Ordinance promulgated: Non-filers of tax returns to face strict actions

Islamabad: The government has promulgated an ordinance to introduce new enforcement measures to broaden the tax base, empowering the Federal Board of Revenue (FBR) to disable mobile phones/SIMS, disconnect electricity and gas of persons who are required to file returns but do not appear on the Active Taxpayer List (ATL).

The government has also given powers to the FBR to discontinue gas and electricity connections of persons including Tier-1 retailers who are either not registered or if registered not integrated in terms of section 3(9A) of the Sales Tax Act 1990.

A new section 114B (powers to enforce filing of returns) has been introduced in the Income Tax Ordinance 2001. The Board shall have the powers to issue Income Tax General Order in respect of persons who are not appearing on ATL but are liable to file return under the provisions of this Ordinance. The Income Tax general order may entail any or all of the following consequences for the persons mentioned therein: Disabling of Mobile Phones or Mobile Phone Sims; discontinuance of electricity connection; and discontinuance of gas connection.

The Tax Laws (Third Amendment) Ordinance 2021 has bound the Nadra to share data with FBR for broadening of tax base, calculating indicative income and identifying potential tax evasion. The National Database and Registration Authority shall, on its own motion or upon application by the Board, share its records and any information available or held by it, with the Board, for broadening of the tax base or carrying out the purposes of this Ordinance.

FBR issues stern warning to non-filers

The Nadra may submit proposals and information to the Board with a view to broadening the tax base and identify in relation to any person, whether a taxpayer or not. The Board may use and utilize any information communicated to it by the Nadra and forward such information to an Income Tax authority having jurisdiction in relation to the subject matter regarding the information, who may utilize the information.

Another big enforcement measure introduced through the Ordinance is the changes in penal regime for non-filers. The penalty for non-filers has been increased to Rs 1,000/- per day of default. The government has increased the amount of penalty for tier-1 retailers who are not integrated with the FBR. The government has also imposed additional advance tax on the rates ranging from 5 percent to 35 percent on professionals using domestic electricity connections. The professionals covered accountants, lawyers, doctors, dentists, health professionals, engineers, architects, IT professionals, tutors, trainers and other persons engaged in the provision of services.

The government has also enhanced Extra Tax rates on industrial and commercial gas and electricity connections to persons, who are unregistered.

The government has granted sales tax zero-rating to fat filled milk including those sold in retail packing under a brand name or a trademark and also withdrawn exemption on import of fruit from Afghanistan.

Any expenditure in excess of Rs. 0.25 million by the corporate sector to be inadmissible if not paid through digital mode. The salaries in excess of Rs. 25,000/- per month if paid through digital mode to be admissible expense along with paid through other banking channels.

Under the Ordinance, the reduced rate of 16 percent sales tax would be applicable on supplies made by POS integrated outlets where payment is made through digital mode; reduced rate of 14 percent on re-meltable scrap imported by steel meltors; reduced rate of 5% on import of electric vehicles on CBU condition and reduced rate of 16.9 percent sales tax on business to business transactions, where payment is made through digital mode. Moreover, the government has excluded steel and edible oil sectors from the charge of Further Tax u/s 3(1A) of the Sales Tax Act, 1990.

The government has introduced an enabling provision for making facilitator of online market place as withholding agent under Eleventh Schedule to the Sales Tax Act, 1990 and also requirement of integration for specified persons to integrate the invoice issuing machines with Board’s Computerized System.

Willful tax defaulters, non-filers: New policy to lay down third-party audit mechanism

Through the Tax Laws (Third Amendment) Ordinance 2021, the government has introduced a mechanism of appeal against the order of Director General Valuation is proposed to be provided by amending section 25D. Appeal maybe filed with Member (Customs Policy). Further appeal may be filed with High court against the order of Member (Customs Policy). Consequential changes in section 194A and 196 are also proposed. The mechanism of reassessment of already assessed GD is proposed to be streamlined. The corporate guarantee to be included in the definition of security instrument for provisional clearance. This will facilitate and avoid high financial costs for industrial importers.

The Ordinance has granted exemption to certain raw materials for auto disabled syringes and exemption on import of POS machines granted to all persons.

The FBR has included “steel” sector in clause 24D to provide a reduced rate of minimum turnover tax to distributors, dealers, sub dealers, wholesalers and retailers at par with cement sector. The government has also included local manufactures of mobile phones in clause (11A) Part IV of Second schedule to exempt them from minimum tax at par with STZ and SEZ enterprises. The government has also included all entities mentioned in Table I of clause (66) of

Part I of the Second Schedule in Thirteenth Schedule to make donations eligible for tax credit.

The Ordinance has clarified that the remittance through Money Service Bureaus (MSBs), Exchange Companies (ECs) and Money Transfer Operators (MTOs) such as Western Union, Money Gram and Ria Finance or other like entities shall be deemed to constitute foreign exchange remitted from outside Pakistan through normal Banking channels.

Copyright Business Recorder, 2021