(1) The economic growth for the year has been recorded at 5.1%, well above the target rate of 4.5% and the revised estimate of 3.4% for the last year. This performance, which is the best since 1995-96, signals the termination of low growth phase in which the country was locked for the last many years. Incidentally, this has happened at a time when there is global slow down. Pakistan’s performance is the best in South Asia and within the top tier in Asia.

(2) On the back of this growth performance, there has been a handsome increase of 12% rupee terms and 17% in dollar terms in the per capita income of our people.

(3) This growth has been based on a healthy growth in almost all sectors of the economy. Growth in agriculture was recorded at 4.2% against the target of 2.5%, large scale manufacturing recorded a growth of 8.7% against the target of 6% and services sector recorded a growth of 5.3% against the target of 5.0%.

(4) Inflation has been contained to 3.3%, well below the target of 4% and reflects continued price stability, due largely to adequate supplies of both agriculture commodities and industrial goods;

(5) Total investment was recorded at 15.5% of GDP against the target of 15% of GDP, thus surpassing the target.

(6) During the period July-April, foreign investment amounted to $695 million compared to $306 million for the same period last year, showing more than 100% increase.

(7) Foreign exchange reserves of the country have touched an unprecedented mark of $10.5 billion sufficient for 11 months of imports;

(8) The reserves have been accumulated through a combination of good exports performance, increased flow of remittances and support from creditors through rescheduling and concessional financing.

(9) Exports during 10 months were up by more than 20%, higher than the target growth for the year. For the first time in country’s history, exports have crossed the elusive mark of $10 billion.

(10) Remittances are likely to cross the level of $4 billion for the year, which is also unprecedented in the history of the country.

(11) The current account of balance of payments will be in surplus by a big margin of $3 billion. There were only two previous occasions when this happened in the country, first at the time of Korean War in early 50s and then in the wake of massive devaluation of Pakistan rupee in early 70s. While on each of these occasions it was a blip, the same is not the case this time. This surplus is for the second consecutive year, and if it was not for our concern for the growth of the economy, we could make a persistent feature.

(12) There is continued stability in the exchange rate, which has in fact appreciated by nearly 11% since September 2001. Here again, there were strong pressure for continued appreciation of the rupee against dollar, but for apprehensions relating to loss of exports competitiveness State Bank has stabilized it at the current level of around Rs57-58 to a dollar;

(13) Tax revenues have shown a healthy growth of 15% and the target of Rs.459 billion for the year will be achieved, Insh’Allah;

(14) There has been effective control on expenditures, while protecting the essential social sector expenditures.

(15) The combination of tight expenditure control and good revenue collection performance has led to the achievement of fiscal deficit target of 4.6% for the year;

(16) There has been considerable reduction in our debt burden, with the debt to GDP ratio that stood at more than 100% has been brought down to nearly 90%. Indeed, some fiscal space is now made available due to savings we have made in debt servicing charges. As against 64% of revenues, debt servicing is now brought down to 37% of revenues;

(17) Cost of borrowing has dramatically declined to unprecedented levels. The treasury bill rate at which government is borrowing is less than 2% per annum;

(18) There is plenty of liquidity in the market and credit to private sector has increased from Rs.37 billion last year to Rs.120 billion this year, which is again unprecedented. Credit to agriculture has also shown good growth as it increased from Rs.35 billion last year in July-March period to Rs.37.5 billion in the same period this year;

(19) The stock market is scaling new heights everyday and is currently rated as the best performing market in world.

(20) Accelerated Growth: First, the need for accelerating the growth rate is quite pressing. This essential for poverty reduction, and for this purpose we must ensure that growth emanates from sources that have potential to create employment opportunities.

(21) Increased spending on human development: Second, we need to invest a much larger share of our development spending in human development and for this have to create additional fiscal space.

(22) Containing losses of PSEs: Third, the losses of public sector corporations remain a burden on the budget. This drag is affecting our capacity to invest in the human capital and development.

(23) Radical improvement in infrastructure: Fourth, there are significant bottlenecks, in achieving the full potential of our economy, posed by an inadequate stock of infrastructure. In particular, water storage, canals, roads and ports are some of the key infrastructures that need radical improvement.

(24) Private investment: Finally, the investment in the private sector remains a challenge. Although there have seen improvements in investment levels, both domestic and foreign, yet a much larger effort is needed to achieve high rates of growth.

(1) GDP growth will rise to 6% in the year 2005-06;

(2) Inflation, on average, will be contained at less than 4%

(3) Gross investment to GDP ratio will be increased to 18%;

(4) Fiscal deficit will decline to 3.0%;

(5) Current account deficit will be contained to 1.8% of GDP;

(6) Foreign exchange reserves will be maintained for a minimum of 28 weeks of imports.

(25) a sustained application of new resources to attack the root causes of poverty implicit in poor social indicators such as in education, health, family planning and water supply.

(26) a significant expansion in the agriculture potential of the country through provision for additional storage capacity, building of new canals and rehabilitation of irrigation assets;

(27) a radical improvement in the physical infrastructure of the country such as roads, highways, ports, power and gas supplies;

(28) Education: In the development plan we have allocated to Rs.3.1 billion for education against the allocation of Rs.1.7 billion last year. This represents an increase of nearly 80% from last year. For higher education we have provided Rs.4.5 billion against an allocation of Rs.3.7 billion for this year. This represents an increase of more than 20%. For improving girls enrollment Rs.700 million will be spent for Tawana Pakistan aimed at better nutrition support.

(29) Health: The development plan has provided adequate resources to cover the cost of all a wide range of preventive programs against common and emerging diseases, which is the main plank of our health policy. Against an allocation of Rs.3.3 billion for this year, in the next year the allocation is raised to Rs.4 billion showing an increase of more than 20%.

(30) Tameer-e-Pakistan Program: The government has initiated a new program of small public works. Such a program is needed to create temporary employment opportunities and augment the sources of income for the poor. To ensure people’s participation, members of Parliament will be recommending schemes in their constituencies. Under this program small public works schemes, such as development of farm to market roads, water supply, sewage, garbage collection, spurs, culverts and village electrification are undertaken. An allocation of Rs.4 billion is kept for this program.

(31) Food Support Program: A targeted intervention to reach out to the poorest of the poor is the food support program. The new government has increased subsidy from Rs.2000 to Rs.2400 per. A total number of 1.2 million households are benefiting from this scheme.

(32) Microfinance: Microfinance has emerged as one of the most effective instruments of fighting poverty. The Khusshali Bank, which is now entering third year of its operations, has opened branches in 35 districts. So far it has disbursed Rs.1.3 billion to about 75,000 poor borrowers. Branches of Khusshal Bank will be opened in all the districts of the country. Pakistan Poverty Alleviation Fund (PPAF), which was set-up to provide whole sale credit to microfinance institutions, including NGOs, has significantly increased overall lending. So far it has provided loans of about Rs.860 million for on-lending to 82,805 beneficiaries through various NGOs in all parts of the Pakistan.

(33) Zakat System: Zakat has come to occupy a central place in the social safety net programs of the country. On an overall basis, during the first 9 months of the current year, a total Zakat of Rs.4 billion was disbursed under different schemes among 944,855 Mustahiqueen compared to Rs.3 billion disbursed in the same period last year. Under the rehabilitation grant, an amount of Rs.2 billion was disbursed to 116,755 Mustahiqueen.

(34) Agriculture and water sector development: According highest priority to agriculture an allocation of Rs.17 billion against Rs.10.9 billion last year, representing an increase of 60%. The projects for expansion of water storage capacity through provision of new dams, new sources of irrigation through flood canals, drainage and rehabilitation of irrigation system are included in this plan.

(35) IT development: Information technology remains an important focus of the government. A large number of projects aimed at promoting IT and its education have been completed and many more are planned for the next year. For this purpose an allocation of Rs.2 billion has been made.

(36) Physical infrastructure: To expand infrastructure major investments in power, transport and roads are planned. In power sector Rs.31 billion have been allocated that would lead to new hydel projects, transmission lines and village electrification. In Railways Rs.8 billion have been allocated for upgrading and expanding all assets of the railways. In roads sector, an allocation of Rs.16.7 billion has been made that would see completion of many roads as well as development of new roads such as linking Gwadar to Chaman and Rattodero. Gas supplies be provided to a number of areas around Pakistan especially in the rural sector.

(37) Port Development: The work on Phase-I of Gwadar port, comprising deepening of channel and construction of 3 berths, is proceeding apace and an expenditure of Rs.5.1 billion was incurred during the year. In the budget for 2003-04 an additional expenditure of Rs.3.4 billion is planned. The Phase-I will be completed by end 2004, which will represent a watershed in the economic history of Balochistan and Pakistan.

(38) Foreign investment during the first 9 months of the year amounted to $670 million, which is more than double the investment that flowed last year;

(39) The imports of machinery have increased by more than 35% in the first 11 months of the year, indicating that significant capital investment is taking place in the country;

(40) The credit off-take by the private sector rose by more than 3 times during the first 10 months from Rs.37 billion to Rs.120 billion.

Unequivocal message of consistency and continuity in economic policy;

Further rationalization of tariff with a view to improving the competitiveness of our industry;

Constant review of tax laws and tax machinery that should act as a major source of comfort to business community;

Further improvements in the process of refunds and removal of other procedural bottlenecks in complying with the tax laws;;

A competitive and reformed banking sector and capital market, that is catering largely to the needs of the private sector;

Constant review and removal of irritants that have the potential to impose undue costs on businesses.

(1) State Bank has introduced a number of radical changes in the regulatory environment to encourage housing finance. For this purpose following measures are noteworthy:

(41) The foreclosure law has been amended to allow the banks to repossess the property without recourse to Courts.

(42) Government employees have few opportunities to borrow for the purpose of house building. This is understandable in view of the limited budgetary resources available in the country. To overcome this problem, it has been decided to induct House Building Finance Corporation in this area. HBFC will be providing housing loans to all government employees against the obligation of federal government to make deduction from the salaries of the employees and service these loans. This is a major relief to government employees.

(43) Provincial Governments are rationalizing stamp duties and registration fees on transfer and acquisition of housing property minimize the financial burden on owners and encourage proper documentation.

(44) A Committee comprising federal and provincial officials is being constituted that would examine all regulations relating to registration, transfer, dispute resolutions and duties applicable to property and real estate markets. A coordinated set of policy changes will be announced in the light of the report of the committee in consultation with the provincial governments.

(45) Federal and Provincial Governments will generously provide new lands in all parts of Pakistan for housing schemes. The federal government will enable provincial governments to reach similar arrangements with banks and financial institutions as for the federal government employees.

(46) NSS Scheme for Widows: For the benefits of widows, it has been decided that the special savings scheme available to retired pensioners will also be available to widows.

(47) Increase of Pensions: Pensioners deserve our respect and sympathy for their services they have rendered during their working life. To give some relief to them it has been decided to raise their pensions.

(48) Salary of Government employees: The report of the pay and pension committee was partially implemented in the last budget. It is proposed to give some more relief to government employees. For this purpose, salaries will be increased.

(1) Income Tax Ordinance 2001: The most sweeping tax administration reform is the promulgation of a new Income Tax Ordinance 2001 which became effective from July 1, 2002 and incomes under it will be assessed in the year 2003-04. This law represents a revolutionary advance in instituting a modern tax system in the country where discretionary powers of tax authorities are minimized, presumptive and non-adjustable taxes have been gradually removed, self assessment is allowed for all types of incomes, audit is the main instrument of discouraging misreporting and discrimination against different classes of taxpayers has been eliminated.

(2) Large and Medium Taxpayer Unit (LTU): A Large Taxpayer Unit (LTU) has been launched in Karachi in accordance with the schedule. This office caters to the complex and wide ranging operations of the largest taxpayers of the Karachi region. Five more medium taxpayer units (MTU) for income tax will also be established to prepare the income tax organization to be transformed from a circle based organization into a functionally specialized organization.

(3) Reform strategy document: Through a well planned document these examples of excellence will be replicated over time in different areas of tax administration.

(4) Round the clock customs clearance: A pilot program has been launched in Karachi where the clearance operations will soon be conducted round the clock. This fully automated system will be functional within the next 9 months. It will significantly reduce clearance time from the average of eight days to within 48 hours.

(5) Risk management:: The customs pilot project will modernize import and export clearance procedures by introducing the concept of risk management and self-assessment. It has been decided that in future customs control will be carried out on selective basis by using risk management techniques. The application of the principle of risk management will allow customs to focus on high risk imports of non-compliant importers. The new system of customs clearance after successful completion of the pilot at Karachi Container Terminal by March 2004 will be replicated throughout the country in next few years.

(6) Alternate Dispute Resolution Mechanism: The Alternate Dispute Resolution system is now functional. A panel of renowned persons from private sector including chartered accountants, lawyers, academicians and prominent taxpayers has already been notified. The unanimous recommendations of the ADR committees are now being made binding on the Central Board of Revenue.

(7) Refund of sales tax and customs duty: The procedures for payment of rebates of customs duties and sales tax refunds have always been subject to criticism. It is stated that all customs duties rebates are now being paid on time and there are no reports of any delay.

(8) Transparency in sales tax refunds: In order to make the refund system more transparent and efficient, all sales tax refund claims are now received in computer diskettes for processing without any human interference. The result is that complaints of collusion and arbitrariness in the refund system have diminished significantly.

(9) Risk management in refunds: To further simplify the sales tax refund system quality exporters will be paid the refund amount in a single installment within ten days of filing of claim instead of multiple installments over 40 days. Moreover the exporters in the gold and silver categories will also be entitled to this facility. All exporters with annual exports of $ 5 million or more will be extended the facility of local purchase of raw materials from the registered person without any payment of sales tax against a bank guarantee or a certified post dated check.

(10) Refunds simplification and cost to exchequer: By un-blocking the refunds in the manner stated above, the government will undergo a cash flow constraint of approximately Rs.6 billion. The government is prepared to take this hit for the sake of assisting the legitimate needs of the exporters as well as to remain steady on the path of reform.

(11) Concession on cost of housing finance: Borrowing cost on a loan obtained for housing purpose from selected sources is entitled for tax credit to the extent of Rs.100,000 or 25% of the income – whichever is less. To encourage housing sector, it is proposed to enhance the said limit to Rs.500,000 or 40% of the income – whichever is less. The facility is also being extended to loans from any bank or non-bank financial institution.

(12) Increase in the limit of property income for withholding tax: The rate of withholding tax on property income is 7.5% if the annual amount of rent is Rs.100,000 or more. To encourage the housing sector, this limit is enhanced to Rs.200,000 and the rate of withholding tax is reduced to 5%.

(13) Concession on profit or interest from mortgaged property: It is proposed that profit or interest on mortgage of property or other capital charge will be an allowable deduction for the purpose of income tax.

(14) Lease rentals tax deductible: It is proposed that any amount paid or payable to Scheduled Bank or an Investment Bank or DFI or a Modaraba or a Leasing Company by a person in connection with the lease of an asset which is income of the lessor will be allowed as an expense.

(15) Smoothing out the tax liability on defense savings certificates: For investment in Defence Saving Certificates, where profit is payable on maturity or encashment of such certificates, it is proposed to tax such profit in the tax year to which it relates or accrued. The recipient of profit can give option for taxation as per the new provision of law.

(16) Rationalization of the rates of withholding tax for various agents: Withholding tax rate on brokerage and commission is 5% while the said rate in respect of indenting commission agents is 10% which is against the principle of equity. Therefore, it is proposed to reduce the said rate at 5% to bring them at par with other commission agents.

(17) Allowing initial depreciation to imported second hand plant and machinery: To encourage investment in industry, it is proposed to provide initial depreciation to plant and machinery imported second hand and used in Pakistan.

(18) Capital gains on shares of listed companies: Exemption on capital gains of public companies listed on stock exchange would be available upto tax year 2005.

(19) Provision of carry forward of losses incurred during period of exemption: Business loss sustained by a concern during the tax holiday period is not adjustable against income of the post-exemption period. It is proposed that such businesses may also be allowed to carry forward their losses.

(20) Adjustment of fixed income tax at import stage for capital goods: Tax deducted at import stage is final discharge of tax liability except in the case of raw materials imported by industrial undertaking for its own use, which is adjustable at the time of determination of final tax liability. For the minimization of presumptive tax regime and the globalization of taxation, it is proposed that the tax withheld on import of fixed or capital assets imported by an industrial undertaking for its own use may also be made adjustable.

(21) Individuals to pay advance tax on the basis of last assessed income: Advance income tax is payable in four quarterly installments on turnover basis by all the taxpayers. The individuals having non-business income or having share from association of persons or registered firm etc. have no turnover and are, thus, not liable to pay advance tax, whereas previously they were required to pay advance tax on the basis of last assessed income. It is proposed that advance payment of tax on turnover be restricted to companies and AOPs and individuals should pay advance tax on the basis of last assessed income.

(22) Exemption of income of sport boards or authorities: Income derived by any Board or organization established by Government of Pakistan for the purposes of controlling, regulating or encouraging major games and sports recognized by the Government is exempt from income tax. This facility will now be available to bodies other those established by Government of Pakistan.

(23) Certain companies to be treated as public for application of tax rates: The tax law provides tax rates for public, private and banking companies but certain other companies included in the definition of a "company" do not fall in these three categories. It is proposed that such companies will be subject to rates applicable to a public company or an individual, whichever is beneficial to taxpayer.

(24) Dividends from non-resident companies to be taxed at concessional rate: At present dividend from non-resident company is taxed at normal rates. It is proposed to tax the dividend receipt from the non-resident companies at the same rates which are applicable to dividend receipt from a resident company.

(25) Concession for indirect exports registered under DTRE Rules 2001: At present suppliers of manufactured goods to direct exports are taxed at 3.5%. To boost up export suppliers registered under DTRE Rules and receiving payments from the direct exporters against a firm contract for supply of manufactured goods for exports, are proposed to be taxed at reduced rates applicable to direct exporters.

(26) Increasing limit for contribution towards annuity scheme of insurance companies: At present, individual taxpayers are entitled to tax credit for payments by way of contribution to an Annuity Scheme of an Insurance Company approved by SECP upto Rs.100,000 or 10% of taxable income – whichever is less. To promote savings the limit for contribution or premium paid in such annuity scheme is proposed to be raised to Rs.200,000 or 10% of the income, whichever is the less.

(27) Construction contractors executed outside Pakistan by a resident person to be taxed at 1%: Payments on account of construction contracts received by a resident person are subject to withholding tax rate at 6%. To facilitate Pakistani Construction Contractors to actively participate in the re-construction activity of Afghanistan and Iraq side by side international and multinational construction companies, it is proposed to tax them at a reduced rate of 1%.

(28) Facility of advance ruling to non-residents investing in Pakistan: Foreign investors in preparing feasibility report on new projects or industries to be set up in Pakistan usually face difficulty in ascertaining the tax component of the project. Following the international practice provision is proposed to be added for advance ruling on the application of the non-resident taxpayer.

(29) Scope of computer software related services for export explained: Income from export of computer software and related services developed in Pakistan is exempt from tax upto June 30, 2016. The scope of such services has been explained to include software development, software maintenance, system integration, web design, web development, web hosting, network design, call centers, medical transcription, remote monitoring, graphic design etc. etc.

(30) Expanding the definition of public company: Certain companies, like Pak Arab Fertilizer Limited, attract the status of private limited company being subsidiary of government owned companies. This places the companies from brother Muslims countries investing in Pakistan at a disadvantageous position. Since such foreign companies are either government companies or government owned companies and the corporations in Pakistan are also owned by the government, it places them at disadvantageous position only for technical reasons. To facilitate them for a future taxation.

(31) Withdrawal of 20 exemptions: Under a conscious policy the Government is continuously reducing exemptions to bring equity in the income tax law. It is, therefore, proposed to withdraw 20 further exemptions from the said schedule.

(32) Self-assessment scheme: With the promulgation of Income Tax Ordinance 2001, it has been ensured that all classes of taxpayers, irrespective of their status, location or income level will be entitled to avail "Self Assessment Scheme" without any conditions for declaration of income, G.P rate or increased payment of tax. To further improve the facility detailed guidelines are being issued for maximum ease of the taxpayers to ensure voluntary compliance. Under-reporting and other cases of risk assessment shall, however, be subjected to audit. Simultaneously, taxpayers would be required to make declaration of their income on the basis of records and books of accounts they maintain.

(33) Amendments in income tax ordinance: Besides, the above changes, a number of other editorial and technical amendments required to be made for streamlining and simplification of the provisions of the new income tax law are also proposed.

(34) Philanthropy: To bring transparency and uniformity in the provision of exemption for non-profit philanthropic activity, it has been decided that Pakistan Center for Philanthropy be assigned the initial responsibility for setting up a rating system for such organizations. This will be done through a transparently laid down criteria developed by qualified professionals.

(35) Repeal of Wealth Tax Act: It is proposed to repeal the Wealth Tax 1963. With this a lingering apprehension among the taxpayers should come to an end.

(36) Removal of excise duty on paper and board: As part of its policy to reduce excisable items, it has been decided to abolish central excise duty on paper and paperboard altogether. Consequently, prices of printing and writing paper will come down and text books and stationery items should become less expensive for education.

(37) Removal of excise duty on wires and cables: It is also proposed to withdraw CED on wires and cables to support the construction industry.

(38) Reduction in the duty on cement: To give boost to construction industry it is proposed to reduce the excise duty by 25% on cement.

(39) Restoration of supervised clearance: On the demand of the industry, the system of supervised clearance is being restored on cigarettes and cement.

(40) Adjustment of duty to avoid double taxation: Last year, adjustment of central excise duty was allowed in order to remove double taxation on certain items. This year a simplified procedure is being introduced to facilitate the adjustment of duty paid at import and local stages.

(41) Incentive for local production of oilseeds: To encourage local production of oilseeds, it is proposed to replace the existing 10% customs duty with 20% sales tax on imported oilseeds. This measure will be neutral for prices of vegetable ghee and cooking oil while providing strong incentives for enhanced local production of oilseeds.

(42) Incentive to engineering Industry: An exercise was conduced by CBR and Ministry of Industries and Production with a view to removing difficulties being faced by various industries and to provide added incentives to core industries. Primarily focus was placed on heavy engineering, light engineering, ceramics, fan industry and casting and forging. Keeping in view the aforementioned objective rate of duty on ….. categories of items being raw materials and components for these industries is proposed to be reduced.

(43) Incentive for local manufacturing: In order to honor our commitments under WTO, deletion programs of 86 industries are being phased out. Consequently these industries would be left outside the scope of concessionary SROs. However, to preserve incentives at the present level a number of new sub-headings are proposed to be created in the customs tariff. This will help to further promote local manufacturing of refrigerators, air conditioners, bulbs and tube lights, electronics and switch gears, boilers etc.

(44) Rationalization of duty on local car industries: In rationalization of customs tariff, duty rates on over 2500 tariff lines were reduced in the budget of the last financial year. The maximum tariff of 25% is applicable to all imports other than automobiles and spirits. The protection to the local car manufacturer has helped to improve production of vehicles. Now the industry has achieved certain level of strength. Therefore, with a view to providing competitive environment to local industry, the rate of duty on import of cars is proposed to be reduced.

(45) Reduction of duty on import of medical equipment and apparatus: Medical equipment and apparatus based on the use of X-rays or other radiation are widely used for diagnostic purposes in the hospitals and medical institutions. In order to ensure availability of such medical equipment and apparatus at lower price, it is proposed to reduce the rate of customs duty on them from 10% to 5%.

(46) Discouraging smuggling: The smuggling of goods has come down. The reduction of customs tariff on various import items has helped to control smuggling. It is proposed to reduce duty on certain others smuggling prone items. These include tea, ball bearing and spices etc.

(47) Measures for export promotion: A number of measures have been taken to simplify the regime for our exporters. Such measures have had a positive effect on our exports. These measures include simplification of documentation, use of IT and telecommunication means for processing and creation of tariff lines for thousands of new export products for better utilization of quota. This is a continuous work and more will be done in consultation with exporters.

(48) DTRE Rules: The strategy of no-duty no-drawback scheme envisaged in the DTRE Rules, introduced in the year 2001, holds the promise to resolve the issue of refunds. To speed up the use of this scheme, government has improved its working. A DTRE Committee headed by Chairman, Export Promotion Bureau and comprising all stakeholders was constituted to resolve these issues. On its recommendations, DTRE rules were revised in November, 2002 whereby permission was granted for:-

(49) Revised DTRE Rules: Duty drawback would now be available under DTRE on duty paid inputs purchased domestically. Consequently, inputs purchased domestically and not imported under DTRE will get a proportionate percentage of duty-drawback admissible as per rates already notified for exports. Compensatory duty drawback will also be available under DTRE on locally manufactured PSF on deemed imports basis. The government has also agreed, in principle, to allow DTRE for the purpose of sales tax alone in which case the exporter will be able to procure sales tax free inputs and will be entitled to full duty drawback on his duty paid raw materials. The initial utilization period is being enhanced from 12 months to 18 months and scope of DTRE is being extended to cover supplies against international tenders. The demand of the industry for considering supplies to DTRE manufacturer as exports for the purpose of SRO 554 and income tax has also been approved with necessary safeguards. The government has shown great flexibility for facilitation of exporters by way of the measures mentioned above. We urge the trade & industry to adopt the DTRE scheme to permanently eliminate irritants related to refunds and make their contribution towards documentation of economy.

(50) Sales tax audit: There are complaints that sales tax payers are subjected to audits many times in the same financial year. This cannot be allowed to continue. It is announced that in future there will be only one audit per year by the Sales Tax Department. Unlike in the past, the taxpayer would be provided a copy of the audit report besides the opportunity to explain his point of view with reference to audit observations. The Auditor would also give a certificate to the taxpayer that his record had been audited for a specified period of time.

(51) Settlement of past liabilities: In consultation with Federation of Chambers of Commerce and Industry and other representative bodies of the taxpayers it has been decided to grant relief for liabilities of sales tax before 30^th June, 2000. The persons who have been registered either voluntarily or compulsorily with effect from 01-07-2000, would now be liable to pay turnover tax @ 2% on the basis of their declaration with income tax authorities for the financial years 2000-2001 and 2001-2002 without any additional tax and penalty. Moreover, all business persons who get registered upto 30^th September, 2003 pay turnover tax @ 2% only for one year and no question would be asked about past liabilities. This is a major concession to facilitate transition to a full VAT mode tax system. This facility will have to be availed before 30-9-2003.

(52) Incentive for export of high quality agriculture exports: The government has also decided to provide incentives for enhanced exports of high quality products of the agriculture and livestock sectors e.g. rice, dairy produce, graded, sorted and preserved fruits and vegetables, etc. For such uses, selected machinery and equipment previously attracting sales tax will be zero rated.

(53) Removing the import bias of sales tax: The existing GST regime, to the extent of available exemptions, is biased against local production and encourages imports instead. One such anomaly was removed earlier in so far as exemption on procurement of machinery and equipment by the oil and gas sector were concerned by zero-rating local supplies to such sectors. To ensure that local production is not at a disadvantage, the facility of zero-rating is being extended to a number of items. The list of such items is separately provided.

(54) Relief Measures: It is also proposed to reduce the rate of additional tax from 2% to 1% per month besides reduction in penalty for late filing of return from Rs.5000 to Rs.100 per day for the first 15 days after the notified date for filing of return. The mandatory deposit of full adjudged amount of taxes before filing of appeal is also now being reduced to only 25%. However, the Appellate Authority can stay the recovery. Limit of mandatory payment of sale proceeds within a period of 120 days is proposed to be substituted so that the payment of sale proceeds through the banking instruments is only confined to the payment of the amount of sales tax.

(55) Retail stage taxation: To facilitate registration by small traders, it is proposed that the turnover threshold may be enhanced from Rs.5 million to Rs.20 million per annum. A defined set of parameters will be notified to compute the turnover and the tax liability of small and medium enterprises up to the enhanced monetary limits. These parameters will be size and location of the business, type of business, number of workers, amount of capital employed etc. It is hoped that this significant relief will go a long way in improving tax compliance.

(56) Amendments in Sales Tax Act: A number of amendments are also proposed in the Sales Tax Act to facilitate the taxpayers and to remove the legal infirmities besides ensuring facilitation to the taxpayers.