Mini-budget of Rs 52 billion: mid-year tax measures

Presidential ordinances instead of the acts of the parliament The government is using all the means at its disposal to mop up cash resources from whatever source it finds including heavy bank borrowings including the printing of currency notes to the dismay of the SBP; and instead of abandoning the luxurious lifestyle of the government, it has now come up with a mini-budget of Rs 52 billion, levying extra taxes which shall be burdened on the already heavily taxed poor people in the country.
On the protests of the textile trade and industry, it was however agreed in the meeting between the FBR and the Aptma that the sales tax rate would be slightly relaxed in case of non-registered persons in the zero-rated supply chain of five export sectors.
At present, the country is faced with an acute energy crisis, gas load shedding, low water level in the rivers, law and order situation, flight of capital owing to regressive taxation policies and risk to life and property of every citizen due to adverse after-effects of the unholy American war of terror being fought by the present regime on the sacred soil of Pakistan. It has destroyed the confidence of investors in the new business adventures, which has ultimately closed the factories, damaged the export market of our products and created unemployment. The day-to-day increase in electricity and POL prices is another practice of the government to add salt to the injury of inflation caused to the common people. The unethical practice of printing of currency notes by the government has created high inflation, which has made life miserable for the poor masses, who voted the present government to power on the fake slogan of roti, kapra aur makan.
In these days of drought when dust is in the riverbeds, the government has imposed a flood surcharge of 15% on tax payable by every taxpayer in the country. This is in fact is a tax on tax on the honest taxpayers. The Waderas, Sardars, Chaudhrys and Maliks including politicians and the feudal lords who posses enormous wealth have been spared. The State Bank of Pakistan (SBP) has said that more than Rs 30 billion is generated as agriculture income by the landed class of the big agriculturists; but they remain out of the tax net. The ex-finance minister Shaukat Tareen had revealed that the tax machinery was so corrupt that tax revenue of Rs 5000 billion is usurped by them. It does not come in the national exchequer. It was the duty of the government to plug the loopholes of revenue leakages and control corruption at all levels of its administration; and devise ways and means to facilitate productive activities in the country.
Under conditionalities agreed with the IMF for the release of second tranche of the aid finances, the government had to introduce Value Added Tax (VAT) Act, 2009 in the last budget but it was deferred till October 01, 2009 and later to introduce it under the label of the Reformed General Sales Tax (RGST), 2010 in the second half of the current fiscal. However, finding it difficult to get it endorsed by the elected representatives sitting in the parliament, the president sought to use his powers granted under the constitution of Pakistan to enforce tax measures through ordinances instead of acts of the parliament. The parliament was ignored on such vital issues. This was an undemocratic move by the president who represents the democratically elected PPP government in the country.
The President of Pakistan in a bid to generate additional revenue for the national exchequer by imposing extra taxes has promulgated three ordinances on 15th of March, 2011 followed by subsequent series of SROs and notifications. These ordinances were neither publicised nor uploaded on the FBR's portal to seek public comments prior to their enforcement.

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1.Federal Excise Duty

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 (i) Federal Excise (amendment)                   FED rate increased from 1% to 2.50% by

Ordinance, 2011 dt. Mach 15, 2011                amendment in Section 3Aof Federal

(ii) SRO 261(I)/2011 dt. March 19, 2011          Excise Act, 2005.

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2. Sales Tax

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 (i) Sales Tax (amendment) Ordinance,

2011 dt. March 15, 2011                          Sales tax exemption on agricultural

                                                 tractors withdrawn.

(ii) SRO 229(I)/2011 dt. March 15, 2011

a) Input tax on agricultural tractors

b) Import and supply of fertilizers              Sales tax exemption on fertilizer

                                                 withdrawn.

c) Import and supply of pesticides               Sales tax exemption on pesticides

                                                 withdrawn.

(v) SRO 230(I)/2011 dt. March 15, 2011           Zero percent sales tax omitted on supply

(Supply of goods: a) cotton seeds, b) oil        of goods as mentioned in the SRO.

cake, c) plant machinery and

equipment, d) food items, e) stationery,

f) soybean meal, and g) petroleum

production etc.

(vi) SRO 232(1)12011 dt. March 14, 2011          Sales tax @8% on actual sales price

(Sales tax on sugar)                             subject to uniform price of sugar yet to be

                                                 fixed by the government.

(vii) SRO283(I)/201 1 dt. April 1, 2011          i) In case of registered persons:

(Zero-rated and reduced sales tax rates          -Zero-rated sales tax on 185 items of

Applicable in the five export sectors            goods on conditions as specified under

namely: i) textile, ii) carpet, iii) leather,    this SRO.

iv) sports goods and v) surgical goods)          ii) In case of unregistered persons:

No sales tax shall be payable at ginning         -Purchase/sale shall be chargeable to

or man-made and synthetic fiber                  sales tax @ reduced rates of 6% & 4%

manufacturing stage.                             respectively on the conditions as laid

                                                 down under the SRO.

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3.Income Tax

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(i) Income Tax (amendment)                       Tax on tax:

Ordinance, 2011, March 15, 2011                  -15% surcharge on tax payable by

(A new section '4A surcharge' has                every taxpayer.

been inserted in the income tax                  By this arrangement 15% surcharge

ordinance, 2001 to impose tax on                 shall be deducted at source as

tax on every taxpayer under Part V               identified under Fart V of Chapter X of

of Chapter X or Chapter XII of                   the Ordinance on (i) advance tax u/s.

Income Tax Ordinance, 2001).                     147 (ii) imports u/s. 148 (iii) salary u/s.

                                                 149 (iv) dividends u/s. 150 (v) profit on

                                                 debt u/s. 151 (vi) payments to non-

                                                 residents u/s. 152 (vii) payments for

                                                 goods and services u/s. 153 (viii)

                                                 payment to non-resident media

                                                 persons u/s. 153A (ix) exports u/s.

                                                 154 (x) income from property u/s. 155

                                                 (xi) prizes and winnings u/s. 156 (xii)

                                                 petroleum products u/s. 1 56A (xiii)

                                                 withdrawal of balance under pension

                                                 fund u/s. 156B.

                                                 Similarly 15% surcharge shall also be

                                                 deducted at source as identified under

                                                 Chapter XII of the Ordinances on (i)

                                                 cash withdrawal from a bank u/s.

                                                 231A (ii) advance tax on transactions

                                                 in bank u/s. 231AA (iii) advance tax on

                                                 private motor vehicles u/s. 231 B (iv)

                                                 brokerage and commission u/s. 233

                                                 (v) collection of tax by a stock

                                                 exchange registered in Pakistan u/s.

                                                 233A (vi) transportation business u/s.

                                                 234 (vii) CNG stations u/s. 234A (viii)

                                                 electricity consumption u/s. 235 (ix)

                                                 telephone users u/s. 236 (x) advance

                                                 tax at the time of sale by auction u/s.

                                                 236A (xi) advance tax on purchase of

                                                 air ticket u/s. 236B.

(ii) SRO 1 74(I)/201 I dt. March 05, 2011        In case of flour mills, rate of minimum

(Amendment in minimum tax u/s                    tax on the amount of turnover shall

113)                                             be reduced by eighty percent.

(iii) Circular 3/2011 dt. April 01, 2011

(WHT in the zero rated supply chain of

export sectors: (i) textile and articles

thereof, (ii) carpets, (iii) leather and

articles thereof including artificial            WHT @ 10% on brokerage commission.

leather, (iv) surgical goods (v) sports          Final tax.

goods.)

(a) Rate

(b) Taxability status

(iv) Circular 4/2011 dt. April 01, 2011

(Deductibility of withholding tax or

otherwise on the purchase of

agricultural produce)                            Seed cotton, rice, edible oils, and other

(a) Types of agriculture produce                 agriculture produce.

                                                 (i) No tax if the agricultural produce

                                                 Directly sold by the grower I cultivator.

(b) Withholding Tax                              (ii) 1.5%taxshallbedeductedon

                                                 brokerage commission if sold through the

                                                 commission agent.

(v) SRO288(l)/2011 dt. April 1, 2011

(Withholding tax on local sales, supplies

or services in the following categories of

sales tax zero-rated taxpayers: (i) textile

and articles thereof, (ii) carpets, (iii)

leather and articles thereof including

artificial leather, (iv) surgical goods (v)

sports goods).

                                                 1%

(a) Rate

(b) Amnesty                                      No question shall be asked on the

(new sellers, suppliers, and service             amounts credited (unexplained income

providers in the supply chain of                 and assets) in the books of account

zero-rated sectors to get them                   maintained upto 30 June, 2011.

registered for the purpose of sales

tax upto June 30, 2011.

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