Pkrevenue.com

Author: Mrs. Anjum Shahnawaz

  • OICCI suggests harmonization of sales tax on goods, services

    OICCI suggests harmonization of sales tax on goods, services

    KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended harmonization of sales tax on goods and services and should be set at 13 percent as applicable in Sindh province.

    The OICCI in proposals for budget 2020/2021, said that the sales tax rate in Pakistan, at 17 percent, is the highest in Asia. Our analysis shows an average of less than 12 percent in Asia, with a range of 6 percent to 17 percent.

    Moreover different rates of sales tax on goods and services i.e. standard, reduced, specified etc. prevailing in the country lead to a number of issues for business organizations operating all over the country.

    Sales tax rates (federal and provincial), both on goods and services, should be harmonized throughout the country and be aligned to 13 percent charged in Sindh.

    Moreover only one Tax return should be filed with FBR.

    The OICCI highlighted the issue of admissibility of Input sales tax on civil work and other equipment and materials.

    Adjustability of input sales tax restricted under section 8(1)(h) & (i) of Sales Tax Act, 1990 and SRO 490(I)/2004 on building material, office equipment, furniture & fixtures, vehicles & their parts used for taxable activity purposes has increased the cost of doing business for all documented sectors, and encourages procurement from un-registered sector whereby 17 percent sales tax cost is mitigated with only 5 percent sales tax withholding.

    The OICCI recommended that Sub-Section (1)(h) and (i) of section 8 of STA 1990 should be deleted.

    SRO 490(I)/2004 which is in contradiction with section 8 should also be rescinded.

    The overseas chamber pointed out the issue of sales tax be applied at the time of delivery, instead of Earlier of Receipt of Payment or Delivery of Goods.

    It said that prior to amendment made in section 2(44) of Sales Tax Act, 1990, vide Finance Act, 2013, sales tax was levied at the time of actual delivery of goods regardless of time of payment.

    Application of sales tax on advances causes serious operational issues and also leads to unnecessary reconciliations resulting in hardships to taxpayers.

    The OICCI recommended that sales tax be applied at the time of actual delivery for ease of doing business, rather than earlier of receipt or delivery.

    The OICCI said that as per serial no. 1 and 2 of Eleventh Schedule of Sales Tax Act, 1990, Government departments/ bodies/ authorities and Companies as defined in ITO 2001 are required to withhold sales tax against supplies made by registered and active sales taxpayers. This is only creating hardship for registered sales tax persons as Government departments are not making withholding sales tax payments through FBR web-portal system and deductions made by Companies like leasing companies, Modarabas, etc who are not registered in STA 1990 and FBR does not allow any manual entry of such withholding sales tax.

    After implementation ‘STRIVe’ from July 2016 onwards, no mismatch arises between input and output tax for transactions with registered sales tax persons.

    Therefore, withholding sales tax on purchases made by Government departments/ bodies/ authorities or unregistered taxpayers, etc. from registered sales tax persons being active taxpayer is only creating hassles and unnecessary documentation for tax payers.

    It is recommended to abolish serial no. 1 and 2 of Eleventh schedule of STA 1990.

    Sales tax SRO’s are issued so frequently that it is very difficult to keep oneself updated with respect of different SRO’s and it’s also difficult to identify the current applicable SRO.s

    All active SRO’s should be made part of the Act. Subsequently in every budget, SRO’s issued during the previous year, should also be made part of the Act.

    Joint and several liability of registered persons in supply chain where tax remains unpaid.

    As per section 8A of Sales Tax Act, 1990 a registered person purchasing goods is jointly and severally liable if the sales tax is not paid by the seller of the goods. It is quite unjustified to punish a genuine buyer for an offense committed by corresponding supplier. This section is also inequitable as payments are made after verifying the seller status on the FBR portal at the time of purchase.

    It is recommended that Section 8A of the Sales Tax Act, 1990 should be abolished.

    As per section 8B a registered person is not allowed to adjust input tax in excess of 90 percent of the output tax for that period in STA 1990.

    It is recommended that section 8B of the STA 1990 should be abolished for registered taxpayers. Most industries have long term import contracts with international suppliers. Due to current COVID pandemic situation, sales of companies have reduced significantly and resultantly, input tax is getting accumulated as full adjustment of input taxes against output tax is not possible.

  • Reviewing withholding tax on profit on debt suggested

    Reviewing withholding tax on profit on debt suggested

    KARACHI: The tax authorities have been suggested to review withholding tax rates on profit on debt in forthcoming budget.

    Overseas Investors Chamber of Commerce and Industry (OICC) in proposals for budget 2020/2021 said that through Finance Act, 2019, multiple withholding tax rates of profit on debt were introduced which are based on the profit threshold and active /in-active status of taxpayer (i.e. Profit less than Rs0.5 million is subject to tax at the rates 10 percent and 20 percent for active and in-active respectively.

    Whereas, profit greater than Rs 0.5 million is subject to tax at the rates 15 percent and 30 percent for active and in-active filer respectively).

    It has been provided that minimum tax rate on profit on debt is 15 percent as prescribed under section 7B of Income Tax Ordinance, 2001.

    So, there is no need to tax the profit at reduced rate (i.e. 10 percent), if the person has to discharge his final tax liability on such higher rate i.e. 15 percent.

    The OICCI suggested that prescribed threshold of withholding tax on profit should be deleted and there should be only two rates, for active and inactive taxpayers respectively.

  • FBR proposed revamping withholding tax regime, reducing to five rates

    FBR proposed revamping withholding tax regime, reducing to five rates

    KARACHI: Federal Board of Revenue (FBR) has been proposed to revamped withholding tax regime and reduced the number of withholding tax rates to maximum five.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for fiscal year 2020/2021 highlighted withholding tax as one of the key irritant for compliant tax payer.

    It said that the fact that the ‘collection and deduction of income tax at source (Withholding Agents Perspective) (Taxpayer’s Facilitation Guide)’ on the FBR website is of 51 pages highlights the complexity of the withholding tax regime which has more than 30 tax provisions that need to be followed and 50 different tax rates, applicable on nearly all heads of receipts/payments.

    The rate of withholding/advance tax also varies depending upon the nature of transaction, legal/tax status of the parties i.e. company or individual and active or in-active filer.

    Moreover, FBR system does not auto populate taxes withheld in the portal to the credit of the beneficiary.

    Furthermore, at present FBR has prescribed following categories of withholding tax (WHT) rates under the ITO 2001, for various types of payments and it has become extremely difficult for the person processing payments to be precise and accurate in applying WHT rates and ensure compliance.

    The, complexity for the withholding agent has been further compounded after the introduction of active taxpayers list and different rates for an active and non-active filers, the OICCI said.

    It recommended that withholding tax regime should be revamped by reducing it to a maximum of five rates for all withholding taxes and the differentiation should be on the basis of active and inactive taxpayers only.

    FBR system should be upgraded and all taxes withheld should be auto populated in the portal to the credit of the beneficiary.

    Final Taxation Regime should be done away with and all withholding taxes should be available for adjustment and the operations wing of FBR should ensure that all persons whose taxes have been deducted file their tax returns.

    Withholding agents should be given incentive in the form of 2 percent tax credit of the amount collected for facilitating the Government.

    In addition to the above administrative/streamlining issues, withholding/ advance tax rates on below transactions should be reconsidered.

    Withholding tax rate be reduced to 1 percent for all FMCG distributors in line with the withholding taxes applicable on the distributors of cigarette and pharmaceutical products.

    Withholding tax rates applicable on services is 8 percent minimum tax regardless of the actual taxable income of the service provider.

    The nature of this tax effectively becomes indirect tax and increases the cost of doing business for service providers, hence, tax on services should be made adjustable.

    Withholding taxes deducted from payments should be deposited in the Govt. treasury on monthly rather than current requirement of weekly basis.

    In case of payments to non-residents, the law requires to deposit corresponding withholding tax amount, seven days before the actual remittance to the non-resident person. The deposit of withholding tax should be aligned to the payment to non-resident due to exchange rate implications.

    Withholding tax deduction u/s 153 (1)(a) which is currently considered as minimum tax for all the suppliers (except manufacturers and listed companies) should be made adjustable at least for corporates appearing in active taxpayers’ list

    i. Withholding tax under section 153 (1b) be reduced to 3% for all the taxpayers providing

    ii. services in line with 18 service sectors as mentioned in sub-clause 2 clause 1 of Division III of Part III of Schedule I. not clear

    iii. Withholding agent should be given authority to adjust from subsequent payments, in case of reversal of excess deduction of withholding or where underlying transactions are cancelled, reversed or cases where tax status is updated subject to filing of proper adjustment form/return.

  • Telenor awarded Rs588 million contract for providing hi-speed broadband

    Telenor awarded Rs588 million contract for providing hi-speed broadband

    ISLAMABAD: The Universal Service Fund (USF) has awarded contract worth Rs588 million to Telenor Pakistan for providing hi-speed broadband in Sanghar Lot (Sindh).

    Federal Minister IT & Telecom, Syed Amin ul Haque inaugurated the Next Generation Broadband for Sustainable Development project in Sanghar (Districts of Sanghar and Umerkot) at a ceremony held at Ministry of IT & Telecom on Thursday.

    The contract was signed by Haaris Mahmood Chaudhry, CEO USF and Irfan Wahab Khan, CEO Telenor Pakistan. Secretary IT, Shoaib Ahmad Siddiqui was also present at the ceremony.

    Chief Guest of the ceremony, Syed Amin ul Haque stated that under the vision of Digital Pakistan, the Ministry of IT & Telecom is taking concrete steps to spread the benefits of digitalization to the masses.

    He said that during the spread of Coronavirus, Ministry of IT & Telecom will keep on making efforts to ensure that broadband connectivity helps us overcome this crisis.

    He added that the key stakeholders in IT & Telecom sector should work together vigorously to come up with innovative ways for fighting against Covid 19 through technology.

    He congratulated the teams of USF and Telenor Pakistan and also hoped that they will continue to achieve these milestones in future as well.

    While sharing his views at the ceremony, Shoaib Ahmad Siddiqui said that the main objective of USF is to facilitate the masses through broadband technology in the country.

    He added that during the coronavirus pandemic, Ministry of IT & Telecom is making sure that broadband connectivity plays an integral part in creating ease for people.

    He further said that USF projects are already making a huge difference in lives of people and with the new challenging scenario during the spread of coronavirus, these projects have become more crucial for socio-economic benefit.

    Also speaking at the ceremony, Haaris Mahmood Chaudhry, CEO USF informed that Federal Minister, Syed Amin ul Haque, Secretary IT, Shoaib Ahmad Siddiqui and USF Board of Directors have been giving constant guidance and support to USF for making rapid progress.

    He also added that all these projects are playing an integral role in enabling people of Pakistan to carry on their activities through broadband technology during the Covid 19 pandemic.

    Through the project in Sanghar lot, broadband coverage will be provided in 500 mauzas in Sanghar, covering an approximate unserved area of 12,000 sq. km and benefitting a population of 1.47 million people.

    Sharing his views on the development, Irfan Wahab Khan, CEO Telenor Pakistan said, “We are more committed than ever before to strengthen the pillar of connectivity as part of our purpose of connecting people to what matters most to them.

    “At Telenor Pakistan we are driven to empower the country through enhanced connectivity, creating opportunities and uplifting the lives of millions and stand firm in our commitment to break socio-economic barriers through the use of mobile technology.”

    Senior officials of the Ministry of IT, USF and Telenor Pakistan were also present at the ceremony.

  • Foreign exchange reserves increase by $292 million to $18.75 billion

    Foreign exchange reserves increase by $292 million to $18.75 billion

    KARACHI: Pakistan’s foreign exchange reserves of the country have increased by $292 million to $18.755 billion by week ended April 30, 2020, State Bank of Pakistan (SBP) said on Thursday.

    The total foreign exchange reserves were at $18.463 billion a week ago.

    The official reserves held by the central bank increased by $259 million to $12.329 billion by week ended April 30, 2020 as compared with $12.07 billion a week ago.

    The reserves held by commercial banks also increased by $33 million to $6.426 billion by week ended April 30, 2020 as compared with $6.393 billion a week ago.

  • Share market falls by 424 points on profit taking

    Share market falls by 424 points on profit taking

    KARACHI: The share market fell by 424 points on Thursday as profit taking witnessed which resulted in selling pressure during the day.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 33,304 points as against 33,728 points showing a decline of 424 points.

    Analysts at Arif Habib Limited said that the market opened on a negative note today and could only manage to pull back into green for a brief time, before plunging due to selling pressure.

    Regardless of what the international crude prices are trading at, local E&P and O&GMCs which responded positively to the ascend in international crude prices last week, remained oblivious to further price gains.

    Profit booking is clearly on investors mind, who have so far been cashing out from Fertilizer, Cement, E&P and O&GMCs.

    Banks, on the other hand, which have weathered the flow from foreign investors (possibly due to MSCI rebalancing), showed initial signs of recovery on the prospect of expectation of status quo in the upcoming monetary policy.

    This is reflected by the yield change in secondary market for 10yr PIBs, which marked a low of 7.64 percent on April 17, 2020 and have since then recovered to 8.23 percent today, indicating that there may be a status quo on policy rate.

    Cement sector led the volumes with 41.8 million shares, followed by Banks (19.1 million) and O&GMCs (18.9 million). Among scrips, HASCOL topped with 16.1 million shares, followed by MLCF (12.6 million) and DGKC (8.2 million).

    Sectors contributing to the performance include E&P (-127 points), Cement (-56 points), Power (-54 points), Fertilizer (-41 points) and O&GMCs (-39 points).

    Volumes declined from 208.9 million shares to 175.8 million shares (-16 percent DoD). Average traded value on the other increase by 4 percent to reach US$ 46.8 million as against US$ 45.1 million.

    Stocks that contributed significantly to the volumes include HASCOL, MLCF, DGKC, UNITY and FCCL, which formed 30 percent of total volumes.

    Stocks that contributed positively to the index include UBL (+28 points), HBL (+24 points), EFUG (+11 points), SYS (+8 points) and MTL (+5 points). Stocks that contributed negatively include OGDC (-51 points), PPL (-48 points), HUBC (-44 points), LUCK (-34 points), and BAHL (-28 points).

  • Meezan Bank maintains deposit base at Rs928 billion

    Meezan Bank maintains deposit base at Rs928 billion

    KARACHI: The Board of Directors of Meezan Bank in its meeting, held on May 05, 2020 approved the financial statements of the Bank for the quarter ended on March 31, 2020.

    The meeting was presided by Riyadh S.A. A. Edrees – Chairman of the Board; Faisal A. A. A. Al – Nassar – Vice Chairman of the Board was also present.

    The bank maintained its deposit base at Rs 928 billion with market share of more than 6 percent in the banking industry. Meezan Bank is the 6th largest bank in Pakistan with a network of 774 branches in 231 cities, complimented with a comprehensive array of digital services, including Internet Banking, Mobile App and other Alternate Distribution Channels for delivery of seamless Shariah-compliant banking services to its customers across Pakistan and around the globe.

    The bank’s net spread grew by 66 percent primarily due to higher volume of average earning assets and higher underlying Policy Rate while the Bank’s non-funded income grew by 64 percent mainly due to higher foreign exchange income and gain on sale of securities of Rs 680 million.

    Administrative and other operating expenses increased to Rs 7.1 billion from Rs 5.5 billion in corresponding period last year primarily due to costs associated with opening of 98 new branches since March 2019.

    The bank’s financing portfolio decreased slightly from December 2019 mainly due to overall slowdown in economic activity and repayment of seasonal financing. Recognizing stresses in certain sectors of the economy due to the COVID -19 outbreak, an additional General Provision of Rs 1 billion was approved by the Board against any potential non-performing financings, bringing the Bank’s non-performing financings coverage ratio to 147 percent – the highest in the banking industry while its infection ratio, at less than 2 percent is one of the lowest in the industry.

    The bank has taken several initiatives to safeguard the health of its employees, their families and its customers during the current pandemic, including activation of Business Continuity Plans, deployment of almost 70 percent Head Office staff to work from alternate sites or from the safety of their homes and mandatory use of face masks at all times in all its premises so as to minimize the risk of exposure to the disease.

  • Pakistan Customs cadre strength (BS-17-22) increases to 501

    Pakistan Customs cadre strength (BS-17-22) increases to 501

    ISLAMABAD: The cadre strength, which includes officers of BS-17 to BS-22, of Pakistan Customs Service (PCS) has increased to 501 by May 06, 2020, according to a notification issued by the Federal Board of Revenue (FBR) on Thursday.

    The number of senior officers of Pakistan Customs has increased by 25 from 476 on August 21, 2019.

    As per latest cadre strength, there are two officers of PCS presently working. The number of officers in BS-21 are 25. Further BS-20 officers are 71.

    The number of BS-19 are 140, BS-18 are 156 and BS-17 are 107 working across Pakistan.

  • Rupee falls by 17 paisas against dollar

    Rupee falls by 17 paisas against dollar

    KARACHI: The Pak Rupee fell by 17 paisas against dollar on Thursday owing to hope of escalation in economic activity and higher demand for imports.

    The rupee ended Rs160.22 to the dollar from previous day’s closing of Rs160.05 in interbank foreign exchange market.

    Currency experts said that positive sentiments were prevailed in the markets on reports of ease in lockdown.

    They said that the announcement of allowing import of petroleum products also deteriorated the rupee value.

    However, the trade deficit shrank by 25.68 percent to $19.49 billion during July – April 2019/2020 as compared with the deficit of $26.23 billion in the same period of the last fiscal year.

    The exports in first ten months (July – April) 2019/2020 also fell by four percent to $18.41 billion as compared with $19.16 billion in the corresponding period of the last fiscal year.

    On the other hand the import bill fell by 16.5 billion to $39.9 billion in the first ten months of current fiscal year as compared with $45.4 billion in the corresponding period of the last fiscal year.

  • APTMA demands allowing textile downstream supply chain operation

    APTMA demands allowing textile downstream supply chain operation

    The All Pakistan Textile Mills Association (APTMA) has fervently appealed to the Sindh government to lift restrictions on the textile downstream supply chain, emphasizing the urgent need to resume operations to prevent a looming unemployment crisis.

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