Author: Faisal Shahnawaz

Finance Bill 2019: 12th Schedule introduced to levy 3pc value addition sales tax on all imported goods

ISLAMABAD: The government has proposed Twelfth Schedule to Sales Tax Act, 1990 to streamline imposition of 3 percent value addition tax on imported goods.

The schedule has been proposed to make part of the Act through Finance Bill, 2019.

According to the schedule,

(1) The sales tax on account of minimum value addition as payable under this Schedule (hereinafter referred to as value addition tax), shall be levied and collected at import stage on all taxable goods as are chargeable to tax under section 3 of the Act or any notification issued thereunder at the rate specified in the Table in addition to the tax chargeable under section 3 of the Act or a notification issued thereunder:

(2) The value addition tax under this Schedule shall not be charged on,—

(i) Raw materials and intermediary goods meant for use in an industrial process which are subject to customs duty at 16% or 20% ad valorem under First Schedule to the Customs Act, 1969;

(ii) The petroleum products falling in Chapter 27 of Pakistan Customs Tariff as imported by a licensed Oil Marketing Company for sale in the country;

(iii) Registered service providers importing goods for their in-house business use for furtherance of their taxable activity and not intended for further supply; and

(iv) Cellular mobile phones or satellite phones.

(3) The value addition tax paid at import stage shall form part of input tax, and the importer shall deduct the same from the output tax due for the tax period, subject to limitations and restrictions under the Act, for determining his net liability. The excess of input tax over output tax shall be carried forwarded to the next tax period as provided in section 10 of the Act.

(4) In no case, the refund of excess input tax over output tax, which is attributable to tax paid at import stage, shall be refunded to a registered person.

(5) The registered person, if also dealing in goods other than imported goods, shall be entitled to file refund claim of excess carried forward input tax for a period as provided in section 10 or in a notification issued there under by the Board after deducting the amount attributable to the tax paid at import stage i.e. sum of amounts paid during the claim period and brought forward to claim period. Such deducted amount may be carried forward to subsequent tax period.”

June 13, 2019
FBR empowered to probe foreign remittances above Rs5 million received in a year

ISLAMABAD: Federal Board of Revenue (FBR) has been empowered to probe source of foreign remittances above Rs5 million received by a person in a year.

According to Finance Bill 2019, an amendment has been proposed to Section 111(4) of Income Tax Ordinance, 2001 in this regard.

At present the FBR cannot ask source to any amount of foreign exchange remitted from outside Pakistan through normal banking channels up to Rs10 million in a tax year that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect.

However, this threshold has been reduced to Rs5 million.

FBR sources said that the proposal had been introduced through Finance Bill 2019 to shut the window for whitening of money.

June 13, 2019
Finance Bill 2019: Banks to pay 37.5pc tax on profit from investment in govt securities

ISLAMABAD: Banks shall pay 37.5 percent income tax on profit from investment in government securities, according to proposals made through Finance Bill, 2019.

The Federal Board of Revenue (FBR) in explanation to the Finance Bill, 2019 said that banks are earning substantial profits on account of incremental exposure to government securities.

Therefore profit from such government securities as is in excess of twenty percent of total profit before tax is being taxed separately at the rate of 37.5 percent.

The FBR further said that banks generally do not offer for taxation the provisions which were previously allowed but later on reversed. Therefore reversal of provisions already allowed is being made taxable by inserting an explanation in the Seventh Schedule.

Banks are also allowed to claim deduction in respect of provisions classified as “doubtful” and “loss”. Now only deductions only in respect of provisions classified as “loss” are to be allowed.

June 13, 2019
Finance Bill 2019: Advance tax increased by 900 percent on renewal of license by arhatis

ISLAMABAD: The government has increased the advance tax by 900 percent (nine times) at the time of renewal of license by middleman of a commodity markets in agriculture sector.

The tax rates have been increased through Finance Bill, 2019 and may be applicable from July 01, 2019.

The Federal Board of Revenue (FBR) said that presently every market committee is required to collect advance tax from dealers, commission agents and arhatis at the time of issuance or renewal of licenses.

Now the tax rates are being increase for:

Class A from Rs10,000 to Rs100,000/-,

Class B from Rs7,500 to Rs75,000/-,

Class C from Rs5,000/- to Rs50,000; and

for any other category from Rs5,000/- to Rs50,000/-.

The tax has been collected under Section 236J of Income Tax Ordinance, 2001.

According to the section:

“236J. Advance tax on dealers, commission agents and arhatis etc.— (1) Every market committee shall collect advance tax from dealers, commission agents or arhatis, etc. at the rates specified in Division XVII of Part-IV of the First Schedule at the time of issuance or renewal of licences.

(2) The advance tax collected under sub-section (1) shall be adjustable.

(4) In this section “market committee” includes any committee or body formed under any provincial or local law made for the purposes of establishing, regulating or organizing agricultural, livestock and other commodity markets.”

June 13, 2019
Finance Bill 2019: Law proposed to initiate criminal proceedings against FBR officials

ISLAMABAD: The government has framed law to initiate criminal proceedings against officers and officials of Federal Board of Revenue (FBR) for committing corruption.

A new section 216A to Income Tax Ordinance, 2001 has been proposed through Finance Bill, 2019 as part of the budget 2019/2020 to initiate criminal proceedings against FBR officials.

The FBR said that in order to effectively check misuse of authority to gain financial benefit, a new enabling provision is being introduced to prescribe rules for initiating criminal proceedings against officers and officials of the Board who deliberately commit acts or fail to act for personal benefits.

Similar action would also be taken against persons who offer bribes or other financial benefits to the tax employees.

The proposed section is as follow:

“216A. Proceedings against persons.—(1) Subject to section 227, the Board shall prescribe rules for initiating proceedings including criminal proceedings against any authority mentioned in section 207 and officer of the Directorates General mentioned in Part II and Part III of Chapter XI including any person subordinate to the aforesaid authorities or officers of the Directorates General who willfully and deliberately commits or omits an act which results in personal benefits and undue advantage to the authority or the person or taxpayer or both.

(2) Where proceedings under sub-section (1) have been initiated against a person or authority, the Board shall simultaneously intimate the relevant Governmental agency to initiate criminal proceedings against the taxpayer.

(3) The proceedings under this section shall be without prejudice to any liability that the authority, person or taxpayer may incur under any other law for the time being in force.”

June 12, 2019
No provision for non-filers to purchase immovable property, motor vehicle: FBR

ISLAMABAD: Federal Board of Revenue (FBR) has said that no such provision was proposed through Finance Bill 2019 to allow non-filers to purchase immovable property or motor vehicles.

In a statement on Wednesday, the FBR strongly refuted the news appearing in some sections of press which states that the new Finance Bill has allowed the non-filers to purchase immovable property or cars.

The actual position is that the whole system of recognizing a non filer as a legal entity has been done away with in the new Finance Bill.

FBR has explained that under Income Tax Ordinance, every person earning taxable income ought to file his Income Tax Returns.

In case of failure of filing of Returns by persons involved in significant monetary transactions, a complete mechanism has been provided in the newly inserted 10th Schedule.

such persons will not only have to pay 100 percent more tax at Withholding stage but will also be automatically assessed to tax and his imputable income will be treated as concealed income liable to penalties and prosecution.

June 12, 2019
Rupee falls by 10 paisas on import demand

KARACHI: The Pak Rupee fell by 10 paisas against dollar on Wednesday owing to demand for import and corporate payments.

The rupee ended Rs151.57 to the dollar from previous day’s closing of Rs151.47 in interbank foreign exchange market.

The foreign exchange market was initiated in the range of Rs151.50 and Rs151.75. The market recorded day high of Rs152.00 and low of

Rs151.40 and closed at Rs151.57.

Currency experts said that the rupee would remain stable till the end of current fiscal year or June 30, 2019.

The exchange rate in open market also witnessed depreciation in rupee value.

The buying and selling of dollar was recorded at Rs151.30/Rs152.00 from previous day’s closing of Rs151.00/Rs152.00 in cash ready market.

June 12, 2019
Finance Bill 2019: tax rate enhanced up to 20pc on profit on debt

ISLAMABAD: The rate of tax has been increased up to 20 percent from 15 percent on profit on debt through Finance Bill, 2019.

The government has proposed increase in tax rates on profit on debt through Finance Bill 2019 as part of budget 2019/2020.

The tax rate has been increased to 15 percent from 10 percent where profit on debt does not exceed Rs5,000,000.

The tax rate has been increased to 17.5 percent from 12.5 percent where profit on debt exceeds Rs5,000,000 but does not exceed Rs25,000,000.

The tax rate has been increased to 20 percent from 15 percent where profit on debt exceeds Rs25,000,000 but does not exceed Rs36,000,000.

Presently the profit on debt is taxed separately and is not part of the income in normal tax regime.

According to the Federal Board of Revenue (FBR) the existing tax rates are 10 percent, 12.5 percent and 15 percent for slabs up to five million rupees, between five million to twenty five million rupees and above twenty five million rupees respectively.

The rates are being revised wherein tax rates for profit on debt not exceeding Rs 5 million shall be increased from 10 percent to 15 percent, between Rs 5 and 25 million tax rates shall be increased from 12.5 percent to 17.5 percent and from 25 to 36 million tax rates are being increased from 15 percent to 20 percent.

The rate of advance withholding tax on payment of profit on debt is also being enhanced from 10 percent to 15 percent.

Furthermore, the separate rates mentioned above would be applicable for profit on debt up to Rs.36 million and for amounts exceeding Rs. 36 million the profit on debt will be made part of the total income and taxed at normal rates.

June 12, 2019
Finance Bill 2019: turnover tax enhanced to 1.5 percent

ISLAMABAD: The rate of minimum turnover tax has been increased to 1.5 percent from 1.25 percent in the budget 2019/2020 presented a day earlier.

The Finance Bill, 2019 proposed to enhance the rate of minimum turnover tax

The Federal Board of Revenue (FBR) explained that presently minimum tax on turnover is charged at the rate of 1.25 percent of the turnover if taxable income is less than 1.25 percent of turnover.

Certain sectors have reduced rate of minimum tax at 0.2 percent, 0.25 percent and 0.5 percent of turnover.

The aforesaid rates of minimum tax are being enhanced from 1.25 percent to 1.5 percent, from 0.20 percent to 0.25 percent, from 0.25 percent to 0.3 percent and from 0.5 percent to 0.75 percent, respectively.

The following changes have been made in the minimum turnover tax for different sectors:

Minimum tax rate increased from 0.2 percent to 0.25 percent for:

(a) Distributors of pharmaceutical products, fast moving consumer goods and cigarettes;

(b) Petroleum agents and distributors who are registered under the Sales Tax Act, 1990;

(c) Rice mills and dealers; and

(d) Flour mills.

Minimum tax rate increased from 0.25 percent to 0.3 percent for motorcycle dealers registered under the Sales Tax Act, 1990.

Minimum tax rate increased from 0.5 percent to 0.75 percent for:

(a) Oil marketing companies, Oil refineries, Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited (for the cases where annual turnover exceeds rupees one billion.)

(b) Pakistani Airlines; and

(c) Poultry industry including poultry breeding, broiler production, egg production and poultry feed production.

(d) Dealers or distributors of fertilizer; and

(e) person running an online marketplace as defined in clause (38B) of section 2.

Minimum tax rate increased from 1.25 percent to 1.5 percent in all other cases.

June 12, 2019
Finance Bill 2019: late filer salary persons allowed ATL entry

ISLAMABAD: The government has allowed late filers to include Active Taxpayers List (ATL) after payment of penalty. Presently, as per law the late filers are not allowed to ATL entry till next tax year.

The government has proposed this relaxation through Finance Bill, 2019 as part of budget 2019/2020. The payment of penalty has been fixed Rs20,000 for companies, Rs10,000 for Association of Persons (AOPs), Rs3,000 for non-salaried persons and Rs1,000 for salaried persons.

The Federal Board of Revenue (FBR) while explaining the Finance Bill, 2019, said presently law prohibits placing a person’s name on the ATL for the year if the return is not filed within the due date.

Hence, a person who files a return of income after the due date would be subjected to higher tax rates meant for persons not appearing on ATL, for the ensuing year, creating a disincentive towards return filing.

“The condition of not placing name on ATL for the whole year is being abolished.”

Instead, such a person would be penalized by withholding any refund due to a late-filer in the tax year in which the return was filed late without incurring any liability of compensation for delayed refund.

Further, a nominal tax for placement on ATL after the due date of filing of return has been imposed as under:-

1. Company Rs. 20,000

2. Association of persons Rs. 10,000

3. Non-salaried individuals Rs. 3,000

4. Salaried individuals Rs. 1,000

June 12, 2019