Pkrevenue.com

Author: Mrs. Anjum Shahnawaz

  • FBR urged to abolish withholding tax on telecom services

    FBR urged to abolish withholding tax on telecom services

    KARACHI: Federal Board of Revenue (FBR) has been recommended to abolish withholding tax on telecom services considering the rate is too high and a large segment of people living below poverty line.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 said that currently, telecommunication services in Pakistan are subject to withholding tax at 12.5 percent, which is much higher as compared to other sectors.

    Since approximately 30 percent of the population lives below the poverty line and the percentage of return filers is also nominal, imposition of withholding tax on the entire subscriber base is neither fair nor based on sound principle of proportionate taxation.

    The OICCI recommended the FBR to abolish withholding tax to promote the accessibility of internet/data services to the low-income groups.

    The OICCI also highlighted the issue of sales tax on services applicable in provinces.

    In Punjab, KPK, Baluchistan and Sindh, GST on telecom sector is charged from all consumers at 19.5 percent. In the federal capital, this rate is 17 percent.

    It is pertinent to mention that the provinces are levying a much lower rate of GST on other services – i.e. 13 percent – 16 percent.).

    The OICCI recommended:

    i. Reduce and harmonize GST across the country – i.e. a single rate for all services across all jurisdictions.

    ii. Since GST is a consumption tax on usage, the decrease in GST/FED rate will result in increase in usage of telecom services and consequently drive tax collection upwards.

    iii. A recent GSMA study1 concluded that harmonization of GST on mobile services to 17 percent would yield have an estimated PKR 62 billion positive impact on the GDP and exchequer. Additionally, we can expect 4.5 million more subscribers primarily on mobile broadband, which will be further stimulate GDP growth.

  • Share market gains 112 points in mixed trading

    Share market gains 112 points in mixed trading

    KARACHI: The share market gained 112 points on Thursday in mixed trading during the day.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 33,805 points against 33,693 points showing an increase of 112 points.

    Analysts at Arif Habib Limited said that the market made a repeat of yesterday, opening 204 points up, increasing by 304 points in total during the session and closing 112 points.

    Fertilizer sector played an important role in posting gains on the index, primarily due to announcement of package for the farmers towards purchase of DAP and Tractors.

    Resultantly, FFBL hit upper circuit whereas other Fertilizer sector scrips also went up before facing selling pressure.

    Cement, Steel, Banks and E&P sector largely traded range bound. Upward movement in international crude prices even couldn’t excite investors.

    Technology sector topped the index with 40.7 million shares, followed by Cement (29.1 million) and Chemical (21.3 million).

    Among scrips, TRG realized 20.9 million shares, followed by UNITY (18.6 million) and AGL (14.8 million).

    Sectors contributing to the performance include Fertilizer (+80 points), Inv Banks (+31 points), Food (+27 points), Technology (+24 points), E&P (+23 points), Banks (-59 points), Power (-32 points) and Cement (-28 points).

    Volumes increased from 219.2 million shares to 240.2 million shares (+10 percent DoD). However, average traded value declined by 25 percent to reach US$ 38.5 million as against US$ 51 million.

    Stocks that contributed significantly to the volumes include TRG, UNITY, AGL, FFL and MLCF, which formed 32 percent of total volumes.

    Stocks that contributed positively to the index include FFC (+48 points), NESTLE (+26 points), DAWH (+26 points), MTL (+25 points) and OGDC (+18 points). Stocks that contributed negatively include HUBC (-31 points), HBL (-22 points), ABL (-20 points), BAHL (-10 points), and LUCK (-10 points).

  • Foreign exchange reserves ease to $18.74 billion

    Foreign exchange reserves ease to $18.74 billion

    KARACHI: The foreign exchange reserves of the country eased by $10 million to $18.745 billion by week ended May 02, 2020, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves were at $18.755 billion a week ago i.e. April 30, 2020.

    The official reserves of the central bank fell by $58 million to $12.271 billion by week ended May 08, 2020 as compared with $12.329 billion a week ago.

    The SBP said that the official reserves of the central bank fell due to external debt repayment.

    The reserves held by commercial bank increased by $48 million to $6.474 billion by week ended May 08, 2020 as compared with $6.426 billion a week ago.

  • Rupee makes sharp recovery against dollar

    Rupee makes sharp recovery against dollar

    KARACHI: The Pak Rupee made significant recovery of 85 paisas against dollar on Thursday owing to inflows of the foreign currency in shape of remittances and export receipts.

    The rupee ended Rs160.10 to the dollar from previous day’s closing of Rs160.95 in interbank foreign exchange market.

    The US dollar strengthened by around one rupee during (Monday to Wednesday) three trading sessions owing to fall in remittances and rise in demand for import payments.

    The currency experts attributed to depreciation in rupee value to the ease in lockdown from May 10, 2020 the demand of consumer goods increased substantially, which also encouraged the importers to place new foreign orders.

    Overseas Pakistani workers sent home $1.790 billion in April, compared with $1.894 billion in previous month.

    Pakistan received $18.781 billion in remittances in July-April FY2020, compared with $17.801 billion in the same period last year.

    However, the experts said that the local currency recovered on the back of improved economic indicators.

  • Textile exports post sharp 64 percent decline in April

    Textile exports post sharp 64 percent decline in April

    ISLAMABAD: The textile exports have witnessed massive 64 percent decline in April 2020 due to lower demand in foreign markets and cancellation of orders due to coronavirus outbreak.

    According to data released by Pakistan Bureau of Statistics (PBS) on Wednesday, the textile exports recorded $403 million dollars in April 2020 as compared with $1.14 billion in the same month of the last year.

    The exports in April 2020 were also registered decline of 61 percent when compared with $1.04 billion in March 2020.

    The textile exports however registered 2.79 percent decline to $10.81 billion in first ten months (July – April) 2019/2020 as compared with $11.12 billion in the corresponding months of the last fiscal year.

    State Bank of Pakistan (SBP) in its second quarterly report on Pakistan Economy, stated that the outbreak of the virus in Europe and North America and the ensuing lockdowns may have an adverse impact on Pakistan’s exports.

    Further, domestic exporters have already warned of cancellation of orders as retail sales in destination markets weaken and port and shipping activities are restricted, the SBP noted.

  • Car import registers 148 percent growth amid coronavirus pandemic

    Car import registers 148 percent growth amid coronavirus pandemic

    KARACHI: Import of motor vehicles in completely built-up unit (CBU) condition registered phenomenal growth of 148 percent in April 2020 despite restrictions to foreign trade owing to lockdown for preventing coronavirus pandemic.

    According to data released by Pakistan Bureau of Statistics (PBS) the import of motor vehicles in CBU condition increased to $10.77 million in April 2020 as compared with $4.34 million in the same month of last year.

    Sources said that due to coronavirus pandemic many overseas Pakistanis opted to return homeland and they brought household along with them.

    It is interesting to note than due to the pandemic most of the imported goods registered massive decline in the month of April 2020 due to restrictions imposed on the foreign trade.

    Whereas, the lockdown imposed in the country not a single locally manufactured car was sold during April 2020.

    The commercial import of motor car is not allowed in Pakistan. However, overseas Pakistanis are allowed to bring motor car under three different ways including personal baggage, transfer of residence and gift schemes.

    The import of CBU motor vehicles registered 64.58 percent decline to $75.57 million during first ten months (July – April) 2019/2020 as compared with $23.37 million in the corresponding period of the last fiscal year.

    The overall decline in import of motor vehicles can be attributed to measures taken by the government to discourage misuse of the facility which is only allowed to overseas Pakistanis.

    Last fiscal year the government brought changes to these schemes and customs clearance of imported cars under these schemes only through payment made out of foreign exchange, which should be verified by banking system.

    Recently, the ministry of commerce through a SRO issued on December 30, 2019 amended in payment system for clearance of imported cars under which local resource could be utilized in case of shortage of payment due to enhancement of exchange rate fluctuation or enhancement in duty rate etc.

    The import of motor vehicles in completely knocked down (CKD) condition registered 40 percent decline to $405.6 million during first ten months of current fiscal year as compared with $678.76 million in the corresponding period of the last fiscal year.

    Industry sources said that the decline in motor vehicles in CKD condition was due imposition of duty and taxes in the last budget, which resulted in hike in prices of locally manufactured cars.

    Besides, slowdown in economy in pre-Covid and later imposition of lockdown to prevent coronavirus spread also discourage the sales of locally manufactured motor cars.

  • Huge lot of Afghan transit vehicles to be auctioned on May 15

    Huge lot of Afghan transit vehicles to be auctioned on May 15

    KARACHI: A large number of motor vehicles of Afghan Transit Trade has been offered for auction at Port Muhammad Bin Qasim International Terminal Operator (QICT), Karachi.

    The auction is scheduled for May 15, 2020.

    Following vehicles will be presented for auction:

    S. No.Lot No.DescriptionNo pkgs/Units
    1QAT=01July2011Suzuki Jeep and Motorcycle06 units
    2QAT=08June2011Toyota Corolla car06 units
    3QAT=05June2011Toyota Corolla Car06 units
    4QAT=03June2011Toyota Corolla Car06 units
    5QAT=11May2011Toyota Corolla Car06 units
    6QAT=10May2011Toyota Corolla Car06 units
    7QAT=06May2011Toyota Corolla Car06 units
    8QAT=05May2011Toyota Corolla Car05 units
    9QAT=04May2011Toyota Corolla Car05 units
    10QAT=01Jan2011Suzuki STRIMB/Toyota Corolla Car06 units
    11QAT=02Nov2010Toyota Corolla Car05 units
    12QAT=01Nov2010Suzuki Balino05 units
    13QAT=02Sep2010Used Toyota Corolla05 units
    14QAT=02Sep2009Toyota Corolla Car05 units
    15QAT=02Feb2011Toyota Corolla Car06 units
    16QAT=01Mar2011Toyota Corolla Car06 units
    17QAT=02Mar2011Toyota Corolla Car06 units
    18QAT=01Apr2011Toyota Corolla Car06 units
    19QAT=05Mar2011Toyota Corolla Car06 units
    20QAT=04Mar2011Toyota Corolla Car06 units
    21QAT=03Mar2011Toyota Corolla Car05 units
    22QAT=03Apr2011Toyota Corolla Car05 units
    23QAT=02May2011Toyota Corolla Car06 units
    24QAT=10Jun2011Toyota Corolla Car06 units
    25QAT=25July2011Toyota Corolla Car06 units
    26QAT=24July2011Toyota Corolla Car06 units
    27QAT=12Jun2011Toyota Corolla Car06 units
    28QAT=11Jun2011Toyota Corolla Car06 units
    29QAT=07Jun2011Toyota Corolla Car06 units
    30QAT=06Jun2011Toyota Corolla Car06 units
    31QAT=01Aug2010Truck Cabin With Accessories04 units
    32QAT=01Sep2010Toyota Corolla Car04 units
    33QAT=01May2011Toyota Corolla Car06 units
    34QAT=26July2011Crane01 unit
    35QAT=02Jun2011Toyota Corolla Car06 units
    36QAT=03May2011Toyota Corolla Car06 units
    37QAT=01Dec2010Divo Matiz Car04 units
    38QAT=01Oct2010Old Used TV 
    39QAT=03Feb2011CT Scanner Machine 
    40QAT=01Dec2011Glass Wool (Loos) 
    41QAT=02Oct2013Oil Base Paint 
    42QAT=01June2011Old Used Road Roller06 units
    43QAT=08May2011Vehicles Suzuki Maruti06 units
    44QAT=09May2011Vehicles Toyota Corolla05 units
    45QAT=03Jan2011Vehicles Toyota Corlla04 units
    46QAT=03Aug2012Glass Weare1X40 Cont
    47QAT=05Nov2010Toyota Corolla05 units
    48QAT=09June2011Toyota Corolla06 units
    49QAT=07Mar2011Toyota Corolla06 units
    50QAT=04April2011Toyota Corolla06 units
    51QAT=21July2011Toyota Corolla06 units
    52QAT=23July2011Toyota Corolla06 units
    53QAT=22July2011Toyota Corolla06 units
    54QAT=02Jan2011Toyota Corolla06 units
    55QAT=07May2011Toyota Corolla06 units
    56QAT=17June2017Excavator Model DX-22501 unit
    57QAT=01April2011Toyota Corolla Car 199606 units
    58QAT=25July2011Toyota Corolla Car 199705 units
    59QAT=24July2011Toyota Corolla 199606 units
    60QAT=02April2011Toyota Corolla Car 199705 units
    61QAT=11Aug2011Toyota Corolla Car 199706 units
    62QAT=08June2011Toyota Corolla Car 199606 units
    63QAT=02Sep2011Toyota Corolla Car 199505 units
    64QAT=02Feb2011Toyota Corolla Car 199706 units
    65QAT=03April2011Toyota Corolla Car 199505 units
    66QAT=03Nove2010Suzuki Alto 199508 units
    67QAT=10May2011Toyota Corolla Car 199406 units
    68QAT=10Aug2011Toyota Corolla Car 199906 units
    69QAT=08Aug2011Toyota Corolla Car 199705 units
    70QAT=01Dec2010Daewoo Matiz 199905 units
    71QAT=02Sep2010Toyota Corolla Car 199506 units
    72QAT=01Sep2010Toyota Corolla04 units
  • Reduction in corporate rate for E&P companies recommended

    Reduction in corporate rate for E&P companies recommended

    KARACHI: Federal Board of Revenue (FBR) has been recommended to reduce the income tax rate for exploration and production (E&P) companies especially in wake of massive reduction in international oil prices.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021, said that higher corporate tax rate on exploration and production (E&P) sector should be reduced and aligned to the rate of other corporate sector.

    The applicable tax rate for the Oil and Gas Exploration and Production sector is 40 percent. Before the promulgation of Income Tax Ordinance, 2001, the tax rate was 50 percent to 55 percent, however, the royalty payment to the government was adjusted against the tax liability, resulting in effective tax rate of approximately 35 percent or less.

    Applicability of effective 40% tax rate has in fact increased the tax expense of the Oil and Gas Exploration and Production Companies, as against the incentives given to other sectors of the economy, whereby the tax rate will be gradually reduced to 30 percent.

    The OICCI recommended:

    i. To incentivize oil and gas exploration in the country especially after the massive reduction in the international oil prices, the corporate tax rate on E&P sector should be reduced from the current 40 percent to the rate applicable to other corporate sector by making necessary amendments in the Income Tax Ordinance, 2001 and Regulation of Mines and Oilfield and Mineral Development (Government Control) Act, 1948.

    The OICCI further said that the rate of tax applicable on E&P companies on their Oil & Gas profits are given in their respective PCAs signed with Government.

    Under Rule 4AA of Part I of the Fifth Schedule to ITO 2001, Super tax has been imposed at 3 percent for E&P companies earning Rs 500 million (equivalent to US$ 5million).

    The OICCI recommended:

    i. It is critical for E&P sector and recommended that the tax applicable should be calculated strictly in accordance with the provisions of the respective PCAs signed between Government and each E&P company & are legally binding, without changes throughout the full Lease period.

    Tax credits under section 65A and 65B are not currently being allowed to E&P companies by the tax authorities despite the fact that appellate Tribunal decided the matter in favor of E&P companies.

    Therefore, the FBR should issue necessary clarification.

    The OICCI highlighted issue of depletion allowance – under Rule 3 of part 1 of the Fifth Schedule of Income Tax Ordinance, 2001.

    Clarity over definition of well head value for computation of Depletion allowance is required.

    As per clause 3 of Fifth Schedule, depletion is calculated at the rate of 15 percent of the gross receipts representing well-head value of production, but not exceeding 50 percent of taxable income.

    E&P industry interprets above by calculating depletion at 15 percent of Gross Revenue before royalty deduction. Tax authorities calculate depletion at 15 percent of Gross Revenue after deduction of royalty.

    Therefore, it is recommended:

    Amendment should be introduced in the relevant clause in favor of E&P companies for depletion to be calculated at the rate of 15 percent of revenues before royalty deduction.

    Under the sales law the rate of sales tax is 17 percent. In case of Independent Power Producers (IPP’s), they are required to pay Output sales tax (GST-Output) at 17 percent on the value of sale of electricity after adjusting the Input sales tax (GST-Input) on Residual Fuel Oil (RFO) paid by them to PSO. Currently the GST-Input rate is 20%. This is resulting in significant adverse cash flow for IPPs as well as is increasing the refund due from FBR.

    Therefore, it is recommended that the rate on electricity should be raised from 17 percent to 20 percent as has been done in the case of diesel based IPPs, so that input and output GST rates are same.

  • 10th National Finance Commission constituted

    10th National Finance Commission constituted

    ISLAMABAD: The President of Pakistan on Tuesday constituted the 10th National Finance Commission (NFC) consisting members of federal and provincial governments.

    The finance commission has been constituted with effect from April 23, 2020, consisting following members:

    01. Minister for Finance, Government of Pakistan: Chairman

    02. Minister For Finance, Government of the Punjab: Member

    03. Minister for Finance, Government of Sindh: Member

    04. Minister for Finance, Government of Khyber Pakhtunkhwa: Member

    05. Minister for Finance, Government of Balochistan: Member

    06. Advisor to the Prime Minister on Finance and Revenue: Member

    07. Tariq Bajwa, Government of Punjab: Member

    08. Dr. Asad Sayeed, Government of Sindh: Member

    09. Musharraf Rasool Cyan, Government of Khyber Pakhtunkhwa: Member

    10. Javed Jabbar, Government of Balochistan: Member

    11. Finance Secretary, Government of Pakistan: Official Expert

    The president has also authorized Advisor to the Prime Minister on Finance and Revenue to chair the meeting of the NFC in the absence of Federal Finance Minister.

    A circular issued in this regard stated that in terms of Article 160(2) of the Constitution, the terms of reference for the 10th NFC are as under:

    a. Distribution between the Federation and the provinces of the net proceeds of the following taxes:

    i. Taxes on income, including corporation tax, but not including taxes on income consisting of remuneration paid out of the federal consolidation fund;

    ii. Taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed;

    iii. Export duties on cotton, and such other export duties as may be specified by the president;

    iv. Such duties of excise as may be specified by the president; and

    v. Such other taxes as may be specified by the president.

    b. Making of grants-in-aid by the federal government to the provincial governments;

    c. Exercise by the federal government and the provincial governments of the borrowing powers conferred by the constitution;

    d. Assessment and allocation of resources to meet expenditures related to Azad Government of the States of Jammu and Kashmir, Government of Gilgit-Baltistan and newly merged districts of Khyber Pakhtunkhwa (erstwhile FATA);

    e. Assessment and allocation of resources to meet expenditures made on security and natural disaster/calamities;

    f. Assessment of total public dent and allocation of resources for its repayment;

    g. Rationalization of subsidies given by the federal and provincial governments in their budgets and agreeing on a mechanism to finance them;

    h. Exploring ways to reduce losses of state-owned enterprises and agreeing on mechanism for sharing these losses between the federal government and the provincial governments;

    i. Any other matter relating to finance referred to the commission by the President.

    The finance division shall, as per the Rule of Business, 1973, provide the secretarial support to the commission.

  • FBR urged to reduce regulatory duty on lighting fittings

    FBR urged to reduce regulatory duty on lighting fittings

    KARACHI: Federal Board of Revenue (FBR) has been urged to reduce regulatory duty on lighting fittings in alignment with LED bulbs and LED tubes.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 submitted to the FBR, stated that current regulatory duty on lighting fittings with fixed / fitted LED under HS code 9405.1030 and 9405.4020 is 30% whereas on LED bulbs (HS code 8539.5010) and LED tubes (HS code 8539.5020) the same is 2 percent.

    Therefore, it is recommended that regulatory duty should be reduced on Lighting fittings with fixed / fitted LED under HS code 9405.1030 and 9405.4020 in alignment with LED bulbs and LED tubes.

    Consequent to amendments in law relating to IOCO arrangements, sales tax (including duties) is exempt under fifth schedule of Customs Act under serial no 23 on all type of housing i.e. ‘’Housing/Shell, shell cover and base cap for all kinds of LED Lights and Bulbs under respective headings.

    Accordingly, sales tax should have been exempt on said product under sixth schedule of STA 1990. However, this is not the case as related amendment in sixth schedule of STA 1990 was not made.

    To align with amendment in fifth schedule of Customs Act under serial no 23, consequent amendment be made in serial no. 15A of sixth Schedule of STA 1990 for description of goods for HS code 9405.1090 be changed from Aluminum Housing /shell for LED (LED Light Fixture) to Housing/Shell, shell cover and base cap for all kinds of LED Lights and Bulbs as.

    The OICCI said that through Finance Supplementary (Amendment) Act October 2018, Energy Saving Tubes under HS code 8539.3120 are exempted from sales tax (including duties) under serial no. 22 (xiii) of fifth Schedule of Customs Act 1969. However, related amendments are not made in table 3, serial no. 15 of sixth Schedule of STA 1990.

    To align with amendment in fifth schedule of Customs Act under serial no 22 (xiii), consequent amendment be made in serial no. 15 in table 3 of sixth Schedule of STA 1990 by addition of HS code 8539.3120.

    Taxation of Export of Services and Execution of Contracts outside Pakistan: As per Clause (3) of Part II of second schedule of ITO, the rate of tax has been increased from 1 percent to 3.5 percent and 4 percent on account of execution of contract outside Pakistan and export of services respectively. This significant increase in Finance Act 2016 has adversely affected the export business of companies.

    The rate of tax needs to be reverted back to 1 percent.