Author: Mrs. Anjum Shahnawaz

FBR developing software to eliminate bogus invoices: CTO Chief

KARACHI: Federal Board of Revenue (FBR) is working to develop a new software which will eliminate flying / bogus invoices, Dr. Aftab Imam, Chief Commissioner, Corporate Tax Office (CTO) Karachi said during his visit to Pakistan Hosiery Manufacturers Association (PHMA).

The chief commissioner assured the exporters that all the issues of exporters will be resolved on top priority without delay, a statement issued by PHMA on Saturday quoted the chief commissioner as saying.

The chief commissioner stated that exporters may personally visit his office to meet and discuss their individual issues in order to resolve them. He stated after transformation to FASTER plus, the sales tax refund system was efficiently processing the claims. There were certain checks in the system which was necessary.

He said that CTO was playing its due role in policy making by communicating the matters and issues related to exporters by sending to the Board for implementation thereof.

Commenting on the Post Refund Audit notices, he added that all the income tax notices issued bear a barcode while the Post Refund audit notices regarding sales tax bear no barcode, however, they are valid notices.

The system is going through developmental phase and in next few weeks Post Refund Audit notices issued shall also reflect the barcode.

Replying to huge demand of documents in the notices, he opined that particular documents which are not available in the online system like stock and proof of payment should be given.

Responding to the requests of issuance of zero rated certificates, he informed that he has already written to FBR for the purpose. Upon confirmation, the requested certificates shall be issued on urgent basis.

Earlier Tariq Munir, Chairman (SZ), Pakistan Hosiery Manufacturers & Exporters Association welcomed the Dr. Aftab Imam, Chief Commissioner, Corporate Tax Office (CTO) Karachi who was accompanied by Zulfiqar Khokhar, Collector to PHMA.

Speaking on the occasion, Muhammad Jawed Bilwani, Chief Coordinator & Former Central Chairman, Pakistan Hosiery Manufacturers & Exporters Association invited the attention of Chief Commissioner CTO-Karachi on burning issue of exporters related to Sales Tax Refund / Audit, Income Tax Refund / Audit, Zero Rated Certificate for reduced tariff of electricity and gas and other issues.

He was of the view that after a lapse of 16 months, after various consultative sessions, suggestion of exporters, FASTER refund system has been improved and also transformed to FASTER plus which is appreciable as the system is efficiently processing the refunds electronically up to 80 percent without human involvement.

Remaining 20 percent may have some issues of filing which after resolution shall also be processed on fast track.

He was of the view that due to speedy refunds increasing trend in textile exports is witnessed. He stated that several members have informed that still amounts are missed and deferred in the FASTER system which should be looked into and rectified. He proposed that total missing amount should be reflected in the Sales Tax Refund MIS.

Bilwani also highlighted the matter of Notices of Post Audit Refund of Sales Tax as well as Income Tax issued to exporters demanding huge documentation which is already available with FBR system and same should be done away with and only necessarily required relevant documents should be demanded because the entire textile export chain is documented.

He also urged that all the FBR Notices should have barcodes and should sent electronically. The exporters should be provided the facility to apply for zero rated certificate regarding reduced tariff of gas and electricity to FBR and same should also be provided electronically.

FBR and SRB system are linked and integrated. exporters are in practice to adjust WWF amount against income tax refund. Hence, the FBR should intimate to the SRB that the exporters have paid the WWF amount.

On this occasion, Abdul Jabbar Gajiani, Senior Vice Chairman, Bashir Ghaffar Vice Chairman, Khizer Mehboob, Chairman, Taxation Committee, Abdur Rehman Former Vice Chairman PHMA, Saleem Parekh, Qadir Bilwani, Ilyas Gigi, Advocate Arshad Shehzad, Tax Advisor presented and other member exporters through zoom participated in the meeting.

November 7, 2020
Banking system witnesses Rs222 billion withdrawal in October

The State Bank of Pakistan (SBP) has reported a significant withdrawal of Rs222 billion from the banking system during October 2020. According to SBP statistics, banking deposits fell to Rs16,664 billion by the end of October 2020, down from a record high of Rs16,886 billion at the close of September 2020.
(more…)

November 7, 2020
Rate of tax on sale to distributors, dealers and wholesalers

ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of advance income tax on sale to distributors, dealers and wholesalers during tax year 2021 (July 01, 2020 to June 30, 2020).

The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendment brought through Finance Act, 2020.

The FBR updated the rate of advance income tax on sale to distributors, dealers and wholesalers under Section 236G of Income Tax Ordinance, 2001.

The rate of collection of tax under section 236G shall be at 0.7 percent on sale of fertilizers and 0.1 percent on sale of other than fertilizers/

The text of section 236G is as follow:

Section 236G. Advance tax on sales to distributors, dealers and wholesalers.—

(1) Every manufacturer or commercial importer of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam sector, at the time of sale to distributors, dealers and wholesalers, shall collect advance tax at the rate specified in Division XIV of Part IV of the First Schedule, from the aforesaid person to whom such sales have been made.

(2) Credit for tax collected under sub-section (1) shall be allowed in computing the tax due by the distributor, dealer or wholesaler on the taxable income for the tax year in which the tax was collected.

November 7, 2020
Weekly Review: market likely move positive on improvement economic indicators

KARACHI: The stock exchange likely to move positive during upcoming week on the back of improved macro-economic front.

Analysts at Arif Habib Limited said that the market to remain green due to reasons included: improvement on the macro-economic front amid reduction in trade deficit (rising exports and decreasing imports); strengthening PKR/USD parity; no expectation of immediate rate hike; and robust dispatches reported by cyclical sectors.

On the other hand, upcoming auto data (released by PAMA) is expected to attract investors’ interest in the automobile sector.

However, a surprise swing in the US elections may disrupt global investors’ confidence together with rising global coronavirus cases as daily cases crossed 600,000 mark for the first time on November 05, 2020, exerting pressure on countries to impose a lockdown.

The benchmark KSE-100 is currently trading at a PER of 7.2x (2021) compared to Asia Pac regional average of 14.1x while offering a dividend yield of ~6.2 percent versus ~2.6 percent offered by the region.

This week trading commenced on a negative note and the index nosedived by 776 points on Monday due to i) continuous surge in Covid-19 cases together with rising infection ratio from 2 percent per day to 4 percent, ii) dismissal of review petition on GIDC case by the Honorable supreme court, and iii) budding pressure on global equities and commodities in anticipation of the US presidential election.

However, the negative performance was short lived as the index displayed a rebound on Tuesday and increased by 1,369 points (highest day increase after April 17, 2020) as i) nation-wide lockdown was ruled out by the NCOC, ii) announcement of an electricity relief package for industrial sector by Prime Minister, iii) CPI at 8.9 percent (lower then anticipation), and iv) recovery in global equities with Biden in the lead in US elections.

As a result, the KSE-100 index closed at 40,732 points, up by 844 points or 2.11 percent WoW.

Contribution to the upside was led by i) Commercial Banks (203 points), ii) Oil and Gas Exploration Companies (149 points), iii) Technology and Communication (97 points), iv) Cement (74 points), and v) Fertilizer (57 points). Scrip-wise major gainers were POL (90 points), TRG (83 points), MEBL (61 points), BAFL (35 points), and HMB (33 points). Whereas, scrip-wise major losers were HBL (38 points), FFC (14 points) PAKT (13 points), MUREB (6 points) and APL (6 points).

Foreigners offloaded stocks worth of USD 5.50 million compared to a net sell of USD 21.34 million last week. Major selling was witnessed in Commercial Banks (USD 3.46 million) and E&P (USD 1.86 million). On the local front, buying was reported by Individuals (USD 5.37 million) followed by Insurance Co. (USD 3.63 million). That said, average daily volumes and traded value for the outgoing week were down by 21 percent and 20 percent to 368 million shares and USD 79 million, respectively.

November 7, 2020
SECP extends coronavirus contingency plan for corporate meetings

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has extended the applicability of coronavirus related contingency planning for general meetings of shareholders.

In a notification issued on Friday, the SECP extended the applicability of its circular No. 5 of 2020 dated March 17, 2020 to annual general meetings and extra-ordinary general meetings to be held up till January 31, 2021.

In its circular no. 5 dated March 17, 2020, the SECP issued following coronavirus contingency planning for annual general meetings of shareholders:

In light of the threat posed by evolving COVID-19 situation (coronavirus) pandemic and to protect the wellbeing of shareholders, the SECP issued the following directives:

i. In order to avoid large gathering at one place, the companies shall consider provision of video link facilities, webinar or other electronic means.

ii. The companies shall also provide email, WhatsApp number, mobile number or any other electronic mean through which shareholders can provide comments/suggestions for the proposed agenda items of the AGM.

iii. The companies shall disseminate the aforesaid details to the shareholders through its website, Pakistan Stock Exchange and addendum/notice in newspapers along with complete information necessary to enable them to access the facility. Any change in venue shall also be communicated.

iv. It will be responsibility of the company secretary and chairman of the meeting that comments / suggestions of the shareholders should be discussed in the meeting and made part of the minutes of the meeting.

v. Maximum participation of shareholders be ensured via electronic means and by requesting members to consolidate their attendance through proxies, while honoring quorum provisions.

vi. The companies shall consider protective measures during the meeting i.e. provision of hand sanitizers, masks and distant seating etc.

vii. For special business voting through postal ballot shall be considered.

viii. With reference to Circular No. 02/2018 dated February 09, 2018 it is re-emphasized that the provision of gifts/incentive in any form to shareholders at or in connection to general meetings is strictly prohibited under Section 185 of the Act.

November 6, 2020
Sales tax rates for construction services updated

KARACHI: Sindh Revenue Board (SRB) has issued updated rates of sales tax on construction services. The SRB explained the rate of sales tax at normal, concessionary and exempted on construction services.

The SRB issued working tariff updated up to November 01, 2020.

Following are the rate of sales tax on construction services:

The SRB said that a general rate of 13 percent is applicable on the construction services.

However, a reduced rate at 8 percent is also available on following conditions:

(i) The benefit of this reduced rate is not available to persons, engaged in providing or rendering the construction services, who elect or opt to pay the statutory rate of tax at 13 per cent under the Special Procedure prescribed by the Board and avail of the input tax credit/adjustment facility as prescribed in the Act and rules

(ii) Input tax credit/adjustment shall not be admissible.

Another reduced rate at 5 percent is also available on following conditions:

(i) Construction service in relation to Government Civil Works for which expenditure is paid out of the expenditure budget of the Federal Government or the Local Government or the Cantonment Board.

(ii) Input tax credit/adjustment shall not be admissible.

The SRB said that sales tax on service is exempted on construction services related to:

(i) Construction work undertaken by a person whose annual turnover does not exceed 4 million rupees in a financial year;

(ii) Construction and development of EPZ, SEZ and diplomatic and counselor buildings; and

(iii) Construction of an independent private residential house, other than residential unit covered by tariff headings 9807.0000 or 9814.3000, having total covered area not exceeding 10,000 square feet.

November 6, 2020
FBR issues procedure for oversight committee to settle cases

ISLAMABAD: Federal Board of Revenue (FBR) on Friday issued procedure for assessment oversight committee for resolving cases of settlement filed against assessment notices.

The FBR issued SRO 1184(I)/2020 to notify the rules. Previously, the FBR issued draft rules through SRO 957(I)/2020 dated October 02, 2020 to seek input from stakeholders.

The FBR introduced Rule 231CA to the Income Tax Rules, 2002 for procedures for assessment oversight committee that shall apply to all cases of settlement filed under Section 122D (agreed assessment in certain cases) of Income Tax Ordinance, 2001.

As per the rule, a settlement application shall be made electronically by the applicant in person or by his authorized representative, under Section 122D for agreed assessment of the committee on IRS web portal.

A settlement application shall be preferred to the committee after the date of service of the notice issued under sub section (9) of Section 122 of the Ordinance and before finalization of assessment.

The commissioner shall not conclude assessment proceedings under section 122 if an application, made against the notice issued under sub section (9) of section 122, lies pending before the committee.

The committee, after examination of the contents of an application submitted by an applicant and facts stated therein and on scrutiny of requisitioned record, if any, shall afford opportunity of being heard to the applicant in writing.

The committee shall finalize the applications filed under section 122D of the Ordinance within thirty days of receipt of application or within an extended period of sixty days, for reasons to be recorded in writing by the committee.

November 6, 2020
Share market sheds 340 points on profit taking

Karachi, Pakistan – The share market experienced a sharp decline on Friday, shedding 340 points due to selling pressure across various sectors.
(more…)

November 6, 2020
Rupee gains 37 paisas; dollar eases to Rs159.09

KARACHI: The Pakistani Rupee gained 37 paisas against the US dollar on Friday, closing at Rs159.09 from the previous day’s rate of Rs159.46 in the interbank foreign exchange market. This appreciation was attributed to lower imports and higher inflows of export receipts and workers’ remittances, according to currency dealers.
(more…)

November 6, 2020
FBR issues rules to finalize return forms by January 31

ISLAMABAD: Federal Board of Revenue (FBR) on Friday amended rules under which annual income tax return form will be available on January 31 every year following the financial year to which the return relates.

The FBR issued SRO 1185(I)/2020 to amend Income Tax Rules 2002. Previously, the FBR issued SRO 1041(I)/2020 dated October 13, 2020 to notify draft rules and invited suggestions from the stakeholders.

The FBR introduced Rule 34A for making it mandatory that the annual income tax return form shall be available by January 31 every on IRIS portal and ready for filing by taxpayers.

The text of the new rule 34A is as:

34A. Time limit for notifying income tax return form:

(1) This rule shall apply for the purpose of setting timelines in respect of various steps involved in notifying income tax return forms for a tax year.

(2) The return form specified in sub rule (2) of rule 34 shall be notified for suggestions from all persons likely to be affected thereby on or before the first day of December of the financial year following the financial year to which the return relates by observing following timelines:

(a) Inland Revenue Policy Wing shall identify the legal amendments to be incorporated in income tax return forms by thirty-first day of August of the financial year following the financial year to which the return relates;

(b) preparation of change request form (CRF) shall be finalized by Inland Revenue Policy Wing and Information Technology Wing, in consultation with PRAL, by the fifteenth day of September of the financial year following the financial year to which the return relates;

(c) analysis and scrutiny of the change request form (CRF) by Chief Income Tax Policy and Chief Business Domain Team shall be conducted by sixteenth day of September of the financial year following the financial year to which the return relates and the same shall be submitted to Member Inland Revenue Policy for approval on the same day;

(d) PRAL shall complete configuration and development of the approved CRF by thirty first day of October of the financial year following the financial year to which the return relates; and

(e) User Acceptance Test (UAT) of the amended return forms on testing environment shall be finalized by Inland Revenue Policy Wing and Information Technology Wing, in consultation with PRAL, by fifteenth day of November of the financial year following the financial year to which the return relates and the same shall be submitted to Member Inland Revenue Policy for approval on the same day.

(3) The return form shall be remain available on the portal for suggestion till seventh day of January of the financial year following the financial year to which the return relates.

(4) The final return form shall be notified on or before the thirty first day of January of the financial year following the financial year to which the return relates by observing following timelines:

(a) Inland Revenue Policy Wing and Information Technology Wing shall review the suggestions received from stakeholders by twelfth day of January of the financial year following the financial year to which the return relates;

(b) a new change request form, if required, shall be finalized by Inland Revenue Policy Wing and Information Technology Wing, in consultation with PRAL, by 15^th day of January of the financial year following the financial year to which the return relates and the same shall be approved by Member Inland Revenue;

(c) PRAL shall complete configuration and development of the approved CRF by 20^th day of January of the financial year following the financial year to which the return relates;

(d) User Acceptance Test (UAT) of the final return forms on testing environment shall be finalized by Inland Revenue Policy Wing and Information Technology Wing, in consultation with PRAL, by 25^th day of January of the financial year following the financial year to which the return relates and the same shall be submitted to Member Inland Revenue Policy for approval;

(e) final income tax return forms shall be available on IRIS by the thirty day of January of the financial year following the financial year to which the return relates;

(f) in case, any further amendments are made in the financial year to which the return relates that have an impact on the finally notified income tax return forms referred to a clause (e), such amendments shall also be incorporated accordingly; and

(g) notwithstanding anything contained in this rule, the time so specified may, if requested by the Member Inland Revenue Policy, be extended by the Board to such extent and subject to such conditions and limitations as it may deep proper.

November 6, 2020