Government Proposes New Taxes, Higher GST, And Exemptions

The government has introduced a proposal in the upcoming budget to impose new taxes across various sectors while eliminating certain exemptions. Despite the IMF’s reservations, the proposal includes tax exemptions for specific sectors.

Significant tax concessions are planned for the establishment of agricultural warehouses and the insurance sector, according to sources. Key features include a 10-year tax exemption on the import of storage and warehouse equipment to ensure nationwide food security. These exemptions will benefit companies offering warehouse services for agricultural commodities.

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This measure aims to help farmers reduce annual losses from spoilage of produce like wheat, rice, and fruits through reliable long-term storage facilities. Modern warehouses will prevent spoilage and financial losses, benefiting farmers and eventually increasing government tax revenues.

Additionally, tax credits on investments in life insurance, health insurance, and microinsurance products are proposed. This includes possible tax credits on premiums for personal accident, travel, household, and private motor insurance, with a one-year tax credit on home property and household insurance also being considered.

The proposal suggests raising the annual income tax exemption limit by Rs300,000, potentially increasing the threshold to Rs900,000 per year.

However, the budget also plans to raise tax duties on imported goods and GST on food items. Notably, an 18% GST on baby milk, medical equipment, and imported packaged food is proposed, alongside plans to abolish withholding tax, remove sales tax exemptions, and increase customs duty rates. Additionally, the GST rate on solar panels might be increased, impacting the renewable energy sector.

The budget, initially set for June 7, is now rescheduled to June 10 due to the prime minister’s visit to China. These reforms aim to balance economic growth with fiscal responsibility, despite potential IMF challenges.