Pkrevenue.com

Author: Mrs. Anjum Shahnawaz

  • Revival of sales tax zero rating suggested to ease liquidity problem

    Revival of sales tax zero rating suggested to ease liquidity problem

    KARACHI: Business community has recommended revival of zero rated sales tax for the export sector in the wake of difficulties faced following COVID-19.

    Pakistan Business Council (PBC) has suggested sales tax proposals for budget 2020/2021 to ease the pressure on the industry.

    It said that the proposal for bringing the five export sectors under the ambit of normal sales tax regime has clearly not worked.

    Sales tax refund claims continue to accumulate with the FBR while export industries have faced massive liquidity in the past nine months on account of this move.

    Exporters liquidity as well as net operating results / losses have taken a strong negative hit from the two-edged sword; once after withdrawal of zero rating regime resulting in piling of sales tax refunds and thereafter, due to cancellation of existing orders post the COVID-19 pandemic.

    Restoration of Zero rating will allow some relief on the liquidity front for the major export sectors

    It further said that at present, local sales to DTRE license holder has been provided the benefit of sales tax zero rating, however, local supplies to EOUs / manufacturing bond is chargeable to sales tax at 17 percent, which is an apparent anomaly between the DTRE, EOUs and Manufacturing bond rules.

    In order to remove anomaly and considering the fact that material / goods being purchased by DTRE / EOU / Manufacturing Bond are used for the purposes of exports and are subject to strict scrutiny, it is proposed to allow zero rating on local purchase of goods by EOUs / Manufacturing Bond in line with the benefit given to DTRE.

    Under the Sales Tax Act, Section 8 – B, a company is not allowed to adjust input tax in excess of 90 percent of the output tax for that period. Further, commercial importers paying 3 percent minimum Value Addition sales tax at import stage are totally exempt from the applicability of minimum tax under section 8B.

    All manufacturers be allowed 100 percent adjustment of input tax instead of the current restriction of 90 percent

  • Minimum tax collection should be suspended for two years

    Minimum tax collection should be suspended for two years

    KARACHI: Pakistan Business Council (PBC) has recommended suspending minimum tax under Section 113 of Income Tax Ordinance, 2001 considering the pandemic of COVID-19 and its impact on businesses.

    The PBC in its budget proposals 2020/2021, said that a turnover based minimum tax is fundamentally flawed in that it fails to take account of the industry specific margins and acts as a barrier to entry of new players.

    A minimum tax at 1.5 percent of sales for manufacturers (and higher rates for the services industry), under the present depressed business conditions will put an unbearable burden on businesses.

    “Pending a review of the continued justification of minimum tax, under the current business circumstances, we recommend that its collection be suspended for at least the next two financial years.”

    The PBC further said that as per Section 61 of the Income Tax Ordinance, 2001, persons falling under the Minimum Tax Regime / Alternative Corporate Tax are not able to claim any sort of tax credit on donations.

    Considering the situation of last quarter ending June 2020 due to COVID, many companies would fall under the minimum tax regime due to reduced product demand and margin issues.

    Section 61 of the Income Tax Ordinance, 2001 be amended to allow direct deduction of donations paid by any person to the Prime Minister’s COVID-19 Pandemic Relief Fund-2020 or any other Fund established by any Provincial Government or to any other approved Non-Profit Organization subject to the condition that the said donation should be made through crossed cheque.

    Moreover, in case of donation in kind, deduction against minimum turnover tax be allowed on the basis of valuation prescribed under Rule 228(4) of the Income Tax Rules, 2002.

    At present, rate of tax deduction on export proceeds is 1.0 percent.

    In order to promote sustainability of industries engaged in exports, rate of tax on export proceeds should be reduced to 0.5 percent from 1.0 percent for the next two financial years.

    In order to get exemption certificate against tax deduction under sections 153 [supply of goods] and 148 [import on goods], taxpayers are required to pay advance tax

    Taxpayers should be allowed unconditional exemption from tax deduction on import and supply stage without heavy upfront payment of advance tax liability. In order to ensure regular inflows to the Government, taxpayers be made liable to discharge at least 70 percent [as against present 90 percent condition] of total estimated annual tax liability in 4 quarterly instalments.

  • Introduction of registered savings, investment accounts proposed

    Introduction of registered savings, investment accounts proposed

    KARACHI: Pakistan Stock Exchange (PSX) has proposed introduction of registered savings and investment accounts (RSIAs) in the upcoming budget 2020/2021.

    In its budget proposals for the fiscal year 2020/2021, the PSX said that saving and investment are crucial for playing an important role in the process of socio-economic development through capital accumulations.

    Pakistan, besides facing problems such as unemployment, rapid growth of population, slow economic growth in the country, has a saving rate that is meager and undesirable for sustainable national economic development. Low level of saving rates in any economy have been cited as one of the most serious constraints to sustainable economic growth.

    Higher savings and the related increase in capital formation can be result in a permanent increase in economic growth rates.

    Registered savings and investments accounts (RSIAs) are personal accounts that allow investors to accumulate savings (e.g., Individual Retirement Accounts and Roth IRAs in the US, Registered Retirement Savings Plans and Tax Free Savings Accounts in Canada).

    Other variations on the theme promote saving toward other goals like children’s education (Registered Retirement Saving Plans in Canada) or funding future needs of a disable individual (Registered Disability Savings Plan in Canada).

    Although their design varies according to the schemes objective, they all have 2 features in common:

    — Capital accumulates free of tax (on interest, dividend or capital gains) as long as it stays in the account;

    — Eligible investments in the account are listed stocks and ETFs, tradable bonds and mutual funds

    In the United States, Roth Individual Retirement Arrangement (Roth IRA) is similar to TFSA. The Roth IRA was established by the Taxpayer Relief Act of 1997.

    The total contribution allowed per year to all IRAs is the lesser of one’s taxable compensation. The Packwood-Roth plan would have allowed individuals to invest up to $2,000 in an account with no immediate tax deductions, but the earnings could later be withdrawn tax-free at retirement.

    Therefore, it is proposed that the Government of Pakistan introduce a mechanism and regulatory structure for the launch of registered savings and investment accounts (RSIAs) to help channel savings towards productive investments.

    RSIAs will help bring capital from the large undocumented sector into the formal economy. Further, it is also crucial that firm guarantees be offered that contributions be subject to full amnesty-aside from AML and Terrorist Financing issues due diligence.

    Where they have been introduced, registered savings and investment account (RSIAs) have been very successful in channeling savings to productive investments through capital markets and often constitute the main source of income in retirement. In Pakistan, they will bring the added benefit of driving the government’s goal to document the informal sector.

    RSIAs could become one of the driving forces in the transformation of Pakistan’s economy. By some estimates, 40 million middle-class Pakistanis have an average accumulated wealth of over USD 10,000, for a total of over Rs. 50 trillion. Much of that wealth is currently invested in real estate, gold and other asset classes in Pakistan offshore. If RSIAs can capture 10% o that wealth, It would be equivalent to more than half the current market capitalization of PSX listed companies or more than the outstanding amount of PIBs and Sukuks.

    Appropriate amendment to be made in the Income Tax Ordinance, 2001.

  • Karachi Chamber demands ease in lockdown, resuming trade activities

    Karachi Chamber demands ease in lockdown, resuming trade activities

    KARACHI: The Karachi Chamber of Commerce and Industry (KCCI) has urged the government to ease the ongoing lockdown and allow the resumption of trade activities.

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  • Headline inflation contracts to 8.5 percent in April

    Headline inflation contracts to 8.5 percent in April

    ISLAMABAD: The headline inflation based on Consumer Price Index (CPI) contracted to single digit i.e. 8.5 percent in April 2020 as compared with an increase of 10.2 percent in the previous month, Pakistan Bureau of Statistics (PBS) said on Friday.

    The PBS said that CPI inflation general increased by 8.5 percent on year-on-year basis in April 2020 as compared to an increase of 10.2 percent in the previous month and 8.3 percent in April 2019.

    On month-on-month basis, it decreased by 0.8 percent in April 2020 as compared to an increase of 0.04 percent in the previous month and an increase of 0.7 percent in April 2019.

    CPI inflation Urban increased by 7.7 percent on year-on-year basis in April 2020 as compared to an increase of 9.3 percent in the previous month and 8.4 percent in April 2019. On month-on-month basis, it decreased by 0.7 percent in April 2020 as compared to an increase of 0.1 percent in the previous month and an increase of 0.8 percent in April 2019.

    CPI inflation Rural, increased by 9.8 percent on year-on-year basis in April 2020 as compared to an increase of 11.7 percent in the previous month and 8.1 percent in April 2019. On month-on-month basis, it decreased by 1.1 percent in April 2020 as compared to a decrease of 0.1 percent in the previous month and an increase of 0.6 percent in April 2019.

    Sensitive Price Indicator (SPI) inflation on YoY increased by 9.0 percent in April 2020 as compared to an increase of 11.8 percent a month earlier and an increase of 10.0 percent in April 2019.

    On MoM basis, it decreased by 2.0 percent in April 2020 as compared to a decrease of 0.3 percent a month earlier and an increase of 0.5 percent in April 2019.

    Wholesale Price Index (WPI) inflation on YoY basis increased by 5.1 percent in April 2020 as compared to an increase of 9.2 percent a month earlier and an increase of 17.1 percent in April 2019.

    WPI inflation on MoM basis decreased by 2.1 percent in April 2020 as compared to a decrease of 0.9 percent a month earlier and an increase of 1.8 percent in corresponding month of last year i.e. April 2019.

  • SBP enhances refinancing limits for hospitals

    SBP enhances refinancing limits for hospitals

    KARACHI: State Bank of Pakistan (SBP) on Friday increased the refinancing limits for hospitals and medical centers in the background of rising cases of COVID-19 in the country and with the need to strengthen health sector in fight against COVID-19.

    The central bank enhanced financing limit of a single hospital/ medical center under its Refinance Facility for Combating COVID -19 (RFCC) from Rs. 200 million to Rs. 500 million.

    RFCC is an emergency funding facility to support hospitals/medical centers to develop their capacities for treatment of infected patients of COVID-19.

    The financing under this facility is being made available by State Bank at zero percent to banks that can charge a maximum rate of 3 percent per annum to hospitals/medical centers.

    State Bank has been continuously improving features of this Facility to ensure timely financial support to hospitals/medical centers engaged in combating COVID-19.

    So far, financing of Rs. 2.2 billion for 11 hospitals/medical centers has been approved whereas financing requests of Rs 3.6 billion for 23 hospitals/medical centers are being processed by the banks.

    With today’s enhancement of financing limit, it is expected that large scale facilities will be created for treating COVID-19 patients by using subsidized funding being extended under this facility.

  • FBR collection falls by 13.4 percent in April

    FBR collection falls by 13.4 percent in April

    ISLAMABAD: The revenue collection has registered 13.4 percent decline in April 2020 over the corresponding month of the last year, due to ongoing lockdown to contain spread of coronavirus.

    According to provisional statistics of Federal Board of Revenue (FBR), the collection of duty and taxes fell to Rs256.68 billion in April 2020 as compared with Rs296.58 billion in the corresponding month last year.

    The FBR issued refunds in April 2020 to the tune of Rs 15.12 billion, which is 127 percent higher when compared with Rs6.66 billion in the corresponding month last year.

    Moreover, the Rs16 billion as refunds have been issued to exporters, Rs33 billion as arrear refunds and Rs15 billion as duty drawback in April 2020.

    The total collection of the FBR during first ten months (July – April) 2019/2020 increased to Rs3,408.83 billion showing an increase of 10.4 percent compared with the Rs3047.95 billion collected during the corresponding period of the last fiscal year.

    The refunds of Rs116.961 billion have been issued during first ten month of current fiscal year, which was Rs6.515 billion during July – April 2019/2020.

    The FBR has collected the target revenue of Rs200 billion for April 2020 and collected Rs256 billion out of revised annual revenue target of Rs3908 billion for the current Financial Year.

  • FBR extends sales tax return filing date up to May 15

    FBR extends sales tax return filing date up to May 15

    ISLAMABAD: Federal board of Revenue (FBR) on Thursday announced relief in sales tax return filing of last three months due to outbreak of coronavirus and lockdown in the country.

    The FBR issued a notification allowing taxpayers to make payment of sales tax and federal excise duty up to May 12, 2020 for the months January, February and March 2020.

    Further, the taxpayers have been allowed to file sales tax and federal excise monthly returns up to May 15, 2020 for the months January, February and March 2020.

    The FBR has been extending the date in order to facilitate the taxpayers to discharge their liabilities. However, cases of coronavirus were reported in February and subsequently lockdown was imposed in March, which resulted in halt of business activities.

  • FBR extends date to submit stock position up to May 15 for claiming refunds

    FBR extends date to submit stock position up to May 15 for claiming refunds

    ISLAMABAD: Federal Board of Revenue (FBR) on Thursday allowed taxpayers to submit their stock position for the period July– November 2019 up to May 15, 2020 in order to claim sales tax refunds under newly only verification and issuance system.

    In an official memorandum issued, the FBR extended the time limit for filing of Annexure – H for the tax period July – November 2019 up to May 15, 2020.

    Annexure-H is a statement for providing stock position by taxpayers along with monthly sales tax return.

    The FBR from July 01, 2019 introduced expeditious payment of sales tax refunds within 72 hours subject to the true filing of Annexure – H.

    As per the Rules, refund will be treated as having been filed only after filing of Annexure H of the Sales Tax return, for which deadline of 120 days has been prescribed in the Rules and the same can be extended for a period of 60 days on the basis of approval from the Commissioner.

  • Prices of petroleum products slashed up to 39 percent

    Prices of petroleum products slashed up to 39 percent

    ISLAMABAD: The government on Thursday announced a significant reduction in the prices of petroleum products, with cuts reaching up to 39 percent. This move aims to pass on the benefits of the massive decline in international oil prices to the public.

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