Author: Mrs. Anjum Shahnawaz

Weekly Review: Equity market likely gain on improved economic indicators

KARACHI: The stock market likely to remain positive due to improved macro-economic position on the back of enhanced inflows in debt securities and rising foreign exchange reserves.

Analysts at Arif Habib Limited said that the market to remain positive on the back of improving macroeconomic position, country witnessing foreign net inflows in debt securities to $2,588 million in FY20TD, rising foreign exchange reserves improving investor’s sentiments, and stable market determined exchange rate.

Moreover, with the likelihood of Pakistan to get out of FATF’s grey list, investor sentiment should remain upbeat.

The KSE-100 is currently trading at a PER of 7.3x (2020) compared to Asia Pac regional average of 12.5x while offering a dividend yield of ~6.4 percent versus ~2.7 percent offered by the region.

This week trading commenced on a negative note attributable to OGRA’s proposing gas price hike coupled with government’s decision to eliminate GIDC on fertilizer sector to reduce prices of Urea which may hurt bottom line of some companies due to different type of gas tariffs.

On the other hand, Oil and Gas Exploration sector remained under pressure amid decline in international oil prices by 2 percent WoW coupled with appointment of financial advisor to sell stake of OGDC.

Meanwhile, increase in prices of key commodities like wheat and sugar is set to elevate headline inflation with a stronger force considering their weights in CPI index.

As a result, the benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed below 43,000-mark at 42,633 points, decreasing by 535 points or 1.24 percent WoW.

Contribution to the downside was led by i) Fertilizer (-204 points) due to removal of GIDC, ii) Commercial Banks (-87 points) amid profit taking, iii) Oil and Gas Marketing Companies (-71 points), iv) Oil and Gas Exploration Companies (-61 points) due to decline in international oil prices, and v) Tobacco (-61 points). Scrip wise major losers were ENGRO (-153 points), OGDC (-93 points), EFERT (-80 points), PAKT (-53 points), and HMB (-36 points). Whereas, scrip wise major gainers were FFC (+56 points), MARI (+48 points), and COLG (+27 points).

Foreigners accumulated stocks worth of $4.81 million compared to a net buy of $2.81 million last week.

Major buying was witnessed in Oil and Gas Marketing Companies (USD +7.73 million) and Fertilizer (USD +1.88 million). On the local front, selling was reported by Individuals (USD -19.31 million) followed by Broker Proprietary Trading (USD -3.05 million).

That said, average daily volumes for the outgoing week were down by 31 percent to 187 million shares likewise value traded decreased by 10 percent to USD 51.3 million.

January 25, 2020
CNIC condition not to apply on purchases by end consumers

KARACHI: The requirement of Computerized National Identity Card (CNIC) is not applicable on purchases above Rs50,000 made by end consumers, tax officials said on Friday.

They said that the condition of CNIC will be applicable from February 01, 2020 on sales by registered persons to unregistered persons.

Every registered person is required to collect information of buyer making purchases above Rs50,000.

The officials said that the condition of CNIC shall not apply on ordinary consumer, which means a person who is buying the goods for his own consumption and not for the purpose of re-sale or processing.

Through Finance Act, 2019, it was made mandatory that a registered person making a taxable supply shall issue a serially numbered tax invoice at the time of supply of goods containing the following particulars, in Urdu or English language, namely: –

The condition of CNIC or NTN was made mandatory from August 01, 2019.

However, on opposition from small traders the government after an agreement on October 30, 2019, postponed the applicability of CNIC till January 31, 2020.

The FBR on October 04, 2019 issued definition / rules related to condition of CNIC.

The FBR said that keeping in view the problems reported by the registered persons is ensuring proper identity of the buyer to fulfil the requirement of reporting NTN/NIC of the buyer in terms of section 23 of the Sales Tax Act, 1990, it is directed that the NIC/NTN of the buyer with respect to taxable supplies to an unregistered person shall be deemed to have been reported in good faith by the supplier provided that:

(a) The tax invoice complies with the requirements of section 23(b) of the Act.

(b) Payment made by or on behalf of the unregistered purchaser of the amount of the tax invoice, inclusive of sales tax and applicable further tax, is deposited into the supplier’s declared business bank account.

(c) The NIC provided by the purchaser is found authenticated by the National Data and Registration Authority (NADRA).

(d) The NIC/NTN provided is not of the employee of the seller or of his associates as defined under the Income Tax Ordinance, 2001.

The issuance of a show cause notice to a registered person being a seller on account of any matter arising out of the NIC provided by a purchaser shall not be made without the prior approval of the Member (IR-Operations), FBR after providing an opportunity to be heard.

January 25, 2020
New mobile phone registration payment validity is seven days: PTA

ISLAMABAD: Pakistan Telecommunication Authority (PTA) on Friday said that payment of duty and tax for new mobile phone registration has to be made within seven days.

In a statement, the authority said that the validity of all applications and payment slip identification (PSID) is seven days. During this period the applicant has to pay duty and taxes with the Federal Board of Revenue (FBR).

The PTA said that after lapse of seven days in which payment has not been made then the application/PSID would automatically deleted from the system. In such cases the claimants could not make payment at banks on invalid PSID.

The authority said that in case expiry the applicants need to re-submit application for issuance of new PSID.

The PTA introduced Device Identification Registration Blocking System (DIRBS). As par law all the new mobile phones has to get registration through this system within 60 days before linking to any local cellular provider.

The PTA facilitated the registration of new mobile phones through three different ways including website, SMS and franchise of mobile operators/service centers.

January 24, 2020
Pakistan takes preemptive measures against Corona virus

ISLAMABAD: Pakistan has taken preemptive measures to deal with the situation in wake of Corona virus cases in China.

Dr. Zafar Mirza, Special Assistant to Prime Minister on Health, reviewed the situation while chairing a high level meeting participated by heads of federal hospitals and health institutions.

He directed to expedite the establishment of a robust surveillance system at all ports of entry before February 8, 2020 with quarantined areas.

SAPM monitored the situation in the Emergency Operations Centre established in the Ministry of National Health, Services, Regulations & Coordination.

He directed that a dedicated Helpline be established by next week for provision of information on the disease to the general public and health-care providers.

He reviewed measures taken by major hospitals to receive possible cases of Corona virus emphasized that all necessary arrangements be made to receive patients of the disease.

SAPM also stressed to accelerate the steps required for public awareness and education related to the symptoms of the disease, preparedness level, mitigation and response in case of any emergency.

Special information stalls should be established in arrival areas of airports for information of travelers.

Dr. Zafar Mirza directed that Thermo Guns be made available to screen passengers in addition to Thermo scanners. SAPM further directed that National Institute of Health should act as a hub where all information should be updated.

The meeting was informed that there are at present 890 reported cases of Corona virus with 26 deaths.

In addition to a beefed up surveillance mechanism and public awareness, all Provincial Chief Ministers are being advocated to notify a focal person to coordinate with point of entry staff and manage suspected cases of coronavirus infection.

NDMA is also taken on board to support in case of any emergency, the meeting was informed.

January 24, 2020
FDI data collected on fiscal year basis: Finance Division

ISLAMABAD: The Finance Division on Friday clarified news reports and said that the data of Foreign Direct Investment (FDI) collected on fiscal year basis not on calendar year basis.

Finance Division has described as factually incorrect and misleading a news item published in a section of the press claiming that the foreign direct investment flows into Pakistan had dropped by 20 per cent in 2019.

In an official statement, the Finance Division has clarified that a news report published in a segment of the press has highlighted that Foreign Direct Investment (FDI) inflows into Pakistan declined by 20 percent to $1.9 billion in 2019 (calendar year) against $2.4 billion in 2018.

In this context, it is clarified that FDI data is collected on the basis of fiscal years, whereas the quoted figure is taken on calendar year basis.

Furthermore, on fiscal year basis, FDI has increased by 68.3 percent during July-December 2019 as compared to same period of last year (from $0.797 billion to $1.341 billion)

January 24, 2020
Stock market gains 126 points in mixed trading

KARACHI: The stock market gained 126 points on Friday amid mixed trading sessions. The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 42,633 points as against 42,507 points showing an increase of 126 points (+0.3 percent DoD).

Analysts at Arif Habib Limited said that the market recovered some losses made earlier during the week and closed the session +126.08 points.

During the session, the index swayed from -256 points to +200 points.

Cement sector gained both in volume and value, with KOHC hitting upper circuit and healthy buying activity observed in Cement heavy weights including LUCK, DGKC and MLCF.

E&P sector also showed some signs of recovery with PPL crossing recent highs.

Similarly, positive move was observed in Refineries, which saw ATRL and NRL closing at upper circuits. Cement Sector led the volumes with 36.5 million shares, followed by Food (18.8 million) and Banks (18.7 million).

Among scrips, MLCF registered trading volume of 17.3 million shares, followed by ASC (14 million) and HASCOL (13.9 million).

Sectors contributing to the performance include Cement (+41 points), E&P (+29 points), Power (+19 points), Textile (+18 points) and Banks (+15 points).

Volumes declined back from 230.8 million shares to 173.0 million shares (-25 percent DoD). Average traded value also declined by 31 percent to reach US$ 43.5 million as against US$ 63.2 million.

Stocks that contributed significantly to the volumes include MLCF, ASCR, HASCOL, UNITY and AVN, which formed 36 percent of total volumes.

Stocks that contributed positively include PPL (+42 points), BAHL (+17 points), LUCK (+16 points), HUBC (+15 points) and MCB (+15 points). Stocks that contributed negatively include POL (-21 points), HBL (-15 points), SHFA (-12 points), BAFL (-9 points), and PMPK (-8 points).

January 24, 2020
Rupee gains five paisas on inflows

KARACHI: The Pak Rupee made gain five paisas against dollar on Friday owing to inflows of export and remittances.

The rupee ended Rs154.57 to the dollar from previous day’s closing of Rs154.62 in interbank foreign exchange market.

Currency dealers said that the market witnessed supply of dollars during the day which helped the rupee to make gain.

The foreign currency market was initiated in the range of Rs154.65 and Rs154.68. The market recorded day high of Rs154.65 and low of Rs154.56 and closed at Rs154.57.

The exchange rate in open market witnessed stable rupee value. The buying and selling of dollar was recorded at Rs154.60/Rs154.90, the same previous day’s closing, in cash ready market.

January 24, 2020
OGDCL announces gas discovery in Sindh

KARACHI: Oil and Gas Development Company Limited (OGDCL) on Friday announced discovery of gas in the exploratory well located in Khairpur Sindh.

In an information shared with Pakistan Stock Exchange (PSX), the company announced that the joint venture of Ranipur Block comprising OGDCL as operator (95 percent), Government Holdings Private Limited (GHPL) (2.5 percent and Sindh Energy Holding Company (Private) Limited (SEHCL) (2.5 percent had discovered gas and condensate in the exploratory well Metlo 01, which is located in District Khairpur, Sindh Province.

The OGDCL said that the Metlo-1 was spud on November 17, 2019 and reach a depth of 1504 meters inside Upper Goru Formation. Based on wireline logs, drill stem test (DST) was conducted in Ranikot Formation and Sui Main Limestone.

The well has tested 1.85 million cubit feet per day of gas, 6 barrels per day of condensate and 38 barrels of water through 32/64” choke at well head flowing pressure of 285 pounds per square inch (Psi) from lower Ranikot Formation.

The discovery of Metlo-1 is the result of aggressive exploration strategy adopted by the company. “This discovery will add to the hydrocarbons reserves of OGDCL, GHPL, SEHCL and of the country and will contribute in reducing the gap between supply and demand of oil and gas in the country through the exploitation of indigenous resources.

January 24, 2020
SRB suspends sales tax registration of Arabia Sea Country Club

KARACHI: Sindh Revenue Board (SRB) has suspended sales tax registration of Arabian Sea Country Club for tax fraud.

In a notice for suspension of registration of M/s. Arabia Sea Country Club, the SRB said that the taxpayer had collected the amount of tax on services provided but did not deposit to the provincial exchequer.

The SRB said that the taxpayer provided services to M/s. Aisha Steel Mills Limited, M/s. Master Motors, M/s. Novartis Pharma (Pakistan) Limited, M/s. Naveena Steel Mills (Pvt) Limited, M/s. Yamaha Motor Pakistan (Pvt) Limited, M/s. L’oreal Pakistan Pvt Limited amounting to Rs11,615,885 involving Sindh sales tax of Rs1,510,067 for the tax period January 2019 to October 2019.

“It is inform you that the aforesaid act of non-payment/short payment of Sindh sales tax is covered under the ‘tax fraud’ as defined under the provision of Section 2(94) of the Act, 2011.”

The SRB has given deadline of January 28, 2020 to the taxpayer:

To discharge all the due Sindh sales tax liability along with default surcharge; and

To e-file the true and correct monthly Sales Tax return for the said tax periods.

“In case of non-satisfactory response or failure to take remedial measures as suggested above on or before January 28, 2020, the case shall be processed for cancellation of registration.”

January 24, 2020
FBR not to compromise integrity of automated refund system

KARACHI: Federal Board of Revenue (FBR) has told the legislators that it will not compromise the integrity of automated sales tax refund system despite pressures from various quarters.

The FBR made a presentation before the standing committee of National Assembly on Finance, Revenue and Economic Affairs on Thursday. The officials of Large Taxpayers Unit (LTU) Karachi explained in detail about the newly launched Fully Automated Sales Tax e-Refund (FASTER).

The standing committee had asked the FBR to explain the automated sales tax refund system following hue and cry from the business community that their refunds under the newly launched system were stuck up and they were facing liquidity problems.

The FBR officials informed the standing committee the automated system was fully transparent and all doors had been closed for issuance of refunds on fake and flying invoices.

It was informed that in the last budget the zero rating of sales tax was abolished which was related to five export oriented sectors.

After withdrawal of SRO 1125(I)/2011, the items in the SROs had become subject to normal sales tax at 17 percent on import and local supply.

In this scenario all the inputs of exporters have become taxable which gave rise to refunds and liquidity issues.

However, the government resolved the issue of sales tax refunds of exporters through introduction of FASTER system, which applied from July 01 onwards.

It is informed that data provided in monthly returns is treated as data in support of refund claim and no separate electronic data is required. “The only requirement is filing of Annexure-H with 120 days of the filing of sales tax return.”

After filing, the claim is routed through processing module FASTER. Refund claim data is verified by the system and Refund Payment Order (RPO) of the amount found admissible is generated.

The FBR officials told that RPO was electronically communicated to the State Bank of Pakistan within 72 hours.

The standing committee was informed that refund claims, which were not verified through validation checks, are processed under STARR.

In order to resolve issues related to FASTER system, the FBR deputed focal persons in all field formations. Besides, chief automation and PRAL team is available through cell phones/ helpline to assist taxpayers.

Further, filing date of annexure – H has been extended up to February 15, 2020.

After the launch of FASTER system the issuance of refund payment registered unprecedented growth of 165 percent. According to the briefing the FBR released Rs36.82 billion during July 01- January 21 2019/2020 as compared with Rs13.9 billion in the corresponding period of the last fiscal year.

The issuance of refunds by LTU Karachi registered phenomenal growth of 317 percent to Rs7.89 billion during July 01 – January 21 2019/2020 as compared with Rs1.89 billion in the corresponding period of the last year.

January 24, 2020