Rs38bn additional taxation measures: Tax Laws (Amend) Ord may be extended for another 120 days

ISLAMABAD: The government may extend the date of the Tax Laws (Second Amendment) Ordinance 2022, which was promulgated on August 23, 2022, for the continuation of the additional taxation measures of around Rs38 billion during 2022-23.

Sources told Business Recorder that the Tax Laws (Second Amendment) Ordinance, 2022 would expire after 120 days, ie, December 23, 2022. The National Assembly is expected to pass a resolution for giving an extension of the Ordinance for another 120 days. The new ordinance may extend the date after the expiry of the Tax Laws (Second Amendment) Ordinance, 2022.

The Federal Board of Revenue (FBR) has started the work on drafting the new Ordinance for possible extension in the date of the Tax Laws (Second Amendment) Ordinance, 2022.

The Tax Laws (Second Amendment) Ordinance, 2022 had taken additional taxation on the tobacco industry of Rs36 billion, sales tax exemption to single cylinder agriculture diesel engines, exemption of Capital Value Tax for the passenger/goods transport vehicles and vehicles of foreign diplomats and foreign diplomatic missions and restoration of old tax scheme for small traders/retailers prevailing prior to Finance Act 2022.

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The government had also restored the exemption on allowance and perquisite paid or allowed outside Pakistan by the Government of Pakistan to its citizen for services rendered outside Pakistan, withdrawn earlier through the Finance Act, 2022 with effect from July 1, 2022. The total measures taken under the Tax Laws (Second Amendment) Ordinance 2022 stood at around Rs38 billion. The revenue impact of the tax relief measures through the Tax Laws (Second Amendment) Ordinance 2022 stood at nearly Rs19 billion. Therefore, the net impact of measures comes to around Rs19 billion.

The subsidy provided by the federal or a provincial government on natural gas to consumers, including RLNG, has been granted sales tax exemption under the Tax Laws (Second Amendment) Ordinance, 2022.

Through the Ordinance, the advance tax rates on passenger transport vehicles have been rationalised.

Under the Ordinance, the amendments have been made in the Sales Tax Act 1990, Income Tax Ordinance 2001, Federal Excise Act 2005 and Finance Act 2022, the President House added.

The Ordinance had amended provisions of the Finance Act 2022 to bring necessary changes in the income tax, sales tax and FED laws. The Ordinance has amended Income Tax Ordinance 2001, Sales Tax Act 1990 and Federal Excise Act 2005.

Under the Ordinance, the income tax exemption has also been granted to any allowance or perquisite paid or allowed as such outside Pakistan by the Government to a citizen of Pakistan for rendering service outside Pakistan. The exemption on income derived by Kuwait Foreign Trading Contracting and Investment Company or Kuwait Investment Authority being dividend of the Pak-Kuwait Investment Company in Pakistan has been restored as per sovereign agreement.

Under the Tax Laws (Second Amendment) Ordinance, 2022, the Fixed Tax Scheme introduced for retailers (other than Tier-I retailers) on commercial electricity connection has been withdrawn with effect from July 1, 2022 and previous regime (prevailing prior to Finance Act 2022) has been restored. Instead of fixed tax on retailers that will reduce revenue of Rs42 billion, we will now revert to the old system of ad valorem tax.

Copyright Business Recorder, 2022