The FY2021 budget includes further increases in health and social spending, tariff and custom duty reductions on food items, an allocation for “COVID-19 Responsive and Other Natural Calamities Control Program” (PKR 70 billion), a housing package to subsidize mortgages (PKR 30 billion), as well as the provision of tax incentives to the construction sector (retail and cement companies) which got extended in the context of the second wave to the end of December 2021.

 

Provincial governments also implemented supportive fiscal measures from the onset of the shock, including cash grants to low-income households, tax relief, and additional health spending (including a salary increase for healthcare workers). The government of Punjab implemented a PKR 18 billion tax relief package and a PKR10 billion cash grants program. The government of Sindh’s measures included cash grant and ration distribution program of PKR 1.5 billion for low-income households. The FY2021 provincial budgets also provide tax relaxations and sizeable increases in expenditure allocations, especially on health services.

 

 

 

The Government has exempted various items from the application of sales tax, customs duty, regulatory duty and tax at import stage for various medical and other related items regarding COVID-19 outbreak. Elimination of import duties on emergency health equipment (recently extended until December 2020).

 

The exemption period, which was due to expire on 20 June 2020, from customs duties on import of goods including edible oils and oil seeds covered under COVID-19 relief package has been extended. 

 

Exemption from sales tax on health related items to be extended for a period of three months from 19 June 2020. 

 

Approval of funds has been granted for payback of income tax and sales tax refunds, duty drawbacks and customs duties which has been due for the last 10 years.

 

Immediate release of tax refunds and Drawback of Local Taxes and Levies (DLTL) payments to Exporters/Industry (PKR 100 billion).

 

 

The Federal Board of Revenue (FBR) has announced various exemptions under different provisions of the Income Tax Ordinance, 2001 to help businesses and workers mitigate the impact of COVID-19 on the economy:

 

Various reliefs have been introduced via statutory regulatory orders issued by the Federal Board of Revenue concerning waiver of withholding tax on commission received from Ehsaas Emergency Program, removal of brand specification in respect of certain goods being imported for prevention and treatment of COVID-19, and rules for recovery of tax from persons holding money on behalf of taxpayer, etc. 

 

In the wake of COVID-19 outbreak and the surge in cases, the FBR has granted condonation of limitation for the finalization of proceedings in certain cases.

 

Special provisions relating to builders and developers have been introduced to promote Government’s efforts to support low-cost housing projects for the masses in urban areas. 

 

Effective on 1 May 2020, builders and developers are proposed to be included in the ambit of an “industrial undertaking” for the purpose of import of plant and machinery for building and development activity. 

 

A tax exemption to any amount paid as donation to the Prime Minister’s COVID-19 Pandemic Relief Fund-2020 has been introduced.

 

Exemption from application of Minimum Turnover Tax to the following has been introduced: (1) The Prime Minister’s COVID-19 Pandemic Relief Fund-2020; and (2) the Federal Government Employees Housing Authority for the tax year 2020 and the following four tax years. 

 

Exemption from application of withholding tax/advance tax to the Prime Minister’s COVID-19 Pandemic Relief Fund-2020 under various provisions of the law has been introduced.

 

No tax is required to be deducted under Section 236P of the Ordinance in respect of banking transactions otherwise than through cash at the time of transfer of any sum to the Prime Minister’s COVID-19 Pandemic Relief Fund 2020.

 

 

Various regulatory measures have been introduced by the State Bank of Pakistan to counter economic challenges posed by COVID-19: (1) the SBP launched a dedicated portal/webpage to announce a number policy measures for the banking sector. (2) an extension in repayment of loan, principal amounts by one year, concessional financing for hospitals to procure equipment to combat COVID-19 as well as other measures. (3) extended the Rozgar Scheme for Supporting Employment for another three months and widened its scope in collaboration with Government of Pakistan. (4) enhanced its refinance limits to finance up to 100% of wages and salaries of businesses with average three-month wage bill of up to Rs500 million. (5) on 6 May 2020, the Federal Government allocated Rs30 billion under a credit risk sharing facility for the banks spread over four years to share the burden of losses due to any bad loans in future. (6) the SBP reduced the policy rate by a cumulative 625 basis points since 17 March 2020.

 

(Updated: May 2022)