The Securities and Exchange Commission of Pakistan (SECP) has proposed to the Federal Board of Revenue to abolish FED on service sector under Federal Excise Act, 2005 to avoid double taxation on service providers in provinces. According to the budget proposal of the SECP communicated to the FBR on Monday, Federal Excise Act, 2005 and related rules should be withdrawn for service sector including insurance companies.
Details of the proposal revealed that the Federal Excise Duty Act, 2005 and related rules are still applicable to service sector including insurance companies having business in Pakistan despite the introduction of sales tax on services law by Sindh and Punjab.
As the collection of sales tax on services has been awarded to respective provinces and the collection of tax on services through FED which is a federal tax has been withdrawn therefore the FED ACT 2005 should be withdrawn otherwise it would tantamount to double taxation which is not the intention of current law, the SECP said.
Federal Excise Act 2005 and related rules should be withdrawn for service sector including insurance companies, the SECP proposed. In this regard, the SECP has referred to the Federal Excise Act 2005 Table I serial No 7 heading/sub heading No 9813.1000 and Federal excise rules Chapter No 8 Rule 40. The SECP has proposed amendment to Seventh Schedule (insertion of a new sub-clause (4) in Clause 8). The SECP said that the profits and gains accruing to any person on sale of immovable property to a REIT Scheme are exempt from tax under clause (99A) of second schedule of the income tax ordinance. However, this exemption is not available to banks. The proposed amendment seeks parity in tax treatment for all. The proposed provision said the profits and gains accruing to a bank on sale of immovable property to a REIT Scheme shall be exempt from tax up to thirtieth day of June 2015, the SECP added.
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