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Banks 4% Super Tax is likely to have an impact of 6-10%. WHT on non-filers has been
maintained at 0.6%.
INCOME TAX: Reduction in corporate tax rate, the rate has been reduced to 31% for Tax
Year 2017.
Extension in exemption to export of IT services till June, 2019.
Enhancing limit of interest on House Building Loan, amount is being increased from PKR 1mn
to 2mn.
Relief on Education Expenses: Individual having taxable income less than PKR1mn is being
given tax relief equal to 5% of school fee up to PKR 60,000 per child per annum
Cements In the Budget FY17, the govt. has proposed to increase the rate of FED from
current 5% of MRP (Excluding GST) to a fixed Re1/kg. Current FED rate translates into
~Re0.42/kg (assuming average MRP of Rs495/bag).
Custom Duty on import of clinker has been increased to 11% from 2%. While being
considered a positive development overall, we believe that this will not result into any
material positive for the industry as clinker imports remain minimal in the country.
Textiles Export refinance rate reduced to 3%, which will further add stimulus to sector
sales .Extension in exemption of customs duty on the import of machinery .
Minimum wage has been increased from Rs13,000 to Rs14,000, which is somewhat negative
for textiles through increased labor costs, particularly for the labor intensive garment
manufacturing segment.
Food Producers & Beverages In order for EFOODS to maintain margins, our calculations
suggest a price increase of Rs6-7/ltr. We flag the company has already increased milk prices
by Rs5/ltr just before the budget (covering ~80% of the required increase).
Regulatory duty on import of powdered milk may increase by 25%. We believe this would be
in addition to 20% custom duty that exists on local milk manufacturers. EFOODS may bear a
neutral impact of the additional duty if a ~Rs2/ltr increase on its products is passed on to
the consumer.
FED on locally produced aerated water to be increased to 11.5% from 10.5% previously
(impact on MUREB)
Insurance Tax credit for investment in health insurance has been introduced up to
Rs100,000 or 5% of income whichever is lower, which is a positive for the sector.
Advance tax has been introduced at 4% for general insurance and at 1% on life insurance on
insurance premium (if exceeding Rs200,000/annum).