Ishaq Dar Unveils Major Budget Changes

Finance Minister Ishaq Dar unveiled major budget changes in the National Assembly on Thursday, including a Rs20 billion farm subsidy fund, withdrawal or reduction of some duties and a higher raise in the salary of government employees. 

Winding up the general discussion on the budget for 2015-16 after a tumultuous morning session marked by an opposition walkout.

Ishaq Dar
Ishaq Dar Unveils Major Budget Changes

Mr Dar announced what he called total acceptance of 20 and partial acceptance of 15 of the 92 non-binding recommendations made by the Senate on Wednesday. He said 66 proposals had been accepted in principle while implementation of remainder 36 proposals was not immediately possible. The minister did not specify the upper house proposals accepted or not accepted, but said many of those accepted were similar to those made of members of the lower house during nine days of debate, which was at times interrupted by angry political arguments between the opposition and treasury benches. Mr Dar took pains to counter opposition charges about the budget being pro-rich and anti-poor, citing examples like an increased allocation for the Benazir Income Support Programme to Rs102 billion from Rs97bn, expansion of Baitul Maal charity and a crop insurance scheme and said it was “pro-poor and not pro-rich budget”. 

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The morning sitting saw repeated shouting between members of the Pakistan Tehreek-i-Insaf and the Pakistan Muslim League-Nawaz provoked by a young PML-N backbencher, Talal Chaudhry. Mr Chaudhry even refused to comply with Speaker Sardar Ayaz Sadiq’s demand to refrain from talking about the controversy over Lahore’s NA-122 constituency the speaker had won against PTI chairman Imran Khan in the 2013 general elections, compelling him to give chair to Deputy Speaker Murtaza Javed Abbasi so the member could speak on the issue. Shouts of “pre-planned” erupted from PTI benches as the speaker made way for his deputy before the party lawmakers stormed out of the house, followed by sympathy walkouts by the main opposition Pakistan Peoples Party and the PTI-allied Jamaat-i-Islami.

MQM WALKOUT: The opposition Muttahida Qaumi Movement followed with a walkout of their own to continue a protest against Defence Minister Khawaja Mohammad Asif for what they call his refusal to apologise for some of his remarks in the house recently that the MQM considered insulting for the entire Mohajir community of Karachi. The opposition returned to the house a short while later, with Talal Chaudhry offering regrets for his objectionable remarks about PTI leaders. However, the house calmly heard Mr Dar announce his revised or new budgetary proposals incorporated into the new finance bill, most of which, in brief are:

INCENTIVES FOR AGRICULTURE: A Rs20bn fund to be set up to provide subsidy to farmers on phosphatic and potash-based fertiliser; GST on pesticides to be reduced to non-adjustable seven per cent from 17pc; repayment period for loans for solar tubewells to be extended from five to seven years; value of produce index units (PIUs) for obtaining loans to be increased to Rs4,000 per PIU from the originally proposed Rs3,000; import of oilseeds for sowing to be exempted from customs duty and sales tax.

INCENTIVES PACKAGE FOR BALOCHISTAN: Five years’ income tax holiday on all manufacturing units to be set up in Balochistan between July 1, 2015, and June 30, 2018, which will also be exempted from turnover tax for five years; exports of perishable goods – fruits, vegetables, dairy products and meat from Balochistan to Afghanistan to be allowed against Pakistan currency instead of dollars with effect from July 1.

INCENSTIVES FOR MBILE PHONE MANUFACTURERS: Exemption from income tax for five years on all new manufacturing units set up between July 1, 2015 and June 30, 2018; first year depreciation allowance of 90pc on the plant and machinery installed; exemption from customs duty and sales tax on the import of plant, machinery and assembly line equipment.

SALARIES: The originally proposed 7.5pc salary increase for government employees to be given after the merger of ad hoc relief allowances of 2011 and 2012, which will mean a real increase of 11pc.


  • Existing sales tax exemption in respect of local supply of poultry and cattle feed to be continued while import and supply of their ingredients, except soya bean meal, to be subjected to 5pc sales tax, in return for a poultry association’s assurance to reduce poultry price.
  • The proposed rate of federal excise duty on aerated waters reduced to 10.5pc from 12pc.
  • A 2014 Finance Act exemption from advance income tax on immovable property in case of a government scheme for expatiate Pakistanis to be available to a scheme to be planned by the Capital Development Authority, with the condition that the expatriate Pakistanis will remit foreign exchange directly to the State Bank.
  • Tax credit allowed under section 65E (of the Income Tax Ordinance 2010) to companies investing in the installation of plant and machinery with 100pc new equity raised by issuing new shares, and currently available from the year of installation, proposed to start from the date of the commencement of commercial production.

*Period of tax credit allowable for extension, expansion, balancing, modernisation and replacement of the plant and machinery installed in an industrial undertaking to be extended to June 30, 2016 from June 30, 2015.

  • Mutual fund sector income not to be subject to Workers Welfare Fund charge.
  • In the context of tax on undistributed reserves proposed in the new finance bill, companies with huge reserves to be given the option to distribute at least 40pc of profits or 50pc of paid up capital.
  • A simplified system of tax for Haj operators applicable for 2013 and 2014 to be extended to tax year 2015.