Author: Faisal Shahnawaz

FBR suggested abolishing regulatory duty on import of phrma raw materials

KARACHI: Federal Board of Revenue (FBR) has been suggested to abolish regulatory duty and reduce customs duty on import of raw materials by pharmaceutical industry.

Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020 said that through the Finance Act 2008, custom duty on pharmaceutical raw materials was reduced to five percent.

However, there are still many items that are not included in the list of duty reduction.

The OICCI recommended reduction in custom duty and abolishment of regulatory duty on pharma raw materials and packing materials.

All pharmaceutical raw materials should be added to Table A of Part-II of Fifth Schedule to the Pakistan Customs Tariff, it further recommended.

The OICCI pointed out another issued saying that as already highlighted in the Supreme Court Human Right Case No. 93336 of 2018, FBR to allow Sales Tax exemption for Goods defined in Medical Devices Rules – 2017 under DRAP Act, 2012 with their respective headings of Customs Act 1969 imported and locally manufactured.

The OICCI recommended that a new Serial No.4A to be inserted in Part II of the First Schedule to reduce the rate of tax from 5.5 percent to 1 percent on import of pharmaceutical raw materials and finished goods for filers.

It said that presently the rate of tax at import of pharma raw materials and finished goods is very high considering the price constraints on pharmaceutical products and significant devaluation of currency over past months.

The pharma sector is highly dependent on import due to non-availability of raw materials and medicine in finished form in as local substitutes.

The OICCI also suggested sales tax zero rating on pharmaceutical inputs. It said that sales tax being paid on packaging material utilities and other supplies used in manufacturing pharmaceutical products is adding to the product cost.

Since the final product is exempt from Sales Tax, the tax paid can neither be passed on to the consumer nor can be claimed as input tax. This is also against the philosophy of sales tax which is supposed to be borne by the consumer.

It recommended that local supply of medicines/drugs should be classified under Zero-rating, instead of the current “exempt” status from levy of sales tax, so that the pharma industry, whose selling prices are regulated by the government, may claim input tax credits on taxable inputs.

“Alternatively, the taxable raw materials and packing materials, whether imported or locally procured may be notified as exempt from sales tax, if purchased by a pharma manufacturer.”

June 2, 2019
FBR advised to allow tax adjustment on telecom services

KARACHI: Federal Board of Revenue (FBR) has been urged to allow adjustment of withholding tax on services provided telecom sector.

The Overseas Investors Chamber of Commerce and Industry (OICCI) in tax proposals for budget 2019/2020 recommended that the eight percent minimum tax regime should be withdrawn and should be made adjustable.

The OICCI said that through Finance Act, 2016, an amendment was made in Section 153(1)(b) of the Income Tax Ordinance, 2001 whereby the 8 percent withholding tax deducted against the services provided by telecom companies, along with other service providers, have been subjected to a charge of minimum tax instead of adjustable regardless their actual income or loss.

This tax has thus changed the character of income tax from a direct tax to an indirect tax as the amount of charge would no longer be applicable on the quantum of income actually earned even under the standard income tax rules.

Furthermore, the exorbitant rate of 8 percent will seriously erode the profitability, or further increase the losses, of the telecommunication industry which according to independent reports is in shackles and is already the victim of discriminatory taxation.

Consequent to the above amendment in the law, non-issuance of exemption certificates under Section 153(1)(b) on Income Tax Ordinance, 2001 of the Income Tax Ordinance, 2001 in view of the imposition of the minimum tax has also increased the administrative burden of both the telecommunication companies and the withholding tax monitoring units of FBR as the tax that was previously deposited lump-sum as advance tax is now being collected by thousands of corporate customers across Pakistan.

June 2, 2019
AFU Islamabad announces auction of confiscated goods on June 03

The Model Customs Collectorate (MCC) Air Freight Unit (AFU) in Islamabad has declared a public auction of confiscated goods, including a substantial quantity of LCD/LED Televisions.
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June 2, 2019
FBR increases sales tax on petrol

ISLAMABAD: Federal Board of Revenue (FBR) has increased sales tax rate on petrol to 13 percent for the month of June 2019 from 12 percent, which was applicable in May 2019.

The FBR issued SRO 603(I)/2019 dated May 31, 2019 and revised the sales tax rates on petroleum products effective from June 01, 2019.

The sales tax on petrol has been increased to 13 percent from 12 percent.

The sales tax rate on high speed diesel has been reduced to 13 percent from 17 percent.

However, sales tax rates on kerosene oil and light diesel oil were kept unchanged at 17 percent.

The government increased the prices of POL products for the month of June 2019, which are as follow: Petrol 108.42 increased to Rs112.68; High Speed Diesel 122.32 increased to Rs126.82; Kerosene (SKO) Rs96.77 to Rs98.46; and Light Diesel Oil (LDO) Rs86.94 to Rs88.62.

June 2, 2019
Customs unfolds bid to clear mobile phones on passengers’ stolen information

KARACHI: Pakistan Customs has unfolded a bid to steal the data of air travelers for the purpose of mobile phone registration with the Pakistan Telecommunication Authority (PTA).

According to the details the customs staff posted Jinnah International Airport (JIAP), Karachi detained a person, who was fraudulently obtained data of air travelers including passport numbers for clearing mobile phones at customs stage and for clearing PTA restriction.

As per regulations only PTA certified mobile phones are allowed to have active connection in Pakistan. In this regard passengers arriving from abroad are allowed to clear one mobile phone without payment of duty and taxes. However, more than one phone will attract levy.

Details revealed that customs authorities recovered around 63 mobile phones from a passenger namely Muhammad Umar arriving from an international flight.

The accused passenger entered details of passengers into the PTA system to get cleared the mobile phones without duty and taxes. The accused passenger managed to get clearance from the PTA for those 63 mobile phones.

This was confirmed by Muhammad Faisal, Deputy Collector of Pakistan Custom.

The customs official said that the authorities had lodged an FIR against the accused for smuggling cell phones and stealing information of passengers.

Faisal said that the accused had indulged in clearing mobile phones by entering details of passengers including CNICs, flight number and passport numbers etc.

The accused in his statement said that many travel agencies were involved in this scam.

The customs official said that PTA had been requested to introduce bio-metric system for the clearance of mobile phones.

June 2, 2019
PTBA urges FBR to extend date for filing income tax returns

KARACHI: Pakistan Tax Bar Association (PTBA) on Saturday urged Federal Board of Revenue (FBR) to extend the last date for filing income tax returns for Tax Year 2018 up to June 30, 2019 considering the recently launched tax amnesty scheme.

In a letter to FBR Chairman Syed Muhammad Shabbar Zaidi, the PTBA informed that the Asset Declaration Ordinance, 2019 was announced on May 16, 2019 and the last date for filing declaration is June 30, 2019.

The PTBA urged the FBR chairman to extend the last date for filing of return of income and statement of final taxation for individuals, Association of Persons (AOPs) and companies (other than public limited companies quoted on stock exchange) to June 30, 2019.

The last date was already extended by the FBR till April 30, 2019 through Circular No. 03/2019 dated March 31, 2019.

The apex tax bar said that the extension would encourage the new taxpayers to bring their house in order and come into the mainstream of economic activities by availing the benefit to become active taxpayers.

June 2, 2019
Chemical merchants advocate FTR continuation for commercial importers

KARACHI: Chemical merchants have strongly advocated continuation of Final Tax Regime (FTR) for commercial importers in the upcoming budget.

In a statement issued on Saturday Shahid Vaseem, Chairman, Pakistan Chemicals & Dyes Merchants’ Association (PCDMA), said that because commercial importers pay 6 percent advance non-adjustable tax at import stage, whereas industrial importers of same raw material pay only 5.5 percent adjustable/refundable advance tax or avail tax exemption certificate facility, therefore it was not justified to withdraw Final Tax Regime (FTR) from Commercial importers without giving them options of claiming tax refund and facility for issuance of Tax exemption certificate if excess tax is already paid at import stage.

In meeting with PCDMA memebers and leading importers of industrial Raw Materials, Chairman PCDMA, said that assessed value for calculation of customs levies of an industrial raw material whether it is imported by industrial importer or commercial importer; remains same either on the basis of valuation ruling (if available), international scan (if available) or custom data; therefore, chances of under-invoicing eliminated on import of industrial raw materials.

Shahid Vaseem said in his opinion by imposing similar rate of sales tax on industrial raw materials will also eliminate the issue of imports by non-genuine industrial importers and excess imports by the genuine industrial importers, who just import big volumes of industrial raw materials to sale in market at huge profit due to less rate of tax and in some cases got extra ordinary benefits of various SROs. Which resulted in loss of billions of rupees to government revenue.

Shahid Vaseem demanded the Government to provide a level-playing field for commercial importers who are importing industrial raw material and supply these essential raw materials to industries in SME segment. At import stage commercial importers are paying 17+3= 20 percent sales Tax as compared to 17 percent only, if same items are imported directly by industrial importers, this renders our customer industries in SME segment un-competitive in local as well as export markets, thereby eliminating job opportunities and hurting exports of value-added goods.

He explained that 3 percent Additional Sales Tax on import of Industrial Raw Materials if imported by Commercial Importers is irrational and unjustified, because 3 percent ADDITIONAL Sales Tax can only be applied if the Value Addition on raw material is assumed 17.65 percent, which is not possible because there is no process of value addition involved and no inputs such as Land, Buildings, Machinery, Labor, Electricity and Gas etc. are used by commercial importers of same industrial raw materials.

On the contrary the value addition by manufacturers is assumed as 10 percent only and the GST is charged at the rate of 1.7 percent despite all the above inputs.

He claimed that by implementing same rate of taxes and extending benefits of various SROs to commercial importers, similar to the industrial importers of Raw materials for one year will result in significant drop in import volume by the industrial importers, which will prove the misuse of reduce tax facility by the industrial importers and will provide opportunity to the government to identify non-genuine industrial importers who are only existing for importing raw materials for commercial sales.

June 1, 2019
Weekly Review: Investors likely cautious ahead of budget

KARACHI: The present government is presenting its first budget just after the Eid holidays and investors likely to take a cautious stance, analysts said.

Analysts at Arif Habib Limited said that anticipation of Market Support Funds attracted positive sentiments alongside high volumes.

The four day week commenced on a negative note amid lack of clarity over the funds, but, later during the week bulls took over after two support funds were approved by ECC worth Rs20 billion. Moreover, Pak Rupee gained some strength against the greenback, which further kept the sentiment positive. The market closed at 35,974 points, gaining 270 points.

Positive sector-wise contributions came from i) Commercial Banks (174 pts), ii) Oil & Gas Marketing Companies (120 pts), iii) Automobile Assembler (53 pts), iv) Oil & Gas Exploration Companies (41 pts) and v) Tobacco (34 pts). Whereas, sectors that contributed negatively include i) Fertilizers (93 pts) and ii) Textile Composite (61 pts). Scrip-wise positive contributions came from UBL (67 pts), BAHL (60 pts), LUCK (58 pts) and PSO (44 pts). Whereas, negative scrip-wise contributions came from FFC (66 pts), HBL (65 pts), and NML (44 pts).

Foreign selling was witnessed this week clocking-in at USD 2.95mn compared to a net buy of USD 0.02mn last week. Selling was witnessed in Exploration & Production (USD 5.9mn) and Fertilizer (USD 0.7mn). On the domestic front, major buying was reported by Banks / DFIs (USD 5.2mn) and Broker Proprietary Trading (USD 3.4mn). Average Volumes settled at 165mn shares (down by 8% WoW) while value traded clocked in at USD 48mn (up by 22% WoW).

June 1, 2019
Rupee gains another 50 paisas in interbank

KARACHI: The Pak Rupee gained another 50 paisas against US dollar on Friday owing to inflows related to Eid improved the supply.

The rupee ended 147.90 to the dollar from previous day’s closing of Rs148.40 in interbank foreign exchange market.

The interbank foreign exchange market was initiated in the range of Rs147.50 and Rs147.75.

The market recorded day high of Rs148.25 and low of Rs147.25 and closed at Rs147.90.

The exchange rate in open market also witnessed 50 paisas increase in rupee value.

The buying and selling of dollar was recorded at Rs147.50/Rs148.50 from the previous day’s closing of Rs148.00/149.00 in the cash ready market.

May 31, 2019
Ministry opposes suggestions to allow commercial import of used cars

ISLAMABAD: The ministry of industries and production has opposed the suggestions to allow commercial import of used and old motor cars into Pakistan.

In an office memorandum, the ministry said that a meeting was held earlier this month with the car dealers federation to analyse suggestions to devise import and re-export of used vehicles policy 2019/2029 wherein it was unanimously observed that the dealers were interested in commercial import of used/old cars.

The ministry said that as for the investment plan of $3.2 billion, the same seems irrational as importers do not plan to build any manufacturing facilities in near future. The Engineering Development Board (EDB) has therefore opined that proposed plan will negatively affect existing OEMs, new entrants and auto part manufacturers.

The ministry further said that it is important to consider that Auto Development Policy (ADP) 2016-2021 has attracted investment of more than $1.3 billion so far from foreign investors who are at various stages of setting up their projects.

Under ADP 2016/2021, fifteen new investors have been granted Greenfield status and under Brownfield category two closed down units have been revived, the existing OEMs are enhancing their capacities, their production and other new entrants are expected to start their production/complete their manufacturing facilities shortly. As per business plans, few new entrants have planned to export as well.

“In view of above, allowing commercial import for domestic market would be against the spirit of Automotive Development Policy 2016/2021, which was prepared in consultation with Board of Investment, FBR and Ministry of Commerce etc.”

It is also pertinent to point out that import of used cars would be at odds with the relevent import policy provision, hence it is requested to reject the proposal.

May 31, 2019