The Constitution has empowered the Federal Board of Revenue (FBR) to issue Statutory Regulatory Orders (SROs) for granting tax exemptions to individuals/sectors under Customs Act, 1969, Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005 - four statutes duly approved by Parliament.
Sources told Business Recorder here on Friday that the FBR has not by-passed Parliament for granting exemptions as the ample powers are available under the Constitution. Article 77 of the Constitution envisages that "no tax shall be levied for the purposes of the federation except by or under the authority of Act of [Majlis-e-Shoora (Parliament)]. The said article provides two types of enactment for the levy of tax: Firstly, levy by the Act of Parliament and secondly, levy of tax under the authority of Act of the Parliament.
These powers are delegated to respective organisations of State under respective Acts, ie the Customs Act, 1969, Sales Tax, 1990, Federal Excise Act, 2005 and Income Tax Ordinance, 2001 are all statutes enforced by FBR and its field formations. Further amendments in the Acts are proposed in the Finance Bill of every financial year which is laid down before the Parliament for approval and when approved these become the part of the respective Acts.
The SRO is issued to regulate any given provision of a statute. Customs Act, 1969; Income Tax Ordinance, 2001; Sales Tax Act, 1990 and Federal Excise Act, 2005, are all statutes approved by Parliament. There are specific sections in these statutes which empower Federal Government and FBR to regulate the given sections in these statutes through notifications.
Sources added that the SROs are issued after getting approval from the competent authority/Economic Co-ordination Committee to address specific cases of hardship/natural disasters. These are also promulgated for incentivising exports and limiting imports for a certain category of goods/industry to encourage local industry. There are different sections of the relevant Acts where under the powers are mostly used by the Federal Government/FBR for levy, exemption, reduction/ modification of duty rates, waivers of penalties and surcharges and to make general rules for the purpose of application of the Acts.
In case of Customs Act, 1969, the Federal Government is empowered to impose Regulatory Duty on goods imported or exported subject to certain conditions under section 18(3). Under section 18(5), the Federal Government is competent to levy additional Customs duty through a notification. As per section 18-A of Customs Act, the Federal Government is empowered to impose special Customs duty on goods imported as are of the same kind as goods produced or manufactured in Pakistan. The Federal government may lower the rate of duty under certain trade agreement with any country under section 18-C. Under section 19 of the Customs Act, the Federal Government is empowered to notify exemption of whole or part of Customs duties subject to certain conditions/limitations on goods imported or exported. Similarly, the FBR is empowered under section 20 to grant exemption on whole or part of Customs duty, on case to case basis, under circumstances of exceptional nature.
Under Sales Tax Act, 1990, the clause (a) of sub-section (2) of section 3 authorises the Federal Government to include or exclude through an SRO any taxable supplies in the Third Schedule. Sales Tax is collected at the rate of 16% of the retail price from the manufacturer on the supplies of goods included in Third Schedule. The clause (b) of sub-section (2) of section 3 authorises the Federal Government to prescribe the manner of charge and payment of tax and also to prescribe lower or higher rates of tax.
There are many other sections of the Sales Tax Act 1990 under which the FBR can exempt or zero-rate any sector. For example, under clause (c) of section 4, the Federal Government may zero-rate any goods. Under clause (d) of section 4, the FBR may zero-rate any goods through a General Order.
Under section 3(1)(b) of Federal Excise Act 2005, the Federal Government through SRO, can specify the goods manufactured in non-tariff areas that shall be subjected to Federal Excise on being brought in tariff areas. Whereas, the Federal Board of Revenue through SRO, can levy and collect duties on production capacity or on fix basis under section 3(3) of Federal Excise Act 2005. Besides, there are different sections of the Federal Excise Act 2005 which allows exemption or zero-rating of tax. Under section 53 of the Income Tax Ordinance, 2001, the Federal Government has been authorised to grant exemption; grant reduction in tax rates; allow a reduction in tax liability and exempt from the operation of any provisions. The sub-section (2) of section 148 empowers Federal Board of Revenue to exempt any imports from withholding tax at import stage.
The section 47 authorises FBR to make rules for determination of consideration received from the disposal of any asset. Sub-section (3) of section 159 empowers the Federal Board of Revenue to amend the rates of withholding taxes and to exempt persons or goods from withholding tax. Under section 183A of the Ordinance 2001, Federal Government can grant exemption of penalty and default surcharge. Under section 240 of the Income Tax Ordinance, FBR can pass any order for removal of difficulty.
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