SALIENT FEATURES CUSTOMS BUDGETARY MEASURES 2011-12

Policy Objectives: Equity in tax system.
-- Industrial incentives for growth and expansion through reduced cost of raw materials.
-- Tariff rationalisation to facilitate trade.
-- Amendments in legal provisions to remove arbitrage and ambiguity. Export promotion.
1. Relief Measures:
a. Removal of Regulatory duty, particularly on edible items.
b. Reduction of duty to 5% on pharmaceutical raw materials to provide relief to common man.
2. Incentives to Local Industry:
a. Concession for butyl acetate industry through concession on import of its raw materials (Sabutol)
b. Incentives for glass industry through concession on its two major raw materials namely "mirror backing paint" and "waste / scrap of glass".
c. Incentive for CNG compressors manufacturing industry through concession on its 15 components.
d. Concession in machinery and equipment to incentivize oil exploration companies.
e. Concession on raw material of audio cassettes.
f. Incentive for hi-tech car audio manufacturing industry through concession on import of mechanism for car audio system.
g. Corrections in industrial SRO 565(I)/2006 to ensure expeditious clearance.
3. Tariff rationalisation:
a. Tariff rationalisation on bars, rods and profiles of refined copper and copper alloy.
b. Corrections in descriptions of PCT codes 2923.9010 and 2930.9060.
c. Creation of separate PCT codes for brass scrap and armoured cash carrying vehicle.
d. Tariff correction to remove ambiguity in re-import scheme.
4. Legal Changes in Customs Act, 1969:
The following legal changes have been made in the Customs Act, 1969:-
a. Reference to section 32 is deleted from section 15 of the Act to remove arbitrage and eliminate the possibility of any miscarriage of justice through its misuse.
b. In order to provide incentives to local manufacturers and suppliers of domestic goods against international tenders, section 21(c) is amended to treat these supplies as exports. This would entitle supplies against international tenders to customs duty draw back (rebate).
c. The limitation period under section 32 of the Act is extended upto five years for taking cognisance of offences relating to short-paid duty and taxes in cases unearthed during audit.
d. In order to mitigate hardships of persons who have wrongfully deposited duty, the limitation period for refund under section 33 of the Act will be from the date of finalisation of the case (order / decision / judgement).
e. The grant of transit facility has increased Customs facilitation and allied operations manifold. In order to provide self-sustaining infrastructure and services at customs stations and en-route, an enabling provision for collection of transit fee has been provided under new section 129A in the Customs Act, 1969.
INCOME TAX
1. For the welfare of individuals with low income earnings, the basic exemption limit is proposed to be enhanced from Rs 300,000/- to Rs 350,000/-. However individual taxpayers whose normal income is between Rs 300,000/- to Rs 350,000/- shall be required to file return of income and statement, for the purposes of documentation.
2. In order to encourage enhanced equity financing, and to provide relief to new corporate industrial undertakings established on or after 1st July 2011, with 100% equity financing, a tax credit equal to 100% of tax payable is proposed. The existing companies may also take benefit under this arrangement if investment in BMR is financed through their 100% equity, on or after by 1st July 2011.
3. The rate of tax deductible on Cash Withdrawals from Banks is proposed to be reduced to 0.2% from existing 0.3%, for bringing in improvement in the liquidity position of eligible taxpayers.
4. In order to harmonise the existing tax credits available to individuals for investment in shares and for premium paid to Insurance Company, the maximum cumulative limit for both the investments is fixed @ 15% of the taxable income, with maximum upper limit for investment upto five hundred thousand.
5. Tax relief is proposed to be provided to withdrawals exceeding Rs 500,000/- from a Voluntary Pension Fund.
6. For encouraging companies' enlistment on stock exchange, the existing tax credit equal to 5% is proposed to be enhanced to 15%.
7. For the national cause of Broadening of Tax Base and utilisation of third party databases, NTN and CNIC of eligible taxpayers are proposed to be provided expressly alongwith other particulars, in the withholding tax statements filed by withholding agents.
8. For the purpose of identification of eligible taxpayers, the requirement of mandatory filing of return of income by the commercial and Industrial consumers of electricity with annual billing above one million rupees, is proposed. This measure will also help in Broadening of Tax Base in the country.
9. In order to discourage the practice of arbitrage by banks for receiving 'dividends' from Asset Management Companies, the rate of tax on such return is proposed to be enhanced from 10% to 20%.
10. For encouraging investments made by non-residents in Government Securities, the withholding tax on profit on debt deductible @ 10% is proposed to be a final tax. This measure will relieve the non-residents from the statutory requirement of filing of return of income, and will boost national economy.
11. The withholding tax on profit on debt deductible @ 10% arising from investment in Government securities by individual is also proposed to be a final tax. This measure will relieve such taxpayers from the statutory requirement of filing of return of income, and will also encourage domestic investments in the Government Securities.
12. After imposition of capital gain tax on Modarba certificates and instruments of redeemable capital traded at stock exchange through Finance Act 2010, the 0.01% CVT on such instruments is proposed to be withdrawn in order to encourage their trade.
SALES TAX & FEDERAL EXCISE BUDGETARY
MEASURES (FY 2011-12)
-- The budgetary measures pertaining to Sales Tax & Federal Excise are primarily aimed at:
Reduction in the rate of Sales Tax from 17% to 16%.
-- Reducing overall the scope of federal excise duty and completely eliminating special excise duty to reduce the burden of multiple taxation.
-- Enhancing the sales tax revenues by rationalising exemption regime with the objective to minimise additional burden on the lower segments of the society.
-- Distributing the burden of extra taxation measures on exempt sectors of the economy.
-- Enhancing tax incidence on cigarettes in line with international practices.
BRIEF POINTS ON MAJOR FISCAL MEASURES:
RELIEF MEASURES
-- Withdrawal of special excise duty to reduce the quantum of taxation on all items including those used by the middle and lower middle class of population.
Enforced through amendment in Federal Excise Act, 2005 and withdrawal of SRO 655(I)/2007, dated 29.06.2007, effective from the 1st July, 2011.
-- Review of federal excise duty regime by reducing the number of goods liable to federal excise.
Enforced through amendment in Table-I of First Schedule to the Federal Excise Act, 2005, effective from the 1st July, 2011.
-- Reduction in the quantum of excise duty on cement and withdrawal of excise duty on white cement is basically aimed at encouraging construction activity which will result in adequate increase in employment opportunities.
Enforced through amendment in Table-I of First Schedule to the Federal Excise Act, 2005, effective from the 1st July, 2011.
-- Reduction in the rate of federal excise duty leviable on aerated beverages from 12% to 6% to provide a level playing around vis-à-vis its substitute like fruit juices, etc. Enforced through amendment in Table-I of First Schedule to the Federal Excise Act, 2005, effective from the 1st July, 2011.
-- Federal excise duty levied on services provided by property developers or promoters to reduce the level of taxation which will in turn reduce the quantum of taxation on housing sector already subject to levy of Capital Value Tax Enforced through amendment in Table-II of First Schedule to the Federal Excise Act, 2005, effective from the 1st July, 2011.
-- Exemption on local supply of reclaimed lead to recognised manufacturers of lead batteries has been proposed to check misuse of the facility whereby taxes are charged by the suppliers of reclaimed lead but is not deposited into the exchequer.
Enforced through amendment in SRO 551(I)/2008, dated 11.06.2008, effective from the 4th June, 2011.
-- Immediate full adjustment of sales tax paid on import or local purchase of capital goods has been allowed to mitigate the cash flow of industrial sector and to ensure timely and quick adjustment of input tax paid.
Enforced through amendment in section 8B of the Sales Tax Act, 1990 effective from the 4th June, 2011.
REVENUE MEASURES
-- Withdrawal of exemption of sales tax on defence stores at import and local supply to bring it in line with international best practices Enforced through amendment in Sixth Schedule to the Sales Tax Act, 1990, effective from the 4th June, 2011.
-- Revision in the upward limit of duty slabs to enhance the burden of Federal Excise Duty on locally produced Cigarettes.
Enforced through amendment in Table I, of First Schedule to the Federal Excise Act, 2005, effective from the 4thJune, 2011.
-- The exemption regime is being rationalised with objective to reduce its scope only to selected sectors.
Enforced through amendments in Sixth Schedule to the Sales Tax Act, 1990 and SRO 551(I)/2008, dated 11.06.2008, effective from the 4th June, 2011.
-- The value addition tax levied on commercial importers is being enhanced from 2% to 3%, which is levied and collected at import stage.
Enforced through amendment in Chapter X of Sales Tax Special Procedure Rules promulgated through SRO 480(I)/2007, dated 9th June, 2007, effective from the 4th June, 2011.
-- Exemption of sales tax on cement/concrete blocks and bricks has been withdrawn to extend similar treatment in line with other inputs used in the construction industry Enforced through amendment in Sixth Schedule to the Sales Tax Act, 1990, effective from the 4th June, 2011.
-- The sales tax leviable on sugar at import and local supply stage has been withdrawn and federal excise duty @ 8% is being levied on aforesaid stages.
Enforced through amendment in First and Second Schedule to the Federal Excise Act, 2005, effective from the 4th June, 2011.
-- The zero-rating regime has been rationalised to limits its application only to selected sectors.
Enforced through amendment in SRO 549(I)/2008, dated 11.06.2008 and by rescinding SRO 1161(I)/2007, dated 03.06.2007 effective from the 4th June, 2011.
-- The Federal Excise Duty leviable on filter rods for cigarettes has been rationalise from Rs 1/- per filter rod to 20% ad val.
Enforced through amendment in Table I of First Schedule to the Federal Excise Act, 2005, effective from the 4th June, 2011.
-- The Federal Excise Duty on unmanufactured tobacco is being enhanced from Rs 5/- per kg to Rs 10/- per kg.
Enforced through amendment in Table I of First Schedule to the Federal Excise Act, 2005, effective from the 4th June, 2011.
LEGAL AMENDMENTS
1. Proposal to provide for revision of special return filed under section 27 by amending section 26(3) of the sales tax act, 1990
2. Proposal to insert the word "per annum" in section 8 of the federal excise act, 2005 to bring it at par with section 34 of the sales tax act, 1990
3. Proposal to bring uniformity in period of recovery of federal excise duty and sales tax
4. Proposal to remove the redundant words in heading of section 34a of the federal excise act, 2005
5. Proposal to amend rule 43a to remove anomaly in the rate of federal excise duty
6. Proposal to substitute cigarettes with cigarettes or beverages in section 26 of the federal excise act, 2005
7. Proposal to substitute cigarettes with cigarettes or beverages in section 27 of the federal excise act, 2005
8. Proposal to rescind SRO 364(I)/2007, dated 03.05.2007, now redundant due to withdrawal of federal excise duty on cable operators
9. Proposal to disallow auto revision of sales tax return available under rule 14-a of the sales tax rules, 2006
10. Proposal to prescribe time limit to decide the case after issuance of show cause notice
11. Proposal to harmonise section 38 of the federal excise act, 2005 with section 47 a (4) of the sales tax act, 1990.
12. Proposal to harmonise section 47 a(4a) of the sales tax act, 1990 with section 38 of the federal excise act, 2005 .
13. Proposal to harmonise rule 65(3) of the sales tax rules with section 47 a (3) of the sales tax act, 1990 .
14. Proposal to amend SRO 880(I)/2007, dated 01.09.2007 to include Eclia in s. No 59 and to include calibrated in s. No 50
15. Proposal to amend section 21 of the sales tax act, 1990 to empower commissioner inland revenue to effectively enforce the blacklisting regime
16. Proposal to amend sub-section (1), (3) and (4) of section 30 of the sales tax act, 1990 to include the designation inspector inland revenue as an authority under the sales tax act, 1990
17. Proposal to amend section 30a of the sales tax act, 1990 and section 29 of the federal excise act, 2005 to replace the word "fbr" occurring in the heading and wherever occurring in the text of by the word "inland revenue"
18. Proposal to empower officers with designation assistant commissioner and above to carry out investigative audit under 38b of the sales tax act, 1990
19. Proposal to empower officers inland revenue to reject refunds filed under section 66 of the sales tax act, 1990 where incidence has been passed on to the consumers
20. Proposal to empower federal board of revenue in terms of section 74 of the sales tax act, 1990 to condone time limit in time bound cases dealt by authorities specified in section 30 of the sales tax act, 1990.