In the upcoming budget, the government has put forward a proposal to impose new taxes on various sectors while eliminating certain exemptions, despite the IMF’s concerns. The proposal aims to grant tax exemptions to specific sectors, with a focus on providing significant tax concessions for agricultural warehouses and the insurance industry, according to sources.
Key elements of the proposal include a 10-year tax exemption on the import of storage and warehouse equipment, aimed at enhancing food security nationwide. These exemptions are expected to benefit companies offering warehouse services for agricultural goods.
Sources indicate that this measure could help farmers mitigate annual losses caused by spoilage of crops like wheat, rice, and fruits, by facilitating long-term preservation in modern and dependable storage facilities. By establishing such warehouses, losses can be minimized, the sources added.
Furthermore, the government expects that these modern warehouses will not only aid farmers in storing and preserving their produce but will also contribute to increased tax revenues over time.
The proposal also suggests providing tax credits for investments in life insurance, health insurance, and microinsurance products. This includes potential tax credits on premiums for personal accident, travel, household, and private motor insurance. Additionally, a one-year tax credit on home property and household insurance is being considered.
Additionally, the proposal outlines plans to raise the annual income tax exemption limit by Rs300,000, potentially increasing the threshold to Rs900,000 per year.
However, the proposed budget also includes measures to raise tax duties on imported goods and GST on food items. Notably, it suggests an 18% GST on baby milk, medical and surgical equipment, and imported packaged food. There are also plans to eliminate withholding tax, revoke sales tax exemptions, and raise customs duty rates. Furthermore, the proposal recommends increasing the GST rate on solar panels, which could impact the renewable energy sector.
The budget presentation, initially scheduled for June 7, has been postponed to June 10 due to the prime minister’s visit to China.
These proposed reforms reflect the government’s attempt to balance economic growth with fiscal responsibility, although they may encounter challenges due to the IMF’s reservations. The full impact of these measures will become clearer as the budget is deliberated and finalized in the coming weeks.
