Salaries up, tax net widened, more jobs promised
June 14, 2016
Print : Top Story
Punjab unveils Rs1.681 trillion budget 2016-17
Duty imposed on imported cars; Rs50 bn package for farmers; 10pc hike in salaries, pensions; 49,000 teachers to be recruited; three special economic zones approved; vacant plots, health professionals, property dealers/builders, schools added to tax net
LAHORE: Punjab Finance Minister Ayesha Ghaus Pasha on Monday presented a Rs1.681 trillion budget with a development outlay of Rs550 billion. The budget size has more than doubled since the first budget of Rs879.5 billion presented by the incumbent government for the year 2013-14.
The Punjab government announced a Kisan Package worth Rs50 billion for 2016-17, increased pay and pensions by 10 per cent. The government slapped a one-time tax on imported vehicles above 1300cc engine capacity, Rs150,000 on 1500 to 1800cc cars and Rs200,000 on cars of over 1800cc.
According to the budget documents, prices of fertilisers have been lowered, one per cent tax has been imposed on buses, tractors, motorcycles, taxis, and 16pc taxes have been imposed on cold storage, bakers and packaging services
The Punjab government would recruit 49,000 teachers for its primary schools in 2016-17. It expects to generate employment of half a million on the strength of its development programme.
The new services brought under the tax net are: cosmetics and plastic surgeons, warehouses and cold storages, packaging and handling services. The government has proposed to impose a professional tax of Rs5,000 on medical consultants, specialists, dental surgeons, Rs3,000 on registered medical practitioners, and Rs2,000 on hakeems and homeopathic practitioners.
The government has also proposed Rs3,000 per branch tax on educational institutions falling in the metropolitan or municipal corporation limits, which charge Rs1,000 per month fee; and Rs1,000 tax on branches situated in rural areas.
Property dealers and developers constructing residential, commercial and industrial buildings will pay Rs100,000 annual tax.
The government has also levied property tax on vacant plots. This tax is introduced to check speculative trading in real estate and improve the supply of housing by discouraging retention of vacant plots for long periods of time and to strengthen the local government tax base.
The tax on vacant plots will be levied after two years of delivery of possession to the owner. Moreover, the provision relating to exemption of building and lands used exclusively for educational purposes is proposed to be clarified by adding an explanation.
The government has also proposed to rationalise the registration fee on vehicles and to provide ease to the taxpayers through lump sum and periodic payments.
It is proposed to charge one percent of vehicle price of engine capacity up to 1000cc, 2pc of the engine capacity exceeding 1000cc but not exceeding to 1500cc, 3pc on the engine capacity exceeding 1500cc but not exceeding to 2000cc and 4pc on 2000cc and above engine capacity.
It is proposed to give 10pc discount to those who pay three years token taxes on vehicle exceeding engine capacity 1000cc to and not exceeding 1300cc.
To provide less expensive entertainment to the lower strata of society, entertainment duty is proposed to be withdrawn from petty entertainments such as ‘death well’, swings and magic shows.
In order to safeguard the public revenue, it is proposed that Article 63-A of Schedule-I of the Stamp Act, 1899 meant for transfer of a right or interest relating to an immovable property may be inserted in Section 27-A of the Act ibid so that the assessment of the land may be made according to the valuation table.
Currently, stamp duty at the rate of 3% is being charged on the value of immovable property in case of transfer of a right or interest in housing sector i.e. cooperative housing societies/ private housing societies etc. However, valuation tables notified by the district collector under Section 27-A is not applicable on such transfers.
Section 29 of the Stamp Act, 1899 imposes responsibility as to who shall pay the stamp duty at the time of execution of the instruments. However, the instruments of contract (Article 22-A), decree, rule of a court or an order of a court (Article 27-A), gift (Article 33) and transfer of a right or interest relating to an immovable property in cooperative housing societies etc. (Article 63-A) are not included in Section 29 of the Stamp Act, 1899, which causes ambiguity regarding the responsibility to pay the stamp duty. In order to remove this ambiguity, it is proposed that the Article Nos. i.e. 22-A, 27-A, 33 & 63-A of Schedule-I may be included in Section 29 of the Act ibid.
At present, stamp duty at the rate of 3pc is being charged on the instrument of power of attorney if the same is executed for consideration but valuation tables are not applicable. Similarly, stamp duty of Rs1,200 per instrument is being charged when the power of attorney is executed for authorising the agent to sell the property. The same rate of stamp duty is proposed if the power of attorney is executed for consideration but the value shall be calculated according to the valuation table notified by the district collector concerned.
Moreover, the rate of Rs1200 is proposed to be substituted at the rate of 2pc of the value of the property according to the valuation table if it is executed between persons other than spouses or between one wife or widow and another wife or widow of the same husband, or between father, mother, son, daughter, grandparents, grandchildren or siblings. For the purpose Article 48(b), 48(bb) of Schedule-I of the Stamp Act, 1899 is proposed to be inserted in Section 27-A of the Act A of the Stamp Act, 1899. This amendment shall discourage purchasers to register power of attorneys instead of registering sale deeds.
Currently, the rate of Capital Value Tax on power of attorney is Rs100 per square foot, which is creating hardship for the public due to heavy taxation. To rationalise levy of taxes on power of attorney, it is being proposed that the stamp duty at the rate of 2pc may be levied and Capital Value Tax on ‘power of attorney’ may be abolished at the same time.
The operational experience gained by PRA during the preceding financial year has led to the proposal of some technical amendment to the Punjab Sales Tax on Services Act 2012.
The technical amendment relate to encouraging the use of banking channels, input tax credit rationalisation of pecuniary penalties for non-compliance taxpayers.
In order to plug compliance gaps arising out of the diversities of services tax tariff interpretations, descriptions of a few taxable services has been made consistent with their definition provided in the relevant rules so that any ambiguity is removed and taxpayers have clearer understanding of their tax obligations. Besides, three new services have been included under the tax net.
For the first time, the federal transfers are expected to exceed one trillion rupees to 1.039 trillion rupees, including excise duty on natural gas. Provincial tax revenue is expected to increase to Rs184.436 billion which is only 11 per cent of the total Punjab budget. In the current fiscal year, the Punjab government has increased its own tax revenue by over 22 per cent which is a good progress towards achieving less reliance on the Centre.
The development budget has been increased to Rs550 billion from Rs400 billion in 2015-16 and Rs290 billion in 2013-4.
The government expects to generate Rs2.3 billion from agriculture income tax, Rs0.8 billion from registration fee, Rs12.3 billion from urban immovable property, Rs14.5 billion from land revenue, Rs0.8 billion from professional tax, Rs86.5 billion from sales tax on services, Rs2.9 billion from provincial excise, Rs31.6 billion from stamp duty, Rs12.7 from motor vehicle tax and other indirect taxes Rs7.7 billion.
Pays and pensions would consume Rs207 billion. Police has been allocated Rs100.9 billion, law courts Rs18.7 billion, and Rescue and Emergency Services Rs15.7 billion.
The total allocation for education has been increased to Rs312.8 billion, including development, with health getting Rs149.9 billion. For roads, the government has earmarked Rs210 billion, agriculture Rs52.3 billion, livestock Rs13.6 billion and irrigation Rs54.1 billion. Water supply and sanitation have been allocated Rs57.2 billion.
The foreign assistance expected this year stands at Rs114.95 billion which is around 7 per cent of the total provincial budget.
The Punjab government has allocated Rs6.5 billion for technical education – only 2 per cent of the total education budget. This is insufficient keeping in view the demand of skilled manpower in the province. During Ayub era, the budget for technical education accounted for 13pc of the total education budget.
Massive untrained labour force has created a large pool of unemployable people which is on the rise. For the time being, this unskilled force is being absorbed by the booming construction sector. This may not be the case as in coming years mechanization in construction would reduce employability of unskilled workforce.
The government has devised an appreciable plan for developing industrial zones through private sector without involving provincial resources. It has approved three special economic zones – Quaid-e-Azam Apparel Park, Value Addition City and M-III Industrial City. These zones, according to the Punjab finance minister, are expected to generate one million new jobs.
Punjab has lowest per capita budget allocation, mainly due to its reduced share under the 7th NFC Award. Punjab gets 46pc from federal transfers compared with its population share of 56.2pc.
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