Industrial sector has been allowed to import raw materials at zero-rated duty. Other areas, which have been granted reduction in import duty, include chemicals and petrochemicals, soap and detergents, poultry feed and livestock, home appliances, computers and computer accessories, ginning, agriculture sector, textile and engineering industries.
Earlier during the day, the Cabinet in its special meeting, presided over by Prime Minister Shaukat Aziz, approved the Finance Bill.
Duty on import of tractors has been reduced from 20 percent to 15 percent, 5 percent custom duty on urea reduced to zero. Duty-free import of ginning presses has been allowed. Import of agriculture machinery like bulldozers, angle dozers, graders, levellers has been exempted from customs duty. Duty on tyres used in light trucks and construction has been reduced to 20 percent and 10 percent, respectively.
Duty on machinery and equipment used in hotels has been reduced to 5 percent. Duty on bicycle parts, CNG dispensers, manmade fibres has also been reduced for benefit of the buyers.
In order to benefit the exporters, temporary importation scheme under SRO 410 has been extended up to June 30, 2006, and importers have been allowed clearance of goods from warehouses by paying duty and taxes at the rate of one percent.
The existing Central Excise Act 1944 is to be replaced with the new Federal Excise Act 2005.
Zero-rated GST has been allowed for the entire chain of textile sector and carpet, leather, surgical goods and sports good industries. Customs duty collected on raw materials to manufacture these five export items has been zero-rated at the import stage to do away with duty-draw back refund claims.
Since the government will lose tax revenue from these five export sectors (inclusive of Sales Tax on utilities used by them) the Finance Bill proposes to levy three percent tax inclusive of one percent income tax on retailers (where annual sales exceeds Rs. 5 million) as a final tax.
Import of raw material and parts used in manufacture of plant and machinery has been allowed at zero rate.
Government employees would get 15 percent increase in salaries from July 1, 2005. Likewise, pensioners would get 10 percent increase in pensions. The increase in pay and pension would cost the government additional Rs 25.5 billion.
Minimum wages limit has been increased from Rs 2500 to Rs 3000, and pension from Rs 700 to Rs 1000.
HBFC borrowers up to Rs 100,000 will have a new scheme soon for relief. Upper limit of income tax for senior citizens has been enhanced to Rs 400,000.
Teachers and researchers' tax reduction limit has been enhanced from 50 percent to 75 percent.
Banking, public and private companies' corporate tax rates have been reduced to 38 percent, 35 percent and 37 percent, respectively.
Reduction of 1 percent tax is allowed to the companies for enlistment on stock exchanges. The step has been taken to encourage enlistment of companies on stock exchanges.
Profit on investment up to Rs 150,000 in national saving schemes is exempted from withholding tax.
Agriculture sector growth rate has been set at 4.8 percent. However, major crops growth target would be 6.6 percent.
Agriculture sector would be ensured availability of inputs such as fertilizers and pesticides, besides 66.5 percent more water supply.
Farm sector share in PSDP has been increased from last year's Rs 7 billion to Rs 9.1 billion.
Investor would get lucrative incentives to prefer agriculture sector for investment. The government would also line 1,000 water-courses in the next fiscal year to ensure water availability to the farmers at the tail end.
Health sector is to get 68.6 percent more funds, education and professional training 49.5 percent, higher education 28.6 percent, IT 35.6 percent, and science and technology 60.8 percent.
Balochistan and NWFP would have bulldozers to level uncultivated land. To meet the increasing demand of the farmers the government has allowed duty-free import of tractors.
Activation charges have been reduced from Rs 1000 to Rs 500. It would increase mobile phone density.
Duty on luxury cars has been reduced to offset the load of booking on local car manufacturing. Maximum duty on import of 1500 cc cars would be 50 percent, for 1800 cc cars 65 percent and above 1800 cc cars 75 percent.
The provinces' share from divisible pool has been increased to Rs 284 billion, against Rs 239 billion of last fiscal year, showing an increase of 19 percent.
Defence has been allocated Rs 223 billion.
PSDP size would be Rs 306 billion, showing an increase of 34.7 percent.
Defence expenditure is to stay at 3.1 percent of the GDP for the next fiscal year.