In a move likely to burden consumers already grappling with high inflation, the Senate Standing Committee on Finance approved on Saturday an 18% sales tax on processed and packaged food items including flour, pulses, rice, sugar, and spices.
The decision was made during a committee meeting chaired by Senator Saleem Mandviwalla, which also discussed several changes to the Income Tax Act.
The new tax will be effective from the beginning of next month.
Hassan Mandviwalla - representing lawyers - voiced concerns over the imposition of a 45% income tax on lawyers and chartered accountants, equating their tax treatment to that of companies.
Committee member Farooq H. Naik argued that associations of persons should not be taxed as companies, but the Chairman of the Federal Board of Revenue (FBR) clarified that the tax on professionals has been increased to meet the conditions of a previous program.
Salim Mandviwala acknowledged the widespread increase in income tax, suggesting that professionals must also share the burden. Consequently, the committee approved the proposal to increase income tax on professionals.
The meeting also considered a proposal to impose an 18% sales tax on locally produced baby milk. Industry representative Sheikh Waqar Ahmed warned that such a steep tax increase would significantly raise baby milk prices, urging a more gradual approach. However, the FBR Chairman argued that manufacturers had already raised prices multiple times over the past two years, further burdening consumers without contributing to the government's revenue.
Farooq H. Naik proposed extending the 18% sales tax to multinational companies, a sentiment echoed by committee member Mohsin Aziz who pointed out that the sales tax ultimately affects consumers rather than companies.
The new sales tax measures come at a time when the public is struggling with escalating costs of living.
The abolition of zero rating for certain products from the next financial year and the high cost of imported milk, which is sold at double the price of local milk, further compound the economic pressures on households.
