Finance Minister Ishaq Dar on Wednesday tabled Finance (Supplementary) Bill 2023 dubbed as “mini-budget” in the National Assembly and Senate in order to meet the conditions set by the International Monetary Fund (IMF) for the revival of the derailed $6.5 billion programme after President Arif Alvi refused to promulgate an ordinance sent by the government.

The government through the supplementary bill has proposed to raise the goods and services tax to 18% from 17% as part of efforts to raise 170 billion rupees ($639 million) in extra revenue during the current fiscal year ending July.

The bill also proposed to raise taxes on luxury items, first and business class air travel, cigarettes among other things.

Addressing the session, Dar said that only after a few months in power, the current government faced the daunting task of managing the floods, saying that the country endured an estimated Rs8,000 billion worth of damage.

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He asked the house to read the agreement done by the PTI government with the IMF. “This [agreement] was not done only by a government but by the state of Pakistan but Imran Khan deviated from it,” he added.

Dar informed the National Assembly that the government had suggested Rs40 billion increase in the budget of the Benazir Income Support Programme (BISP) to protect downtrodden segments of the society from the impact of increasing inflation.

“The government has proposed to increase the BISP budget from Rs360 billion to Rs400, allocating Rs40 billion additional funds to benefit the (BISP) beneficiaries,” he said.

The finance minister’s statement comes as Pakistan faces mounting economic challenges, including a growing fiscal deficit, declining foreign exchange reserves, and high inflation. The IMF had earlier suspended its $6.5 billion programme with Pakistan in 2022, citing the government’s failure to meet key reform targets.

The tabling of the “mini-budget” is a crucial step towards meeting the conditions set by the IMF for the resumption of the programme. However, it remains to be seen if the government can implement the necessary economic reforms to revive the country’s economy and secure the IMF’s support.

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Addressing the session, which started after a delay of almost an hour, Dar asked the masses to adopt a “simple way of life”. He said that the floods destroyed standing crops but despite weak financial situation, the government allocated Rs300 billion for the flood victims.

“A commission should be formed on the economic lapses in the country so that the core reason of the economic failure is ascertained,” he said and added that the circular debt had reached a “destructive” level in the country.

Lashing out at the former regime, he said that the PTI government made an agreement with the IMF in 2019 but the PML-N government is now honouring the agreement on behalf of the state of Pakistan.

“We gave priority to the state over politics. The political capital we lost is there to see for everyone.”

Dar said that the government has decided to impose taxes worth Rs170 billion after negotiations with IMF. “Since we could not achieve our previous target [of tax collection], we have to impose new taxes,” he added.

He said that the circular debt had reached Rs2,467 billion during the tenure of PTI government but the current government has managed to prevent it from increasing to a certain extent.

GST raised from 17% to 18%

The finance minister said that the government has proposed to increase the General Sales Tax on the import of luxury items from existing 17% to 25%, while overall GST has also been increased from existing 17% to 18% as part of efforts to raise 170 billion rupees ($639 million) in extra revenue during the current fiscal year ending July.

The minister said the government recently held talks with the International Monetary Fund to revive the programme in which it was agreed that the government would take some tough decisions to streamline the deteriorating condition of country’s economy.

He said the new revenue measures would not affect the poor segment as most of the new taxes were being imposed on luxury items not used by them.

In addition to the proposal to levy advance tax on marriage halls and hotels, the bill also proposed to collect advance tax on commercial lawns, marquees and clubs as well. It also proposed to increase tax on mobile phones.

Apart from this, there is also a proposal to impose 10 per cent tax on the retail price of beverages along with advance tax on air tickets.

The bill recommended increasing the tax on cement by Rs50 paisa per kg while it also proposed to raise federal excise duty (FED) on cement from Rs1.5 to Rs2 per kg.

10% advance tax on wedding ceremonies

The finance bill included a proposal to increase the GST from 17 to 25 per cent on mobile phones costing more than $500. It also recommended collecting 10 per cent advance tax on wedding ceremonies, seminars, workshops, exhibitions, musical concerts and other parties.

The bill proposed to impose 10% FED on fruit juices and other beverages. It also suggested FED will be collected on first class and business class air travel at 20% or Rs50,000 (whichever is higher). It also proposed 10% tax on shares on purchasing or holding.

Dar said that the government had distributed Rs1,000 among the farmers out of the Rs2,000 announced in the Kissan Package, adding that the government had allocated Rs30 billion for youth loans.

Cabinet to give plan to reduce govt expenditure

The finance minister said that Prime Minister Shehbaz Sharif will soon take the nation into confidence on the Finance Supplementary Bill, adding that the cabinet would soon give the plan to reduce the government expenditures.

He said that the notification for opening Letters of Credit (LCs) for medicines, petroleum and sports sectors has been issued. He said that the current target of Rs170 billion and the previous target for tax collection will be met.

“What we need the most today is to set a roadmap as we need to adopt a national mindset on economy. We have to sit together. We hope that the institutions would also extend their full support,” he added.

Dar said that the country was facing challenges today and only if we work together then the country will be on the path of progress.

Senate proceedings

Later, the bill was presented in the Senate. However, the PTI and other opposition members staged protest and surrounded the dais of Senate Chairman Sadiq Sanjrani. They also hurled slogans against the government.

The Senate chairman said that the recommendations on the bill should be presented in the house by February 23. Later, the session was adjourned till 10:30am Friday.