The National Assembly Standing Committee on Finance and Revenue unanimously recommended to approve the Government Bill, “The Fiscal Responsibility and Debt Limitation (Amendment) Bill, 2021” in its 72nd meeting held today at 11:00 a.m. in the Committee Room of Federal Board of Revenue (FBR), Islamabad. The meeting held under the Chairmanship of   Mr. Faiz Ullah, MNA.

The Joint Secretary (CF), Finance Division briefed the Committee that Fiscal Responsibility and Debt Limitation (FRDL) Act provide for reduction of federal fiscal deficit and ratio of public debt to gross domestic product to a prudent level by effective public debt management. The Debt Policy Coordination Office was also established under this Act. However, proposed amendments will strengthen the Debt Office with the mandate and resources for effective planning and execution of debt management functions of the Government. He informed that the Bill proposed to bring overall debt to GDP ratio to 60% in six years after financial year 2020-21. He said that target to decrease debt to GDP ratio by 2% annually and outstanding guarantees to 10% of GDP. The Hon. Chairman, Standing Committee (Mr. Faiz Ullah, MNA) said that there would be room for loans in case of increase in expenditure so that the system can continue to function. After detailed discussion and deliberations, the Committee unanimously recommended to approve the Bill.

The Committee deferred the remaining Government Bills, “The State-owned Enterprises (Governance and Operations) Bill, 2021”, “The COVID-19 (Prevention of Smuggling) Bill, 2020” (Ordinance No. III of 2020), and “The Tax Law (Third Amendment) Bill, 2021” (Ordinance No. XXII of 2021) till its next meeting. The Committee also deferred the Calling Attention Notice No. 3, regarding impact of COVID-19 on business community across the country specially Karachi and Hyderabad, moved by Engr. Sabir Hussain Kaim Khani, MNA due to unavailability of the Mover.

While briefing on the issues being faced by different sectors of the country due to heavy taxation, the Chairman, FBR apprised that there is no change in taxation of Jewelers in the Income Tax Ordinance, 2001. The Sector continues to avail concessionary reduced rate of withholding tax on import of unwrought or semi-manufactured Gold @ 1%, whereas, other industrial raw materials are generally subject to tax at import stage @ 2%. However, in the Finance (Supplementary) Act, 2022, the sales tax exemption and reduced rates on import and local sales of articles of jewelry have been withdrawn and these articles are now chargeable to sales tax at standard rate of 17%. He apprised that the exemption was withdrawn under IMF program to remove economic distortions created by tax exemptions and reduced rates. Monetary gold, however, is still exempted at both import and local sales stages. He informed that the sector is also exempted from levy of value addition tax @ 3% at import stage.

During the course of discussion, the Vice Chairman, Jewelers Association said that the sale of jewelry is liable to tax @ 1.5% on gold, 3% on making and 2% on value of diamonds. However, the Finance (Supplementary) Bill proposes to increase it to normal rates i.e., 17%. He informed that out of approx. 36,000 jewelers only 50 plus are registered with sales tax, and such a harsh measure would result in complete closure of this documented sector and fall in revenue. He also informed that in the history, even when reduce rate was not there, the exemption was available up-to 90% of the value. Similarly, jewelry across the globe is taxed at reduced rates i.e., the rate of VAT on jewelry is 3% in India. He further informed that sales tax registered jewelers have to pay withholding tax @ 9% as all the suppliers in the supply chain are un-registered and out of tax net. The Committee directed the Vice Chairman, Jewelers Association to make proposals for viable solutions to registered the jewelers with sales tax. The Committee also directed the FBR to reduce the withholding tax to 0.25% and Ministry of Commerce to revise the import policy so that gold could be imported.

The meeting was attended by Mr. Sadaqat Ali Khan Abbasi, Mr. Faheem Khan, Dr. Ramesh Kumar Vankwani, Mr. Ahsan Iqbal Chaudhary, Mr. Ali Pervaiz, Syed Naveed Qamar and Mr. Abdul Wasay, MNAs. However, Mr. Amjid Ali Khan, Mr. Jamil Ahmed Khan, Mr. Qaiser Ahmed Sheikh, Dr. Aisha Ghous Pasha, and Dr. Nafisa Shah, MNAs attended the meeting through video-link. The senior officers from M/o Finance & Revenue, M/o Law & Justice, FBR and representative from Jewelers Association also attended the meeting.