Federal Budget Speech 2018-19

The Federal Budget Speech 2018-19 is part of the federal budget for FY 2018-19. This page reproduces the text of its 51 PDF pages, extracted automatically from the official PDF published by the Finance Division, Government of Pakistan.

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                       Budget Speech 2018-19
                       Bismillahir-Rehmanir-Rahim

                               PART-I

Mr. Speaker,

1.        It is my honour to present today the sixth budget of the PML(N) government to
this Parliament. It is indeed a historic moment for the nation and the Parliament to
celebrate. Despite challenges, we have achieved a highest growth in thirteen years,
low inflationary environment, and overall macro-economic stability. I congratulate the
nation and the Parliament.

Mr. Speaker,

2.     Presentation of the budget 2018-19 is a solemn obligation of the present
government.  It is incumbent on this Parliament, before its term expires, to debate
and pass Annual Budget for next year. Presentation of Federal budget is essential
for  provinces  to  estimate  Federal  fiscal  transfers  without  which  provincial
government can  neither formulate  their budgets nor  carry out  their business.
Passage  of  the budget  is necessary  for  financial  stability and  continuity  of
government machinery. The next elected Government will be free to make changes
in the budget priorities.

Mr. Speaker,

3.    The budget being presented today reflects the vision of Mian Nawaz Sharif
and aspirations and hopes of the people of Pakistan who voted for him as their
Prime Minister in 2013. His absence today in the House is dearly missed.

Mr. Speaker,

4.        I would like to take you back to May 2013 when we inherited a collapsed
economy, low growth, high  inflation and high  fiscal  deficit. Foreign Exchange
reserves were at a historic low. International default seemed imminent and was
widely predicted.

5.     Let me remind this House that during the five years preceding 2013, average
inflation was 12% and average GDP growth was 2.8%. Even worse, the country was
in grip of a protracted energy  crisis. There was 12-18 hours of electricity load
shedding in urban and rural areas. Our country was facing large scale industrial
shutdowns and labour layoffs. My farmer brothers did not have electricity to run tube
wells. My sisters in urban areas did not have gas to heat hearths and cook food for
their children.

Mr. Speaker,

6.     Domestically, terrorism was widespread, and people were not feeling safe in
their houses. Corruption and bad governance was common. Doom and gloom was
pervasive, and nation’s morale was at the lowest.

Mr. Speaker,

7.    The PML(N) came into power in 2013 and immediately embarked upon a
home-grown agenda. Economy, energy and good governance were  the core

elements of that agenda. Under the leadership of Mian Nawaz Sharif we took on the
challenges head on. For five years we worked long and hard, took painful decisions
and never allowed our personal interests to be our preference. There has been only
one motivation and that  is serving the people who are the real masters  in a
democratic dispensation. As Abbas Tabish said:

Mr. Speaker,

8.        I  will now  present  before  this House  the main achievements  of  our
government in the area of economy;

           a. Real GDP Growth. Last year, our Government achieved GDP growth
              of 5.4% which was the highest growth rate in last 10 years. In contrast,
             the average GDP growth during the period 2008-12 was a paltry 2.8%
            per annum. For this year our growth is projected 5.8% which is the
             highest  in  last 13 years. This places Pakistan among the fastest
            growing economies.

          The  high  growth  rates  over  the  last  5  years  have  produced
            unprecedented economic expansion. Size of the economy expanded
            from Rs.22,385 billion in FY2013 to Rs.34,396 billion in FY2018, while
            per capita income increased from Rs.129,005 in 2013 to Rs.180,204.
             Alhamdolilah, today Pakistan’s economy is 24th largest economy in the
            World.

b. Agriculture. Agriculture is the mainstay of our economy. Agriculture
   sector has shown the highest growth in the past 18 years of 3.8%. All
   major  cash  crops  including  cotton,  rice,  and  sugarcane  have
   contributed to this growth. This is the result of prudent policies pursued
   by our government during the last five years. In addition a special
   Kisaan package was announced by Mian Nawaz Sharif in 2015-16.
   Under this package, cost of fertilizers and pesticides were reduced,
   and cheaper credit was made available, and cash support was given to
    rice and cotton growers.

c.  Industry. Industrial production grew by 5.8% this year. This growth is
   the highest in a decade. It is driven by historically low interest rates and
   uninterrupted supply of electricity and gas after many long years of
   load shedding and darkness. A  robust  industrial  sector  is today
   generating several thousand additional jobs for our youth.

d. Services.   Services   sector,   which   includes   banking,    retail,
   transportation etc. witnessed a remarkable growth of 6.4%. You will not
   be surprised now  if  I tell you that this too is one of the highest in a
   decade.

e.  Inflation. Inflation is the biggest tax on the poor people of Pakistan.
   Alhamdolilah, we have been able to curtail average inflation to less
   than 5 percent in the past five years, compared to 12 percent between
   2008-13. In the first nine months of this year, inflation was only 3.8
   percent while food inflation was only 2 percent. Over our last 5 years,
   people have enjoyed an unprecedented period of price stability.

f.  Fiscal  Deficit.  In FY2013,  fiscal  deficit was 8.2%  of GDP. Our
   government  pursued  a  policy  of  financial  prudence  and  fiscal
   consolidation. During the current year, fiscal deficit will be contained
   below 5.5% of GDP. Public money is a trust and we will continue to
   spend it prudently.

g. FBR Revenues. In FY2013, FBR tax collection was Rs.1,946 billion.
   For the current fiscal year, FBR revenue is projected to increase to
   Rs.3,935 billion which is two times increase in 5 years. Tax to GDP
    ratio which was 10.1% in 2013 will increase to 13.2% this year. Such
   phenomenal increase  in tax  collection  in 5 years  is not a small
   achievement.   I  want  to  thank  taxpayers  of  Pakistan  for  this
   achievement.

h. Policy Rate of State Bank of Pakistan. Policy rate came down from
   9.5% in June 2013 to 5.75% in 2017, which was lowest in many
   decades. Similarly, mark up rates of Export Refinance Facility was
   reduced from 9.5% in 2013 to 3% in June 2016. Mark up rate on Long
   Term Finance Facility was also brought down from 11.4 % to 5-6%.
   Unprecedented  low  interest  rates have  allowed  businesses and
   industry to grow and create jobs.

i.  Agriculture Credit: Five years ago, credit given to agriculturists was
   Rs.336 billion. At the end of February 2018,  it stood at Rs.570 billion
   and  it  is expected to increase to Rs.800  billion by June 2018. In
    addition,  interest  rate  of  agriculture  credit  was  also  reduced
    significantly.

j.  Credit to Private Sector: Credit to private sector has grown by 383
   percent, from Rs.93 billion in 2013 to Rs.441 billion by April 2018.

k. Exports. Exports have been a challenging area of the economy due to
   both internal and external factors. As a result of concerted efforts,
   export package of Rs.180 billion as well as exchange rate adjustments
   exports have increased by 13% increase in the first nine months of this
   year and 24% in March on shipment basis. We expect this momentum
    to continue.

l.  Imports. Imports during the first nine months increased by 17%when
   compared with the same period last year. Higher imports are mainly
   driven by an increase in import of POL products, machinery and raw
   materials. These imports are augmenting productive capacity of the
   economy for higher export volumes in the future. With the completion
    of the CPEC related projects this year and the recent exchange rate
   adjustment, imports are likely to moderate.

m. Current Account. Increase in productive imports has led to a widening
    of current account deficit to $12 billion in the first nine months of the
   current fiscal year. Government has made adequate efforts to finance
    this deficit.  I am certain that the foreign exchange reserves  will be
   higher than their current level.

n. Foreign Direct Investment. Foreign Direct Investment increased to
   $2.7 billion in FY2017 from $1.3 billion in 2013. During the first nine-
   months of the current fiscal year,  it has increased to $2.1 billion as
   against $1.9 billion during the same period last year. Increased FDI

    reflects confidence of international investors in policies of the present
   government.

o. Workers' Remittances. Remittances by Pakistani’s abroad jumped
   from only $13.9 billion in 2013 to $19.3 billion last year. This year In-
   Sha-Allah, we expect to end the year at more than US$20 billion which
    will be a record for Pakistan.

p. Foreign Exchange Reserves. When the government took office, the
   foreign exchange  reserves had  depleted  to  only US$6.3  billion.
   Reserves increased to US$19.4 billion by October 2016. However, the
   increased trade deficit has impacted the build-up of reserves. Presently
   reserves held with SBP stand at $11 billion. The Government is taking
   necessary measures to ensure reserve adequacy.

q. Pakistan Stock Exchange.  Pakistan Stock Exchange performed
   exceptionally well to reach an all-time high of 53,124 points in May
   2017 from 19,000 in May 2013. The market capitalisation reached
   almost US$100  billion. As a  result  of  political events  the  stock-
   exchange plunged to 37,919 in December 2017. However, the index
   has recovered to almost 46,000 points.

r.  Registration of new Companies. This year 8,349 companies were
   registered  till March 2018 compared to 5,883 companies in the same
   period last year. During the last 5 years 33,285 new companies were
   registered as compared  to 17,079  registrations between 2008-13.
   Registration  of  such  large numbers  of new companies  reflects
   buoyancy of businesses.

            s. Increase in Investment. Better governance, business friendly policies
           and improved  security conditions have brought  investors back  to
             Pakistan. China-Pakistan Economic Corridor is attracting large scale
            investments  to  key  sectors  of  the economy  including;  energy,
            communication infrastructure, transportation, telecommunication, textile
           and construction. These investments addressed perpetual bottlenecks
              of energy and infrastructure and unleashed the growth momentum. A
                total  of US$223  billion were invested  in the economy from both
            domestic and foreign sources over the five years as compared to
          US$140 billion during 2008-13.

                t.  Energy Sector Development. Five years back, electricity was not
              available for 16-18 hours to our people and businesses. The biggest
            promise we made during the last election to the nation was to eliminate
                electricity load shedding which stands fulfilled today. During the last
               sixty-six years of Pakistan’s history, a total of 20,000 megawatts of
             generation capacity was added. In a short-term of five years, we have
           added 12,230 megawatts of new generation capacity. Mian Nawaz
               Sharif, my elder brother Khawaja Muhammad Asif and Chief Minister
            Punjab Mian Shebaz Sharif worked day and night for this success.

Mr. Speaker,

Structural Reforms during the last Five Years

9.    To accelerate economic growth, Prime Minister Shahid Khakaan Abbasi has
lately announced 5-point economic reform package through which taxes have been

lowered. These are the biggest tax-cuts in the history of Pakistan. Some of the key
features of this package are;

           a. Tax rates on individuals have been lowered. Complete tax exemption
           has been given to people who earn upto Rs.12 lakh per year or Rs.1
             lakh per month. This exemption limit, which was previously Rs.4 lakh
            per year has been increased three times to Rs.12 lakh per year. Tax
                 will be levied at the rate of 5 percent for income between two and four
             lakhs monthly. People earning above four lakh monthly will be taxed at
             the rate of 15 percent. In Pakistan highest tax burden was on the
              salaried middle-class which include teachers, doctors, lawyers, nurses,
             accountants. Reduced tax rates will significantly lower tax burden on
               this class.

           b. New initiatives in data-mining are being initiated to identify individuals
           who, despite earning taxable income, are not paying their due share in
             taxes. Government  will now monitor  potential  taxpayers’  financial
             records and issue notices on evidence of tax evasion.

            c. Now that tax rates have been reduced and data-mining methods have
           been introduced to identify assets, we are providing last chance to
             declare  undeclared  assets  held  inside  the  country.  Undeclared
           incomes earned before 30th June 2017 and held as local assets (gold,
            bonds, property etc.) can be regularized on payment of 5% of the value
              of the asset. Dollar account holders in Pakistan who have purchased
              dollars through undeclared money can regularize them on a payment
              of 2%.

           d. Protection  of Economic Reforms  Act  in 1992 was  intended  for
               liberalisation of economy and facilitation of foreign investment. This
                 facility allowed free movement of foreign exchange in and out of the
             country without questions being asked. However, this law was misused
           by some elements for whitening of black money. We have plugged this
             loophole in the law. The law has been amended and now only the filers
           can make cash deposit in their foreign currency accounts. However, all
              inflows  up  toUS$100,000/year/person   will  continue  without  any
             questions from any agency about the source and enjoy tax exemptions.
          The FBR will have the right to ask for source of income from people
              bringing in more than US$100,000/year/person.

           e. We are also allowing people to declare their foreign undeclared assets
              at 3 percent and undeclared liquid assets at 5 percent.

                f.  To check under-declaration of land and property, the state is being
             given the power to purchase land and property at 100% of the declared
             value within six-months of its registration. Non-filers will be barred from
             procuring property above Rs.4 million. FBR rate on property is being
             abolished from  1st July 2018 and provinces have been advised to
             abolish DC rates. There will be a reduced tax incidence on property
               registration, with a maximum of 1% tax for filers. This reform measure
                 is unprecedented and will help in documentation of the economy.

Mr. Speaker,

Budget Strategy

10.   Following are the key targets of our budget strategy:

           a. Real GDP growth rate of 6.2%

           b.  Inflation to remain below 6%

            c. Tax to GDP ratio of 13.8%

           d. Budget deficit of 4.9% of GDP

           e. Net Public Debt at 63.2% of GDP

                f.  Foreign exchange reserves at $15 billion, and

           g. Continuation of social protection programmes.

Mr. Speaker,

11.   Our macroeconomic  policy aims  to address the imbalances  of  external
account, while protecting economic growth. Over the medium-term we propose to
continue reduction of fiscal deficit, maintain a cautious monetary stance, and embark
upon next generation  of reforms  for strengthening investment  climate, export
promotion, and energy sector. Priority should be accorded to reducing losses in the
public-sector enterprises and expanding tax base.

12.   To achieve these goals, the following budget strategy is being proposed:

           a. FBR tax revenue target is proposed to be fixed at Rs.4,435 billion
            which is to be achieved through tax administration and compliance and
             not through any new tax measures. Tax base will be enhanced while
             tax rates are being lowered.

           b. The Government  will  continue  investments  in  social  protection  -
               particularly  Benazir  Income  Support  Programme  and  continue
                initiatives for marginalised segments of the society through a targeted
            subsidy regime. For Benazir Income Support Programme, an amount
              of Rs.125 billion is being proposed in the budget, while Rs.179 billion
           has been earmarked as subsidies.

            c. The Prime Minister’s Youth Scheme will continue. For this purpose,
           Rs.10 billion have been allocated.

           d. Total  size  of the PSDP  is proposed as Rs.800  billion however,
              additional  resources  of  Rs.230  billion  will be  financed  through
           autonomous  organisation,  Public  Private  Partnership,  and  other
           means. Investments in the water, road infrastructure, electricity sector
           and China Pakistan Economic Corridor (CPEC) will be protected.

13.    After the 7thNational Finance Commission (NFC) Award, fiscal space of the
Federal Government shrunk by 10 - 11% while its expenditure could not be reduced.
The provinces received an additional transfer of Rs.2.5  trillion in 8 years which
otherwise  could have been  spent by  the  Federal  government. The  Federal
government also had to allocate substantial resources  for special security and
rehabilitation of TDPs.

Special Initiatives 2018-19

Mr. Speaker,

14.  Now I will present before the House special measures that we propose for the
next year.

Agriculture Sector

15.    Actualising agriculture sector potential is imperative for sustainable higher
GDP growth. Pakistan needs a second green revolution to achieve yield growth
potential, investment in agriculture technology, research and development, cropping
patterns more adaptable to climate change and in changing management and labour
tenure practices.

16.  A radical transition of agriculture sector can only be achieved moving away
from subsidy driven approach to a market driven dynamic policy regime. Going
forward Federal Government  will leave the business of subsidies to provincial
governments and will focus on building a conducive policy environment for research
and development,  productivity enhancement, market access, improvements  in
management, labour practices and technology. We are making a beginning by
announcing the following measures:

           a. Continuation of Incentives of FY 2017-18: A number of incentives
           were announced in Budget 2017-18 including in agriculture credits,
            exemption of customs duty on harvesters, removal of GST on imported
             sunflower and canola seeds etc. All these incentives shall continue to
           be available during 2018-19.

           b. Uniform Rate of GST on all Fertilizers: Considering fertilizer as the
                 critical farm input our government reduced the sales tax on fertilizer
            from a high of 17% to 4% on DAP, 5% on Urea and 9-11% on others. I
         am happy to announce that from  1st July there  will be a reduced
             uniform GST rate of 2% on all fertilizers. This will eliminate distortions

    in tax regime,  further reduce  fertilizer prices and promote use  of
   balanced nutrients.

c.   It is also proposed to reduce GST on agriculture machinery from the
   current 7 percent to 5 percent.

d. Further concessions in taxes and duties are being proposed for the
   dairy and livestock sector. Details will be announced in Part II of this
   speech.

e. Enhancing Cotton Production and Quality: Producing high quality
   and large  quantities  of cotton  is central  to economic growth and
   exports.  In terms of climatic conditions, water and  soil  availability
   Pakistan  enjoys a  natural  advantage we  are  5th  largest  cotton
   producing country in the World, but in terms of exports textile products
  we are ranked amongst the lowest. We need to dramatically improve
   both quality and productivity to achieve higher export values. The
   subject of cotton has been transferred to Ministry of National Food
   Security and Research from the Ministry of Textile Industry.

  We are working with provincial governments to formulate and enforce a
    policy to halt conversion of cotton growing area into sugarcane growing
   area. Plant Breeders Rights Act, which had been facing prolonged
   delays over the  last 15 years, has been recently enacted by our
   government. The Plant Breeders Rights Registry established under this
   law will help in producing higher yield varieties of cotton and other
   crops locally through availability of better quality seed.

                f.  Tariff subsidy on Agriculture tube wells:  Availability of water  is
            necessary for crops. Government is presently providing electricity for
              agriculture tube well at reduced rates. During 2018-19, this scheme will
             continue in these areas where the Provincial Governments agree to
            share cost of subsidy on 50:50 basis.

           g. Agriculture Research Support Fund: The Government is proposing
              setting up an  Agriculture Research Support Fund  with an  initial
              allocation of Rs.5  billion. The Fund  will provide financial grants for
            research and development of modern plant and seed varieties for
             achieving higher crop yields. The Fund  will be  jointly managed by
            Finance Division and Ministry of National Food Security and Research.

           h. Agriculture Technology Fund: The Government of Pakistan is also
            proposing to establish a separate Fund for indigenization of agriculture
            technology with an initial allocation of Rs.5 billion. The Fund will be
                jointly managed by Finance Division and Ministry of National Food
             Security and Research.  It  will work with partner organizations and
           promote indigenization of agriculture technology.

                  i.  Revamping of Agriculture Research Organizations:  Ministry  of
             National Food  Security and Research  is working on a plan  for
              restructuring and revamping of research organizations and institutes to
             convert them into world class state of the art platforms for research and
            development. Necessary financial support will be made available.

Export Promotion

17.   During the last five years we took several measures for promotion of textile
and exports. These included reductions in markup rates of LTFF and ERF to historic
lows of 5 percent and 3 percent respectively, duty free import of textile machinery,
uninterrupted supply of gas and electricity for industries, zero-rating of five key
export sectors, and introduction of export package of Rs.180 billion.

18.   These were immediate measures to arrest decline in exports. We need to
reset policy framework and move away from quick fixes approach to more robust,
sustainable and market  driven  policy instruments. Going  forward, we plan  to
rationalise subsidies and concurrently reduce cost of production. We are making a
beginning through this Budget;

           a. Zero-Rating Regime: Five export sectors namely  textiles, leather,
             sports goods, surgical goods and carpets shall continue to remain in
             zero-rated sales tax regime.

           b. The government has decided to provide freight support on export of
             potatoes. Details will be announced subsequently.

            c. LTFF and ERF Rates: Reduced mark-up rates shall continue to be
              available as per SBP policy under Long Term Finance Facility and
            Export Refinance Facility respectively.

           d. Export Promotion Schemes under Textile Policy and Strategic
           Trade Policy Framework:  Incentives under  various schemes  of
              Textile Policy 2014-19  shall remain available during FY 2018-19.
              Ministry  of Commerce  is also working on  Strategic Trade  Policy

           Framework 2018-23. An amount of Rs.10 billion is being allocated for
             various schemes under these policies.

           e.  Tariff Restructuring:  Tariffs on  various  lines, which  are  mainly
               industrial raw materials, are proposed to be reduced. Details shall be
            presented in Part-II of Finance Bill. Tariff Restructuring shall increase
             competitiveness of exports and help in reducing the current account
                 deficit.

                f.  Export Sector Refunds:  The following measures are proposed to
           overcome the issue of refunds of exporters:

                               i. We are moving towards zero rating of import materials for export
                    sector which  will significantly reduce creation of new refund
                    claims.

                               ii. Refund claims currently pending  will be cleared in a phased
                manner over the next 12 months starting 1st July 2018.

                               iii.  After 1st July 2018 all new refund claims will be paid as per the
                   time stipulated in law and regulations on monthly basis and
                    there will be no delay.

           g.  In order to facilitate exports, the government  is working on a new
            package. Keeping in view the prevailing circumstances, this package
                 will focus on increase non-traditional and value-added exports.

Financial Sector

19.   Remittances. Remittances from overseas Pakistanis are a major source of
foreign exchange  earnings. To  further encourage  remittances  through  formal
channels, the Government has decided to introduce following incentive in FY2018-
19:

           a. Prize Scheme  for  overseas  Pakistanis:  All home  remittance
             transactions sent through commercial banks, exchange companies and
             other financial institutions  will be included in monthly lucky draws.
              Details of the scheme are being finalized and shall be announced
              shortly by State Bank of Pakistan.

20.   Enhancement in the target of agriculture credit: Access and availability of
credit  is very important for small farmers. Our government increased target of
agriculture credit from Rs.315billion in 2013 to Rs.1,001 billion in 2018. For the next
year, this target is being increased to Rs.1,100 billion.

21.   Production Index Units:  Similarly, keeping  in view increase  in cost  of
agriculture  inputs and corresponding demand  for  credit, value  of PIU  will be
increased to Rs.6,000. Value of PIU in 2013 was Rs.2,000 which we increased to
Rs.5,000 during the outgoing year.

Film and Drama Industry

Mr. Speaker,

22.    In order to revive Pakistan’s film industry, which used to be the third largest in
world in the 1960s, the Government is announcing a fiscal package. The package
will provide an enabling environment for film industry to flourish, and to project
Pakistani culture. The main features of this fiscal incentive packages are:

           a. Reduction in custom duty to 3 percent on the import of film & drama
             production equipment and sales tax to 5 percent.

           b. Establishment of a revolving Fund for promotion of film and drama
              industry and to provide financial support to deserving artists.

            c. Rebate of 50% in Income tax to companies investing in film projects
                 will be given for 5years.

           d. 50% tax rebate to income derived by foreign film makers from films
          made in Pakistan.

23.   Further  details  of  film-policy  will be  presented by my  sister Maryum
Aurangzeb in the next few days.

Development of Karachi

24.   Karachi  is the commercial and trading hub of Pakistan and has a major
contribution in the country’s revenue base. PML(N) Government after coming to
office in 2013 successfully restored law and order in Karachi giving confidence to the
business community and rejuvenating economic activity there. The Lahore, Multan
metros were built by provincial funds, however the Green Line Rapid Transit System
in Karachi is being funded by the Federal Government. In the current financial year,
Rs.16 billion have been spent on this project. The road and bridges are ready, but
the provincial government has not yet been able to issue contract for procurement of
buses. On behalf of the Federal government,  I am today offering that  if Sindh
government is unable to get busses for Karachi, the Federal Government will do so.

25.      It was agreed during the time of the previous government that Federal
government will pay 1/3rd of the cost of K4 water project in Karachi. However, no
money was ever paid, and the project never took off the ground. It was the PML(N)
government that started giving funds for the K4 and Mian Nawaz Sharif also agreed
to pick 45% of the total cost. However, it is taking the provincial government a long
time to complete the project due to which cost over-run have crossed 400%.

Mr Speaker,

26.   Karachi is suffering from a severe water crisis. To solve this long-standing
problem, the Federal government is today announcing a new scheme of sea water
desalination plant. This plant will be built by the private sector and will produce 50
million gallons of water a day. In-Sha-Allah  it will be my honour to play a role in
solving the water problem for my city. For this purpose, the Federal government will
bridge the viability gap in partnership with private sector.

27.   Apart from the above, the Prime Minister has announced a Package of Rs.25
billion for Karachi. This Package includes providing infrastructural and other social
sectors facilities. So far, three projects covering roads and flyovers and up-gradation
of firefighting system has been approved and Rs.3.0 billion has been earmarked
during current financial year. An allocation of Rs.5 billion has been proposed in the
PSDP-2018-19. In addition, on my personal request the Minister for Planning Mr.
Ahsan Iqbal has provided funds for expansion of Karachi Expo Centre.

Childhood Development

Mr. Speaker,

28.   Education: We are introducing a new programme to be called 100 100 100.
This is a federal government’s commitment to ensure that 100% Pakistani children
will be enrolled in schools, 100% children will be retained in schools and finally,
InshaAllah 100% will graduate from schools. This is a solemn commitment of not just
of Prime Minister Shahid Khakaan Abbasi but the entire parliament to the children of
Pakistan. Even after 70 years, we the leaders of Pakistan have failed the children of
Pakistan. We have denied them the  light of education. No more. Even though
education is a devolved subject, but federal government will help, both financially
and administratively, each and every province to achieve this goal. This is not about
politics and parties. This is a national commitment that I make today to the children
of Pakistan. We will educate you. And we will insist on 100 100 100.

29.    Nutrition: Mr. Speaker, as a father of three children I am ashamed to tell you
that 30% of my Pakistani children are stunted due to malnutrition and inadequate
food. This Mr Speaker is a moment of reflection for all of us. No sir, this is a matter of
shame for us. This is no more tolerable.

30.      I am today allocating on the instructions of the Prime Minister at least Rs.10
billion for a programme that will end child stunting. But if this programme gets off the
ground quickly and needs more money,  I again promise on behalf of the entire
parliament that we will provide through supplementary grants any amount that is
needed to end child stunting. Standing today in front of this picture of babe-e-quam
in this centre of Pakistani democracy I commit, on behalf my Prime Minister and this
Parliament to end child stunting in Pakistan by 2020.

Mr. Speaker,

Development Plan - PSDP

31.   During the past  five years, our government emphasised on increase  in
development spending several times. The PML(N) government spent over Rs.3,000
billion, as compared to around Rs.1,300 billion spent during 2008-13. This is about
230 percent more. I am proud to say that, under the leadership of my brother Ahsan
Iqbal, public money was spent with  full fiduciary responsibility, transparency and
financial integrity for the benefit of our people.

32.   While PSDP investments were made in different sectors of the economy,  I
would like to highlight the China-Pakistan Economic Corridor (CPEC) upfront. Vision
of Mian Nawaz Sharif, CPEC  initiative has become a global brand of Pakistan.
CPEC investments are mainly  in energy, road and transport infrastructure and
Gwadar. As part of CPEC, our Government initiated road projects that would link
north of Pakistan with Gwadar. Trans-Pakistan corridor of motorways and special
economic zones are designed to provide jobs, enhance manufacturing base, and
increase  prosperity and  growth.  Karachi  Lahore  Motorway,  Thakot  Havelian
Motorway, Eastbay Expressway Gwadar, and many other  link roads  in  Gilgit
Baltistan, KPK, Punjab, Balochistan and Sindh are interlinking Pakistan like never
before.

33.   As part of CPEC, the Government has also finalized the plan to increase the
speed of trains on Main Line-I from Peshawar to Karachi by 3 times. Current average
speed of trains on ML-I is 55 Km per hour which will be increased to 160 Km per
hour by 2021. The project envisages doubling of track from Karachi to Peshawar and
from Taxila to Havalian. This requires an investment of more than $8 billion. This will
enable people to travel from North to South in 12 hours or even less.

Mr. Speaker,

Energy

34.   Our government has  invested  heavily  in Energy  sector. The PML(N)
government fulfilled  its promise of availability of electricity and added generation
capacity  of 12,230 megawatts  to the  national  grid. Let me  highlight the key
completed projects based on a diverse mix of low cost power generation sources
including coal, RLNG, wind, solar and hydel:

           a. 969 MW  Neelum  Jehlum  Hydropower   project,  a   run-of-river
           hydropower project, which is an engineering marvel with 90% of the
              plant being underground in the high mountainous area

           b. Enhancement of Tarbela power station with addition of fourth unit
              contributing an additional 1,410 MW of power

            c. 3,600 MW of RLNG based power plants in Haveli Bahadur Shah,
             Bhikki and Balloki

           d. Pakistan’s first super-critical coal fired power plants located in Sahiwal
           and Port Qasim Coal (north and south) have started operations

           e. 680 MW Chashma Nuclear Power Plants C-3 and C-4 have come
              online; and

                f.  Over 1,000 MWs renewable energy projects with zero fuel costs.

Mr. Speaker,

35.   However, these projects are not the end of our investments in the electricity
sector. For the budget year 2018-19 the proposal is to invest Rs.138 billion in power
sector. Key investments in the sector are proposed as follows:

           a. Rs.27.5 billion have been allocated for installation of two 600 MW coal
               fired power project in Jamshoro, Sindh

           b. Rs.76 billion have been allocated for Dasu Hydro Power Project for
            Stage-one in district Kohistan, Khyber Pakhtunkhwa

            c. Rs.32.5 billion have been allocated for Neelum Jhelum Hydro Power
              Project, and

           d. Rs.13.9 billion have been allocated for Tarbela Fourth Extension Hydro
           Power Project.

Water

Mr. Speaker,

36.      I would like to congratulate people of Pakistan on the recent approval of
the construction of Diamer-Bhasha dam at an estimated cost of Rs.474 billion. The
dam will have 6.4 million acres feet live storage capacity and an installed power
capacity of 4,500 MWs. The project will increase national water storage capacity
from 38 days to 45. In the budget 2018-19, the proposal is to allocate Rs.23.7 billion
for the dam. Overall, investment in the water sector is being increased from Rs.36.7
billion in 2017-18 to Rs.79 billion in 2018-19.

National Highways

37.    Efficient road network is the key to economic prosperity. While recognizing
this fact the PML (N) government has increased investments for highways from
around Rs. 50 billion in 2012-13 to Rs. 320 billion in FY 2017-18. An amount of
Rs.842 billion were allocated through the PSDP during last 5 years while off-budget
financing of Rs. 500 billion was also arranged by employing innovative PPP modes.
Through this investment 3,655 Km new roads have been added while 1,000 Km new
roads were added by our predecessor in five years at the cost of Rs.123 billion.

38.    Travelling experience between Peshawar and Lahore had been revolutionized
by Mian Nawaz Sharif during the 1990s. During the current tenure he has ensured
that the same experience is available throughout Pakistan. His dream of a Trans
Pakistan Motorway is near its fulfilment and by the close of this fiscal year, the length
of the motorways will be around 2,500 kilometres. Some of the key projects that
have been completed include:

           a. 58 KMs of Faisalabad-Gojra motorway

           b. 136 KMs of Hyderabad-Karachi motorway

            c. 56 KMs of Khanewal-Multan motorway.

39.   This year, we plan to complete the following key projects;

           a. Khuzdar Shahdadkot motorway

           b. 230KMs of Lahore-Multan motorway

            c. 62 KMs of Gojra-Shorkot motorway

           d. 64 KMs of Shorkot-Khanewal motorway

           e. 91 KMs of Sialkot-Lahore motorway

                f.  57 KMs of Hazara Motorway.

40.   The North South connection on the western side  is being improved by
constructing  high  class motorways and highways from Burhan  in Islamabad,
Peshawar Motorway to DG Khan and thereon to Quetta via Zhob. This link will be
completed by 2020. Mian Nawaz Sharif has already inaugurated the Gwadar-Quetta
Link that has reduced the travel time between Gwadar and Quetta from more than
24 hours to 8 hours and, for the  first time, made the Gwadar Port viable for
Afghanistan and the Central Asian States.

41.    In budget 2018-19, an allocation of Rs.310 billion is proposed.

Railways

42.   Over the past five years, revenue generation capability of Pakistan Railways
has increased considerably. For budget year 2018-19, in addition to recurrent budget
grant of Rs.35 billion, development budget investment is proposed at Rs.39 billion.
Development of Gwadar

43.   The dream to make Gwadar port fully operational for international trade is now
gradually turning into a reality. For the budget year 2018-19 our main aim is to
allocate required resources for the completion of on-going projects such as; Gwadar
airport and  its access road network, improving port  facilities, development of a
desalination plant for provision of clean-drinking water, upgrade of existing 50 bed

hospital to 300 beds, development of infrastructure for Gwadar export processing
zone, construction of a China-Pakistan Economic Corridor Institute, and construction
of dams. Thirty-one projects for development of Gwadar are part of the proposed
PSDP 2018-19 with an estimated cost of Rs.137 billion.

Human Development

44.   While the social sector functions have been devolved to the provinces, the
Federal Government continues to provide funding for higher education, primary
health services, and programmes for youth. For this purpose, we are enhancing
PSDP allocations for Higher Education Commission to Rs.57 billion, for primary
health programmes to Rs.37 billion and for programmes for youth by Rs.10 billion.
The Federal Government is also providing income support to more than 5 million
families, and has also allocated funds for Pakistan Bait Al Maal, and Poverty
Alleviation Fund. In addition, the Federal government is proposing to build 100 sport
stadiums all over the country on cost-sharing basis with the provincial governments.

Health

45.   Our government introduced large-scale reforms in the health sector.  It  is
government’s top priority to provide quality health services to the people.

46.   Even after devolution of health function to provinces, the Federal Government
cannot abdicate  itself from responsibilities in this sector. For the  first time, poor
people are being provided with quality health services through the Prime Minister’s
Health Programme. Under this programme 30 lakh families in 41 districts have been
provide free of cost services in public and private hospitals.

47.   The scope of this programme is being expanded to all districts in the country.
This programme would help in achieving targets of Sustainable Development Goals
and Universal Health Coverage.

48.    In view  of increasing cases  of  Hepatitis, a National  Hepatitis  Strategic
Framework has been developed together with the provinces. Prices of Hepatitis
drugs have been brought to the lowest level and its production in the country is
encouraged.

49.   Uninterrupted supply of vaccines has been ensured through the vaccination
programme for mothers and children, and its storage and distribution systems are
ISO certified.

50.   Production  of vaccines  in  National  Institute  of Health  is made as per
international standards. The production which was earlier un-operational, has been
made operational.

51.   Keeping  in  view  the  necessity  of  authentic  data  in  policymaking, an
international standard dashboard has been established at the federal level.

52.   For the  collection  of  correct  statistics,  the government has decided  to
undertake international standard survey after every 2 - 3 years.

Childhood disease detection and prevention

Mr Speaker,

53.   technology today provides simple and cheap solutions to many important
problems. If trained and provided with the appropriate mobile phone app, teachers
can look  into students’ eyes and detect many diseases. This  will help detect

diseases at the very inception and allow easy and cheap prevention and cure. This
programme will be started with the poorer districts of Pakistan and will be spread to
all public schools in a few years. At an appropriate time we will also require the
private schools to provide such service. For now I just request the more expensive
schools to provide such service. The federal ministry of National Health Services will
soon start providing guidelines on this subject.

Special Areas

54.   For the AJK and Gilgit Baltistan, an amount of Rs.44.7 billion is proposed to
be allocated. For the people of AJK, we announce today a special project of Lipa
Tunnel construction which  will facilitate the local population. For FATA, Rs.24.5
billion have been proposed. To bring FATA in the mainstream, a ten-year FATA
development plan with total outlay of Rs.100 billion has been approved. During
2018-19 Rs.10 billion are proposed to be provided.

Peace and Security

55.   Alhamdolilah, today Pakistan is more peaceful than it was five years ago. Our
military and para-military apparatus has fought hard and laid their precious lives for
our  country. Last hideouts  in North Waziristan have been eliminated through
operation Zarb-e-Azb. I would like to salute the Jawans, Officers, civilians who have
laid their lives for our today and future of our children.

56.    Millions of people had to leave their homes in the areas of military operations.
We will remember their sacrifices. The government wants to assure them that in this
hour  of need we  will do  our  best  to  provide  necessary  rehabilitation and
reconstruction facilities. Rs.90 billion have been allocated for this purpose in the
budget 2018-19.

Mr. Speaker,

Budget Estimates 2018-19

57.      I would now like to present key numbers for the budget year 2018-19:

           a. The  Federal gross revenue  is  estimated  at Rs.5,661  billion. As
           compared to revised estimates of Rs.4,992 billion in 2017-18, this is
             higher by 13.4 percent.

           b. This includes FBR tax estimate of Rs.4,435 billion as compared to
             revised estimate of Rs.3,935 billion.

            c. Out  of  the  total  revenues,  the  provincial governments  share  is
            estimated  to be Rs.2,590  billion as compared  to Rs.2,316  billion
             revised estimates for 2017-18, showing an increase of 11.8 percent.
           These resources  will be  utilized by the provincial governments  in
            enhancing human development and security of the people.

           d.  After transfer to provincial governments, the net revenue of the Federal
           Government is estimated at Rs.3,070 billion in 2018-19 as compared to
             revised estimates of Rs.2,676 billion in the current financial year.

e. Total Federal expenditure for 2018-19 is budgeted at Rs.5,246 billion
   compared to the revised estimates of Rs.4,857 billion for 2017-18,
   showing an increase of 8 percent.

f.  Interest payments for 2018-19 have been budgeted at Rs.1,620 billion
   against the revised budget of Rs.1,526 billion for 2017-18.

g. The defence budget is proposed at Rs.1,100 billion against the revised
   budget of Rs.999 billion in the 2017-18.

h. Total size of Federal PSDP 2018-19 would be Rs.1,030 billion against
   revised estimates of Rs.750 billion.

i.  Provincial surplus is estimated at Rs.286 billion in 2018-19 against
   revised estimate of Rs.274 billion for 2017-18.

j.  Based on the above estimates budget deficit will be 4.9% of GDP as
   opposed to 5.5% of GDP of revised budget estimate in the financial
   year in 2017-18.

                         PART II

                         FBR Tax

Mr. Speaker,

58.  Now I present part II of the speech which consists of tax proposals.

Mr. Speaker,

59.   Before announcing  relief measures specific to individual taxes  I want to
mention a few steps that will provide ease of doing business for the taxpayers and
curtail the discretionary powers of the tax collectors.

60.   Tax audit  of a business involves considerable hassle and cost  for the
taxpayer. There are instances of taxpayers being subjected to multiple audits in
successive years. In order to encourage compliant tax payers, selection for audit in
respect of all three taxes; Income Tax, Sales Tax and Federal Excise Duty, has been
made risk based and a case shall not be audited more than once in three years for
each tax. This limitation will apply to selection of audit by the commissioner as well
as FBR. The concept of composite audit will also be introduced to ensure that audit
of tax affairs under all tax laws is undertaken simultaneously to avoid inconvenience
to the tax payers. This approach shall serve as an encouragement for compliant
taxpayers, and decrease the cost of compliance with tax laws.

61.   Previously grant of stay by the Commissioner (Appeals) was subject to
payment of 25% of tax  liability. The condition has now been relaxed, and the
payment is proposed to be reduced to 10%.  It is expected that this will provide

substantial  relief to taxpayers who are sometimes burdened with unrealistic tax
demands.

62.   Under the current law the decision of the ADRC is neither binding upon the
FBR nor upon the taxpayer. It is proposed that composition of the members of ADRC
maybe changed so that retired judge of a High Court and tax professionals may be
included in the Committee in addition to representatives from FBR.

63.   As per the Sales Tax Act, any commissioner or  chief commission has
authority to appoint  staff  at the premises of taxpayer, and monitor sales and
production. Complaints have been received on the misusage of  this authority.
Therefore,  this  authority  is  being  withdrawn  from  commissioners and  chief
commissioners. Now only FBR will use this authority based on evidence of variations
in sectoral averages.

64.  Now I shall place before the House further relief and tax measures that are
proposed to be introduced in the current Budget starting with income tax measures

                       INCOME TAX

RELIEF MEASURES

65.      It is widely recognized that a substantial portion of untaxed money is parked in
the real estate sector. Furthermore, the practice of under declaring the value of
properties viz-a-viz their actual market value is rampant. In a bid to address these
challenges to ensure declaration of property transactions at actual market arte and
discourage whitening of black money through investment in the real estate sector the
Prime Minister had announced certain measures in his press conference on April 05,
2018. Accordingly the following measures are proposed to be adopted:

           a. The property transactions are proposed to be recorded on the value
            declared by the buyer and the seller

           b. The FBR notified rates are proposed to be abolished

            c.  At the Federal level, a one percent adjustable advance tax from the
            purchaser on the declared value is proposed to replace the existing
             withholding tax on sellers and purchasers. It is proposed that the non
                 filers may not be permitted to purchase property having declared value
            exceeding four million rupees.

           d. The provinces have been requested to abolish the provincial rates for
             the collection of stamp duty and to collect a total of one percent tax
            under stamp duty and capital value tax on the value declared by the
            buyer and the seller

           e.  In order to deter under-declaration and consequent loss of revenue, it
                 is proposed that FBR may hold a right to purchase any property within
               six months of registration by paying a certain amount over and above
             the declared value which may be 100 percent in the fiscal year 2018-
            2019, 75 percent in the fiscal year 2019-2020 and 50 percent in the
                fiscal year 2020-2021 and thereafter.

                f.  In order to implement the above measures enabling provisions are
            proposed to be incorporated  in the Income Tax Ordinance, 2001.
             Detailed procedure and the date of coming into force of the above
           measures are proposed to be notified later.

GRADUAL REDUCTION IN THE RATES OF SUPER TAX

66.   Super tax was imposed  in 2015  for rehabilitation of  internally displaced
persons. It was continued in 2016 & 2017. Various organizations have demanded its
abolition to reduce the effective tax rate.  It is currently being charged @ 4% on
banking companies & 3% on non-banking companies having income greater than
500 M. It is proposed that Super tax may be continued for the financial year 2017-18
but the rate may be reduced by 1% per year from financial year 2018-19 for both
banking and non-banking companies.

RATIONALIZATION OF CORPORATE TAX RATE

67.    In consonance with the policy to reduce tax rates for individuals and AOPs,
the Government has decided to likewise reduce corporate tax rates from 30% in tax
year 2018 to 25% in tax year 2023. The corporate tax rate will be 29% in tax year
2019 and will be reduced by 1% each year up to tax year 2023.

REDUCTION IN TAX RATE ON UNDISTRIBUTED PROFITS

68.   Tax on undistributed profits is charged @ 7.5% on accounting profit if at least
40% of after-tax profits are not distributed within 6 months of the end of the year.
Various professional bodies have insisted on relaxing the requirements to facilitate
businesses in retaining earnings for investments. Therefore  it is proposed that tax
may be reduced from 7.5% to 5% and the condition of distributing 40% after-tax
profits may be reduced to 20%.

REDUCED RATE OF TAX ON REIT DIVIDENDS

69.    In order to promote Real Estate Investment Trust, the rate of tax on dividends
.issued to the unit holders by REIT is proposed to be reduced from 12.5% to 7.5%.

REDUCED RATE OF WITHHOLDING TAX ON BANK TRANSACTIONS ON NON-
FILERS

70.   Tax @ 0.6% is charged on non-cash banking transactions from non-filers.
The rate is proposed to be reduced from 0.6% to 0.4% on a permanent basis.

INCREASE IN MINIMUM THRESHOLD OF TAX DEDUCTION ON PAYMENT FOR
GOODS AND SERVICES.

71.   Under the existing law, tax is required to be deducted on payment for services
exceeding Rs.10,000 and on goods exceeding Rs.25,000. Considering inflation over
the years  it  is proposed that the threshold  for tax deduction be enhanced  to
Rs.30,000 on payment for services and to Rs.75,000 on payment for goods.

EXTENSION OF TAX CREDITS UP TO TAX YEAR 2021

72.    Currently tax credits are allowed under sections 65B, 65C, 65D and 65E for
establishing a new industrial undertaking, purchase of machinery through equity and
extension, expansion and BMR of machinery. However, in order to give an impetus
to investments the cut-off date for being eligible for these tax credits is proposed to
be extended up to 30.06.2021.

EXEMPTION TO DEEP CONVERSION REFINERIES

73.    In order to promote setting up of deep conversion refineries it is proposed that
such refineries with a capacity of minimum 100,000 barrels per day to be installed
anywhere in Pakistan may be exempted from income tax for a period of 10 years.
Further, such exemption may also be extended to existing refineries in cases where

capacity is expanded by installing deep conversion units with capacity of at least
100,000 barrels per day.

RATIONALIZATION OF TAX RATE ON IMPORT OF COAL

74.    Currently tax on import of coal is payable at the rate of, 5.5% for companies
and 6% for persons other than companies. In order to decrease cost of production it
is proposed that the rate of tax maybe reduced to 4%.

EXEMPTION TO WELFARE INSTITUTIONS

75.    In  recognition  of  the  meritorious  services  being performed by  welfare
institutions exemption is proposed to be granted to society for the welfare of suit,
Aziz Tabba Foundation, Saylani welfare international trust and Al-Shifa eye hospital.

                   REVENUE MESASURES

HIGHER TAX RATES FOR NON-FILERS

76.    In order to increase the cost of doing business higher for non-filers higher
rates of tax withholding  for non compliant taxpayers are being proposed. The
withholding tax rates on sale of goods for non filers are proposed to be increased
from existing 7% to 8% in the case of a company, and from existing 7.75% to 9% in
non-corporate cases.

RETAINING THE NUMBER OF TAX FILERS

77.   Due to enhancement of the taxable limit of income to Rs.1.2 million, the
number of filers will be substantially reduced. This will also result in loss of revenue.
A nominal income  tax may be imposed @  of Rs.1000  for income between

Rs.400,000 to Rs.800,000 and @ of Rs.2000 for income between Rs.800,000 to
Rs.1,200,000

                        SALES TAX

RELIEF MEASURES

Mr. Speaker,

78.  Now I shall present relief measures that are proposed to be introduced in the
Sales Tax and Federal Excise law during the current Budget

EXEMPTION FROM SALES TAX AND CUSTOMS DUTY ON PAPER FOR
PRINTING OF HOLY QURAN

79.    In order to provide concession to printers/publishers of Holy Quran,  it  is
proposed that exemption from sales tax and Customs duty. This exemption will be
available to federal and provincial governments as well as registered publishers of
Holy Quran.

EXEMPTION FROM VALUE ADDITION TAX ON IMPORT OF LNG

80.   Value addition tax @ 3% is chargeable under Sales Tax Special Procedure
Rules, 2007 to provide relief to this sector  it is proposed that value addition tax @
3% on import of RLNG may be removed. To address cash flow issues of Gas
Distribution Companies,  it is proposed that rate of sales tax may be reduced from
17% to 12% on import of LNG and supply of RLNG.

EXEMPTION FROM SALES TAX FOR DAIRY, LIVESTOCK AND AGRICULTURE

81.   Urea is chargeable to sales tax @ 5%, DAP @ Rs.100 per 50 kg bag and
other fertilizers like NP, NPK, SSP, CAN are also charged reduced fixed rates of
sales tax. To promote agricultural growth reduction in rate of sales tax to 3% across
the board on all fertilizers is proposed. It is further proposed that the rate of sales tax
on supply  of  natural gas  to  fertilizers  plant  for use as feed  stock, presently
chargeable @ 10%, may be reduced to 5% to cater for cash flow issues of fertilizers
manufacturers in view of reduction in rate of sales tax on fertilizers. Likewise, rate of
sales tax on LNG imported by fertilizer manufacturers for use as feed stock is also
proposed to be reduced from 5% to 0%.

82.   To promote fish farming, 10% duty on sales tax on fish feed is being removed.
Similarly, sales tax is being exempted for preparation of fans and animal feed of
dairy farms. In addition, sales tax on agriculture machinery  is proposed to be
reduced from 7% to 5%. These proposed measures are expected go a long way in
promoting our agriculture, dairy, and livestock sectors.

SALES TAX ON COMPUTER PARTS

83.    Currently, Personal Computers and laptops are exempt from sales  tax.
However, exemption  is not available  in respect of computer parts.  In order to
promote  local assembling and manufacturing  of  laptops and computers,   it  is
proposed that exemption on 21 types of computer parts imported by manufacturers
may be granted.

ZERO-RATING ON STATIONERY ITEMS

84.    Stationery items were zero-rated under Fifth Schedule to the Sales Tax Act,
1990 which was subsequently withdrawn through Finance Act, 2016. It is proposed
that zero-rating for stationery may be restored, to promote local stationery sector and
reduce the prices of local stationery items.

SALES TAX MONITORING THROUGH ELECTRONIC FISCAL DEVICES

85.   Supply of finished fabric to and by retailers, to end consumers, and other
supplies of finished fabric including carpets, leather etc. are subject to sales tax @
6%. Similar rate of 6% is applicable on import of ready to use articles of textile and
leather.  In order  to  facilitate and promote automation  in  addition  to revenue
generation,  it is proposed that the rate of sales tax @ 6% maybe retained on the
sales for those persons who are integrated with FBR online systems. For others, rate
of sales tax is proposed to be applied @ 9% for both supply of above referred goods
and import of finished goods of textile and leather.

EXCLUSION FROM VALUE ADDITION TAX ON SECOND HAND CLOTHING AND
FOOTWEAR

86.   Presently value addition tax @ 3% under the Sales Tax Special Procedure
Rules, 2007 is applicable on the import of second hand worn clothing and footwear
.It is proposed to provide exclusion from value addition tax to the subject items. This
would support lower income groups.

                   REVENUE MEASURES

INCREASE IN RATE OF FURTHER TAX

87.   To enhance documentation and base of sales tax, further tax is proposed to
be increased from existing 2% to 3%. This will not only discourage undocumented
economy, but it will also result in revenue increase.

FEDERAL EXCISE DUTY ON CIGARETTES

88.   Federal  excise  duty on  locally produced  cigarettes  is proposed  to be
enhanced in respect of Tier-1, TIER-2 and TIER-3 to Rs 3964, Rs 1770 and Rs 848
per thousand cigarettes respectively.

                       CUSTOMS

RELIEF MEASURES

89.  Now the proposals related with Customs are being presented before the
house:

RELIEF FOR AGRICULTURE, DAIRY AND POULTRY SECTOR

90.   The livestock sector continues to be the largest sub-sector of Agriculture in
Pakistan. It provides livelihood and employment to millions in the rural areas of the
country and the commitment of our government to sustain  it remains a key aspect
element to alleviate poverty. To sustain the growth in this vital sector of the economy
and provide further relief, it is proposed that;-

           a. Customs Duty of 3% on import of bulls meant for breeding purposes be
             withdrawn.

           b. Presently available concessionary rate of Customs Duty on the import
              of Feeds meant for livestock sector may be further reduced from 10%

              to 5% and  fans meant  for use  in  dairy  farms be  allowed  at
            concessionary  rate  of 3%  to members  of  the  Corporate  Dairy
             Association. This will substantially reduce their cost of inputs and boost
              further expansion. In respect of the poultry sector, the concessionary
              rate of customs duty on import of growth promoters premix, vitamin
             premix, Vitamin B12 (Feed grade) and Vitamin H2 (Feed grade) is
            proposed  to be  further reduced from 10%  to 5%  for  registered
            manufacturers of poultry feed.

RELIEF FOR HEALTH SECTOR

91.   Health Sector has always been a priority area for the Government. Significant
incentives are already in place to encourage the provision of quality and cost-
effective treatment to the patients. Like previous years, this year as well following
measures are being proposed for this Sector;-

           a. To tackle the problem of physical and mental stunting in children a food
                fortification program  in  collaboration  with  international  partners  is
            underway.    Under   this  program,   flour  mills   will  mix   critical
             micronutrients e.g. folic acid, vitamin B12, Zinc etc in the flour being
            produced  for sale  to general  public. However  to ensure  that the
             appropriate quantities of such micronutrients are being added to the
                flour,  it is being proposed that 3% Customs Duty on import of the
            microfeeder equipment be withdrawn.

           b. To provide relief for cancer treatment in Pakistan, the Government has
           exempted drugs from customs duties at import stage. However the sole

             exception was Tasigna on which customs duty @ 5% is proposed to be
             withdrawn.

            c.   It is also proposed that the rate of customs duty @11%, on corrective
             eyesight glasses be reduced to 3%.

           d.  Import of machinery & equipment, is allowed duty free to charitable
               institutions and hospitals, under the provision of Pakistan Customs
                Tariff code 9917. However there is no mechanism for their disposal. To
             redress this issue, it is being proposed that if such goods are disposed
              of within a period of 7 years of their import, the payment of duty and
             taxes leviable thereon shall be on payment of duty and taxes assessed
              at time of disposal whereas  if disposal is after seven years no taxes
            would be payable.

ENCOURAGING VALUE-ADDED EXPORTS

92.

           a. To provide incentive to exports an inter-ministerial review has identified
              certain raw materials, used in export related sectors.  It is therefore
            proposed that the existing rate of Customs duty on raw materials falling
            under 104 PCT codes are being exempted whereas in respect of 28
         PCT code the Customs Duty rates are being reduced.

           b. 11% Customs Duty on Synthetic filament tow of acrylic or modacrylic
          (PCT 5501.3000) is being withdrawn by inclusion in the Prime Minister
            Export Package.

            c. Leather products are one of the leading export oriented sector of the
             country and have significant export potential in the international market.

93.   Recognizing this, it is being proposed to withdraw customs duty on import of
tanned hides (including wet blue) by registered leather tanning sector.

IMPORT SUBSTITUTION AND EMPLOYMENT GENERATION

94.    Currently finished products and most of the raw materials are importable at
20% duty.  It is proposed that for liquid Packaging Industry, the customs duty on
inputs be reduced.

95.   Regulatory duty on import of optical fiber cable is to be reduced from 20% to
10%. In addition, duty on fibre optic cable and other raw material be reduced to 5%.

RELIEF TO MANUFACTURING SECTOR

96.   To sustain domestic manufacturing sector  it  is essential  that inputs not
available locally are provided and made available at the optimal rates keeping in
view the  availability  of domestically compatible  substitutes.  In  this regard, the
following proposal are being made:

           a. Acetic Acid  is not locally manufactured and  is a widely used raw
             material in various industries including food sector. It is proposed that
        CD on Acetic Acid (PCT 2915.2100) may be reduced from 20% to
           16%.

           b. For promotion of local industry,  it is proposed that customs duty on
             import of plasters (PCT 2520.2000) may be reduced from 16% to 11%
           as it is used for producing Plaster of Paris Bandage.

            c. Carbon Black rubber grade is importable at 20% customs duty which is
           a raw material for manufacturing of tyres. It is proposed that customs
             duty may be reduced from 20% to 16% on import of Carbon Black
            rubber grade.

           d. Presently, silicon electrical steel sheets are importable for manufacture
              of  transformers  at  concessionary  rate  of 10%  customs  duty.
            Transformers are a critical component of the power transmission and
               distribution  infrastructure. To  assist  in up-gradation  of  the power
              infrastructure by reducing domestic manufacturing costs, it is proposed
              that concessionary rate of 10%customs duty on silicon electrical steel
            sheets for transformers may further be reduced to 5%.

PROMOTION OF TOURISM

97.   During the last few years, the quantum of domestic tourism has significantly
increased in areas, which previously were not frequented owing to the security
environment,  especially  in Northern Areas. While the country  is blessed  with
excellent tourist spots, the hotel facilities at such locations are dismal or practically
non-existent. While construction of hotels  is time-consuming with greater capital
cost, a quick and cost effective solution is available in the form of prefabricated hotel
rooms. It is, therefore, proposed that customs duty on import of such Pre-fabricated
structures complete rooms, not locally manufactured, be reduced from 20% to 11%
for setting up of new hotels  / motels  in  hill stations (including AJK and  Gilgit
Baltistan), coastal areas of Baluchistan.

RENEWABLE ENERGY INITIATIVES

98.   The government remains committed to introducing alternative energy in all
walks of life with a view to reduced dependence on consumption of fossil fuel. In this
regard, the government intends to continue its drive and the following proposals are
being made;-

           a. To promote usage of electric vehicles, which are environment friendly,
           an  enabling  fiscal  environment  for   its  related  infrastructure  is
             necessitated.  It  is, therefore, proposed that 16% customs duty on
             charging stations for electric vehicles may be withdrawn.

           b. Custom duty on import of electric cars is proposed to be reduced from
         50% to 25% in addition to exemption from regulatory duty of 15%.
             Import of CKD kits for assembly of domestically produced electric cars
                 is proposed at 10%.

            c. LED  is an efficient alternative to save energy. However to further
              incentivize domestic manufacturing in Pakistan 5% customs duty on
              specified LED parts and components, is proposed to be withdrawn.

                        Revenue Measures

Mr. Speaker,

99.    In order to meet the revenue targets for FY 2018-19, revenue measures will
be required to be taken so as to maintain the overall fiscal deficit within the predicted
limit. Rather than effecting any large scale changes in the existing tariff slabs to meet
this objective, a more restrictive and narrower revenue intervention is predicated.
Accordingly, it is proposed that the rate of existing Additional Customs duty may be
increased from 1% to 2%. Exception is being provided for Plant and machinery,

Imports by Privileged Personnel /Organizations, Relief goods, Export Promotion
regimes etc.

                         PART III:

                                 Relief Measures

Mr. Speaker,

100.  Benazir Income Support Programme (BISP)  is the  largest safety net
programme in Pakistan. When the present government took over the charge in June
2013, the allocation for BISP was Rs.40 billion to provide cash support to 3.7 million
families. The stipend under the program in 2013 was a mere Rs.3,000 per quarter.
During  its tenure, our government not only increased the allocation of funds to
Rs.121 billion during FY 2017-18 but also increased the amount of stipend per family
from Rs.3,000 to Rs.4,834 per quarter. Numbers of beneficiaries have also been
increased to 5.6 million as of December, 2017. The allocation of BISP is being
further increased to Rs.124.7 billion in FY 2018-19.

101.  National Poverty Graduation Programme: To assist the ultra-poor and very
poor in graduating out of poverty on a sustainable basis by enabling especially
women and youth to realize their development potential and attain a higher level of
social and economic wellbeing, the government has launched a National Poverty
Graduation Programme for BISP beneficiaries with an amount of more than Rs 9.5
billion (US$ 82.6 million). Under this programme, BISP beneficiaries who are willing
to  start  their own businesses  will be provided with a one-time cash grant  of
Rs.50,000 to start their own business and become productive members of society.

102.  Pakistan Poverty Alleviation Fund: During the last five years, the present
government arranged more than Rs.20 billion for PPAF. An amount of Rs 688 million
is being allocated for PPFA for FY 2018-19. Besides, PPAF is implementing the

Prime Minister’s Interest Free Loan scheme successfully in 45 districts of Pakistan,
for which the Government has already provided Rs 3.965 billion and further Rs 3.5
billion are being provided for Prime Minister’s Interest Free Loan, PPAF during the
next financial year.

103.  Relief to Widow Borrowers: The scheme was launched in 1991 by PML(N)
government whereby  the Government committed  to pay  the loans  of widow
borrowers from House Building Finance Corporation (HBFC) up to the value of
Rs.3.5 lakh. This scheme will continue in FY 2018-19 with increased limit of Rs.6
lakh. Appropriate budgetary provision is being made for this purpose.

Mr. Speaker,

104.  Our government has consistently provided increase in pay and pensions of
government employees over the last five years. Despite fiscal constraints a further
relief is being provided to government servants and pensioners although the inflation
this year currently stands at 3.8 percent:

           a. A 10 percent Ad-hoc  relief allowance  to  civil and armed  forces
           employees with effect from 1 July 2018.

           b. A 10 percent increase is also being proposed for pensioners across the
             board.

            c. Housing  is a serious problem for government employees in major
                cities. House rent ceiling is being increased by 50 percent.

           d.  Similarly, house rent allowance is also being increased by 50 percent.

           e. Considering the difficulties of low-paid pensioners, minimum pension is
            being increased to Rs.10,000 from the present Rs.6,000. Similarly,
              family pension would also get increased from Rs.4,500 to Rs.7,500.

                f.  Minimum pension of pensioners above the age of 75 will be Rs.15,000.

           g. Overtime allowance of staff car drivers and dispatch riders is being
            increased from Rs.40 per hour to Rs.80 per hour.

           h. The government has also proposed an allocation of Rs.12 billion for
              provision of advances to government servants for house-building and
            purchase of transport facility.

                  i.  The government is also setting aside an allocation of Rs.5 billion for
            Senior  Officers  Performance  Allowance.  Details  of  this  will  be
           announced separately.

105.  The total financial impact of the above proposals will be Rs.69 billion.

Mr. Speaker,

106.  Over the past five years we have only served the people. We have rendered
our responsibilities with sincerity.  If we have been successful,  it was due to our
efforts, benevolence of Allah, and support of the people. To a large extent we have
fulfilled promises that we made with the nation in 2013. Today Pakistan is at a new
stage of growth and prosperity. Probably we have been punished for it as well. But
no one can server our relationship with the people.

Mr. Speaker,

107.  Pakistan is the sixth large country in the world and a strong rising economy.
The nature has bestowed this country with abundant resources. We have now laid
the foundation of growth. Based on this, our talented daughters and sons can make
this country as one of the greatest. As poet Allama Iqbal said:

                              Pakistan Paindabad

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