Pkrevenue.com

Category: 2019-2020

You can go through stories related to budget 2019-2020. The stories are about changes in taxation, customs, sales tax and federal excise.

  • Massive cut in tax exemptions, concessions likely in budget 2019/2020

    Massive cut in tax exemptions, concessions likely in budget 2019/2020

    ISLAMABAD: The government has planned to a massive cut tax in exemptions and concessions in the budget 2019/2020, which is scheduled to be announced on June 11, 2019.

    Sources told PkRevenue.com that the government had committed with the World Bank and other international agencies to withdraw large size exemptions given to various sectors and individuals in order to boost revenue collection, especially in the wake of difficult economic situation.

    The sources said that the Federal Board of Revenue (FBR) had already initiated policy making and would introduce phases to withdraw available tax concessions and exemptions.

    According to Pakistan Revenue Mobilization Program funded by the World Bank, the FBR had already launched several initiatives including ongoing review of tax policy to formulate a medium-term tax policy framework and propose measures to reduce tax expenditure for the budget 2019/2020.

    The cost of tax exemptions and concessions in the fiscal year 2017/2018 was around Rs541 billion, which included: income tax Rs61.78 billion; sales tax Rs281 billion; and customs duty Rs198.15 billion.

    The sources said that in the first phase around 50 percent exemptions and concessions would be withdrawn in the budget 2019/2020.

    The World Bank on Pakistan report said multiple exemptions and discounted rates to select industries, economic actors, and economic activities (e.g. sugar, textiles, and fertilizer industries; ‘associations’ in the real estate sector; imports for infrastructure projects under the China-Pakistan Economic Corridor) are granted in each year’s budget law, which distort competition and economic actors’ incentives. In FY2017/18, Pakistan’s tax expenditure (i.e., tax revenue foregone due to exemptions and concessional rates) was estimated at 2 percent of GDP, primarily due to exemptions from General Sales Tax (GST) and customs duties.

    “Substantial exemptions also apply to property taxes, whereby properties below a certain size are exempted regardless of location, while revenue is also lost due to unrealistically low valuations used for taxation purposes.”

    The Capital Gains Tax (CGT) returns negligible receipts due to the zero rate applied to capital gains from the sale of immovable property after more than four years of ownership, and rates of 5-10 percent for properties sold after one to four years of ownership, the report said.

    The present PTI-led government has issued a roadmap for stability, growth and productive employment issued in April 2019 and stated that tax policy has to balance the revenue objective with equity and growth objectives.

    Presently tax policy has a predominant revenue focus and as such is likely to create distortions in the economy which can adversely affect the growth and equity objectives.

    In addition, even the revenue objective is compromised by large scale exemptions. To correct this shortcoming, the government intends the following:

    i) Enact a law to ensure that no tax exemption is allowed through law or notification without an estimate of its cost independently by the tax department as well as the concerned ministry. Such cost will be made public before notification of the exemption.

    ii) Review all existing exemptions, with the purpose of eliminating as many of those as possible. Even if an exemption is to be retained its cost will be determined and made public. Ministry of Finance to publish annually a statement of tax expenditures to show how much revenue is being foregone due to exemptions.

    iii) Ensure that all exemptions, existing or newly proposed, will have a sunset clause (ideally not more than 5 years).

    iv) Publish a list of all government owned, quasi-government and government-linked enterprises availing tax exemption/concession in any way along with quantification of the tax expenditure. In addition, a plan be prepared for phasing out of these concessions.

    v) Withdraw FBR powers to issue SROs to grant exemptions. This power will vest only with the Parliament.

    vi) Ensure that all non-procedural existing SROs will expire at the end of the fiscal year. Steps taken over the last two years to incorporate all exemptions granted through SROs to be made part of the body of law.

  • Protest on June 10 against plan to abolish zero-rate sales tax

    Protest on June 10 against plan to abolish zero-rate sales tax

    KARACHI: Textile value added sector has announced to stage protest on Monday June 10, 2019 against proposed plan to abolish sales tax zero-rating for export sector.

    Muhammad Jawed Bilwani, Chief Coordinator for Five Zero Rated Export Sectors in a statement on Saturday said that the exporters and manufacturers would stage peaceful protest outside the Karachi Press Club and would also hold a press conference to explain the negative impact of this proposed plan.

    The government reportedly decided in principle to abolish zero rating for five export oriented sectors especially for textile from the next budget 2019-2020.

    According to estimates prepared by the FBR, the total value of domestic and exports stood at Rs3 trillion out of which approximately Rs1.2 trillion was exported while remaining share of Rs1.8 trillion being consumed into the country.

    The rate of GST might be less than 17 percent as the FBR considers that the higher rate at initial stage would create more problems so the rate might be fixed lower than the standard rate.

    Earlier in a joint press conference on May 28, 2019 the Chairmen of Value Added Export Sector Associations stated that discontinuation of zero rated status will result in ruin and disaster of export oriented industries, flight of capital, mass unemployment and huge foreign exchange losses.

    It will also lead to corruption in connivance with dubious FBR officials under the mode of flying invoices, over invoicing, frauds in refunds etc.

    Further, due to significant volumes of liquidity being stuck in the form of sales tax refunds, export growth will be severely affected and we may even witness a decline in exports.

    More than 200 billion rupees of exporters in Refunds of Sales Tax, Customs Rebate, Withholding Tax, DLTL & DDT are already held up with Government.

    They also conveyed serious apprehension on proposed abolition of Final Tax Regime (FTR) for exporters.

    The Chairmen and Representatives of Council of All Pakistan Textile Mills Associations, Pakistan Apparel Forum, Pakistan Hosiery Manufacturers & Exporters Association, Pakistan Textile Exporters Association, Pakistan Bedwear Exporters Association, Towel Manufacturers Association of Pakistan, Pakistan Cloth Merchant Association, Pakistan Knitwear and Sweater Exporters Association, Pakistan Denim Manufacturers & Exporters Association, All Pakistan Textile Processing Mills Association, Pakistan Readymade Garment Manufacturers & Exporter Association, Pakistan Cotton Fashion Apparels Manufacturers & Exporters Association, The Surgical Instrument Manufacturers Association of Pakistan, Pakistan Leather Garments Manufacturers & Exporters Association, Pakistan Tanners Association, Pakistan Sports Goods Manufacturers & Exporters Association, Pakistan Carpet Manufacturers & Exporters Association, All Pakistan Bedsheets & Upholstery Manufacturers Association have fervently appealed to continue the Zero-Rating Scheme in the national interest to uplift exports. The five zero rated sectors are already documented and contribute 70% of total Nation’s exports and generate 50% of total Nation’s employment.

    They added that collecting sales tax and then refunding – is a futile exercise which creates hassles for exporters and also opens flood gates of corruption. No collection and no refund of sales tax from five zero rated export sectors is a tried and tested formula for increasing revenue and exports. We must not forget that during last two decades the Government had tried to undo zero rating twice but miserably failed, hence, zero rating was reintroduced. The zero rated scheme, in consultation with stakeholders, can further be improved for much better outcome.

    They added that the Government rather than involving in futile exercise of collecting sales tax and then refunding should focus its energy on increasing the number of taxpayers. According to FBR, in year 2017 number of active taxpayers was only 1.13 million only (0.51% of total population).

    They warned that Government’s attempt to collect interest free money in shape of sales tax will put the country’s export at stake. Today, in this period of worst economic crisis, can we afford to do away with zero rated status for the five export oriented industries? they questioned. They cautioned that if the Zero-Rating Scheme is discontinued, 30 percent of the export will decline in first year. They urged the Government to broaden the tax-base rather than burdening the existing tax-payers and documented sectors of the economy.

    Pakistan rupee has been devalued approx. 20.16 percent against dollar from 123.6 to 149.07 in just 9 months. Such state of affairs when the dollar is appreciating and banks are also reluctant to fix dollar rates, the Textile Exporters will be aggrieved in case of BMR because some machineries are delivered in 6 to 8 months and cost of machinery is increased to 20% during the period. Previously, on assurances of the Government to continue zero rating, exporters made huge investment in shape of BMR.

    They articulated that the Government focused on enhancing exports and identified the Five Zero-Rated Export Sectors as the main engines of growth for this purpose whereby Power Division vide Notification SRO12(I)/2019 dated 1st January, 2019 has revised the power tariff for zero rated industrial consumers to net 7.5 cents / kwh and OGRA vide Notification dated 18th October 2018 has been fixed Gas tariff for Registered Manufacturers or Exporters of five Zero-Rated sectors and their Captive Power to Rs600/- per MMBTU but discontinuation of zero rating status from the five export sector will put all the hard efforts of the government in vain.

    The Federation of Pakistan Chambers of Commerce & Industry, Karachi Chamber of Commerce & Industry, Lahore Chamber of Commerce & Industry, Faisalabad Chamber of Commerce & Industry & Sialkot Chamber of Commerce & Industry have also supported the stance and demand of Value Added Export Sector Associations to continue zero-rating scheme for the betterment of economy and export enhancement.

  • Salary income threshold may be revisited after huge tax loss

    Salary income threshold may be revisited after huge tax loss

    ISLAMABAD: The government may restore threshold of taxable salary income to June 30, 2018 level in the budget 2019/2020 after facing Rs50 billion revenue loss in the current fiscal year and considering difficult economic situation in the year ahead.

    Sources said reverting tax rates for salary persons to the June 30, 2018 position was under consideration for budget 2019/2020. However, no decision in this regard has been taken so far, the sources said.

    The new threshold may be between Rs600,000 and Rs800,000 for tax exempt income and further tax slabs may be notified accordingly, the sources said.

    In Finance Act, 2018 the rates of taxes upon salary income were considerably reduced and the threshold was increased from Rs.400,000 to Rs.1,200,000.

    However, in order to ensure income tax return filing a token tax of Rs1,000/year was imposed on salary persons deriving income between Rs400,000 and Rs800,000 and tax of Rs2,000/year was imposed on persons deriving salary between Rs800,000 to Rs1,200,000.

    These changes brought about a substantial decrease in the withholding taxes collected through various government and private withholding agents.

    Revenue impact of this change remained Rs.32.4 billion during the period from July 2018 to February 2019, according to a report of FBR sent to ministry of finance.

    It is estimated that total revenue loss on this account would be around Rs.50 billion in the current Financial Year, it added.

  • President summons NA budget session on June 10

    President summons NA budget session on June 10

    ISLAMABAD: President of Pakistan has summoned the budget session of the National Assembly (NA) on June 10, 2019.

    A letter of the national assembly secretariat on Friday said that the President has been pleased to summon the 11th session (Budget 2019/2020) of the National Assembly to meet in the Parliament House, Islamabad on Monday, June 10, 2019 at 4:00 p.m.

  • Any duty increase on beverages to result in industry closure: Siraj Teli

    Any duty increase on beverages to result in industry closure: Siraj Teli

    KARACHI: Siraj Kassem Teli, director of Pakistan Beverage Limited (Pepso Co. franchisee), while using platform of Karachi Chamber of Commerce and Industry (KCCI) raised voice against government’s proposed plan for implementing excise duty on beverage industry.

    Teli, who is also chairman of Businessmen Group (BMG) and former President of KCCI, warned the government against hike in duty on beverage industry and said that any such action would lead not only to closure of the industry but also resulted in mass unemployment.

    In a letter sent to Prime Minister Imran Khan, while referring to the ongoing buzz in the media and government circles about additional and new taxes including health tax and water surcharge being imposed in the next budget on beverage industry, he stated that this industry is already paying Rs100 billion to the national exchequer by way of output tax through FED and Sales Tax while the net revenue collection by the government comes to around Rs60 billion per annum which is apart from income tax, with-holding taxes, super tax and other provincial taxes.

    He pointed out that over the years, beverage industry and its products have become a necessity of life as many Pakistanis do not have access to pure drinking water and this industry is providing them safe water and other beverages produced with state of the art machinery by strictly following global hygienic standards.

    “We understand that the country is in dire need of additional revenue but one should realize that this new revenue must come from new sources and even if it is taken from old sources then it needs to be justified according to their capacity to pay otherwise it may jeopardize the existing revenue”, Siraj Teli stressed, adding that the Beverage Industry is already heavily taxed and if more burden is put on the industry, its growth, which is already in a declining mode in the first quarter, may suffer more.

    He said that the cost of doing business has already gone up due to other import/ regulatory duties and upsurge in dollar rate etc. while as this industry produces consumer products, more burden will be passed on to the consumers.

    Chairman BMG cautioned that there is a high chance that the imposition of new taxes may lead to closure of the industry resulting in jobs losses of hundreds of thousands of people across Pakistan, besides hampering Prime Minister’s efforts to bring more foreign investment to Pakistan because of such anti-business measures.

    He elaborated that this is an industry where supply side of economics should follow where more revenue is generated with growth, wherein taxes are reduced along with consumer prices that would lead to quantum growth and appreciation in net revenue as well. Any proposal to increase taxes will reverse the growth and it would start declining, ultimately reducing the revenue already being achieved from the Beverage Industry and above all high taxes are incentive for evasion, he added.

    Siraj Teli was of the opinion that today’s policy is actually shrinking the economy whereas the Government should have imposed a complete ban for one or two years on luxury items such as cars etc. and on those items which are being manufactured in Pakistan along with such food items without which we can survive.

    “Also controlling inflation by increasing interest rates has a negative impact on new investment and industry. The solution lies in more industrialization only”, he added.

    He said, “We at Pakistan Beverage Ltd. are in this business since the inception of Pakistan and are the highest tax payer in the Beverage and Food Industry for the last 40 years.

    “We believe in a prosperous Pakistan, we believe in paying due taxes and we are there to help and support your initiatives.

    “However, unjustified and excessive taxation will result in closure of the industry and put a significant dent in the existing revenue that is being collected by the government.

    “This will also result in reduction of employment of hundreds of thousands of job across Pakistan in the industry along with the allied retail businesses.”

  • PTBA advises revisiting arrest, prosecution law under sales tax

    PTBA advises revisiting arrest, prosecution law under sales tax

    KARACHI: Pakistan Tax Bar Association (PTBA) has advised the Federal Board of Revenue (FBR) to revisit law related to arrest and prosecution under Sales Tax Act, 1990.

    In its tax proposals for budget 2019/2020, the apex tax bar said that under the existing law, every director and officer of the Company is liable to be arrested if the officer has reasons to believe that such director or officer is personally responsible for actions of the Company contributing tax fraud.

    Accordingly, a person who is a nominee director or employee director can be held responsible for the liability of the company.

    The PTBA said that as per interpretation of the law nominee or employee directors be who are not involved in the administrative matters of a taxpayer are being held responsible for the liability of the taxpayer.

    “It is a trite law that before any coercive action is taken against any person; it is the duty of the Revenue Officer to provide proper opportunity of being heard and pass a judicious order to establish that the act of the registered person is willful and there was an element of mens rea.”

    In the Income Tax Ordinance, 2001 such matters are covered under Section 139 thereof which comprehensively deals with the liability both in case of company and association of Persons. “Section 139 needs to be replicated in the Sales Tax Act, 1990 on the similar lines.”

    The PTBA said that the proposed amendment would protect interest of the nominee/employee directors.

    Pointing out the issue of recovery of arrears under sales tax law, the PTBA said under Section 48 which deals with recovery of arrears does not provide any time limit to initiate the recovery proceedings.

    “By virtue of section 45B of the Act, a registered person aggrieved by any decision, may file an appeal within thirty days of the date of receipt of the order. On the contrary, under Rule 71 of the Sales Tax Rules, proceeding of recovery of impugned tax may be initiated after thirty days from the date of order.”

    In addition, recovery proceedings may be initiated as soon as Commissioner Inland Revenue (Appeals) confirmed the Order under Section 45B of the Sales Tax Act or Section 33 of the Federal Excise Act.

    The PTBA said that the section 45B, 48 and the rule are not harmonized. Sometimes order is served to the registered person after many days of the date of order and the recovery proceedings may be initiated under the Rule even if the time limit provided for filing of the appeal has not lapsed.

    Therefore, it is recommended that Rule 71 should be amended to provide commencement of recovery proceedings after thirty days from the date of receipt of the order.

    Similarly, time limit of 30 days from the date of receipt of the order should be provided in section 48 to bring harmony between the Act and Rules.

    The PTBA suggested that thirty days shall also be allowed for initiation of recovery proceedings in case demand is confirmed by the Commissioner Inland Revenue (Appeals) while disposing appeals filed under section 45B of STA and 33 of FEA.

    Giving rationale to the proposal, the PTBA said that it would keep harmony between the Act and the Rules in the spirit of natural justice.

  • FBR urged to reduce withholding tax for FMCG distributors

    FBR urged to reduce withholding tax for FMCG distributors

    KARACHI: Federal Board of Revenue (FBR) has been urged to reduce withholding tax rate to 0.2 percent for distributors of Fast Moving Consumer Goods (FMCG) companies as higher rate is increasing the cost of doing business.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020, said that the distribution of FMCG is a high turnover and low margin business.

    This fact has also been acknowledged to some extent by the FBR by prescribing minimum taxation rate for the distributors of FMCG Companies at 0.2 percent of their turnover i.e. reducing the basic rate of minimum tax by 80 percent.

    The OICCI suggested that the basic rate of withholding tax under section 153 for distributors of FMCG sector should be reduced to 0.2 percent in line with section 113 of income tax ordinance, 2001.

    Giving rationale, it said that the high rate of withholding tax is increasing the cost of doing business as the existing withholding tax rate is higher than the net margin of distributors.

    Another proposal, the OICCI said that ‘Aerated waters’ is the only item within food and beverage industry that is subject to both sales tax (third schedule of the Sales Tax Act, 1990) and FED (First Schedule of Federal Excise Act, 2005), while all other beverages (like: Juices, Tea & Milk based drinks) are only subject to sales tax at 17 percent.

    Earlier in 2011-2012, FED rate was reduced from 12 percent to 6 percent with commitment that it shall be eliminated in 2 to 3 years but this was not implemented.

    The OICCI recommended that the Federal Excise Duty (FED) should be decreased from 11.5 percent to 8.5 percent, and eliminated gradually.

    The chamber pointed out that after the withdrawal of 58R of Special Procedure Rules, 2007, relating to the payment of Extra Tax on Specified Goods vide SRO 608(I) 2014 dated 02/07/2014, Large Trading Houses are now unable to issue sales Tax Invoice to Customers.

    Resultantly, all Professional Customers are inclined to directly purchase from Manufacturers as they are issuing Sales Tax Invoice to their Customers.

    Therefore, it recommended that Rule 58R which was withdrawn vide SRO 608(I) 2014 be restored only for Large Trading Houses operating as Wholesale-cum-retail under Chapter-XII.

    Giving rationale, it said that it would create level playing field for Large Trading Houses.

    The OICCI also submitted proposal for input Sales Tax on purchase of electrical and gas appliances.

    The Sales Tax Act, 1990 does not permit adjustment of Input Sales Tax on purchase of electrical and gas appliances (including visi-coolers & industrial gas appliances etc.) under section 8(1)(h) of the Act.

    The Act should be amended to allow for adjustment of such input sales tax.
    Visi-Coolers are an integral part of beverage business and inadmissibility of input tax places beverage business at a disadvantage vis-à-vis other businesses, besides such inadmissibility escalates the cost of doing business.

    In other industries, it is reiterated, that all input tax relatable to ‘taxable supplies made or to be made’ is admissible. Removal of restriction shall provide level playing field.

    The OICCI on the issue of further tax on sales to retailers, said with reference to section 14 of the Act, retailers are required to obtain sales tax registration excluding those retailers who are required to pay sales tax through their electricity bill.

    Moreover, as per section 3(1A) further tax at the rate of 3 percent is to be charged where supplies are made to unregistered person other than those mentioned in SRO 648 dated July 9, 2013.

    Therefore it is recommended that retailers who pay their sales tax through electricity bill to be excluded from further tax through inclusion in SRO 648 dated July 9, 2013.

    It will clear the ambiguity regarding applicability of further tax on these retailers.

  • Super tax application may be amended to generate around Rs2 billion

    Super tax application may be amended to generate around Rs2 billion

    KARACHI: Federal Board of Revenue (FBR) may recommend amending application of super tax in the forthcoming budget 2019/2020 to generate around Rs2 billion.

    FBR sources said that the tax authorities had recommended amendments to Section 4B of Income Tax Ordinance, 2001 through Finance Bill, 2019.

    The sources said that it had been recommended to apply super tax on the income computed under Fourth, Fifth, Seventh and Eighth Schedules ‘other than brought forward depreciation and brought forward business losses.

    According to the recommendation, the proposed amendment would bring uniform chargeability of super tax to all taxpayers including taxpayers falling within the purview of Fourth, Fifth, Seventh and Eighth Schedules of Income Tax Ordinance, 2001.

    As per the ordinance the fourth schedule covers insurance companies, fifth schedule covers exploration and production companies, seventh schedule for banking companies and eighth schedule covers capital gains and National Clearing Company Pakistan Limited.

    The sources said that the proposed amendment will help the FBR to generate around Rs2 billion as revenue.

  • FBR urged to allow one sales tax registration for multiple businesses

    FBR urged to allow one sales tax registration for multiple businesses

    KARACHI: Federal Board of Revenue (FBR) has been urged to allow multiple businesses on one sales tax registration for better documentation of the economy.

    In its tax proposals for budget 2019/2020, the Pakistan Tax Bar Association (PTBA) said that after amendment in Sales Tax Act, 1990, through Finance Act, 2008, FBR has directed to cancel multiple registrations under single proprietorship.

    It said that proprietor having two businesses faces with the dilemma to show his entire sales under one business, which is creating hardship for his customers in their respective returns.

    Moreover, tax department often raise queries as to how a registered person can raise a invoice relating one business if he is registered with the department under another ‘business category’.

    “FBR should issue necessary instructions to incorporate multiple business features in its web-portal to facilitate taxpayers,” the PTBA suggested.

    The PTBA said that by implementing this suggestion it would result in better documentation of economy and proper maintenance of records of taxpayer.

    Highlighting another issue, the PTBA said that the definition of time of supply as amended through the Finance Act, 2013 stating receipt of advance as subject to sales tax, has created number of practical problems because of which sales tax on advance was earlier withdrawn by Finance Act 2007.

    The registered persons besides other practical issues has to undertake a tremendous exercise of reconciliation between the books of account where sales is recorded on the basis of delivery of goods with the sales tax returns where sales tax is paid on advance receipts.

    Furthermore, this also leads to discrepancies in CREST resulting in hardships to taxpayers as well as to the department.

    Therefore, the tax bar proposed withdrawal of the amendment made through the Finance Act, 2013.

    It said that it will help taxpayers to avoid unnecessary hassle as well as for the department; as charging of sales tax on advance receipts will not create any additional revenue for the Government.

    The PTBA also pointed out ‘hire purchase’ transaction involves periodical installments received/earned over a period of time.

    Currently, Sales Tax is being charged on full amount at the time of signing (entered into) of hire purchase agreement.

    The registered is burdened with increased amount of output tax on hire purchase sale at the time of sale although the amount is received from the customers in installments.

    Definition of time of supply’ may be amended and tax should not be levied at the time of signing of HP arrangement.

    Instead, tax should be levied at the time when installment is effected / paid.

    Further, the element of interest embedded in such installment should also be excluded for assessment of sales tax.

    Charging sales tax on full amount at the signing of hire purchase agreement is not justified and is in conflict with the definition of value of supply which states that it is the consideration which the supplier receives from the recipient for the supply.

  • PM reviews preparations for budget 2019/2020

    PM reviews preparations for budget 2019/2020

    ISLAMABAD: Prime Minister Imran Khan on Tuesday reviews preparations for budget 2019/2020.

    The prime minister chaired the preparatory meeting for budget 2019-20 wherein he was briefed in detail about the revenue and spendings.

    The federal budget scheduled to be announced on June 11, 2019 for fiscal year 2019/2020.

    The meeting was attended by Finance Advisor Abdul Hafeez Sheikh, Commerce Advisor Abdul Razak Dawood, Planning Minister Khusro Bakhtiar, State Minister for Revenue Hammad Azhar, Special Assistant to Prime Minister Dr Sania Nishtar, Chairman of Federal Board of Revenue Shabbar Zaidi and senior government officers, a Prime Minister Office statement said.