A Synopsis of Federal Budget 2016-17

The PML-N government has unveiled its fourth budget on Friday, June 3 2016 with a total outlay of Rs 4.42 trillion for the fiscal year 2016-17, indicating 7 percent increase over the outgoing fiscal year. This is a deficit budget with Rs 1.2 trillion gap in income and expenditure. The government once again has set an ambitious growth target at 5.7 percent for the next fiscal year.

Following are the highlights of the budget

  • The total outlay of the budget 2016 17 is Rs 4.42 trillion.
  • The resources availability during 2016 17 has been estimated at Rs 4,442.0 billion.
  • The overall expenditure during 2016 17 has been estimated at Rs 4,894.9 billion.
  • Government has announced a 20 percent increase in the PSDP allocation with Rs1.675 trillion set aside for FY16-17, of which the Federal PSDP makes up Rs800 billion.
  • The development expenditure outside PSDP has been estimated at Rs 156.6 billion in the current budget.
  • Rs 860 billion have been allocated for defence expenses, showing 11 percent increase in the defence budget comparing last year.
  • This year the government has allocated Rs24.95 billion for health sector.
  • The government has allocated Rs108.9 billion for education in the new fiscal year.
  • The government will spend Rs32 billion on new water resources.
  • Overall, the government has allocated Rs380 billion for various energy projects.
  • Government has allocated 188 billion for the construction of highways, bridges and flyovers.
  • The government has allocated Rs.14 billion for the procurement / manufacture of new locomotive engines.
  • Minimum wage has been increased to Rs 14,000, indicating a Rs 1,000 increase from the previous year.

Relief Measures

Agriculture Relief Package

The government has announced following relief measures for the agriculture sector

  • • Off-peak tariff for agriculture tube wells will go down from Rs8.85 per unit to Rs5.35 per unit.
  • • Rs26 billion subsidy would be given on Urea and 10 billion on DAP.
  • • Duty on fish feed, 10 percent customs duty on export of small fish and 7 percent tax on pesticides revoked.
  • • 5 percent duty reduced to 2 percent on import of machinery for dairy, livestock and poultry sectors.
  • • Duty of 7 percent on pesticides has been abolished.

Incentives for Industrial Sector

  • • Customs duty on 2,300 items has been reduced to 3 percent from 5 percent.
  • • The tax exemption on investment in green-field industrial undertakings is extended to June 2019.
  • • The tax credit for making sales to registered persons enhanced to 3 percent from 2.5 percent.

Incentives for Energy Sector

  • • Customs duty on imports of parts of LED lights has been reduced from 20 percent to 5 percent.
  • • Sales tax has been exempted on import of dumper trucks for Thar Coal.
  • • Customs duty exemption extended on import of solar panels and related components till June 2017.

Other Relief Measures

  • • The corporate tax rate has been reduced to 31 percent.
  • • Individuals having taxable income less than Rs1 million have been give a tax relief equal to 5 percent of school fee up to Rs60, 000 per child per annum.
  • • The minimum tax for large trading houses has been reduced to 0.5 percent from 1 percent of the entire turnover up to tax year 2019.
  • • Sales tax exempted on the import of laptops and PCs.
  • • 16 percent federal excise duty exempted on advertisement on cable TV.

New Taxes

The government has set next year’s revenue target Rs3.650 trillion in order to meet the target the government has imposed Rs204 billion worth of new taxes in 2016-17.

The breakup of the new tax shows an amount of Rs145 billion worth income tax measures, Rs45 billion of sales tax and FED and Rs14 billion customs duty.

  • • The existing sales tax rates of Rs500 and Rs1, 000 are increased to Rs1, 000 and Rs1, 500 for medium and high category mobile phones.
  • • 10 percent capital gain tax imposed on selling property within five years.
  • • The customs duty has been increased to 11 percent from 10 percent on 900 items and to 16 percent from 15 percent on 508 items.
  • • Customs duty on import of eggs and chicken rose to 11 percent.
  • • Tax on each bag of cement raised to Rs50.
  • • Customs duty rose to 20 percent on frozen fish.
  • • The government imposed regulatory duty of 25 percent on powdered milk.