Author: Hamza Shahnawaz

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has suggested that the minimum tax should be reduced to 0.2 per cent for listed companies with large turnover with lower profit margins.

The OICC in its proposals for budget 2022/2023 submitted to Federal Board of Revenue (FBR) made tax recommendations related to chemical, pesticides, fertilizers, paints and cement sectors.

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The chamber recommended that minimum tax rate should be reduced to 0.2 per cent for listed chemical companies with large turnover with low profit margins.

It recommended minimum tax at Import Stage for Fertilizer manufacturers and said: Clause b of Section 148(7) of Income Tax Ordinance, 2001 as deleted by the Finance Act, 2017 should be restated, which read as follows: “148(7) b fertilizer by manufacturer of fertilizer” to allow adjustment of tax deducted at import stage for fertilizer imported by a fertilizer manufacturer so as not to make it a Final Tax.

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The chamber sought exemption under Clause 42 of Part IV of Second Schedule to the terminal operators. It recommended exemption under Clause 42 read with section 153(3) of the ITO, 2001 be available to all terminals without discrimination. The said clause be re-worded as follows:

“(42) The provisions of sub-section 3 of section 153 shall not apply in respect of payments received by a resident person for providing services by way of operation of terminal(s) at a sea-port in Pakistan or of an infrastructure project covered by the Government’s Investment Policy, 1997.”

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The OICCI highlighted anomaly between input and output sales tax for fertilizer manufacturers. It said for the fertilizer industry, the General Sales Tax (GST) on supply of natural gas as feed stock is at 5 per cent and as fuel stock is 17 per cent. However, the output GST rate on sales of finished goods i.e. urea is 2 per cent. This mismatch between input and output GST results in excessive input tax refundable build-up.

It is recommended: “GST rate on supply of natural gas for fertilizer industry should be zero percent.”

For sales tax rate on raw material of paints, the OICCI recommended:

i. Sales tax of 25 per cent should be imposed on some basic raw materials like Titanium dioxide and other similar categories for commercial importers.

ii. Enforcement measures to be made more effective in consultation with OICCI members, who are established taxpayers, to penalize tax evaders.

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The OICCI pointed out higher tax rates on fertilizer micronutrients. Macro nutrients being imported under Chapter 31 of Pakistan Customs Tariff, enjoy reduced duties and taxes representing only 8% of the value imported whilst in case of micronutrients being imported under Chapter 28, the import duties and taxes are quite high representing 29% of import value.

It recommended to make necessary amendments in the revenue regulation to reduce sales tax and import duties on import of micronutrients.

The authorities have been informed about dual taxation on dealers belonging to chemical sector under Section 236G and Section 233 of the Ordinance shall be removed.

It recommended that dealers of chemical sectors be removed from the scope of Section 236G who are already paying tax on their commission income under Section 233 of the Ordinance and are also appearing in Active Taxpayer List (ATL).

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The OICCI sought exemptions withdrawn on import and supply of seeds for sowing.

It recommended sales tax exemption for the seeds industry be reinstated by withdrawal of amendments made through the Finance Supplementary Act 2021.

Concessions allowed to exploration and production Companies and their contractors under SRO 678(I)/2004 on custom duty on import of spares, chemicals and consumables. It is recommended E&P Companies are exempt from payment of additional customs duty (ADC) on imports for their off-shore projects. FSRU is an offshore installation and therefore imports for FSRU should be allowed the same concession as the E and P companies are allowed in condition (vii).