rs30bln additional in taxes. The International Monetary Fund (IMF) urged Islamabad for “strong cost-side reforms” for restoring the viability of Pakistan’s energy sector.3

Credit: Independent News Pakistan