Finance Bill sails thru parliament

Business Recorder

26-06-2025

ISLAMABAD: The National Assembly on Thursday passed the Finance Bill, 2025, with a total outlay of Rs17.57 trillion, for fiscal year 2025-26, incorporating certain amendments, with the support of its coalition partners.
Finance Minister Muhammad Aurangzeb presented the bill in the House, which includes several government-backed amendments, during a budget session marked by heated protests from opposition parties. The bill was passed clause by clause, with all opposition-proposed amendments rejected.
For the first time in legislative history of the country, the National Assembly Standing Committee on Finance introduced changes to a revised Finance Bill during the parliamentary process – an unprecedented move acknowledged by both treasury and opposition members.
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Opposition lawmaker Khawaja Shiraz of Pakistan Tehreek-e-Insaf (PTI) thanked Committee Chairman Naveed Qamar for what he called 'major improvements' to an otherwise flawed bill.
The bill has revised procedure for arrest of persons involved in tax fraud and penalty regime for sales tax and income tax evaders has also been revised.
The revised bill introduces key regulatory thresholds: Vehicle Purchase: Buyers of locally manufactured or imported vehicles valued above Rs7 million, inclusive of all taxes and duties, will be classified as 'ineligible persons' unless they submit tax returns at the time of booking, purchase, or registration.
Financial Instruments: Investments in securities and money market instruments above Rs50 million per fiscal year must be new, excluding reinvestments of proceeds or liquidated securities.
From July1, the government has introduced new tariff slabs of five per cent, 10 per cent, and 15 per cent, replacing the older slabs of three per cent, 11 per cent, and 16 per cent under the tariff rationalisation plan.
To encourage import of essential items, the zero per cent tariff slab, previously applicable to 2,201 tariff lines, has been extended to an additional 916 Pakistan Custom Tariff (PCT) codes.
The customs duty has been reduced on 2,624 PCT codes, creating a more business-friendly import environment. Revisions to the ACD regime have also been announced.
The ACD has been reduced from two per cent to zero per cent on tariff slabs of zero per cent, five per cent, and 10 per cent, covering 4,383 tariff lines (excluding 95 items which will still attract two per cent).
The ACD on items under the 15 per cent slab has been reduced from four per cent to two per cent, while goods under the 20 per cent slab will now face ACD of four per cent instead of six per cent. Items with duties exceeding 20 per cent will see a drop in ACD from seven per cent to six per cent.
The government has further restructured the regulatory duty (RD) regime. The RD has been removed on 554 PCT codes, and reduced on 595 codes, with the maximum RD rate lowered from 90 per cent to 50 per cent. The government has deleted 479 entries from Part-I, Part-III, and Part-VII of the Fifth Schedule. This move under the exemption regime review aims to eliminate distortion in the tax structure and minimise revenue loss.
According to the amended finance bill 2025, two new sections were introduced to the Customs Act, including the creation of a Customs Command Fund under Section 225. Revenue generated from the auction of smuggled goods will be directed into the fund.
The fund will be used for anti-smuggling operations, subject to approval from Federal Board of Revenue (FBR) and the Ministry of Finance.
Under Section 226 of the Customs Act, the Customs Board will have the authority to designate any customs check post as a Digital Enforcement Station. The move will be formalised through a gazette notification, with associated rules and regulations also issued by the board.
Similarly, withholding taxes under section 236K on purchase of property have also been proposed to be reduced. The proposed rate of withholding would be 1.5 per cent where fair market value does not exceed Rs50 million, two per cent where value exceeds Rs50 million but does not exceeds Rs100 million and 2.5 per cent where value exceeds Rs100 million.
The withholding tax rate under section 236C for the sellers have been increased to 4.5 per cent, 5 per cent and 5.5 per cent respectively for the corresponding values.
The bill includes major amendments to income tax, sales tax and customs legislation.
Income tax exemptions have also been extended to pensions of former presidents and their widows, and to the Diamer-Bhasha and Mohmand Dam funds.
The Finance Bill 2025 also facilitates the deployment of cargo tracking systems, e-billing platforms, and digital enforcement mechanisms aimed at curbing smuggling.
A revised income tax regime has been introduced for salaried individuals. Annual income up to Rs600,000 remains tax-exempt. Incomes between Rs600,001 and Rs1.2 million will be taxed at one per cent. For earnings between Rs1.2 million and Rs2.2 million, a fixed amount of Rs6,000 plus 11 per cent on the amount exceeding Rs1.2 million will apply.
Incomes between Rs2.2 million and Rs3.2 million will face a fixed tax of Rs116,000 and 23 per cent on the amount exceeding Rs2.2 million.
For those earning between Rs3.2 million and Rs4.1 million, a fixed tax of Rs346,000 and 30 per cent on the excess will apply, while income above Rs4.1 million will be taxed at Rs616,000 plus 35 per cent.
Additionally, a five per cent tax has been imposed on annual pensions exceeding Rs10 million. The bill also sets the sales tax rate on solar panels at 10 per cent, and mandates the implementation of an electronic monitoring system for the import, transit and delivery of goods.
Pakistan People's Party (PPP) Chairman Bilawal Bhutto-Zardari expressed strong support for the budget, citing the government's incorporation of several key PPP proposals.
He welcomed a 20 per cent increase in the Benazir Income Support Programme (BISP) allocation, calling it a 'commendable step' that underscores the government's commitment to social protection.
He also applauded the government's decision to raise the annual income tax exemption limit for salaried individuals from Rs600,000 to Rs1.2 million and reduce the sales tax on solar panels from 18 per cent to 10 per cent, following PPP objections.
He welcomed amendments curbing the Federal Board of Revenue (FBR)'s arrest powers, which will now only apply to bailable offenses. 'We opposed the arrest powers being handed to the FBR, and the government accepted our objection,' he said.
Despite opposition pressure to reject the budget, Bilawalaffirmed PPP's support, noting that the inclusion of party recommendations justified backing the bill.
'We are happy to support this budget because our demands have been accepted,' he said, thanking Prime Minister Sharif and Finance Minister Aurangzeb for their cooperation.
Opposition amendments to the Sales Tax Act were rejected by the majority. However, the House approved a government-backed amendment to the Salaries and Allowances Act, aligning ministers' pay with that of parliamentarians.
Speaking on the Finance Bill, PTI lawmakers strongly protested the imposition of taxes in the erstwhile Federally Administered Tribal Areas (FATA), the Provincially Administered Tribal Areas (PATA), and the Malakand Division.
IqbalAfridi of PTI stated that levying taxes in ex-FATA is unjustified, as the region lacks basic facilities, roads, and industrial infrastructure.
He, along with two other party MNAs and Federal Minister for Kashmir Affairs Amir Muqam, also met Prime Minister Shehbaz Sharif in his chamber to discuss the matter.
However, despite repeated requests and protests from the opposition PTI members in the House, the government did not withdraw the tax imposed on ex-FATA and PATA areas, particularly the Malakand Division.
PTI lawmakers also strongly objected to granting arrest powers to FBR officials, arguing that the government has effectively turned what they called the 'most corrupt' institution into a virtual police force, which they fear will now begin harassing citizens under the pretext of tax collection.
Copyright Business Recorder, 2025