Federal Budget 2006-07 has been presented at the back of a sustained high
economic growth. The objectives of the Federal Budget have been:
provide relief to the fixed income group as well as to the common man,
work for the welfare of the common man,
create employment opportunities,
promote investment and growth,
strengthen the country’s physical infrastructure, and
improve social indicators.
FEATURES OF THE FEDERAL BUDGET 2006-07
the following text, the ‘budgeted year’ should be taken as Year 2006-07, and
the ‘previous year’ as the Year 2005-06:
outlay of the
Federal Budget 2006-07 is Rs.1315 billion, which is 19.7% higher than
the previous budget.
Rs.880 billion which is 6.4 % higher than the previous budget estimate
of Rs.826.5 billion.
Rs.435 billion, which is up by 59.9%. Of which, federal component stood at
Rs.320 billion which also include Rs.50 billion for earthquake
reconstruction and rehabilitation program. The provincial component is
share of current expenditure in total budgetary outlay is 66.9
% as compared with 74.5 % of previous year (2005-06).
share of development expenditure in total budgetary outlay
increased sharply to 33.1% as against 25.5% of previous year budget
estimated at Rs.295.8 billion which is lower by 3.0 % over previous year’s
revised estimates of Rs.304.8 billion.
estimated at Rs.250.2 billion or 2.8 % of GDP as against revised estimates
of Rs.241.1 billion or 3.1 % of GDP of previous year (2005-06).
on running civil administration
at Rs.126.9 billion higher than previous year’s estimates of Rs.103.1
billion on account of various relief measures provided by the government.
to the provinces
are estimated at Rs 378 billion under net proceeds of the Federal divisible
pool against previous year's revised estimates of Rs 331 billion, showing an
increase of about 19 % or Rs 47 billion higher.
the next year, revenues from investments are projected at Rs
16 billion against Rs 51 billion for the previous budget, showing a decrease
of over 300 %, perhaps because of disinvestment of government shares in
public sector entities.
estimates for the budgeted year's foreign inflows has been put
at Rs 239 billion which is 12.7 % higher than the previous budget.
amount of Rs 504 billion has been earmarked for general public service
which includes interest payments, debt servicing and superannuation
allowances. This accounts for about 57.3 % of total current expenditure.
the budgeted year 2006-07, it has been projected that the government will
earn about Rs. 20 billion from privatisation proceeds.
The Government is targeting to borrow Rs 140 billion from the banking sector
to meet its budgetary deficit during the next fiscal year. Previous year's
revised estimates (2005-06) for bank borrowing have now been put at Rs 66.8
government has estimated zero collection on account of petroleum
development levy compared with previous year's revised
collection of Rs 20 billion to cap oil prices. However, it would collect Rs
18 billion development surcharge on natural gas.
The government will not charge petroleum development levy on diesel.
government expects Rs 239.3 billion resources from foreign sources
compared with previous year's revised estimates of Rs 234 billion. This
includes Rs 213.4 billion from foreign loans and Rs 26 billion grants.
Foreign loans also include Rs 76.4 billion project loans, Rs 76.5 billion
programme loans, Rs 30.2 billion foreign currency bonds and others. Foreign
grants during previous year amounted to Rs 45 billion, according to budget
Government has also allocated Rs 89 billion subsidy for WAPDA, KESC,
Utility Stores, cement, and other such commodity operations against
previous year's revised estimates of Rs 64 billion, showing an increase of
over 28 %.
cement prices, the government has allocated a subsidy to
maintain a lower price in the next year through an amount of Rs 720 million.
Sector Development Programme:
of the Federal PSDP of Rs.270 billion (excluding
earthquake-related spending), 44.3 % (Rs.119.5 billion) will be spent on
physical infrastructure and 44.1 % (Rs.119.0 billion) on social sector.
infrastructure development, water and power, including
village electrification received Rs.70.6 billion or 59.1 %. This allocation
is up by 44.4 % from previous year (2005-06).
to communication (including NHA, Ports and Shipping and
Railways) is Rs.37.6 billion or 31.5 % of infrastructure development.
social sector development, allocation to the health and
population sectors amounted to Rs.15.4 billion – which is up by
21.3 % from previous year (2005- 06).
to education including HEC has been increased to Rs.22.9
billion – up by 52.7%.
to the Science & Technology is up by 95.3 % (Rs.4.4
billion vs. Rs.2.3 billion).
target for next year overall revenue collection has been
estimated at Rs 1.083 trillion, which is 16.8 % higher than the year 2005-06
budget estimate. This would include a tax revenue of Rs 840.9 billion, up by
17.5 % higher than previous year and non-tax revenue at Rs 241.89 billion,
up by 6.4 % over previous year’s budgeted estimates of Rs 227.3 billion.
tax is estimated
at Rs.267.0 billion (18.7 % higher than previous year) and indirect
tax is targeted at Rs.568.0 billion (18.6 % higher than previous
target for non-tax revenue has been put at Rs 242 billion,
compared with previous year's revised estimates of Rs 307 billion, showing a
reduction of about 21 %. This also includes Rs 115 billion revenue estimates
from properties and public departments, about Rs 4 billion less than
collection by CBR
is targeted at Rs.835 billion – up by 18.6 % against revised estimates
of previous year (Rs.704 billion).
percentage of GDP is targeted at 4.2 % including earthquake related
spending, and without earthquake spending it is targeted at 3.7 % of GDP,
mainly on account of unprecedented increase in the PSDP.
Relief to the Common
the last five Budgets the salary of the government servants was raised for
four times. In the Federal Budget 2006-07, the government will
provide Dearness Allowance at the rate of 15.0 % of the basic
of the government servants
have also been raised. Those government servants who retired before May
1, 1977, their pensions are up by 20 %.
who retired after May 1, 1977, their pensions are up by 15 %.
overtime of Drivers and Dispatch Riders are up by 50 %.
Allowance of Grade 1-16 government servants
is up by 50 %.
under the Employees Old Age Benefits Act 1976
has been increased from Rs.1000 to Rs.1300 per month.
of Workers Welfare Fund for daughter’s marriage
has been increased from Rs.30,000 to Rs.50,000.
the event of the death of the workers, the grant to their
heirs has been increased from Rs.150,000 to Rs.200,000.
scholarship for workers’ children has been increased from
Rs.800 to Rs.1000 per month.
ceiling of workers’ share in Institutions Profit has been
enhanced from Rs.6,000 to Rs.12,000.
Minimum Wage of Worker has been increased by 33.3 %, that is,
from Rs.3000 to Rs.4000 per month.
will get additional relief with a slab of Rs.500, Rs.750 and Rs.1000 per
month, depending upon their qualification.
the event of the death of the government servants:
the widow will receive one time grant ranging between Rs.200,000 to
Rs.1.0 million, depending upon the grade of the deceased government servants;
the widow can retain the official accommodation provided to the deceased
for up to 3 to 5 years;
once heir will get a contract job for two years in Grade 1-15;
one child will get free education until the age of 18 years;
the widow will receive life-long free medical facility;
2% quota is now fixed for the heirs of the government servants who die
during service in Government Housing Scheme;
the members of the Law Enforcing Agencies who die during their service,
their heirs will get a relief package according to the nature of the assignment
performed by the deceased.
in Rate of Return
8.6 % to 9.17 %.
8.88 % to 9.24 %.
9.46 % to 10.0 %.
Benefit A/c & Bahbood Savings Certificates
11.04 % to 11.52 %.
5.0 % to 6.0 %.
5.1 % to 6.5 %.
senior citizens of 65 years and above, with annual income up
to Rs.400,000, were exempted from taxation. This facility will now be
received by citizen of 60 years and above.
of various types will be sold through the Utility Stores Corporation (USC)
at less than the market price from June 6, 2006. The prices of gram pulse
are fixed at Rs.30/kg; Masoor daal at Rs.31/kg, Moong daal at Rs.53/kg; and
Mash daal at Rs.58/kg.
encourage private sector to import pulses the government will provide subsidy to
importers so that pulses are imported and supplied in large quantity in the
government is determined to enhance the supply of pulses in the market and keep
their prices stable. Subsidy on imports and sale of daal through utility store
will cost Rs.2.5 billion to the government.
common man will continue to get sugar at Rs.27.5/kg from the
USC. The government is supplying 33,000 tons sugar to USC every month for
sale to common man at a much cheaper rate than the market.
government has decided to establish at least one Utility Stores
at Tehsil level.
USC will establish Mobile Units of the USC to cater the needs
of the far-flung areas. The USC is also considering setting up Franchise.
Government is appointing Price Magistrates in every District
for the implementation of the Price Mechanism Law. The Magistrate will have
the power to punish profiteers and hoarders. The relevant Law has been
model Sabzi Mandi (Vegetable Market) will be constructed in
Islamabad and the Provincial Chief Ministers will do the same in their
respective Provinces. This will improve the supplies of the essential
commodities in the market and will help stabilize their prices.
billion subsidy will be provided from the Budget to keep the price of
electricity at affordable levels in 2006-07. The government
has provided Rs.44 billion subsidy in 2005-06 for the same.
government will provide facilities of Angiography, MRI and Dialysis
free of cost to the deserving persons in Federal Government
government is spending Rs.11 billion to control Malaria, TB, HIV/AIDS,
Hepatitis and Blindness.
income increased to Rs.200,000 from Rs.100,000 for income tax purpose for working
women; for non-salaried women, this has been increased from
Rs,100,000 to Rs.125,000.
students up to class VIII from September 1, 2006. Education up to Metric
class is already free.
Program of Rs.7.8 billion is being introduced to increase the incomes
of the farmers in 13,000 villages. The Program will start from 1000
villages in 2006-07. This will
create jobs in rural areas.
Public-Private Partnership in dairy sector development with
Rs.3.6 billion has been launched. This Company will set up 1200 Model Dairy
Farms and will establish 2950 farms for raising livestock. This project will
enhance rural incomes.
production of dairy products is now exempt from Sales Tax. The dairy and
livestock equipments are exempt from custom duty and sales tax. The custom duty
on the packaging material of dairy products has been reduced to 5 %. This will
help promote dairy sector in rural area.
irrigation and sprinklers technology
are being introduced in agriculture with Rs.15.0 billion.
billion is being spent in 2005-06 for lining of 15,000 canals. Rs.6.0 billion
will be spent in 2006-07 for the same. As a result, the loss of canal water will
be reduced by 25%.
billion will be spent on Katchi Canal in 2006-07. The
government is constructing Katchi Canal with Rs.22 billion in Balochistan.
This will bring revolution in agriculture in Balochistan.
billion is allocated for the initial work on big dams in
government has provided Rs.5.0 billion subsidy on fertilizer
in 2005-06. In 2006- 07, Rs.12.3 billion subsidy will be provided to keep
the price of fertilizer at affordable level for the farmers.
enhance the agricultural productivity the government is launching National
Agricultural Research Program with Rs.2.5 billion.
machinery for agriculture, horticulture and Floriculture will
be exempt from custom duty.
for promoting fisheries
will be exempt from custom duty.
duty is reduced from 60 % to 30 % on refrigerated vans.
from custom duty on new and used agriculture tractors in CBU
incentive package in the shape of reduced tariff rates for poultry
industry has been proposed.
these measures will help enhance agricultural activities in the country. This
will increase the incomes of the farmers.
Investment and Growth:
for promotion of exports of leather/ footwear industry, marble and
granite, pharmaceutical industry and parboiled rice plants.
for industrial growth and development to aluminium processing, boiler
manufacturing, chemical industry, CNG dispenser manufacturing, electrical
devices for vehicles and electronics, plastic industry, iron and steels
industry and engineering industry.
of duty on industrial inputs like copper raw material, forging
and foundry inputs, zinc, lead, refractory cement, chemicals used for
tanning leather, earth colours, pharmaceutical chemicals, plastics and
sheets, solution for Rubber, etc.
of duty on material for manufacture of fixed wireless towers for CDMA,
CNG equipment for assembly, inputs of leather and leather products,
broadcasting equipment, computer hardware and parts.
of duty on bicycle parts and components, flat rolled steel products
and articles, cutting tools, machine tools, electrical devices, plastic raw
materials, petrochemicals, machinery, inorganic and organic chemicals and
chemicals used in textile processing.
of medical tourism through good quality hospitals and care
facilities by exempting duty and taxes on import of plant and machinery,
medical, surgical, dental or veterinary machinery/ equipment, fixtures,
fittings, and furniture, diagnostic kits not manufactured locally.
order to attract investment in wholesale and retail trade, exemption
from customs duty in excess of 5 % on import of equipments for establishing
the wholesale/ retail chain stores, like, refrigeration system, fork lift
trucks, high racks, fittings/ fixtures, etc.
of tariff based system (TBS), rationalization of duty on multi-axle trucks,
rationalization of duty on purpose built taxi, exemption from duty on
agriculture tractors in CBU condition.
of old/ used cars – Importability in TR, baggage and gift (for age of car) to
be restricted to five years.
promoting transport system in the country the government is reducing custom
duty on buses, trucks and dumpers from 20 % to 10 % in CKD condition and
from 60 % to 30 % in CBU condition. Trucks and dumpers of more than five
tons are exempt from sales tax.
increase export, the Government has introduced Export Promotion Package under
which leather, shoe, marbles, granite and pharmaceuticals industries have been
exempted from customs duty.
Scheme with Rs.12 billion is launched.
Educated persons in the age bracket of 18 – 40 years will get loan for
self-employment. This will begin from July 2006. They can establish PCO,
mobile utility store; can get franchise for USC; can own transport (taxi
etc.). The Government will share the risk associated with loan.
The government will pick up half of the mark up and other half will
be picked by the person himself.
Bank of Pakistan will issue the loans. Under this scheme 1.8 million jobs will
be created during a span of 5-years.
of the People:
Rs.4.0 billion is allocated for 6035 big filters for clean
drinking water in villages and Union Councils.
In the next two years, 425 more villages will get gas.
Rs.35 billion has been allocated for Khushal Pakistan Program.
This money will be spent on rural roads, village electrification, water supply,
gas, education, health, sanitation and levelling of lands for irrigation
salaried employees income tax
exemption base has been increased from Rs. 100,000 to Rs, 150,000.
for salaried employees, range of Tax rates has been decreased which was 3.5%
- 30% previously, now it has been revised downwards in the range of 0.25% -
budget has allocated Rs 4.728 billion for health sector.
of health sector through reduction/ exemption of duty on life
saving drugs, diagnostic kits and equipments like all medicines for cancer,
drugs used for kidney dialysis and kidney transplant, all types of vaccines
for hepatitis, interferon and other medicines for hepatitis, all
vaccines/anti-sera, cardiac medicine, injection anti-D immunoglobulin,
bloods bags CPDA.1, all medicines for HIV, all medicines for thalassemia and
eye drops and medicinal ointment.
to education including HEC has been increased to Rs.22.9
of education sector through special incentive package for
setting-up of universities and technical training and research institutes on
import of machinery, instruments, equipments, spares and parts and other
related items, required for setting-up or up-gradation of projects of
educational nature recognized by the HEC.
Withholding tax on brokerage commission on
sale and purchase of shares has been increased from 0.005 % to 0.01 %.
on trading has been increased from 0.005 % to
CVT on the
purchase of share has been increased from 0.01
% to 0.02 %.
@ 2.0 % on the purchase of 500 Sq. Yards
and above or one kanal and above which ever is less, residential plot in
@ 2.0 % on all purchase of commercial property.
there is no determined value then a CVT charge @ of Rs.50/Sq. Yard.
Cash Withdrawal from Banks:
year 0.1 % Tax was imposed on cash withdrawal of Rs. 25,000 or more from banks.
Now, this tax rate is being enhanced to 0.2%
excise duty has been imposed on FOREX dealers.