INCOME TAX:
TAXATION OF DIVIDEND INCOME OF CORPORATE TAXPAYERS
The following table sets out the Key Budget Financials:
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2013-2014 2012-2013
Rs in Rs in
Billion % Billion %
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Tax revenue 2,598 2,504
Non-tax revenue 822 730
Gross revenue receipts 3,420 100 3,234 100
Less: Transfer to Provinces (1,503) 44 (1,460) 45
Net revenue receipts 1,917 56 1,774 55
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Expenditure
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Current expenditure 2,829 2,396
Development expenditure 762 564
3,591 105 2,960 92
Deficit (1,674) 49 (1,186) 37
Domestic debts non-bank 507 487
Domestic debts banks 975 484
Foreign debt 169 135
Surplus from provinces 23 80
1,674 1,186
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INCOME TAX
TAXATION OF DIVIDEND INCOME OF CORPORATE TAXPAYERS
[Section 8]
Presently dividend income of a corporate taxpayer is excluded from the ambit of Final Tax Regime (FTR) of section 8 read with section 169 and is subject to tax at the rate of 10 per cent as a separate block of income. It is proposed to bring the dividend income of corporate taxpayer under the FTR of section 8 read with section 169 as was the case prior to July 1, 2007. However, dividend income of a corporate taxpayer will continue to be taxed at the rate of 10 per cent.
SET OFF OF LOSSES
[Section 56]
Presently loss under any head of income for the year could be set off against income under any other head for the year. It is now proposed that such loss shall not be available for set off against income under the head 'Salary' for that year.
PERSON - DEFINITION
[Section 80]
The definition of "Company" has been enlarged to include:
-A "non-profit organization"; and
-An "entity" or a "body of persons" established or constituted by or under any law for the time being in force.
In addition to cooperative and finance societies, all other societies will now be treated as company.
UNEXPLAINED INCOME OR ASSETS
[Section 111]
Agricultural income can be taken into account in explaining the source and nature of an asset or expenditure only to the extent of the amount worked back on the basis of agricultural income tax paid by a person under the relevant provincial laws.
MINIMUM TAX
[Section 113]
The minimum tax payable by a resident company, individual or Association of Persons (AOPs), has been increased from 0.5 per cent to 1 per cent of their turnover.
It is proposed that in addition to corporate taxpayers, henceforth non-salaried individuals and AOPs will also be entitled to adjust minimum tax paid for the year against the tax liability (other than minimum tax) for the subsequent five tax years.
TAX ON INCOME OF CERTAIN PERSONS / MINIMUM TAX ON BUILDERS
[Sections 113A and 113B]
Presently, retailers being individuals or AOPs having turnover upto Rs 5 million or more for any tax year, could opt to pay final tax which scheme of taxation is proposed to be withdrawn. Taxation of retailers is now inter alia dealt in section 236H.
Under the substituted sections, minimum tax is proposed at the rate of Rs 25 per square foot, as per the construction or site plan approved, on persons deriving income from the business of construction and sale of residential, commercial or other buildings.
A similar levy of minimum tax is proposed at the rate of Rs 50 per square yard, as per the layout or site plan approved, on persons deriving income from the business of land developers from sale of residential, commercial or other plots.
This minimum tax shall be paid on the basis of total number of square feet / yards sold or booked for sale during the year.
RETURN OF INCOME
[Section 114]
It is proposed to require the following to also file a return of income:
- persons having commercial or industrial connections of electricity where the amount of annual bill exceeds Rs 500,000; presently the threshold is annual bill exceeding Rs 1,000,000.
- persons registered with any Chamber of Commerce and Industry or any trade or business association or any market committee or any professional body including Pakistan Engineering Council, Pakistan Medical and Dental Council, Pakistan Bar Council or any Provincial Bar Council, Institute of Chartered Accountants of Pakistan or Institute of Cost and Management Accountants of Pakistan.
- individuals having income under the head 'Income from Business' in excess of Rs 300,000 but not exceeding Rs 400,000 in a tax year.
Presently, the Commissioner has to allow time of at least one month or more to a person who is issued a notice to furnish his return of income. It is proposed to now empower the Commissioner to require furnishing of the return within a period of less than 30 days.
It is also proposed that the written approval of the Commissioner for revising the return will have to be filed with revised return of income.
PERSONS NOT REQUIRED TO FURNISH A RETURN OF INCOME
[Sections 115 and 118]
Presently, a taxpayer whose entire income in a tax year consists of income chargeable under the head 'Salary' is not required to file his return of income, if the employer has filed related annual statement of deduction of income tax from salary, provided his salary income for the tax year does not exceed Rs 500,000. The relief is proposed to be withdrawn and consequently such taxpayers are required to file return of income.
The requirement of electronic filing of return by the salaried individual having salary income of Rs 500,000 or more remains applicable.
WEALTH STATEMENT
[Section 116]
It is proposed to require every resident taxpayer being an individual filing return of income or statement of Final Tax to file a wealth statement irrespective of any threshold of income or tax paid.
It is also proposed that a revised wealth statement must be accompanied with revised reconciliation of wealth statement and reasons for revision thereof.
INVESTMENT TAX ON INCOME
[Section 120A]
It is proposed to withdraw power of Federal Board of Revenue (FBR) to make investment tax schemes.
PROVISIONAL ASSESSMENT
[Section 122C]
Presently, the provisional assessment cannot be enforced, if a return of income is filed within 60 days from date of service of such provisional assessment order. It is now proposed to restrict such period to 45 days.
APPOINTMENT OF THE APPELLATE TRIBUNAL
[Section 130]
It is proposed to allow induction of officers of Inland Revenue Service, being a law graduate, having at least 15 years of service in BS-17 and above, as Judicial members of the Tribunal.
SALARY
[Section 149]
The responsibility for withholding tax from salary has now been extended to any "person responsible for" paying salary. Previously, it was only the "employer" who was responsible for the withholding.
It is now proposed not to consider the following, whilst determining tax to be withheld from salary payments:
a) Charitable donations;
b) Tax credit for investment in shares and insurance;
c) Contribution to an "Approved Pension Fund"; and
d) Profit paid on loan utilized for construction of a new house or acquisition of a house.
As a result, the salaried individuals will claim the above tax credits in their returns, which may result in refund.
PAYMENTS TO NON-RESIDENTS
[Section 152]
It is proposed that definition of "prescribed person" used in sub-section (7) of section 153 would apply for the purpose of sub-section (2A) of section 152 in respect of payments to a Permanent Establishment of a non-resident for sale of goods, rendering of or providing services and execution of contracts.
PAYMENTS FOR GOODS, SERVICES AND CONTRACTS
[Section 153]
A person registered under the Sales Tax Act, 1990 (Act), is now included in the definition of a "prescribed person" responsible for withholding tax on payments for sale of goods, services and execution of contracts.
PAYMENTS TO TRADERS AND DISTRIBUTORS
[Section 153A]
This section required manufacturers to collect tax from traders and distributors. The operations of this section was suspended and it is now proposed to be omitted, however, similar provision with a limited scope, is being introduced in section 236G.
INCOME FROM PROPERTY
[Section 155]
The "prescribed person" for the purposes of withholding tax from payment of rent will now also include the following:
- charitable institutions.
- private educational institutions, boutiques, beauty parlours, hospitals, clinics or maternity homes.
- individual or AOPs paying gross rent of Rs 1,500,000 and above in a year.
CERTIFICATE OF COLLECTION OR DEDUCTION OF TAX
[Section 164]
Presently, a certificate issued by a withholding agent for tax collected or deducted is treated sufficient evidence of tax suffered for claiming credit thereof under section 168. This facilitation is proposed to be withdrawn.
The law envisages furnishing of copies of challans / receipts of payment with the return of income. It appears that such evidences will be verified by the department for allowing the credit for tax collected or deducted claimed in the return of income.
STATEMENTS
[Section 165]
It is proposed to clarify that the provisions of section 165 shall override all conflicting provisions in following laws restricting certain divulgence of information:
- Protection of Economic Reforms Act, 1992
- Banking Companies Ordinance, 1962
- Foreign Exchange Regulations Act, 1947
- Regulations made under the State Bank of Pakistan Act, 1956.
Further, it is proposed to remove the requirement for including particulars of salary paid, where the income exceeds Rs 300,000 but does not exceed Rs 350,000 from annual statement of tax deduction from salary.
FURNISHING OF INFORMATION BY BANKS
[Section 165A]
It is proposed that every banking company shall make arrangements to provide following to the FBR:
- online access to its central database containing details of its account holders and all transactions made in their accounts;
- list containing particulars of deposits aggregating Rs 1,000,000 or more made during the preceding calendar month;
- list of payments made by any person against bills raised in respect of a credit card issued to that person, aggregating Rs 100,000 or more during the preceding calendar month;
- consolidated list of loans written off exceeding Rs 1,000,000 during a calendar year; and
- a copy of each Currency Transactions Report and Suspicious Transactions Report generated and submitted by it to the Financial Monitoring Unit under the Anti-Money Laundering Act, 2010.
Further, each banking company shall nominate a senior officer at the head office to coordinate with the FBR for provision of any additional information and documents as may be required by the FBR. The banking companies and their officers shall not be liable to any civil, criminal or disciplinary proceedings against them for furnishing the requisite information. The information collected shall only be used for tax purposes and kept confidential.
This provision shall be applicable notwithstanding anything contained in any law for the time being in force including but not limited to the Banking Companies Ordinance, 1962, the Protection of Economic Reforms Act, 1992, the Foreign Exchange Regulation Act, 1947 and the regulations made under the State Bank of Pakistan Act, 1956.
This provision is likely to be a source of great concern as the tax authorities have been given wide powers to probe into banking transactions in general. Also, the effect of this provision overriding other important legislations will also likely lead to litigation and, therefore, the provision needs to be revisited and suitably tailored so as to be enforced judiciously and fairly.
ADDITIONAL PAYMENT FOR DELAYED REFUNDS
[Section 171]
It is proposed to clarify that for the purposes of compensation, refund becomes due from the date of the refund order, made on an application under sub-section (1) of section 170, and not from the date of assessment of income treated to have been made by the Commissioner under section 120.
REPRESENTATIVES
[Section 172]
Any person in Pakistan can be regarded a representative of a non-resident, inter alia where such person has any business connection with the non-resident person. An explanation is proposed to be inserted whereby the expression "business connection" would include transfer of asset or business in Pakistan by a non-resident. It appears that the Commissioner is now empowered to recover tax liabilities of the non-resident from a person who has purchased assets or business from the non-resident in Pakistan. This amendment is similar to the one contained in the Indian Income Tax Act, 1961.
AUDIT
[Sections 177 and 214C]
It is proposed to clarify that the Commissioner's power to select and conduct audit of a person is independent of powers conferred on the FBR under section 214C for selection of a person for tax audit.
Apparently, the proposed amendment is aimed to nullify the effect of a recent decision of Lahore High Court holding that powers to select taxpayers' cases for audit only vested with FBR. Similar amendments are also proposed in The Act and Federal Excise Act, 2005 (FED Act).
TAXPAYERS REGISTRATION
[Section 181]
It is proposed that the FBR may allow the use of Computerized National Identity Card as an alternative to National Tax Number (NTN).
DISPLAYING OF NTN
[Section 181C]
Presently, NTN is required to be displayed at a conspicuous place at every place of business by a taxpayer under Rule 83(1) of the Income Tax Rules, 2002. It is now proposed to be included in the Ordinance.
It is also proposed to levy penalty of Rs 5,000 under section 182 for non compliance with this section.
OFFENCES AND PENALTIES
[Section 182]
The following changes in penalties are proposed:
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Offence Existing penalty Proposed penalty
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Where any person fails to 0.1% of the tax payable for 0.1% of the tax payable for each
furnish a return of income as each day of default subject day of default subject to a
required under section 114 to a minimum penalty of Rs 5,000 minimum penalty of Rs 20,000
within the due date. and a maximum penalty of and a maximum penalty of 50%
25% of the tax payable in of the tax payable in respect
respect of that tax year. of that tax year.
Where any person fails to 0.1% of the tax payable for Rs 2,500 for each day of default
Furnish a statement as each day of default subject to subject to a minimum penalty of
Required under section 115, a minimum penalty of Rs 5,000 Rs 50,000.
165 or 165A within the due and a maximum penalty of
date 25% of the tax payable in
respect of that tax year.
Where a person fails to 0.1% of the tax payable for Rs 100 for each day of default.
Furnish wealth statement or each day of default subject to
Wealth reconciliation a minimum penalty of Rs 5,000
statement. and a maximum penalty of
25% of the tax payable in
respect of that tax year.
Where a taxpayer who,
without any reasonable
cause, in non compliance
with the provisions of
section 177:
(a) fails to produce the Rs 5,000 Rs 25,000
record or documents on
receipt of first notice;
(b) fails to produce the Rs 10,000 Rs 50,000
records or documents on
receipt of second notice;
(c) fails to produce the Rs 50,000 Rs 100,000
record or documents on
receipt of third notice.
Any person who fails to Rs 5,000 for first default and Rs 25,000
furnish the information Rs 10,000 for each for first
required or to comply with subsequent default. default and
any other term of the notice Rs 50,000 for each
served under section 176. subsequent default
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REWARD TO INLAND REVENUE OFFICERS AND OFFICIALS
[Section 227A]
It is proposed that the FBR may make rules for grant of reward to Inland Revenue Officers and officials for their meritorious conduct and informers providing credible information in cases involving concealment and evasion of income tax and other taxes. Such cash rewards will be given only after realisation of part or whole of the tax involved in such cases.
DIRECTORATE GENERALS OF LAW AND RESEARCH & DEVELOPMENT
[Sections 230B and 230C]
It is proposed to create new directorates within FBR relating to functions, jurisdiction and powers to be specified for "Directorate-General of Law" and "Directorate-General of Research and Development".
COLLECTION OF TAX BY NATIONAL CLEARING COMPANY OF PAKISTAN LIMITED (NCCPL)
[Section 233AA and Division IIB of Part IV of the First Schedule]
It is proposed to enhance the scope of collection of advance tax at the rate of 10 per cent by NCCPL from margin financiers, trading financiers and lenders on providing of any margin financing, margin trading or securities lending under Securities (Leveraged Markets and Pledging) Rules, 2011 in share business.
TAX ON GOODS TRANSPORT
[Section 234]
Besides certain editorial changes, the tax paid under this section is proposed to be adjustable. Presently the tax paid on goods transport vehicles is under FTR.
COLLECTION OF ADVANCE TAX
[Sections 236D to 236J]
It is proposed to collect advance tax as follows:
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Transactions/Persons
Section subject to advance Collection/withholding agent Rate applicable
Tax collection
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236D Persons arranging Owner, lease-holder, operator/ 10% of total amount of
functions and gathering manager of marriage hall, bill from the person
related to wedding, marquee, hotel, restaurant, arranging the gathering.
seminar, workshop, commercial lawn, club,
session, exhibition, community place etc.
concert, show, party or any
other gathering for such
purpose.
236E Distributor of foreign Person responsible for censoring Rs 1,000,000 on film;
produced films, TV plays or certifying a foreign-produced Rs 100,000 per TV play
and serials film, TV drama serial or play. /episode of serial.
236F Cable operators and other PEMRA at the time of Rs 7,500 to
electronic media issuance/renewal of license Rs 5,000,000.
236G Distributors, dealers and Manufacturers or commercial 0.1 per cent of the gross
wholesaler importers of electronics, sugar, value of sales.
cement, iron and steel products,
fertilizer, motorcycles, pesticides,
cigarettes, glass, textile,
beverages, paint or foam.
236H Retailers Manufacturer, distributors, dealer 0.5 per cent of the gross
and wholesaler or commercial value of sales.
importer of electronics, sugar,
cement, iron and steel products,
fertilizer, motorcycles, pesticides,
cigarettes, glass, textile,
beverages, paint or foam.
236I Educational fee/charges Educational institutions 5 per cent of the fee
where annual fee exceeds
Rs 200,000.
236J Dealers, commission Market committee or body formed Rs 5,000 to Rs 10,000
agents or arhatis, etc. under any provincial or local law.
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FIRST SCHEDULE
TAX RATES FOR AOPs AND NON-SALARIED INDIVIDUALS
[Clause (1) of Division I of Part I of First Schedule]
Currently, income of AOPs and non-salaried individuals are taxable at rates ranging from 10 per cent to 25 per cent of taxable income.
The Bill proposes to substitute the existing slab rates with the following slabs, effective July 1, 2013:
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S.No. Taxable Income Rate of tax
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1 Where the taxable income does not 0%
exceed Rs 400,000
2 Where the taxable income exceeds 10% of the amount exceeding
Rs 400,000 but does not exceed Rs 400,000
Rs 750,000
3 Where the taxable income exceeds Rs 35,000 + 15% of the amount
Rs 750,000 but does not exceed exceeding Rs 750,000
Rs 1,500,000
4 Where the taxable income exceeds Rs 147,500 + 20% of the amount
Rs 1,500,000 but does not exceed exceeding Rs 1,500,000
Rs 2,500,000
5 Where the taxable income exceeds Rs 347,500 + 25% of the amount
Rs 2,500,000 but does not exceed exceeding Rs 2,500,000
Rs 4,000,000
6 Where the taxable income exceeds Rs 722,500 + 30% of the amount
Rs 4,000,000 but does not exceed exceeding Rs 4,000,000
Rs 6,000,000
7 Where the taxable income exceeds Rs 1,322,500 + 35% of the amount
Rs 6,000,000 exceeding Rs 6,000,000
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The change in effective incidence of tax liability under the proposed amendments, when compared with existing provisions, could be demonstrated as under:
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S. Taxable Income Existing Proposed Tax Impact in
No. (per annum) Tax Liability Tax Liability Tax Impact Percentage
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Rupees
==========================================================================
1 400,000 - - -
2 700,000 30,000 30,000 - 0%
3 1,000,000 72,500 72,500 - 0%
4 1,300,000 117,500 117,500 - 0%
5 1,800,000 207,500 207,500 - 0%
6 2,000,000 247,500 247,500 - 0%
7 3,000,000 472,500 472,500 - 0%
8 4,000,000 722,500 722,500 - 0%
9 5,000,000 972,500 1,022,500 50,000 5%
10 6,000,000 1,222,500 1,322,500 100,000 8%
11 7,000,000 1,472,500 1,672,500 200,000 14%
12 8,000,000 1,722,500 2,022,500 300,000 17%
13 9,000,000 1,972,500 2,372,500 400,000 20%
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TAX RATES FOR SALARIED INDIVIDUALS
[Clause (1A) of Division I of Part I of the First Schedule]
The Bill also proposes to substitute the tax rates applicable to salaried individuals effective July 1, 2013 as under:
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S.No. Taxable Income Rate of tax
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5. Where the taxable income exceeds Rs 77,500 + 12.5% of the amount
Rs 1,300,000 but does not exceed exceeding Rs 1,300,000
Rs 1,800,000
6. Where the taxable income exceeds Rs 140,000 + 15% of the amount
Rs 1,800,000 but does not exceed exceeding Rs 1,800,000
Rs 2,200,000
7. Where the taxable income exceeds Rs 200,000 + 17.5% of the amount
Rs 2,200,000 but does not exceed exceeding Rs 2,200,000
Rs 2,600,000
8. Where the taxable income exceeds Rs 270,000 + 20% of the amount
Rs 2,600,000 but does not exceed exceeding Rs 2,600,000
Rs 3,000,000
9. Where the taxable income exceeds Rs 350,000 + 22.5% of the amount
Rs 3,000,000 but does not exceed exceeding Rs 3,000,000
Rs 3,500,000
10. Where the taxable income exceeds Rs 462,500 + 25% of the amount
Rs 3,500,000 but does not exceed exceeding Rs 3,500,000
Rs 4,000,000
11. Where the taxable income exceeds Rs 587,500 + 27.5% of the amount
Rs 4,000,000 but does not exceed exceeding Rs 4,000,000
Rs 7,000,000
12. Where the taxable income exceeds Rs 1,412,500 + 30% of the amount
Rs 7,000,000 exceeding Rs 7,000,000
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The significant changes, apart from variation in rates, are:
- There would be twelve slabs as against six slabs currently provided for.
- The highest rate of 30 per cent would apply on income exceeding Rs 7,000,000 per annum, whereas this income is currently taxable at the rate of 20 per cent.
Since progressive slab rates are proposed, the concept of 'marginal relief' introduced through Finance Act 2008 and amended through Finance Act 2009 is now proposed to be omitted.
The change in effective incidence of tax liability under the proposed amendments, when compared with existing provisions (without marginal relief), could be demonstrated as under:
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S. Taxable Income Existing Tax Proposed Tax Impact
No. (per annum) Liability Tax Liability Tax Impact in Percentage
Rupees
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1 400,000 - - - 0%
2 600,000 10,000 12,500 2,500 25%
3 800,000 22,500 27,500 5,000 22%
4 1,200,000 62,500 67,500 5,000 8%
5 1,600,000 110,000 115,000 5,000 5%
6 2,000,000 170,000 170,000 - 0%
7 2,400,000 245,000 235,000 (10,000) (4%)
8 2,800,000 480,000 310,000 (170,000) (35%)
9 3,200,000 560,000 395,000 (165,000) (29%)
10 3,600,000 640,000 487,500 (152,500) (24%)
11 4,000,000 720,000 587,500 (132,500) (18%)
12 4,400,000 800,000 697,500 (102,500) (13%)
13 4,800,000 880,000 807,500 (72,500) (8%)
14 5,200,000 960,000 917,500 (42,500) (4%)
15 5,600,000 1,040,000 1,027,500 (12,500) (1%)
16 6,000,000 1,120,000 1,137,500 17,500 2%
17 6,400,000 1,200,000 1,247,500 47,500 4%
18 6,800,000 1,280,000 1,357,500 77,500 6%
19 7,200,000 1,360,000 1,472,500 112,500 8%
20 7,600,000 1,440,000 1,592,500 152,500 11%
21 8,000,000 1,520,000 1,712,500 192,500 13%
22 8,400,000 1,600,000 1,832,500 232,500 15%
23 8,800,000 1,680,000 1,952,500 272,500 16%
24 9,200,000 1,760,000 2,072,500 312,500 18%
25 9,600,000 1,840,000 2,192,500 352,500 19%
26 10,000,000 1,920,000 2,312,500 392,500 20%
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The increase in charge for lower slab rates needs to be rationalised.
CORPORATE TAX RATE
[Division II of Part I of the First Schedule]
The Bill proposes to reduce the rate of tax on the taxable income of a company, other than a banking company, to 34 per cent from the existing rate of 35 per cent. The reduced rate is only applicable for the tax year 2014.
In the Budget Speech, the Finance Minister has proposed to gradually reduce the existing corporate tax rate to 30 per cent by providing a maximum reduction of 1 per cent each year.
INCOME FROM PROPERTY
[Division VI of Part I and Division V of Part III of the First Schedule]
The annual rental income exceeding Rs 1 million derived by individuals, AOPs and companies have now been proposed to be taxed at the following progressive rates:
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Rent slabs Individuals and AOPs Companies
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Where the gross amount of rent Rs 57,500 plus 10 per cent of Rs 65,000 plus 10 percent of
exceeds Rs 1,000,000 but does the gross amount of rent the gross amount of rent
not exceed Rs 2,000,000 exceeding Rs 1,000,000 exceeding Rs 1,000,000
Where the gross amount of rent Rs 157,500 plus 12.5 per Rs 165,000 plus 12.5 percent
exceeds Rs 2,000,000 but does cent of the gross amount of of the gross amount of rent
not exceed Rs 3,000,000 rent exceeding Rs 2,000,000 exceeding Rs 2,000,000
Where the gross amount of rent Rs 282,500 plus 15 per cent Rs 290,000 plus 15 percent of
exceeds Rs 3,000,000 but does of the gross amount of rent the gross amount of rent
not exceed Rs 4,000,000 exceeding Rs 3,000,000 exceeding Rs 3,000,000
Where the gross amount of rent Rs 432,500 plus 17.5 per Rs 440,000 plus 17.5 percent
exceeds Rs 4,000,000 cent of the gross amount of of the gross amount of rent
rent exceeding Rs 4,000,000 exceeding Rs 4,000,000
==============================================================================================
The above rates would also be applicable for withholding tax.
ADVANCE TAX ON IMPORTS
[Part II of the First Schedule]
The rates of advance tax to be collected by the Collector of Customs under section 148 are proposed to be enhanced from 5 to 5.5 per cent in case of all taxpayers excluding companies and industrial undertakings, for which the previous rate remains applicable.
WITHHOLDING TAX ON GOODS AND SERVICES
[Division III of Part III of the First Schedule]
The rates of tax to be deducted from payments for sale of goods, services and execution of contract made to all the taxpayers, except companies, are proposed to be enhanced as follows:
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Sale of goods: from 3.5 to 4 per cent
Rendering or providing of services: from 6 to 7 per cent
Execution of contract: from 6 to 6.5 per cent
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PRIZES AND WINNINGS
[Division VI of Part III of the First Schedule]
The rate of withholding tax to be deducted on a prize on prize bond or crossword puzzle, is proposed to be enhanced from 10 to 15 per cent.
ADVANCE TAX ON MOTOR VEHICLES
[Division III of Part IV of the First Schedule]
The amount of advance tax to be collected under section 234 where the motor vehicle tax is paid on a lump sum basis, has now been prescribed as follows:
=======================================
Amount of Advance Tax
Engine Capacity Rs
=======================================
Upto 1000cc 7,500
1001cc to 1199cc 12,500
1200cc to 1299cc 17,500
1300cc to 1599cc 30,000
1600cc to 1999cc 40,000
Above 2000cc 80,000
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WITHHOLDING TAX ON CASH WITHDRAWALS FROM A BANK
[Division VI of Part IV of the First Schedule]
The withholding tax rate on cash withdrawals from a bank is proposed to be enhanced from 0.2 to 0.3 per cent of the gross amount of withdrawal. The currently applicable limit of per day cash withdrawal upto Rs 50,000 not subject to such withholding, remains intact.
ADVANCE TAX ON PURCHASE OF MOTORCARS AND JEEPS
[Section 231B and Division VII of Part IV of the First Schedule]
The amounts of advance tax to be collected by the Motor Vehicle registration authority on the registration of new motorcars / jeeps are proposed to be revised as under:
=====================================================
Engine Capacity Existing Advance Revised Advance
tax tax
Rupees
=====================================================
Upto 850cc 7,500 10,000
851cc to 1000cc 10,500 20,000
1001cc to 1300cc 16,875 30,000
1301cc to 1600cc 16,875 50,000
1601cc to 1800cc 22,500 75,000
1801cc to 2000cc 25,000 100,000
Above 2000cc 50,000 150,000
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ADVANCE TAX AT THE TIME OF SALE BY AUCTION
[Section 236A and Division VIII of Part IV of the First Schedule]
The rate of advance tax to be collected by a person making sale of any property or goods by public auction has been enhanced to 10 per cent from the existing rate of 5 per cent of the gross sale price of such property or goods.
SECOND SCHEDULE
PART I - EXEMPTIONS FROM TOTAL INCOME
PERQUISITE OF FREE OR CONCESSIONAL PASSAGE
[Clause (53A) of Part I of the Second Schedule]
The perquisite of free or concessional passage provided by transporters including airlines to its employees (including the members of their households and dependants) was exempted from the Salary income vide Finance Act, 2005. This exemption is now proposed to be withdrawn.
INCOME OF UNIVERSITY OR OTHER EDUCATIONAL INSTITUTIONS
[Clause (92) of Part I of the Second Schedule]
Any income of any university or other educational institution established solely for educational purposes and not for purposes of profit, was exempt from tax under clause (86) of Part I of the Second Schedule to the repealed Income Tax Ordinance, 1979. The said exemption was continued under clause (92) of Part I of the Second Schedule to the Income Tax Ordinance, 2001 (Ordinance).
The Bill proposes to withdraw the above exemption and consequently, such universities and educational institutions will now be required to compute their taxable income and pay tax at the applicable rates.
INCOME FROM ICC CHAMPIONS TROPHY 2008
[Clause (98A) of Part I of the Second Schedule]
A specific clause was inserted in 2008 to exempt any income derived by International Cricket Council Development (International) Limited (IDI), International Cricket Council (ICC), employees, officials, agents and representatives of IDI and ICC, officials from ICC members, players, coaches, medical doctors and officials of member countries, IDI partners and media representatives, other than persons who were resident of Pakistan, from ICC Champions Trophy, 2008 which was scheduled to be hosted in Pakistan.
The above clause, being redundant, is proposed to be withdrawn.
DIVIDEND IN SPECIE
[Clause (103B) of Part I of the Second Schedule]
Tax on any dividend in specie derived in the form of shares in a Company, as defined in the Companies Ordinance, 1984 was effectively deferred in a certain manner with effect from July 1, 2010. Where such shares are disposed by the recipient, the amount representing the dividend in specie is taxed at the rate of 10 per cent in accordance with section 5, and the amount representing the difference between the consideration received and the amount taxed as dividend, is taxed under the head Capital Gains under section 37 or 37A, as the case may be.
The Bill proposes to withdraw the above concession and consequently, dividend in specie will be taxed under section 5 at the rate of 10 per cent in the tax year in which the same is received by the shareholder.
SPECIAL ECONOMIC ZONES (SEZ)
[Clause (126E) of Part I of the Second Schedule]
Since July 2009, following corporate income tax holiday had been available with regard to SEZ as announced by the Federal Government:
(a) for a period of five years for projects from the date of start of commercial operations; and
(b) for a period of ten years for developers of the Zone from the date of start of developmental activity in the SEZ.
The Bill proposes to substitute the existing clause 126E by exempting the following:
(a) the income derived by a zone enterprise as defined in the SEZ Act, 2012 for a period of ten years starting from the date the developer certifies that the zone enterprise has commenced commercial production; and
(b) for a period of ten years to a developer of a zone starting from the date of signing of the development agreement in the SEZ as announced by the Federal Government.
PART II - REDUCTION IN TAX RATES
IMPORT OF HYBRID CARS
[Clause (28) of Part II of the Second Schedule]
The Bill proposes to insert a new clause (28) in Part II of the Second Schedule providing for the reduction of tax under section 148 on import of hybrid cars as follows:
======================================
Engine Capacity Rate of reduction
======================================
Upto 1200 cc 100%
1201 to 1800 cc 50%
1801 to 2500 cc 25%
======================================
PART III - REDUCTION IN TAX LIABILITY
FLYING AND SUBMARINE ALLOWANCES
[Clause (1) of Part III of the Second Schedule]
Any amount received as following allowances is presently taxed at 2.5 per cent as a separate block of income:
(a) flying allowance by pilots, flight engineers, navigators of Pakistan Armed Forces, Pakistani Airlines or Civil Aviation Authority, Junior Commissioned Offices or other ranks of Pakistan Armed Forces; and
(b) submarine allowance by the officers of the Pakistan Navy.
The Bill proposes to withdraw the above concessions and consequently, these allowances will be taxed at the applicable rates.
TAX PAYABLE BY A FULL TIME TEACHER OR A RESEARCHER
[Clause (2) of Part III of the Second Schedule]
The tax payable by a full time teacher or a researcher, employed in a non profit education or research institution duly recognised by Higher Education Commission, a Board of Education or a University recognised by the Higher Education Commission, including government training and research institution is presently reduced by an amount equal to 75 per cent of tax payable on his income from salary.
The above reduction in tax liability is now proposed to be withdrawn.
DISTRIBUTORS OF CIGARETTES
[Clause (7) of Part III of the Second Schedule]
Where any company engaged in the business of distribution of cigarettes manufactured in Pakistan is required to pay minimum tax on the amount representing its turnover under section 113, the amount of tax payable under the said section is reduced by eighty per cent.
The above concession is proposed to be extended to non-corporate taxpayers i.e. Individuals and AOPs, who are engaged in the business of distribution of cigarettes manufactured in Pakistan.
PART IV - EXEMPTION FROM SPECIFIC PROVISIONS
PROFIT ON DEBT
[Clause (59)(iv)(a) of Part IV of the Second Schedule]
In the case of any resident individual, no tax is required to be deducted under section 151 from income or profits paid on Defence Saving Certificates, Special Savings Certificates, Savings Accounts or Post Office Savings Accounts, or Term Finance Certificates (TFCs), where such deposit does not exceed Rs 150,000.
The Bill proposes to withdraw the above exemptions effective July 1, 2013.
INCOME FROM HAJJ OPERATIONS
[Clause (72A) of Part IV of the Second Schedule]
The following provisions are proposed to be not applicable in case of a Hajj Group Operator in respect of Hajj operations, provided that the tax has been paid at the rate of Rs 3,500 per Hajji for the tax year 2013 and Rs 5,000 per Hajji for the tax year 2014 in respect of income from Hajj operations:-
(a) Section 21(l)
Any expenditure for a transaction paid or payable under a single account head which, in aggregate, exceeds Rs 50,000 made other than by a crossed cheque drawn on a bank or by crossed bank draft or crossed pay order or any other crossed banking instrument showing transfer of amount from the business bank account of the taxpayer.
(b) Section 113
Minimum tax payable at the rate of 0.5 per cent (proposed by Finance Bill 2013 to be enhanced to 1 per cent) of the turnover from all sources of the tax year where either no tax is payable or the tax paid or payable is less than the rate of minimum tax.
(c) Section 152
Requirement for every person to withhold tax from any payment made to a non-resident person other than certain exceptions laid down in the said section.
IMPORTS BY AN INDUSTRIAL UNDERTAKING
[Clause (72B) of Part IV of the Second Schedule]
Under section 148, the Collector of Customs is required to collect advance tax from every importer of goods on the value of goods at the applicable rate, which is ordinarily treated as a final tax on the income of the importer arising from the imports except inter alia in the case of import of raw material, plant, machinery, equipment and parts by an industrial undertaking for its own use.
The Bill proposes to insert a new clause in Part IV of the Second Schedule whereby the provisions of section 148 will not apply to an industrial undertaking, if the tax liability for the current tax year, on the basis of determined tax liability for any of the preceding two tax years, whichever is higher, has been paid and a certificate to this effect is issued by the concerned Commissioner.
THIRD SCHEDULE
Part II - Initial Allowance
Currently 'eligible depreciable assets' are entitled to initial allowance at the rate of 50 per cent for plant and machinery and 25 per cent for buildings.
The Bill now proposes to reduce the rate of initial allowance to 25 per cent in the case of plant and machinery.
SEVENTH SCHEDULE
[Rule 6 of Seventh Schedule]
The Bill proposes to reduce the rate of tax from 35 per cent to 25 per cent on dividend received from Money Market Funds and Income Funds for tax year 2014 and onwards.
SALES TAX
INADMISSIBILITY OF INPUT SALES TAX NOT VERIFIABLE FROM 'CREST' OR IN THE 'SUPPLY CHAIN'
[Sections 2(5AC), 2(33A) and 8(1)(caa)]
Based on the discrepancies pointed out by the automated information system, 'Computerized Risk-based Evaluation of Sales Tax' ('CREST'), proceedings were initiated against taxpayers either disallowing the relevant claim of input tax or for recovery of output tax.
Discrepancies under this system include:
(i) mismatch on cross matching of the sales tax returns of taxpayers in a supply chain i.e. both the purchaser [input] and registered supplier [output].
(ii) on account of timing differences (in declaration of 'output tax' and claim of corresponding 'input tax').
The action was, however, not fully endorsed by Courts.
Through insertion of sub-sections (5AC) and (33A) in section 2, the terms 'CREST' and 'supply chain' are now proposed to be defined. Further, effective June 13, 2013, a new clause (caa) is proposed to be inserted in section 8(1) for disallowance of input as indicated by CREST or not verifiable from the supply chain.
The proposed amendments are seemingly aimed to validate legal status of the defaults adjudged on the basis of CREST or discrepancies otherwise unearthed by departmental officials in the supply chain.
DEFINITION OF PROVINCIAL SALES TAX
[Section 2(22A)]
The definition of 'Provincial Sales Tax', which is considered as 'input tax' under the Act, has been proposed to be substituted, whereby only those provincial laws or laws relating to Islamabad Capital Territory, which are declared by the Federal Government through notification in the official Gazette, to be provincial sales tax for the purpose of input tax.
TIME OF SUPPLY - PAYMENT OF SALES TAX ON EARLIER OF RECEIPT OF PAYMENT OR DELIVERY OF GOODS
[Section 2(44)]
Under the currently applicable provisions, sales tax is leviable at the time of actual delivery of goods regardless of the time of payment i.e. sales tax is not chargeable on 'advance payments' against purchase of goods.
Amendments are proposed in Clause (44) of section 2, defining the term 'time of supply', to the effect that sales tax becomes chargeable on earlier of receipt of payment or delivery of goods. The timing for accounting of part payment for purchase of goods, including under hire purchase and services has also been proposed.
Accordingly, any payment received in advance will undergo the incidence of sales tax and levy thereon would not be delayed until the supply of goods actually takes place.
The proposed amendment restores the legal position applicable upto June 30, 2007 when sales tax was chargeable on earlier of delivery of goods or payment of consideration. Amendments were introduced on account of litigation on the subject where different nature of advances for purchases was identified.
INCREASE IN TAX RATE FROM 16 PERCENT TO 17 PERCENT
[Section 3]
[Effective June 13, 2013]
The standard rate of sales tax for the purposes of section 3 is enhanced to 17 per cent.
IMPOSITION OF "FURTHER TAX"
[Section 3(1A)]
[Effective June 13, 2013]
Sales to 'persons who have not obtained registration' are now subject to further charge of sales tax i.e. 'further tax', at the rate of 2 per cent in addition to tax chargeable at standard rate.
Such charge is also proposed in addition to that on the basis of:
- Retail price
- Rate prescribed at a lower or higher rate as notified for certain goods
- Extra tax
- Fixed rates of taxes
- Capacity
The Federal Government, however, has been proposed to be vested with a power to notify 'taxable supplies' in respect whereof, further tax would not be applicable.
Upto June 30, 2004, this levy was applicable on "person other than a registered person" at varying rates. The usage of the words "person who has not obtained registration number" under the proposed legislation implies that the amendment seems to be aimed at broadening the ambit of the persons who would be subject to charge of further tax.
The concept of further tax then introduced was abolished as the same gave rise to arbitrage in the form of 'flying invoices' and other discrepancies. This aspect needs to be examined.
Present text of the proposed bill requires amendment / clarification as identified below:
(a) Under the proposed legislation, the sales to consumers are not excluded and as such shall attract 'further tax' unless the Federal Government issues a notification as explained above. In the past, when levy of 'further tax' was applicable, not only the sales of retailers were excluded from the scope thereof but also a clarification was issued to the effect that direct sales by manufacturers to consumers were not subject to charge of further tax. This position needs to be reinstated.
(b) Further, imposition of 'further tax' in respect of goods listed in Third Schedule is unwarranted as in respect of such goods, tax is already collected on the final consumer price. Likewise, 'further tax' on product where sales tax is collected on a fixed basis or on the basis of production capacity is not desired.
SALES TAX ON THE BASIS OF CAPACITY OR ON A FIXED BASIS
[Section 3(1B)]
[Effective June 13, 2013]
A new sub section (1B) is proposed to be inserted in section 3 empowering the Federal Government to impose sales tax on the basis of production capacity of manufacturers or on a fixed basis instead of the sales tax payable on the generalised basis i.e. 'value of supply' under section 3(1).
No notification has been issued with budget documents, specifying the class of goods or class of persons that would be chargeable to sales tax on a fixed basis or on the basis of production capacity. It, however, appears that this mechanism for collection of tax would be opted for in respect of such sectors in which down-stream supply chain is currently outside the tax net.
CLAIM OF INPUT SALES TAX ON PURCHASES FROM BLACKLISTED SUPPLIERS / SUPPLIERS WITH SUSPENDED SALES TAX REGISTRATION
[Section 21]
Section 21(3) provides for disallowance of input sales tax in respect of purchases from a person who has either been blacklisted or whose registration has been suspended. There was, however, an exception to this in cases where the claimant of input sales tax demonstrated compliance with provisions of section 73 of the Act.
It is now proposed that such relaxation be done away with. It implies that even if the buyer of goods demonstrates compliance with section 73, claim of input tax would not be allowed.
Further by way of insertion of sub-section 4, the FBR, Commissioner or any other authorized Officer is proposed to be empowered to block the refunds and input tax adjustments of a taxpayer in respect of whom there are reasons to believe that it is engaged in fraudulent activity or issuance of fake invoices.
While the powers to suspend the registration or blacklist a taxpayer engaged in issuance of fake invoices/ fraudulent activities already vest under provisions of section 21(1), the intentions of proposed blockade of refund etc., is not clear. It appears that disallowance of 'input tax adjustment' was intended for the customers of the person engaged in fraudulent activity / issuance of fake invoices, however, in the proposed new clause, such aspect remains ambiguous.
MAINTENANCE OF RECORDS OF GOODS MOVEMENT
[Section 22]
A new sub-clause (ea) is proposed to be inserted in section 22(1) making it mandatory for taxpayers to maintain records of goods movement to and from business premises/ undertakings / warehouses i.e. inward and outward gate passes and transport receipts. Similar amendment has also been proposed in FED Act.
The inclusion of goods movement documentation in the list of statutory records appears to counter the practices of issuance of fake invoices and dummy transactions.
Practical application of this provision needs to be examined as in the present business and commercial environment, the recommended procedures may raise problems for taxpayers.
POWERS TO CONDUCT AUDIT/ ENQUIRIES
[Section 25]
An explanation is proposed to be added to sub section (5) of section 25 to the effect that powers to conduct audit / enquires do not stand prejudiced by FBR's authority under section 72B to select taxpayers for detailed audit and that such powers stand independently vested with Commissioners / other authorized Officers too.
Apparently, the proposed amendment is aimed at mitigating the effect of a recent decision of Lahore High Court holding that powers to select taxpayers' cases for audit only vested with FBR. Similar amendments are also proposed in Income Tax Ordinance, 2001 and FED Act as such judgment held above explained position to be applicable in respect of 'audits' to be conducted under all these fiscal laws.
POWER TO POST OFFICERS AT TAXPAYERS BUSINESS PREMISES ALSO PROPOSED TO BE VESTED WITH CHIEF COMMISSIONERS
[Section 40B]
The provisions of section 40B(1) empower FBR to post an Officer of Inland Revenue at taxpayers' premises to monitor production, sales, stocks etc.
Now, these powers propose to include 'Chief Commissioners'.
MONITORING OR TRACKING BY ELECTRONIC OR OTHER MEANS
[Section 40C]
Section 40C proposes to empower the FBR to:
(i) subject any class of registered persons or class of goods to electronic monitoring as to production, sales, clearances, stocks etc. in a prescribed manner.
(ii) specify a particular date beyond which movement of taxable goods would be subject to affixing thereon of tax stamps, banderole, stickers, etc.
Similar amendment has also been proposed in FED Act.
POWER OF STAY AGAINST RECOVERY OF DEMAND VESTED IN COMMISSIONER INLAND REVENUE (APPEALS)
[Section 45B]
In line with the amendments made in the Ordinance through Finance Act, 2012, the Commissioner Inland Revenue (Appeals) is proposed to be empowered to grant stay against recovery of a sales tax demand for an aggregate period of 30 days.
Since the Courts have ruled that Commissioner Inland Revenue (Appeals) has inherent powers to grant stay against recovery in a matter sub judice before him, these provisions aim to fix the duration of stay to 30 days. Similar amendment has also been proposed in FED Act.
RECTIFICATION OF MISTAKES
[Section 57]
Section 57 of the Act provides for rectification of clerical / arithmetical mistakes in an order which was limited to an administrative authority.
Section 57 is now proposed to be substituted to the effect that 'mistakes apparent from record' can now be rectified by any administrative or appellate authority i.e. Commissioner Inland Revenue, Commissioner Inland Revenue (Appeals) or the Appellate Tribunal Inland Revenue. Through these provisions, sales tax law is being proposed to be brought at par with provisions relating to rectification of mistakes in the Ordinance.
The controversy of absence of jurisdiction to rectify the orders was considered by appellate courts on a number of occasions and this amendment seeks to make up for the legal deficiency prevailing in the statutory framework.
INTIMATION AS TO BUSINESS BANK ACCOUNT BY WAY OF SUBMISSION OF A PRESCRIBED FORM
[Section 73]
The provisions of section 73 of the Act require a registered person to intimate the Commissioner Inland Revenue in respect of its 'business bank accounts'.
The explanation defining "business bank account" is now proposed to include the manner of intimation either through 'Form STR I' already notified or by 'change of particulars' in registration database.
THIRD SCHEDULE
[Effective June 13, 2013]
With regard to goods specified in the Third Schedule, sales tax at retail price is collected from the manufacturer. The scope of Third Schedule is extended to following goods:
-Finished or made-up articles of textile and leather, including garments, footwear, and bed ware, sold in retail packing;
-Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tube-lights, fans, electric irons, washing machines and telephone sets;
-Household gas appliances, including cooking range, ovens, geysers and gas heaters;
-Foam or spring mattresses, and other foam products for household use;
-Auto parts and accessories sold in retail packing;
-Lubricating oils, brake fluid, transmission fluid, and other vehicular fluids and maintenance products in retail packing;
-Tyres and tubes;
-Storage batteries;
-Arms and ammunition;
-Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing;
-Fertilizers;
-Cement sold in retail packing;
-Tiles sold in retail packing;
-Biscuits, confectionary, chocolates, toffees and candies; and
-Other goods and products sold in retail packing.
No amendment has been made in Chapter XIII of Sales Tax Special Procedure Rules, 2007 which prescribes an extra tax on television sets, refrigerators, freezers, air conditioners, electric ovens, microwave ovens, washing machines, spin dryers and DVD / CD players of all types to be charged by manufacturer in respect of 'value addition' attributable to down-stream chain. In view of this, the concurrent inclusion under Chapter XIII needs to be addressed.
From a practical perspective, an immediate change in applicable regime of sales tax in respect of these items would be considerably difficult as provisions of section 3(2)(a) of the Act as to printing / embossing of 'retail price' may not be possible. Further, change of regime within a tax period may also give rise to various financial reporting and revenue controlling issues.
Moreover, the scope of last entry [other goods and products sold in retail packing] inserted in Third Schedule will lead to controversies / litigations. The proposed amendment, to this extent, is to be deleted. By reference to scheme of law, the statute extends power to specify taxable supplies in the Third Schedule to be chargeable to tax on retail price basis thus essentially 'specific' goods should be included rather than general description.
SIXTH SCHEDULE
WITHDRAWAL OF EXEMPTIONS
[Effective June 13, 2013]
Following entries are proposed to be omitted from the Sixth Schedule to the Act:
==================================================================
Entry Description PCT
Heading
==================================================================
Table I
25. Milk preparations obtained by replacing one 1901.1000,
or more of the constituents of milk by 1901.9020 and
another substance, whether or not packed 1901.9090
for retail sale
Table II
12. Supplies against International tender Respective
headings
==================================================================
Earlier, supplies against international tenders were subject to sales tax at zero per cent in terms of the relevant provisions of Fifth Schedule to the Act. Through Finance Act, 2012, the facility of zero rating on supplies against international tenders was withdrawn and these were exempted from levy of sales tax by virtue of insertion of Entry No. 12 in Table II to the Sixth Schedule.
Further, Chapter VIIA of Sales Tax Rules, 2006, laying out the procedure in respect of supplies against international tenders, is also proposed to be deleted with effect from July 1, 2013 [SRO 506(I)/2013 dated June 12, 2013].
ZERO RATING WITHDRAWN AND SUBSTITUTED WITH EXEMPTION SRO 501(I)/2013 AND SRO 502(I)/2013
[Effective June 13, 2013]
'Zero rating' [available under SRO 549(I)/2008 dated June 11, 2008] has been withdrawn and 'exemption' from whole of sales tax has been extended with the exception of Cotton Seed Oil. This effectively means that input tax, if any, for such products will not be available. Earlier, input tax borne by the manufacturer was refundable.
Zero rating on 'Cotton Seed Oil', supplied to registered manufacturer of vegetable ghee and cooking oil, has been withdrawn. However, it has not been granted exemption from sales tax. Therefore, it is now chargeable to sales tax at the rate of 17 per cent.
List of exempted goods (previously zero rated):
=================================================================================
S. No. Description PCT Heading
=================================================================================
1. Uncooked poultry meat 02.07
2. Milk and cream 04.01 and 04.02
3. Flavored Milk 0402.9900 and 22.02
4. Yogurt 0403.1000
5. Whey 04.04
6. Butter 0405.1000
7. Desi ghee 0405.9000
8. Cheese 0406.1010
9. Processed cheese not grated or powdered 0406.3000
10. Cotton seeds 1207.2000
11. Frozen, prepared or preserved sausages and 1601.0000
similar products of poultry meat or meat offal
12. Meat and similar products of prepared frozen or 1602.3200,1602.3900,
preserved meat or meat offal of all types 1602.5000,1604.1100,
including poultry meat and fish 1604.1200,1604.1300,
1604.1400,1604.1500,
1604.1600,1604.1900,
1604.2010,1604.2020,
1604.2090,1604.3000
13. Preparations for infant use, put up for retail sale 1901.1000
14. Fat filled milk 1901.9090
15. Soyabean meal 2304.0000
16. Oil cake and other solid residues, whether or 2306.1000
not ground or in the form of pellets
17. Colours in sets (Poster colours) 3213.1000
18. Writing, drawing and marking inks 3215.9010 and
3215.9090
19. Erasers 4016.9210 and
4016.9290
20. Exercise books 4820.2000
21. Directly reduced iron 72.03
22. Pencil sharpeners 8214.1000
23. Energy saver lamps 8539.3910
24. Sewing machines of the household type 8452.1010 and
8452.1090
25. Purpose built taxis, whether in CBU or 8703.3226 and
CKD condition which are built on girder 8703.3227
chassis and having following features, namely:
(a) Attack resistance central division along with
payment tray;
(b) Wheelchair compartment with folding
ramp; and
(c) Taximeter and two-way radio system.
26. Bicycles 87.12
27. Wheelchair 8713.1000 and
8713.9000
28. Vessels for breaking up 89.08
29. Other drawing, marking out or mathematical 9017.2000
calculating instruments (geometry box)
30. Pens and ball pens 96.08
31. Pencils including colour pencils 96.09
32. Compost (non-chemical fertilizer) produced and Respective heading
supplied locally
33. Construction materials to Gawadar Export Respective heading
Processing Zone's investors and to Export
Processing Zone Gawadar for development of
Zone's infrastructure.
=================================================================================
FINISHED CONSUMER GOODS OF FIVE EXPORT-ORIENTED SECTORS SRO 504(I)/2013 Amendment in SRO 1125(I)/2011 dated December 31, 2011
[Effective June 12, 2013]
In terms of SRO 1125(I)/2011 dated December 31, 2011 [as amended from time to time] a reduced rate of 2 per cent / 5 per cent is applicable inter alia on local sales of articles covered by five export-oriented sectors i.e. textile, carpets, leather, sports and surgical goods. Through the subject notification, with effect from June 12, 2013, the concession has been restricted to goods other than 'finished' articles. Consequently, the local sale of these 'finished articles' such as 'garments' now attracts sales tax at the rate of 17 per cent.
List of items excluded from SRO 1125(I) of 2011:
======================================================================================
Entry of
Table in Description PCT
SRO Heading
======================================================================================
1125(I)/2011
01. Finished articles of leather and artificial leather Chapter 41 and
heading 64.06
02. Following items relating to textile and articles thereof:
Chapters 50, 51,
(a) finished articles of textiles and textile made-up 52, 53, 54
(b) mono-filament of more than 67 decitex (excluding
(c) sun shading 5407.2000), 55, 56
(d) fishing net of nylon or other material (excluding 56.08
(e) rope of polyethylene or nylon and 56.09), 57
(f) tyre cord fabric (excluding made
ups), 58, 59
(excluding 59.05,
59.10) and 60
03. Carpets in finished condition Chapter 57
excluding made ups)
06. Sports goods in finished condition Respective
headings excluding
finished goods.
07. Surgical goods in finished condition Respective
headings excluding
finished goods
56. Master batches relating to other colouring matter 3206.4900
and other preparations
68. Shoe adhesives 3506.9110
======================================================================================
SALES TAX SPECIAL PROCEDURE (WITHHOLDING) RULES, 2007
WITHHOLDING ON SUPPLIES FROM UNREGISTERED PERSON - EXTENDED SRO 505(I)/2013
[Rule 2(3)]
[Effective June 12, 2013]
At present, only following persons are required to withhold sales tax on purchase of taxable goods from unregistered persons:
- Federal and provincial governments
- Autonomous bodies
- Public sector organisations
Now all companies who are withholding agents under these Rules and persons registered as exporters are also required to withhold sales tax on purchase of taxable goods from unregistered persons.
SALES TAX RULES, 2006
PLACE OF JURISDICTION SRO 506(I)/2013 [Rule 5(1)]
[Effective July 1, 2013]
Presently, the jurisdiction over the case of a corporate person lies with the Regional Tax Office (RTO) or Large Taxpayers Unit (LTU), in whose jurisdiction the registered office is located whereas in the case of a non-corporate person, it is determined with reference to the place where the business is actually carried on and in case of both business premises and manufacturing unit in different areas, the jurisdiction is determined with reference to the place of manufacturing unit.
The amendment sets out a revised and uniform basis for determination of place of jurisdiction as follows:
=============================================================================
Persons having: Jurisdiction
=============================================================================
(a) Single manufacturing unit or RTO/LTU where the manufacturing
business premises, unit or business premises is actually
located
(b) Multiple manufacturing units or To be determined by FBR
business premises
=============================================================================
Consequently, the place of jurisdiction in cases falling under category (a) shall stand automatically transferred on July 1, 2013 to the RTO or LTU in whose jurisdiction the manufacturing unit or business premises is actually located. In case of multiple manufacturing units or business premises, the FBR may decide the place of jurisdiction.
SALES TAX SPECIAL PROCEDURE RULES, 2007
EXTRA TAX ON UNREGISTERED AND INACTIVE CONSUMERS OF ELECTRICITY AND NATURAL GAS
SRO 509(I)/2013 AND SRO 510(I)/2013
[Effective from June 13, 2013]
Extra sales tax at 5 per cent of the total amount billed (excluding the amount of federal taxes) has been imposed on supply of electric power and natural gas to unregistered or registered but inactive persons having commercial and industrial connections where the monthly bill exceeds Rs 15,000. This effectively means that sales tax rate for such persons shall be 24 per cent [i.e. regular rate of 17 per cent plus 2 per cent further tax plus 5 per cent extra tax on unregistered users of electricity].
For the purposes of implementation of this provision, amendments have also been made, through insertion of Chapter IVA, in the Sales Tax Special Procedure Rules, 2007 inter alia specifying the following:
- Extra tax is not adjustable by the supplier or the consumer in their returns, and is required to be paid in full by the supplier into the government treasury.
- The amount of extra tax is required to be shown separately in the bill / invoice.
- The supplier is required to collect and pay extra sales tax in the same manner as is applicable for payment of normal sales tax.
- For claiming exemption from collection of extra tax, the consumer is required to provide sales tax registration certificate to the supplier which the latter shall verify from Active Taxpayers List (ATL) maintained by the FBR and shall further confirm that the name, address and other particulars appearing on the registration certificate or ATL, as the case may be, are the same as that of electric power and natural gas connection. The supplier, upon verifying the above, shall incorporate the sales tax registration number in the billing system and thereafter, stop charging and collecting extra tax from such person. For cases with multiple places of business, it is the responsibility of the consumer to ensure that all such places are properly declared and entered on the registration certificate and ATL. It appears, by implication, that non-inclusion of all places of business shall prohibit the supplier from extending exemption from extra tax in respect of utility bill for a place not appearing on registration certificate or ATL.
- The supplier is required to start charging extra tax once a registered person is de-registered or he does not remain active on ATL.
Sales tax registration certificate normally shows particulars of principal place of business only. It, therefore, seems that persons having multiple places of business are practically now required to obtain new / revised sales tax registration certificates from the department to get incorporated all their places of business in order to avail exemption from extra tax.
The implementation of this provision, from the perspective of supplier, requires continuous monitoring regarding the status of their consumers claiming exemption from extra tax by reviewing ATL every month.
=========================================================================================
SRO Numbers Description
=========================================================================================
646(I)/2005 dated June 30, 2005 Zero rating on supply of hydrogen, nitrogen and
helium falling under PCT headingsc 2804.1000,
2804.3000 and 2804.2990 by M/s BOC Pakistan
Limited to M/s Pakistan PTA Limited.
172(I)/2006 dated February 24, 2006 Exemption from sales tax available to members of
Pakistan Film Producers Association (PFPA) on
import of specified goods used in production
of film making.
863(I)/2007 dated August 24, 2007 Consequent to exemption allowed and withdrawal
of zero rating earlier available under SRO
549(I)/2008, the facility available under this
notification for sales-tax free procurement of raw
materials, sub-components, components, sub-
assemblies and assemblies (imported or local) by
manufacturers of following goods has also been
taken away:
=========================================================================================
S. Description of PCT Headings
No.goods
=========================================================================================
1. Colors in sets 3213.1000
2. Writing, drawing and 3215.9010 and
marking inks 3215.9090
3. Erasers 4016.9210 and
4016.9290
4. Exercise books 4820.2000
5. Pencils sharpener 8214.1000
6. Geometry box 9017.2000
7. Pens, ball pens, 96.08
markers and porous
tipped pens
8. Pencils including 96.09
color pencils
9. Milk including 04.01 and
flavoured milk 0402.9900
10. Yogurt 0403.1000
11. Cheese 0406.1010
12. Butter 0405.1000
13. Cream 04.01 and 04.0
14. Desi Ghee 0405.9000
15. Whey 04.04
16. Milk and cream, 0402.1000
concentrated and
added sugar or other
sweetening matter
17. Preparations for 1901.1000
infant use put up for
retail sale
18. Fat filled milk 1901.9090
=========================================================================================
160(I)/2010 dated March 10, 2010 Amnesty from payment of default surcharge and
penalties available on payment of principal
amounts by June 30, 2010 to registered person
(other than cement, sugar, beverages and
cigarette sectors) located in Hangu, Bannu, Tank,
Kohat, Chitral, Charsadda, Peshawar, Dera Ismael
Khan, Batagram, Lakki Marwat. Sawabi and
Mardan. No concession is currently available
under this notification, being time specific.
164(I)/2010 dated March 10, 2010 Sales tax exemption on supply of electricity to
manufacturing units (having industrial connections,
other than cement, sugar, beverages and cigarette
sectors) located in districts of Hangu, Bannu, Tank,
Kohat, Chitral, Charsadda, Peshawar, Dera Ismael
Khan, Batagram, Lakki Marwat, Sawabi, Nowshera
and Mardan.
117(I)/2011 dated February, 2011 This relates to concession of 50% reduction in
sales tax available to supply of goods (other than
cement, sugar, beverages and cigarette sectors)
manufactured in non-tariff areas of Khyber
Pakhtunkhwa (KP), Federally Administered Tribal
Areas (FATA) and Provincially Administered Tribal
Areas (PATA), namely, Bajaur Agency, Mohamand
Agency, Khyber Agency, Orakzai Agency, Kurram
Agency, North Waziristan Agency, South
Waziristan Agency, Malakand Agency, District
Swat, District Buner, District Shangla, District
Upper Dir and District Lower Dir to the tariff areas
of Pakistan.
180(I)/2011 dated March 5, 2011 Under this notification, 50% reduction in sales tax
was available on supply of goods by the registered
persons (other than cement, sugar, beverages and
cigarette sectors) located in districts of Hangu,
Bannu, Tank, Kohat, Chitral, Charsadda,
Peshawar, Dera Ismael Khan, Batagram, Lakki
Marwat, Sawabi, Nowshera and Mardan.
=========================================================================================
FEDERAL EXCISE DUTY
FURTHER DUTY
[Section 3]
The Bill proposes to levy a 'Further Duty' at the rate of two per cent of the value in addition to the normal rate, when excisable goods and services are supplied to a person who has not obtained a registration number. Federal Government will be empowered to issue a notification in the official gazette to specify the excisable goods and services whereupon such further duty will be charged, levied and collected.
RECORDS
[Section 17]
Every person registered for FED Act is required to maintain and retain records of excisable goods purchased, manufactured and cleared by him or by his agent for the specified period. Such records will now include, inward and outward gate passes and transport receipts.
APPEALS TO COMMISSIONER (APPEALS)
[Section 33]
The Bill proposes to expressly empower the Commissioner (Appeals) to stay the recovery of tax for a period not exceeding 30 days in aggregate, where in a particular case, he is of the opinion that the recovery of tax levied shall cause undue hardship to the taxpayer.
It is important to note that under section 37(1), the Commissioner (Appeals), in any particular case, is already empowered to dispense with the deposit of duty demanded or penalty imposed, subject to such conditions as he may deem fit to impose so as to safeguard the interest of revenue. The order for such dispensation, however, ceases to have effect on the expiration of a period of 6 months from the date of the dispensation order or decision of appeal, whichever is earlier.
POWERS OF FBR OR COMMISSIONER TO PASS CERTAIN ORDERS
[Section 35]
An Explanation has been inserted to clarify that the powers of FBR, Commissioner or Officer of Inland Revenue vested under sections 35, 45 and 46 are independent of the powers of the FBR under section 42B. It has further being clarified that nothing contained in section 42B restricts the powers of FBR, Commissioner or officer of Inland Revenue under the aforesaid sections or to conduct audit.
REWARD TO INLAND REVENUE OFFICERS AND OFFICIALS
[Section 42C]
It is proposed to reward officers and officials of Inland Revenue for their meritorious conduct in cases involving concealment or evasion of excise duty and other taxes. Moreover, the informer providing credible information leading to such detection would also be rewarded after realization of part or whole of the taxes involved in such cases.
It is proposed that FBR may by notification prescribe the procedure to specify the apportionment of reward for individual performance or to collective welfare of the officers and officials of Inland Revenue.
MONITORING OR TRACKING BY ELECTRONIC OR OTHER MEANS
[Section 45A]
It is proposed that FBR may by notification prescribe the procedure to specify any registered person or class of registered persons or any goods or class of goods in respect of which monitoring or tracking of production, sales, clearances, stocks or any other related activity may be implemented through electronic or other means, as may be prescribed.
Moreover, excisable goods shall not be removed or sold by the manufacturer or any other person without affixing tax stamp, banderole, stickers, labels, etc. in any such form, style and manner as may be prescribed by FBR.
FIRST SCHEDULE
REVISION IN DUTY
(TABLE I - EXCISABLE GOODS)
AERATED BEVERAGES
The rate of duty is proposed to be enhanced from 6% to 9% of retail price for following goods with effect from July 1, 2013:
=========================================================================
S.No. Description of goods Heading
number
=========================================================================
4. Aerated waters 2201.1020
5. Aerated waters, containing added sugar or other 2202.1010
sweetening matter of flavoured
6. Aerated waters if manufactured wholly from juices Respective
or pulp of vegetables, food grains or fruits and Headings
which do not contain any other ingredient,
indigenous or imported, other than sugar, colouring
materials, preservatives or additives in quantities
prescribed under the West Pakistan Pure Food
Rules, 1965
=========================================================================
Further, the 'salient features' of Finance Bill provide that capacity based taxation is also being introduced in respect of the above goods.
LOCALLY PRODUCED CIGARETTES
Description and duty on the locally produced cigarettes (PCT heading 24.02) has been revised as under, with effect from June 13, 2013:
=====================================================================================
S.No. Description of goods Revised rate of duty
=====================================================================================
9. Locally produced cigarettes if their on-pack Rupees two thousand three
printed retail price exceeds rupees two hundred and twenty five per
thousand two hundred and eighty six per thousand cigarettes.
thousand cigarettes
10. Locally produced cigarettes if their on-pack Rupees eight hundred and
printed retail price does not exceed rupees eighty per thousand cigarettes
two thousand two hundred and eighty six
per thousand cigarettes
=====================================================================================
OIL SEEDS, VEGETABLE GHEE AND COOKING OIL
[S.R.O. 507(I)/2013 and 508(I)/2013 dated June 12, 2013]
It is proposed to charge duty on oil seeds as under, with effect from June 13, 2013:
==================================================================
S.No. Description of goods PCT Heading Rate of duty
==================================================================
54. Oilseeds Respective Forty paisa per kg
headings
==================================================================
Under SRO 508(I)/2013, duty of forty paisa per kg collected at import stage will be treated as duty collected in lieu of duty payable at production or manufacturing stage of vegetable ghee or cooking oil.
Under SRO 507(I)/2013, duty has also been levied at the rate of Rupee one per kilogram of locally produced oil purchased by a manufacturer of vegetable ghee and cooking oil, in lieu of the duty payable at 16 per cent on vegetable ghee and cooking oil produced or manufactured from locally produced oil. It should be paid by the producer or manufacturer of vegetable ghee and cooking oil alongwith his monthly return for the period in which the locally produced oil is purchased:
Moreover, duty on the stocks of locally produced oil purchased before June 12, 2013 and lying in the premises of vegetable ghee and cooking oil producer or manufacturer shall be paid alongwith the return filed for June, 2013.
MOTOR VEHICLES
It is proposed to charge duty on motor vehicles as under, with effect from June 13, 2013:
==============================================================================
S.No. Description of goods PCT Heading Rate of duty
55. Motor cars, SUVs and other motor 87.03 Ten per cent ad.val
==============================================================================
vehicles of cylinder capacity of 1800
cc or above, principally designed for
the transport of persons (other than
those of headings 87.02), including
station wagons and racing cars of
cylinder capacity of 1800 cc or above.
==============================================================================
TABLE II - EXCISABLE SERVICES
There are certain services which are concurrently taxable by Federal and Provincial legislations. Duplication of incidence are handled by administrative instructions / orders, however, litigation and dispute crop up due to said status. No clarificatory amendment / mechanism for the same has however, been proposed in the bill.
FINANCIAL SERVICES
Description and duty on all types of financial services has been clubbed and extended as under with effect from June 13, 2013:
===============================================================================
S.No. Description of goods PCT Rate of duty
Heading
===============================================================================
8. Services provided or rendered by banking 98.13 Sixteen per cent of
companies, insurance companies, the charges.
cooperative financing societies,
modarabas, musharikas, leasing
companies, foreign exchange dealers, non-
banking financial institutions, Assets
Management Companies and other
persons dealing in any such services.
===============================================================================
The duty on above services is governed by Rule 40A of the Federal Excise Rules, 2005 and SRO 474(I)/2009 dated June 13, 2009. Effectively, only those financial services would be taxable which are not exempted in the said Rule and notification.
THIRD SCHEDULE
TABLE I - GOODS
The duty in respect of the following goods is proposed to be withdrawn, effective June 13, 2013:
==========================================================================================
S.No. Description of goods PCT
Heading
==========================================================================================
5. Hydraulic cement imported or purchased locally by petroleum or 2523.9000
energy sector companies or projects subject to the same conditions
and procedures as are applicable for the purposes of exemption of
custom duty,
7. Lubricating oil if supplied to Pakistan Navy for consumption in its Respective
vessels heading
8. Transformer oil if used in the manufacture of transformers supplied Respective
against international tenders to a project financed out of funds heading
provided by the international loan or aid giving agencies.
==========================================================================================
TABLE II - SERVICES
ASSET MANAGEMENT SERVICES
The Finance Act, 2012 inserted a specific entry in Table II of the Third Schedule whereby services provided by Asset Management Companies were exempted with effect from July 1, 2007.
The above exemption is now proposed to be withdrawn effective June 13, 2013.
CUSTOMS DUTY
DEFINITION
[Section 2(la)]
To provide legal cover for transshipment of goods declaration, the definition of the term 'Goods Declaration' has been expanded to also include declarations filed for 'transshipment of goods'.
DIRECTORATE GENERAL OF INPUT OUTPUT CO-EFFICIENT ORGANIZATION
[Section 3DDD]
To provide legal cover to the Directorate General of Input Output Co-efficient Organization (IOCO), a new authority of Directorate General of IOCO has been introduced. The office of the IOCO would consist of a Director General and as many Directors, Additional Directors, Deputy Directors, Assistant Directors and such other Officers as the FBR may, by notification in the Official Gazette, appoint.
PROVISIONAL DETERMINATION OF LIABILITY
[Section 81]
Provisional assessment and clearance of goods is allowed against bank guarantee or pay order or post dated cheque for differential amount of duty and taxes.
Henceforth, posted dated cheques will not be acceptable for provisional assessment and clearance of goods.
SCHEDULE
TARIFF RATIONALISATION
Following new PCT Codes (in bold) have been added to the Customs Tariff:
======================================================================================================
Rate of
PCT Description Customs
Heading Duty
======================================================================================================
39.03 Polymers of styrene, in primary forms.
3903.9000 Other: 5
72.10 Flat- rolled products of iron or non- alloy steel, of a width
of 600 mm or more, clad, plated or coated.
7210.7010 VCM or PCM coated sheets of a thickness (excluding any
coating) not exceeding 0.5 mm 5
84.18 Refrigerators, freezers and other refrigerating or freezing equipment,
electric or other; heat pumps other than air conditioning machines of
heading 84.15.
Others:
8418.6930 Water dispenser 30
85.17 Telephone sets, including telephones for cellular networks or for other
wireless networks; other apparatus for the transmission or reception of
voice, images or other data, including apparatus for communication in a
wired or wireless network (such as a local or wide area network) other
than transmission or reception apparatus of heading 84.43, 85.25, 85.27
or 85.28.
Telephones for cellular networks or for other wireless networks:
8517.1230 Satellite mobile phone, whether or not functional on cellular 25
networks
85.39 Electric filament or discharge lamps, including sealed beam lamp units
and ultra- violet or infra- red lamps; arc- lamps.
8539.3920 Energy saving tube 0
85.43 Electrical machines and apparatus, having individual functions, not
specified or included elsewhere in this Chapter.
8543.7020 Infrared insect killer 25
87.03 Motor cars and other motor vehicles principally designed for the transport
of persons (other than those of heading 87.02), including station wagons
and racing cars.
8703.2191 Components for the assembly / manufacture of vehicles, in any kit 55
form excluding those of heading 8703.2193 and 8703.2195
8703.2194 Components for the assembly / manufacture of Mini Van, in any kit 55
form
8703.2195 Mini vans (CBU) 55
8703.2230 Components for the assembly / manufacture of mini van, in any kit 60
form
8703.2240 Mini vans (CBU) 60
8703.2321 Components for the assembly / manufacture of vehicles, in any kit 100
form excluding of heading 8703.2323
8703.2322 Components for the assembly / manufacture of sport utility vehicles 100
4x4, in any kit form
8703.2323 Sport utility vehicles (SUVs 4x4) 100
8703.9010 Components for the assembly / manufacture of electric vehicles, in 50
any kit form
8703.9020 Electric vehicles 50
8703.9090 Other 100
87.04 Motor vehicles for the transport of goods.
g.v.w. not exceeding 5 tonnes:
8704.3110 Components for the assembly / manufacture, in any kit form 60
excluding those of heading 8704.3130 and 8704.3150
8704.3120 Components for the assembly / manufacture of mini cargo van, in 60
any kit form
8704.3130 Mini cargo van (CBU) 60
8704.3140 Components for the assembly / manufacture of 3-wheeler cargo 60
loader, in any kit form
8704.3150 3-Wheeler cargo loader (CBU) 60
87.11 Motorcycles (including mopeds) and cycles fitted with an auxiliary motor,
with or without side- cars; side- cars.
8711.9010 Components for the assembly / manufacture of vehicles, in any kit 65
form, excluding those of heading 8711.9030
8111.9030 Electric bikes (CBU) 65
======================================================================================================
REDUCTION IN CUSTOMS DUTY
Duty on the following items has been reduced:
============================================================================================
PCT Description Old Rate New Rate
Heading
============================================================================================
39.26 Other articles of plastics and articles of other materials
of headings 39.01 to 39.14.
3926.1000 Office or school supplies 25 20
44.11 Fibreboard of wood or other ligneous materials,
whether or not bonded with resins or other organic
substances.
4411.1200 Of a thickness not exceeding 5 mm 20 15
4411.1300 Of a thickness exceeding 5 mm but not exceeding 20 15
9 mm
4411.1400 Of a thickness exceeding 9 mm 20 15
4411.9200 Other:
Of a density exceeding 0.8 g/cm2 20 15
Of a density exceeding 0.5 g/cm2 but not
exceeding 0.8 g/cm2:
4411.9310 Not mechanically worked or surface covered 20 15
4411.9390 Other: 20 15
4411.9400 Of a density not exceeding 0.5 g/cm2 20 15
84.21 Centrifuges, including centrifugal dryers; filtering or
purifying machinery and apparatus, for liquids or
gases.
8421.2100 For filtering or purifying water 25 15
============================================================================================
INCREASE IN CUSTOMS DUTY
Duty on the following items has been increased:
============================================================================================
PCT Description Old Rate New Rate
Heading
============================================================================================
8.02 Other nuts, fresh or dried, whether or not shelled or
peeled.
802.8 Areca nuts * 15 * 20
14.04 Vegetable products not elsewhere specified or
included.
1404.902 Betel leaves Rs.200/Kg Rs.300/Kg
============================================================================================
includes regulatory duty of 10 per cent which is not changed.
NOTIFICATIONS
[Effective June 13, 2013]
CHANGES IN CONCESSIONARY RATES OF CUSTOMS DUTY
[SRO 497(I)/2013 AND SRO 567(I)/2006]
WITHDRAWAL OF CONCESSIONARY DUTY
Concessionary duty on import of following goods has been withdrawn:
================================================================================
S. No. of PCT Rate of
SRO 567 Description of Goods Heading concessionary
duty withdrawn
================================================================================
16 Preparations put up in retail packing for
agriculture 3808.9160 0%
24 Uncoated Kraft paper and paper board in
rolls or sheets 4804.1900 5%
Virgin craft liner 4804.1900 0%
Virgin white top craft 4804.1900 0%
Semi - chemical fluting paper 4805.1100 0%
28 Flat rolled products of stainless steel,
of a width of 600 mm or more 7219.9090 0%
29 Silicon electrical steel sheet 7226.1900 0%
48 LCD Panels in CBU form 8528.7211 20%
Plasma display panels in CBU form 8528.7212 20%
================================================================================
PROCEDURAL CHANGES IN THE CONCESSIONARY DUTY REGIME FOR PHARMACEUTICAL SECTOR
(i) Concessionary duty for excepients / chemicals listed in Heading "B" of Table III in SRO 567(1)/2006 shall only be available to the pharmaceutical sector, as per the requirements determined by the Drug Regulatory Authority.
(ii) Concessionary duty for packing material and raw materials for packing material listed in Heading "D" of Table III in SRO 567(1)/2006 shall now only be available to the pharmaceutical sector as per the requirements determined by the Directorate General of IOCO.
CONCESSIONARY REGIME FOR PLANT AND MACHINERY
[SRO 498(I)/2013 AND SRO 575(I)/2006)]
AGRICULTURE SECTOR
Exemption / Concessionary rate of customs duty and sales tax on import of specified agricultural machinery will now apply only where such machinery is used for agriculture sector.
TOURISM SECTOR
The following functions / authority assigned to the Ministry of Tourism, Tourism Departments of Provincial Governments, Gilgit-Baltistan, FATA and Department of Tourist Services of the Capital Administration and Development Division (for allowing concessionary rate of 5 per cent of customs duty and 100 per cent exemption from sales tax) have now been assigned to the Directorate of IOCO:
(i) Determination of item-wise requirements of project;
(ii) On-line furnishing of all relevant information to the Pakistan Customs Computerised System; and
(iii) Recommendation of cases to FBR, eligible for the concession on locally manufactured goods and pre-fabricated buildings.
The aforesaid concessionary regime will now be subject to the following conditions:
(i) Furnishing of undertaking in the prescribed form by the importer at the time of clearance of goods; and
(ii) Certificate of installation / consumption in the prescribed form by the Assistant or Deputy Collector of Customs within one year of import to the effect that the goods have been duly installed or consumed, as the case may be.
RENEWABLE ENERGY
(i) Certification by the Alternate Energy Development Board (AEDB), Islamabad in order to claim exemption / concession in customs duty and sales tax on import of following items, is now no longer required:
====================================================================================
S. No of
SRO 575 Description of items
====================================================================================
35. Items with dedicated use of renewable source of energy like solar, wind,
geothermal etc.
-Solar Home Systems
-Solar Parabolic Trough Power Plants
-Solar Dish Sterling Engine
-Solar Air-Conditioning System
-Solar Desalination System
-Solar Thermal Power Plant with accessories
-Solar Water Heaters with accessories
-PV Modules
-Solar Cell Manufacturing Equipment
-Pyranometers and accessories for solar data collection
-Solar chargers for charging electronic devices
-Remote control for solar charge controller
-Wind Turbines
-Wind Water Pump
-Geothermal energy equipments
-Any other item approved by the Alternative Energy Development
Board (AEDB) and concurred to by the FBR
35A. Items for promotion of renewable energy technologies:
-LVD induction lamps
-SMD, LEDs with or without ballast with fittings and fixtures
-Wind turbines including alternators and mast
-Solar torches
-Lanterns and related instruments
====================================================================================
(ii) Import of following items with dedicated use of renewable source of energy have been exempted from customs duty and sales tax:
==================================================================
Description of items PCT Heading
==================================================================
Submersible pums 8413.7010
Energy saving tube lights 8539.3920
Any other item approved by the AEDB and
concurred to by the FBR N/A
==================================================================
CHANGES IN THE CONCESSIONARY REGIME FOR HYBRID ELECTRIC VEHICLES
[SRO 499(I)/2013 RESCINDING SRO 607(I)/2012]
Import of Hybrid Electric Vehicles (HEVs) falling under the PCT Heading 87.03 was allowed exemption of 25 per cent of applicable rates of customs duty, sales tax and income tax, without any reference to engine capacity. The exemption limit has now been increased as follows:
===================================================
Extent of exemption in
Engine Capacity leviable duty and taxes
===================================================
Upto 1200 CC 100%
From 1201 CC to 1800 CC 50%
From 1801 CC to 2500 CC 25%
===================================================
Depreciation in the duties and taxes, in case of old and used HEVs, admissible at the rate of 2 per cent per month (subject to a maximum of 60 per cent) has been withdrawn.
INCOME SUPPORT LEVY ACT, 2013
Through the Finance Bill 2013 a new tax by the name of Income Support Levy (ISL) is proposed to be introduced through the enactment of Income Support Levy Act, 2013 (ISLA). The object of ISL is to provide for financial resources for running an income support fund for the economically distressed persons and their families.
ISL appears to have been levied by the Federal Government under the right of taxation of Federal Government as laid down in Entry 50 of Part I of Federal Legislative List in the Constitution of Islamic Republic of Pakistan. This law is effectively a reintroduction, in a different form, of wealth tax which was abolished in 2001. The reasons for abolition of wealth tax at that time were the question of double taxation, migration of capital, disincentive for documentation, and non-substantial revenue collection. All those shortcomings need to be taken into account whilst introducing the similar levy.
In case if such a levy is to be introduced then the same should only be applicable for those persons whose income tax liability is less than the incidence under this law.
SALIENT FEATURES OF ISL
(i) The levy is applicable from tax year 2013 on individuals having "Net Movable Wealth" exceeding Rs 1 million on the last date of the tax year. The term 'Net Movable Wealth' has been defined as under:
"net movable wealth" means the amount by which the aggregate value of the movable assets belonging to a person as declared in the wealth statement for the relevant tax year, is in excess of the aggregate value of all the liabilities owed by that person on the closing date of the tax year."
Explanation.- For the purpose of this clause,-
(i) where liability claimed relates wholly and exclusively to an immovable asset, it shall not be claimed and allowed while computing the net movable wealth.
However, where the liability claimed relates wholly and exclusively to a movable asset, it shall be claimed and allowed as a straight deduction while computing net movable wealth; and
(ii) where the gross wealth of a person, declared in the wealth statement includes both movable and immovable assets and the nature of assets to which the liability relates is not determinable, the liability to be allowed while determining the net movable wealth shall be calculated by the following formula:-
(A / B) x C
Where -
A is the gross value of movable assets;
B is the gross value of both movable and immovable assets; and
C is the gross value of debts owed;
(ii) The rate of ISL is 0.5 per cent of Net Movable Wealth exceeding Rs 1 million.
(iii) The value of movable assets declared in the wealth statement under section 116 of the Ordinance shall form the basis of ISL.
(iv) ISL will be payable at the time of filing of the wealth statement.
(v) The Officer of Inland Revenue has been empowered to make an assessment of ISL in the manner prescribed and all the provisions of the Ordinance relating to the collection of levy, appeals, revision and rectification shall apply so far as may be practicable.
(vi) Where a person fails to pay ISL or ISL so paid is less than the amount payable, he shall be liable to pay default surcharge at the rate of sixteen per cent per annum on the amount not paid or the amount by which ISL paid falls short of the amount payable, calculated from the date it was payable to the date it is paid or the date of an order passed by the Officer Inland Revenue, whichever is earlier.
(vii) FBR may, by notification in the Official Gazette, make rules for carrying out the purposes of ISLA.
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