The government has taken new taxation measures of over Rs 154 billion by imposing 10 percent Capital Gain Tax (CGT) on disposal of immovable properties sold within five years of acquisition, doubling of withholding tax on purchase/sale of properties for filers/non-filers, one year extension in Super Tax, Alternate Corporate Tax (ACT) made basis for payment of advance tax, increase in sales tax on import of mobile phones, fixed excise duty of Rs 1 per kg on cement, increase in 10 to 11 percent customs duty on import of 900 items, 15 to 16 percent duty raise on 508 items and final tax on builders/land developers on the basis of per unit area.
To meet revenue collection target of Rs 3,621 billion for 2016-17, new taxation measures have been taken through Finance Bill 2016-17 issued here on Friday. Out of total fixed target of Rs 3,621 billion, the indirect taxes will fetch Rs 2063 billion while direct taxes will bring Rs 1558 billion in into national kitty during financial year 2016-17.
Under new taxation measures, the government has replaced 8 percent FED on sugar to 8 percent sales tax, enhancement in the FED on cigarettes, increase in FED on beverages from 10.5 to 11.5 percent, replacement of 5 percent FED on cement to fixed rate basis of Rs 1 per kg, increase in fixed sales tax on steel sector, sales tax on marble industry @ Rs 1.25 per KWH of electricity consumed and enhancement of sales tax from 5 to 10 percent on certain ingredients of poultry feed.
The government also proposed hiking Federal Excise Duty (FED) on cigarettes, imposing fixed tax on builders and land developers, 5 percent withholding tax on the value of minerals, continuation of super tax for next budget, imposing 17 percent GST on input of milk, fat filled milk while zero rating regime for preparation for infant milk proposed to be retained.
The incidence of withholding tax has been increased on non-filers of income tax returns by including new categories. The rate of tax on dividend in the case of non-filers may be increased from 17.5% to 20%. The tax withheld in excess of 12.5% shall remain adjustable. It is also proposed to increase the withholding tax rate for non-filers from 15% to 20% on winning of prize bonds. Non-filers are required to pay tax at higher rate on dividend. It is proposed to introduce higher tax rates of 15% for non-filers receiving dividend from Mutual Funds. The rate for filers shall remain unchanged at 10%. The excess tax at 5% for non-filers shall be adjustable.
The number of customs duty slabs has been reduced from 5 to 4 i.e. 3 percent, 11 percent, 16 percent and 20 percent. Five percent duty slab has been abolished and reduction in duty slab from 5 to 4 would benefit 2300 items. By reducing duty, the FBR reduced duty on 2300 items mainly on machinery and raw materials. In case of immovable properties, it is proposed to increase the rate in case of sale of property from 0.5% and 1% to 1% and 2% for filers and non-filers respectively and in case of purchase of property, from 1% and 2% to 2% and 4% for filers and non-filers respectively.
Moreover, at present, no tax is charged on capital gain from immovable property if it is sold after two years of acquisition. It is proposed that Capital Gain on disposal of immovable properties be taxed at a rate of 10% if the property is sold within five years of acquisition.
Advance tax is paid on the basis of tax calculated on income or minimum tax on turnover and is required to be deposited in four installments. However, advance tax is not calculated on the basis of Alternate Corporate Tax (ACT). Taxpayers under existing law have to pay entire tax at the time of filing of return. It is proposed that Alternate Corporate Tax may also be made the basis for payment of advance tax. In order to stop mis-declaration and to bring the tax structure in line with market prices, the rates of sales tax on mobile phones are being rationalized. The existing sales tax rates of Rs 500 and Rs 1,000 are proposed to be increased to Rs 1,000 and Rs 1,500 for medium and high category mobile phones respectively. The rate of tax on low category mobiles will remain unchanged at Rs 300.
Compared to high profit margins of stock brokers, the withholding tax rate of 0.01% withholding tax on commission of members of Stock Exchange is quite low. It is proposed that it may be enhanced to 0.02%.
Similarly, it is proposed that an adjustable withholding tax at the rate of 3% of the value of vehicle be collected by every bank/leasing company etc from non-filers at the time of lease. In line with the one basket approach for banking companies introduced last year, it is proposed that income of insurance companies from all sources may also be subjected to same corporate tax rate.
It is also proposed that any person making payment for a foreign produced advertisement shall collect withholding tax at the rate of 20% of the payment. Other taxation measures revealed that the advance tax is paid on the basis of tax calculated on income or minimum tax on turnover and is required to be deposited in four installments. However, advance tax is not calculated on the basis of Alternate Corporate Tax (ACT). Taxpayers under existing law have to pay entire tax at the time of filing of return. It is proposed that Alternate Corporate Tax may also be made the basis for payment of advance tax.
It is proposed to extend the holding period for taxation of capital gain on sale of immovable property from two years to five years to be charged at uniform rate of tax of 10%. According to the Finance Bill, every person responsible for making payment directly or through an agent or intermediary to a non resident person for foreign produced commercial for advertisement on any television channel or any other media shall deduct tax at the rate of twenty percent from the gross amount paid. The tax deductable shall be final tax on the income of non-resident person arising out of such payment. The mineral water is charged to sales tax at 17% of value of supply. It is proposed to include mineral water in the Third Schedule so that the tax is charged on the basis of retail price.
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