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Author: Mrs. Anjum Shahnawaz

Customs duty exempted on import of industrial raw material

ISLAMABAD: Federal Minister for Industries and Production Hammad Azhar announced to exempt customs duties on import of industrial raw material.

While presenting the Budget 2020/2021, the minister highlighted the key points of changes brought to Customs Act, 1990 through Finance Bill, 2020.

He said that the government had initiated customs tariff rationalization during the last year and allowed exemptions from customs duties on 1600 tariff lines of raw material.

In order to reduce cost of production it is suggested that all raw material should be exempted from customs duty from next fiscal year.

These exemptions has been proposed for import of raw material for manufacturing of chemicals, leather, textile, rubber, fertilizers etc.

These tariff lines include 20,000 items which are around 20 percent of the total imports.

Furthermore, he said that customs duty has been reduced on 200 tariff lines on import of raw material and secondary products which, included bleaching, rubber and raw material for home consumption.

Hammad Azhar on the floor of the National Assembly said that regulatory duty has been reduced to 6 percent from existing 12.5 percent on import of hot rolled coils for encouraging domestic engineering sector.

He said that the regulatory duty has been reduced on various products in order to discourage smuggling. The minister said that in the past regulatory duty was imposed which resulted in reduction of import of such goods. However, it is observed that some products were imported by Afghanistan and then entered into Pakistani markets.

Therefore, it is suggested the reduction of regulatory duty on import of cloths, sanitary ware, electrodes, blankets, pad locks etc.

The government has also abolished duty and taxes on import of diagnostic kits for coronavirus and cancer to provide relief to the masses. Further, duty and taxes have also been abolished on import of special food supplements and dietetic food.

June 12, 2020
Budget salient features related to Income Tax

ISLAMABAD: Federal Board of Revenue (FBR) issued budget salient feature related to income tax presented through Finance Bill, 2020.

INCOME TAX

RELIEF MEASURES

• Deletion of Withholding Taxes

To augment efforts towards simplification of the withholding tax regime, the following withholding tax provisions are being deleted:

Section 236R: Collection of advance tax on education related expenses remitted abroad

Section 235B: Tax on steel melters and composite units

Section 156B: Withdrawal of balance under pension fund

Section 148A: Tax on local purchase of cooking oil or vegetable ghee by certain persons

Section 236D: Advance tax on functions and gatherings

Section 236F: Advance tax on cable operators and other electronic media

Section 236J: Advance tax on dealers, commission agents and arhatis etc.

Section 236U: Advance tax on insurance premium

Section 236X: Advance tax on tobacco

This measure would reduce the cost of the compliance of taxpayers, enhance the control of FBR over the withholding tax regime and would be pivotal in promoting ease of doing business.

• Enhancement of Threshold for Becoming Prescribed Person for Withholding of Tax on Supplies, Services and Contracts from fifty to hundred million rupees and a similar threshold of hundred million rupees is being prescribed for a sales tax registered person to become a withholding agent.

• Reduction in Holding Period and Tax Rates for Capital Gain on Immoveable Property to incentivize and propel economic activity in the real estate sector, the bifurcation of plots and constructed property for determining holding period of capital gains is being done away with i.e. the holding period for taxation of capital gains on disposal of immovable property is being restricted to 4 years. In addition, rates are also being reduced on capital gains emanating from disposal of immoveable property.

• Increase in Threshold of Section 21(l) per transaction delineated under section 21(l) is being increased from Rs. 10,000/- to Rs. 25,000/-. Similarly, the threshold of payments under a single from Rs.50,000/- to Rs.250,000/-.

• Increase in Threshold of Section 21(m) from Rs. 15,000/- per month to Rs.25,000/- per month.

• Enabling Adjustability of Property Expenses for All Individuals/AOPs

• Exempting Withholding Tax on Cash Withdrawal to the extent of Foreign Remittances

• Promoting Investment in Government Debt Instruments through a foreign bank account, a non-resident rupee account repatriable or a foreign currency account.

• Issuance of Centralized Income Tax Refunds

• Hajj Operators to be Exempted from Withholding Tax on Payments to Non-Residents

• Explanation for excluding Vehicles Up to 200cc from the Ambit of Advance Tax

• Advance Tax on Auction of Immovable Property to be Collected in Installments

• Prompt Issuance of Exemption Certificates to Public Listed Companies within 15 days

• Collection of Advance Tax by Educational Institutions not to Apply to Persons on the ATL

• Rationalizing Tax on Imports by shifting from person-specific rates to goods specific rates cascaded according to the type of goods, with tax @1% for capital goods, 2% for raw materials and 5.5% for finished goods irrespective of status of the importer. However, the prevailing concessional rates on certain items such as remeltable scrap of iron and steel, potassic and urea fertilizers, LNG, Gold, Cotton, goods that were importable by manufacturers under the rescinded SRO 1125(I)/2011 dated 31.12.2011, mobile phones etc. are being maintained.

• Agreed Assessment through arbitration by Assessment Oversight Committee

• Strengthening Alternate Dispute Resolution Mechanism

• Taxation Of Resident Shipping Companies as per latest marine policy

PROCEDURAL MEASURES

• Taxpayer’s Profile Automated Adjusted Assessment to rectify computational errors and wrongly claimed credits

• Real-Time Access to Databases of Certain Organizations

• Audit on the Basis of Benchmark Ratios

• Enabling E-Audit

• Strengthening Compliance Regime of Non-Profit / Welfare Organizations

• Electricity Expense to be Treated as an Inadmissible Business Deduction subject to non-disclosure of name of actual user from 01.01.2021

• Disallowance of Business Expenditure Proportionate to Sales Made to Sales Tax Unregistered Persons

• Rationalizing Depreciation Deduction based on the Half Year Rule

• Limiting Interest Deductibility to Foreign Affiliates

TECHNICAL MEASURES

• Rationalization of Cost of Transport Vehicle for Claiming Deduction on Account of Lease Rentals

• Filing of Withholding Statements under section 165 on Quarterly Basis

• Incentivizing and Promoting the Construction Industry

• Tax Exemptions and Concessions for the Gwadar Port and the Gwadar Free Zone

• Incorporation of Relief measures provided through SROs during the COVID pandemic.

June 12, 2020
Budget salient features related to Sales Tax, FED
ISLAMABAD: Federal Board of Revenue (FBR) issued budget salient feature related to sales tax and federal excise duty (FED) presented through Finance Bill, 2020.

RELIEF MEASURES
1. The minimum threshold of supplies by retailers for obtaining CNIC of the buyers is proposed to be increased from Rs 50,000 to 100,000;
2. In wake of COVID-19, the Federal Government granted exemption to health related items and equipment through SRO 237(I)/2020 dated 20-3-2020 which is going to expire on 19-6-2020. In the present circumstances vis-à-vis COVID-19, the said period is being extended for another three months starting from the 20th June 2020.
3. Exemption allowed on import of dietetic foods intended for special medical purposes for the children suffering from Inherited Metabolic Syndrome;
MEASURES FOR REMOVAL OF ANOMALIES

3(a) In order to encourage documentation, it has been decided to provide relief to organized retail sector which is integrated online with FBR through Point of Sale system. Their existing sales tax rate is proposed to be reduced from 14 percent to 12 percent

STREAMLINING MEASURES
1. Concept of conducting audit proceedings through electronic means introduced;
2. Ninth Schedule is proposed to be amended in line with Mobile Manufacturing Policy approved by the ECC of the Cabinet;
3. Insertion of the Tax Laws Amendment Ordinance 2019, relating to tax concessions and exemptions to Gawadar Port and Gawadar Free Zone, in the Finance Bill 2020;
4. To strengthen the Alternate Dispute Resolution process and to make it more taxpayer-friendly, it is proposed that the taxpayer is allowed to withdraw his case from any court of law or any appellate authority after decision of ADRC. Furthermore, the decision of ADRC, once it is conveyed by the taxpayer to the tax authorities, is binding upon the tax authorities;
5. The scope of section 73 is proposed to be widened to cover all registered persons supplying taxable goods;
6. Board is empowered to fix minimum production on the basis of single or more inputs and for fixation of wastage;
7. Real-time access to information and databases to the Board by various authorities such as NADRA, FIA, provincial excise & taxation departments etc.
SALIENT FEATURES

FEDERAL EXCISE DUTY

The proposed budgetary measures pertaining to Federal Excise Duty (FED) for FY 2020-21 are:

HEALTH RELATED MEASURES
1. Increase in the rate of FED on cigars, cheroots , and cigarillos and cigarettes from 65 percent to 100 percent of retail price; increase in the rate of FED on filter rods from Rs 0.75 to Rs 1 per filter rod;
2. Levy of FED on e-liquids of electric cigarettes @ Rs 10 per ml.
3. Levy of FED on caffeinated energy drinks @ 25 percent;
MEASURES FOR REMOVAL OF ANOMALIES
1. Levy of FED @ 7.5 percent ad valorem in case of locally manufactured double cabin (4×4) pick-up vehicles and @ 25 percent in the case of imported ones.
4(a) In the wake of worsening affect of COVID-19 and reduction in production of cement, it has been proposed to reduce FED on cement from Rs. 2 per kg to Rs. 1.75 per kg.

STREAMLINING MEASURES
1. Board is empowered to fix minimum production on the basis of single or more inputs and for fixation of wastage;
2. The scope of seizure of non-duty paid goods is extended to all products subject to FED besides cigarettes and beverages;
3. Real-time access to information and databases to the Board by various authorities such as NADRA, FIA, provincial excise & taxation departments etc.
June 12, 2020
Budget salient features related to customs duty
ISLAMABAD: Federal Board of Revenue (FBR) issued budget salient feature related to Customs duty presented through Finance Bill, 2020.

Industrial Relief Measures
1. Exemption of additional custom duties on those tariff lines which are now @ 0 percent customs duty in tariff.
2. Reduction of custom duty on 40 raw materials of various industries.
3. Tariff rationalization under National Tariff Policy 2019, by reducing customs duty on 90 tariff lines from 11 percent to 3 percent and 0 percent.
4. Allowing the exemption on import of raw material to those Nashiran-e-Quran also who do not have their own in-house printing facility.
5. Reduction in regulatory duty from 12.5 percent and 17.5 percent to 6 percent and 11 percent, respectively on Hot Rolled Coils (HRC) of Iron and steel falling under PCT codes 7208 and 7225& 7226, respectively.
6. On the request of various local industries, a number of their inputs/intermediary raw materials are being allowed concessional import under new serial number of the fifth schedule through IOCO quota determination.
• Exemption of custom duties on import of raw materials by manufacturers of Butyl Acetate.

• Exemption of custom duty on import of raw material by manufacturer of syringes and saline infusion sets.

• Exemption of customs duties on import of raw material by manufacturers of buttons.

• Reduction in custom duty on import of raw material by manufacturers of interlining/buckram.

• Reduction of custom duty and exemption of additional custom duty and regulatory duty on import of raw materials by manufacturers of Wire rod

• Exemption of custom duties and regulatory duty on import of machinery, equipment and other project related items for setting up of internet cable landing stations.

• Exemption of custom duties on import of raw material by beverage can manufacturers.

• Reduction in Custom duty and exemption from Additional custom duty on import of raw material by food packaging industry.

Relief to Common Man
1. Exemption from customs duties on import of 61 COVID19 related items, which was due to expire on 20th June has been extended due to the continuation of pandemic.
2. Exemption from 2 percent ACD on import of edible oils and oil seeds under PM’s COVID19 Relief Package has been extended.
3. Exemption of duties & taxes on import of Dietetic Foods for Children with inherited metabolic disorders.
4. Exemption of all duties & taxes on import of Diagnostic Kits for Cancer and Corona Virus.
5. Exemption of Customs duties on inputs of Ready to use Supplementary Foods (RUSF).
6. Exemption of Customs duties on import of life saving drug Meglumine Antimonite for treatment of leishmaniasis.
7. Extension up to 2023, in exemption of customs duties on imports for setting up new industries in erstwhile FATA area.
Miscellaneous
1. Reduction in regulatory duty on smuggling prone items to bring these items under legal imports
2. Regulatory duty on several industrial inputs is also being reduced to decrease their cost of doing business
3. Tariff protection for domestic industry by increasing/levy of regulatory duty on import of those items which are also locally manufactured
4. Incentivizing soap manufacturing industry by reducing rate of Additional customs duty on Palm Stearin
5. Enhancing scope of concessions available to Special Economic Zones.
June 12, 2020
Budget 2020/2021 at a glance

ISLAMABAD: Hammad Azhar, Federal Minister for Industries and Production, on Friday presented budget 2020/2021 in National Assembly.

Following is the budget at glance.

June 12, 2020
Budget 2020/2021 unveiled; no new tax; fiscal deficit estimated at 7pc

ISLAMABAD: Hammad Azhar, Federal Minister for Industries and Production, on Friday presented budget 2020/2021 on floor of house claiming to be a corona-hit budget with no new tax.

The budget 2020/2021 has the following salient features:

The total outlay of budget 2020/2021 is Rs7295 billion. The size is 11 percent lower than the size of budget estimates 2019/2020.

The budget deficit has been estimated at Rs3,195 billion or 7 percent of the GDP for next fiscal year starting July 01, 2020.

The net federal revenue has been estimated at Rs3,700 billion and total expenditures has been estimated at Rs7,136 billion. While it is estimated at the provinces would provide Rs242 billion surplus.

The resources availability during next fiscal year has been estimated at Rs6,315 billion against Rs4,917 billion in the budget estimates of 2019/2020.

The net revenue receipts for 2020/2021 have been estimated at Rs3,699 billion indicating an increase of 6.7 percent over the budget estimates of 2019/2020

The provincial share in the federal taxes is estimated at Rs2,873.7 billion during the next fiscal year, which is 11.7 percent lower than the budget estimates for 2019/2020.

The net capital receipts for 2020/2021have been estimated at Rs1,463 billion against the budget estimates of Rs831 billion in 2019/2020 reflecting an increase of 75.93 percent.

The external receipts in 2020/2021 are estimated at Rs2,222.9 billion. This shows a decrease of 26.7 percent over the budget estimates for 2019/2020.

The overall expenditure during 2020/2021 has been estimated at Rs7,295 billion, out of which the current expenditure is Rs6,345 billion.

The develop expenditure outside PSDP has been estimated at Rs70 billion in the budget 2020/2021.

June 12, 2020
Rupee gains 35 paisas on inflows

KARACHI: The Pak Rupee gained 35 paisas against dollar on Friday owing to improved inflows of export receipts and remittances.

The rupee ended Rs164.24 to the dollar from previous day’s closing of Rs164.59 in interbank foreign exchange market.

The rupee gained the value after losing around Rs1.30 against dollar during past four trading days.

Currency dealers said that the forex market witnessed improvement after inflows of foreign remittances and export receipts.

However, the dealers further said that the significant decline in foreign exchange reserves of the country also put pressure on demand side.

June 12, 2020
Stock market sheds 517 points on ease in international oil prices

KARACHI: The stock market ended down by 517 points on Friday on the back of weakness observed in international markets, decline in crude oil prices.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 34,611 points as against 35,129 points showing a decline of 517 points.

Analysts at Topline Securities said that KSE 100 index (down by 1.47 percent) closed negative on the last trading session day of the week on the back of weakness observed in international markets, decline in crude oil prices and growing investor concerns over spread of second wave of Coronavirus.

The analysts at Arif Habib Limited said that the market shed 625 points during the session today on the back of global rout in capital as well as commodity markets.

US and regional markets saw Stock Indexes tumbling 4 percent to 7 percent and similar attrition was observed in international crude oil prices, which dampened the investors’ sentiment in pre-budget market session.

Investors in general resorted to profit booking, considering a nominal ascend seen so far in the Index on Budget releases.

Chemical and Textile sector stocks still showed investor interest, though the aggression was absent.

Cement sector led the volumes with 30.9 million shares, followed by Textile (18.5 million) and Technology (17.9 million). Among scrips, ANL topped the volumes with 12.7 million, followed by MLCF (11.4 million) and UNITY (10.8 million).

Sectors contributing to the performance include Banks (-180 points), E&P (-122 points), Power (-35 points), Fertilizer (-30 points) and Technology (-22 points).

Volumes declined from 270.6 million shares to 177.9 million shares (-34 percent DoD). Average traded value also declined by 27 percent to reach US$ 38.4 million as against US$ 52.6 million.

Stocks that contributed significantly to the volumes include ANL, MLCF, UNITY, HASCOL and TRG, which formed 29 percent of total volumes.

Stocks that contributed positively to the index include ANL (+8 points), NESTLE (+6 points), PIOC (+5 points), FFC (+4 points) and JLICL (+2 points). Stocks that contributed negatively include OGDC (-50 points), HBL (-47 points), MCB (-45 points), PPL (-44 points), and UBL (-31 points).

June 12, 2020
Income tax exemptions surge by 166pc to Rs378bn

ISLAMABAD: Despite massive shortfall in revenue collection the Federal Board of Revenue (FBR) granted Rs378 billion as income tax exemption during current fiscal year, which is 166.2 percent higher than the last fiscal year.

According to Pakistan Economic Survey 2019/2020 released on Thursday the FBR granted provisionally Rs378 billion as income tax exemption and concession during the outgoing fiscal year as compared with Rs142 billion in the last fiscal year.

The FBR granted around Rs212 billion as exemption from total income during the outgoing fiscal year. While another Rs104.5 billion concessions were granted as tax credit. An amount of Rs36.43 billion was exempted for allowances.

It is pertinent to mention here that the FBR was assigned Rs5.55 trillion as collection target for the current fiscal year. However, slowdown in economy and COVID-19 outbreak the target was revised downward to Rs3.9 trillion.

However, grant of exemption and concession fell 13.21 percent to Rs519 billion under the head of sales tax during current fiscal year as compared with Rs598 billion in the last fiscal year.

The FBR granted sales tax exemption of Rs255.84 billion on imports. An amount of Rs74 billion granted exemption/concession as reduced rates of two percent under Eight Schedule of Sales Tax Act, 1990.

Further, an amount of Rs35 billion has been granted as exemption/concession as reduced rates of 10 percent under Eight Schedule.

The authorities granted Rs23.15 billion sales tax concession on cellular mobile phones under Ninth Schedule.

The FBR granted exemption of Rs54.87 billion on local supplies during the fiscal year 2019/2020.

The exemption and concessions under customs duty cost an amount of Rs253 billion to the revenue authority during outgoing fiscal year, which is 8.58 percent higher when compared with Rs233 billion the last fiscal year.

Around Rs95 billion has been granted as duty exemption / concession to automobile sector, E&P companies and projects under CPEC. While an amount of Rs87 billion granted as exemption and concessions under Fifth Schedule of Customs Act, 1969.

The concessions granted under Free Trade Agreement (FTA) and Preferential Trade Agreement (PTA) was around Rs45 billion during the current fiscal year.

The FBR allowed exemption and concession an aggregate amount of Rs1150 billion during fiscal year 2019/2020 as compared with Rs972 billion in the last fiscal year.

June 12, 2020
Pakistan to face greater challenges in next fiscal due to COVID

ISLAMABAD: Pakistan is likely to face greater challenges in the next fiscal year starting July 2020 due to COVID-19, said Economic Survey 2019/2020 released on Thursday.

“After recording its first contractionary year due to the COVID crisis since 1952, Pakistan is likely to face greater challenges in the 2020/2021 starting July 2020,” according to the survey.

Under normal circumstances, after recording over 3 percent growth, Pakistan could have been reaping the benefits of macroeconomic stability achieved over the last year and would have embarked on a higher growth trajectory of over 4 percent.

However, the pervasive and lasting effects of COVID-19 pose serious challenges to the economy which remains susceptible to its aftermath, despite efforts towards the outbreak’s curtailment.

With an expected 2 percent growth for next year which is even lower than the population growth rate, challenges such as unemployment and poverty are expected to persist and amplify.

A second round of the outbreak could further threaten macroeconomic stability and socioeconomic outcomes.

Businesses will face liquidity issues, and many more may experience insolvency. They will require different kinds of support, for instance bailouts and provision of cheap funding, among others.

Global trade will further dampen thereby constricting exports and remittances inflow, while domestic fiscal adjustment will become even more challenging. Higher debt accumulation will be problematic, financing for development projects may become scarce, revenues might be difficult to increase while expenditure demand may be immense.

Synthesizing all this in an intricate policy mix has to ultimately be in place to smoothen this transition from crisis to stabilization.

June 12, 2020