New FED, sales tax regime to impact people's wallets in 2020-21.

ISLAMABAD: Various measures proposed by the government in the budget for fiscal year 2020-21 under the federal excise duty (FED) and sales tax regime will have an impact on citizens' wallets, even though the government has introduced no new tax in the budget.

While most recommendations pertain with improving documentation and streamlining the various tax regimes, the government has also provided some relief while also imposing a few new penalties. For example, in order to battle the coronavirus pandemic, the government has provided relief from sales tax on certain health-related items and equipment. In related move pertaining to healthcare, it has provided relief on import of dietetic foods intended for use by children suffering from Inherited Metabolic Syndrome.

Another important proposal in the budget is to reduce sales tax on mobile phones manufactured in the country, in accordance with the Mobile Manufacturing Policy. It is hoped that this new policy will see smartphones being manufactured in Pakistan. The government has also proposed exempting withholding tax on cash withdrawal to the extent of foreign remittances

For retailers, the government has given in to a key demand and relaxed the NIC condition. The budget proposes that retailers can carry out transactions with buyers worth Rs 100,000 or less without obtaining NICs. The amount was Rs 50,000 earlier and had caused a lot of friction between retailers and the government.

Similarly, the organised retail sector which has integrated with the Federal Board of Revenue through their Point of Sale will benefit from a reduced sales tax rate of 12% compared to 14% who have not integrated.

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