Amended Finance

Bill FY 2018-19

NBP FUNDS
Managing Your Savings
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Amended Finance Bill 2018-19 - aims to address fiscal &
external account concerns NBP FUNDS Managing Your Savings

After taking the helm, PTI-led government, finally appears to take charge of the economic affairs of the country.
After taking gas price hike decision yesterday, the finance minister while terming the current economic condition
as disastrous , tabled a supplementary budget in the Parliament today that aims to rein in the burgeoning fiscal
deficit by mobilizing additional revenues together with scaling down the development outlays. To assuage the
pressure on the external front, measures to stimulate exports and contain the unnecessary imports have also been
taken. The proposed measures will now be deliberated and discussed in the parliament before they are implemented.
Finance Minister stressed that the government had only two priorities: “protect the poor and support exporters”.

Budgetary Overview:
In terms of overall numbers, the mini budget aims to raise an additional revenues of PKR180 billion, which will
be equally generated from improved administrative tax measures & oversight and from new revenue measures,
which include rationalization of income tax rates of individuals and AoPs, broadening and deepening of duties
on imported non-essential goods, raising taxes on locally manufactured cigarette. Further to this, the government
has also proposed to slash the development outlay from budgeted amount of PKR1,030 billion to PKR750
billion.

The government has again allowed leeway to non-filers in purchasing property and automobile which is against
the spirit of increasing the tax base. Moreover, no new concrete measure has been taken to increase the tax base.
A positive surprise was also no announcement of wealth tax on movable assets, which was being speculated in
the media.
 NBP FUNDS Managing Your Savings

Key revenue measures:

• Tax rate rationalization for individuals and AoPs (the maximum tax rate will be 25% for salaried persons
and 29% for non-salaried persons)
• Federal excise duty on cars of 1800cc engine capacity or more has been doubled from 10pc to 20pc
• Increase in WHT on banking transactions (other than cash withdrawal) from 0.4% to 0.6% for non-filers
• Customs duty to be increased on more than 5,000 items, whereas regulatory duty to be increased on the
import of more than 900 items
• FED on cigarettes has been increased
• Duty on several imported luxury products and expensive phones is proposed to be raised
• Withdrawal of tax exemptions on various benefits to the ministers is proposed

Key relief measures:

• Major relief for textile sector has been announced with proposed subsidy on LNG to the tune of PKR44 billion.
Further benefits are expected for textile and other export-oriented sectors in the upcoming electricity policy
• Reduction in PDL from budget levels
• Minimum 10% increase in Employees Old‐Age Benefits Institution (EOBI) pensioners
• Release of PKR4.5bn for the completion of a low-cost housing scheme for the underprivileged
• Health insurance coverage of PKR540k per family in Fata and Islamabad in the form of the Sehat Insaf Card
to cover doctors' fees and medicines
• PKR6-7 billion subsidy for provision of urea by boosting local production and by importing 100k MTs urea
• Regulatory duty on raw material used for export industries to be reduced to zero to benefit export industries
by allocating PKR5 billion
Sectoral Impact NBP FUNDS Managing Your Savings

Textiles: Postive
In order to support the export sector, Government has removed regulatory duty on raw material that amounts to
a relief of PKR5 billion. Further to this, PKR44 billion subsidy for the Punjab based textile companies on LNG
has been announced. Moreover, gas prices have been kept unchanged at PKR600/mmbtu for five zero-rated
sectors for Sindh and KPK provinces.

Autos: Positive
Federal excise duty is proposed to be doubled on cars of 1800cc engine capacity or more from 10pc to 20pc.
Additionally, it has been decided to do away with the restriction imposed on the non-filer from purchase of a
new car (first registration).

Chemical: Slightly Negative

Government has increased gas prices by 30% to PKR780/mmbtu from PKR600/mmbtu which is slightly negative
for South based plant (EPCL & LOTCHEM). On the other hand, Punjab based plants would have overall negligi-
ble negative impact in earnings due to curtailed supply of domestic gas.

Cement & Steel: Slightly Negative

PSDP has been slashed from PKR1,030 billion to PKR725 billion, which appears negative. However, given that
only PKR661 billion disbursement was made in FY18, there is still growth on a yearly basis in PSDP. That being
said, as has been in the past, rarely PSDP disbursements match the budget allocations, which can result in soft
demand of cement & steel from the public sector.
Sectoral Impact NBP FUNDS Managing Your Savings

Fertlizer: Slightly Negative

Government has announced subsidy of PKR7bn to facilitate urea imports and resumption of shut-down fertilizer
plants. This is slightly negative for the sector as it would result in reduction in pricing power of the urea manufacturers.
Secondly, government has raised feedstock prices by 50% and fuel stock prices by 30%. Response of fertilizer
manufacturers over gas price hike is awaited, to ascertain the impact on this sector.

Banks: Slightly Negative

WHT on banking transactions is proposed to be increased to 0.6% for non-filers. This is expected to have a marginally
negative impact on the overall banking sector where we expect reduction in banking transactions/deposits.

OMC: Neutral
Increase in Petroleum levy in the last budget from PKR8/liter to PKR30/liter has been reversed by the government.

Tobacco: Negative
Increase in duties on lower slab cigarettes can negatively impact the volumetric sales.
Pharmaceuticals: Slightly Positive
Sehat Insaf cards in Fata Islamabad and potentially in Punjab for the underprivileged bodes well for the Pharma-
ceutical sector due to incremental demand of medicines.
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