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Budget relief

Imran Alvi

The writer is a stock market analyst.

The government is set to pass the federal budget for fiscal year 2020-21. It has already hinted at providing stimulus packages and allocating funds to various sectors in the upcoming budget. The pharmaceutical sector is expected to receive a massive package worth over one trillion rupees.
This will be spent as part of the national health policy amid the adverse impact of the coronavirus pandemic. The decision to grant funds will boost the pharmaceutical sector and will be an important step in the virus against the virus that is wrecking the economy and the lives of people.
The government is also expected to reduce the Federal Excise Duty (FED) for the food sector from 13% to 9% and introduce a zero-rated sales tax regime for dairy farmers. There have been reports of abolishing FED on locally produced cars and also reduce the 5% sales tax on vehicle tracking companies to zero for the upcoming year.
For the banking sector, the government is expected to reduce the income tax rate from 35% to 29% in the upcoming budget which includes 4% ‘super tax’ relief. The income tax rate for microfinance banks is also expected to be reduced to 20%.
The government is also considering to reduce Capital Gains Tax on publically-listed companies in the stock market. If this is provided in the budget, then it will provide a much-needed boost to trading activities at the Pakistan Stock Exchange and lead to a surge in the coming weeks.
There is relief for the fertilizer sector as the government is expected to reduce sales tax on imported products by 3% while the price of urea could be reduced by Rs243 per bag. The textile industry, which remains the largest exporter, is also expected to receive a subsidy of Rs20 billion. This could be used to revamp the textile industry and increase revenue in the coming years.
If the government provides all these tax relief measures and financial packages, then the budget can be aptly termed as a ‘people-friendly’ budget. In the past, all federal budgets imposed new taxes to burden people and worsening their miseries.
The country is going through one of the worse times due to the coronavirus pandemic. The government has indicated that the next budget will provide relief to the people and various sectors of the economy to herald economic revival and bring prosperity to the country.
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