Category: Budget 2020-2021

Concealment of currency, gold in baggage to be treated as smuggling

ISLAMABAD: The Finance Bill 2020 has made amendments to Customs Act, 1969 and defined any concealment of currency or gold in passengers’ baggage shall be treated as smuggling.

In this regard amendment made to Section 139 of Customs Act, 1969 through Finance Bill, 2020 issued on Friday.

(Note: Amendments in red)

139. Declaration by passenger or crew of baggage.- (1) The owner of any baggage whether a passenger or a member of the crew shall, for the purposes of clearing it, make a verbal or written declaration of its contents in such manner as may be prescribed by rules to the appropriate officer and shall answer such questions as the said officer may put to him with respect to his baggage and any article contained therein or carried with him and shall produce such baggage and any such articles for examination:

Provided that where the Customs Computerized System is operational, all declarations and communications shall be electronic.

“(2) Where any passenger or a member of the crew makes a false declaration or fails to make such declaration as required under sub-section (1), he shall be guilty of an offence under this Act.”; and

“(3) Notwithstanding the provisions of sub-section (2), where any person attempts to bring into or takes out of Pakistan, currency, gold, precious metals or stones, in any form, through concealment in baggage or circumventing customs controls at airports, sea-ports and land border custom-stations, he shall be guilty of an offence of smuggling within the meaning of clause (s) of section 2.”

June 13, 2020
Law tightened to prevent fiscal fraud on imported goods

ISLAMABAD: The Finance Bill, 2020 issued on Friday has proposed tightening customs law to prevent fiscal fraud on imported goods.

The bill proposed amendment to Section 32A of Customs Act, 1969 which is related to fiscal fraud.

A new clause (ca) has been proposed to insert to the section, which is:

“(ca) declares value which is significantly higher or lower than the actual value, that is, the price actually paid or payable for the goods when sold for export to Pakistan, proceedings may be initiated under this section subject to conditions or limitations as may be prescribed by the Board under the rules;”; and

in clause (e), for the expression “(c)” the expression “(c), (ca)” shall be shall be substituted; and

In sub-section (2), for the full stop at the end, a colon shall be substituted and thereafter the following proviso shall be added, namely:-

“Provided that an offence, having no revenue implication but covered under sub-section (1), shall also be served with show cause notice within a period of one hundred and eighty days of detection of such fraud for penal action under the relevant provisions of law.”;

The existing text of the Section is read as:

32A. Fiscal fraud.- (1) If any person, in connection with any matter related to customs-

(a) causes to submit documents including those filed electronically, which are concocted, altered, mutilated, false, forged, tempered or counterfeit to a functionary of customs;

(b) declares in the goods declaration electronically filed customs declaration, the name and address of any exporter or importer which is physically non-existent at the given address;

(c) declares in the goods declaration electronically filed customs declaration, an untrue information regarding payment of duties and taxes through self-assessment, description, quantity, quality, origin and value of goods;

(d) alters, mutilates or suppresses any finding of the customs functionary on any document or in the computerized record; or

(e) attempts, abets or connives in any action mentioned in clauses (a), (b), (c) and (d) above, he shall be guilty of an offence under this section.

(2) Where, by any reason as referred to in sub-section (1) as aforesaid, any duty or tax charged or fee or fine and penalty levied under any provision of law has not been levied or has been short levied or has been refunded, the person liable to pay any amount on that account shall be served with a notice within a period of 180 days of the date of detection of such custom duty and tax fraud, requiring him to show cause as to why he should not pay the amount specified in the notice along with any other amount imposed as fine or penalty under the provisions of this Act.

(3) The appropriate Adjudicating Officer, after considering the written or verbal representation of such person, may determine the amount of duty or tax chargeable or fee payable by such person which shall in no case exceed the amount specified in the notice and such person shall pay the amount so determined besides the fine or penalty or both.

June 13, 2020
Duty, taxes up to Rs5,000 exempted on imported goods

ISLAMABAD: An amount up to Rs5,000 has been exempted in case minimum total duty and taxes on imported goods.

An amendment to Customs Act, 1969 has been introduced through Finance Bill, 2020 issued on Thursday.

Through the amendment the minimum duty and taxes that is not demanded by the customs authorities have been increased to Rs5,000 from existing Rs1,000.

Through the bill Section 19C of the Customs Act, 1969 has been substituted.

Finance Bill proposed following amendment to the Customs Act:

“19C. Minimal duties not to be demanded.- Where the value of imported goods does not exceed five thousand rupees, no duties and taxes shall be demanded, subject to conditions and restrictions as may be prescribed by the Board under the rules.”

June 13, 2020
Development expenditures slashed by 18pc; federal PSDP pitched at Rs650bn

The total allocation for Pakistan’s national Public Sector Development Program (PSDP) has been set at Rs1,324 billion for the fiscal year 2020/2021, according to budget documents released on Friday. This allocation represents an 18 percent decrease compared to the Rs1,613 billion allocated in the outgoing fiscal year.
(more…)

June 13, 2020
Subsidies sharply cut by 40pc for next fiscal year

ISLAMABAD: The federal government has decided sharp cut in subsidies during fiscal year 2020/2021. An amount of Rs209 billion has been allocated as subsidies for next fiscal year as compared with Rs349.5 billion of current fiscal year, showing reduction of 40 percent.

According to budget documents for fiscal year 2020/2021 released on Thursday, a subsidy of Rs124 billion has been allocated to WAPDA/PEPCO during the next fiscal year as compared with Rs201 billion of current fiscal year.

The government allocated subsidy of Rs30 billion to Naya Pakistan Housing Authority. Further an amount of Rs6 billion allocated for fertilizer plant subsidy (Engro, Fatima) during current fiscal year. The government already disbursed subsidy amount of Rs7 billion under this head.

The subsidy to KESC has been reduced to Rs25.5 billion during next fiscal year from Rs59.5 billion of current fiscal year.

The government has granted subsidy amount of Rs43.5 billion through Utility Stores Corporation (USC) during current fiscal year. However, during next fiscal year the government allocated subsidy of Rs3 billion for Ramazan Package through USC.

An amount of Rs7 billion has been allocated as subsidy to PASSCO for wheat operation and wheat stock during next fiscal year. The government granted Rs15.5 billion subsidy under this head during current fiscal year.

The government has allocated no subsidy to National Food Security and Research Division during the next fiscal year.

June 13, 2020
FBR assigned 27 percent higher revenue collection target in 2020/2021

ISLAMABAD: Federal Board of Revenue (FBR) has been assigned 27 percent higher revenue collection target for fiscal year 2020 despite challenging economic conditions due to COVID-19.

According to official documents of Budget 2020/2020, the FBR has been assigned revenue collection target of Rs4,963 billion during upcoming fiscal year as compared with expected current revenue collection of Rs3,908 billion during the outgoing fiscal year, which is Rs1,055 billion higher.

The collection target under direct tax has been estimated at Rs2,043 billion during fiscal year 2020/2021 as compared with expected collection of Rs1,623 billion in the current fiscal year, which is Rs420 billion higher.

Under direct tax collection, target for income tax has been estimated at Rs2,037 billion, workers welfare fund at Rs3.2 billion and capital value tax at Rs3 billion.

The collection of indirect taxes has been estimated at Rs2,920 billion during next fiscal year as compared with existing estimated collection of Rs2,285 billion during the current fiscal year, which is Rs635 billion higher.

Under indirect taxes, the collection target of customs duty has been set at Rs640 billion, sales tax at Rs1,919 billion and federal excise duty at Rs361 billion.

Targets for collection of other taxes are included: ICT Rs20.47 billion; Mobile handset levey Rs5.8 billion; airport tax Rs25 million, Gas Infrastructure Development Cess (GIDC) Rs15 billion; National Gas Development Surcharge Rs10 billion etc.

The collection of petroleum levy has been estimated at Rs450 billion for next fiscal year as compared with existing collection of Rs260 billion, which is 73 percent higher.

The target for total tax revenue has been set at Rs5,464 billion during fiscal year 2020/2021 as compared with Rs4,208 billion expected to be collected during current fiscal year.

June 13, 2020
Advance ruling in Customs laws introduced

ISLAMABAD: The government has introduced mechanism of advance ruling to facilitate importers and investors to ensure transparency in clearance process.

Section 212B has been inserted to the Customs Act, 1969 through Finance Bill, 2020 to introduce advance ruling.

Section 212B: Advance Ruling.

(1) An applicant desirous of advance ruling shall make an application in such form and in such manner as may be prescribed under the rules, stating any of the questions as contained in sub-section (2), on which the advance ruling is sought.

(2) The question on which advance ruling is sought shall be in respect of-

(i) classification of goods under First Schedule to this Act;

(ii)determination of origin of the goods under the rules of origin notified for bilateral and multilateral agreements;

(iii)applicability of notifications issued in respect of duties under this Act or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this Act; or

(iv)any other matter as the Board may specify by notification in the official Gazette.

(3)The advance ruling issued under sub-section (1) shall be binding on the applicant.

(4)The advance ruling issued under sub-section (1) shall be binding on the customs collectorates for the period specified by the Board in the rules, unless there is a change in law or facts or circumstances on the basis of which the advance ruling was pronounced.

June 12, 2020
Customs duty exempted on import of industrial raw material

ISLAMABAD: Federal Minister for Industries and Production Hammad Azhar announced to exempt customs duties on import of industrial raw material.

While presenting the Budget 2020/2021, the minister highlighted the key points of changes brought to Customs Act, 1990 through Finance Bill, 2020.

He said that the government had initiated customs tariff rationalization during the last year and allowed exemptions from customs duties on 1600 tariff lines of raw material.

In order to reduce cost of production it is suggested that all raw material should be exempted from customs duty from next fiscal year.

These exemptions has been proposed for import of raw material for manufacturing of chemicals, leather, textile, rubber, fertilizers etc.

These tariff lines include 20,000 items which are around 20 percent of the total imports.

Furthermore, he said that customs duty has been reduced on 200 tariff lines on import of raw material and secondary products which, included bleaching, rubber and raw material for home consumption.

Hammad Azhar on the floor of the National Assembly said that regulatory duty has been reduced to 6 percent from existing 12.5 percent on import of hot rolled coils for encouraging domestic engineering sector.

He said that the regulatory duty has been reduced on various products in order to discourage smuggling. The minister said that in the past regulatory duty was imposed which resulted in reduction of import of such goods. However, it is observed that some products were imported by Afghanistan and then entered into Pakistani markets.

Therefore, it is suggested the reduction of regulatory duty on import of cloths, sanitary ware, electrodes, blankets, pad locks etc.

The government has also abolished duty and taxes on import of diagnostic kits for coronavirus and cancer to provide relief to the masses. Further, duty and taxes have also been abolished on import of special food supplements and dietetic food.

June 12, 2020
Budget salient features related to Income Tax

ISLAMABAD: Federal Board of Revenue (FBR) issued budget salient feature related to income tax presented through Finance Bill, 2020.

INCOME TAX

RELIEF MEASURES

• Deletion of Withholding Taxes

To augment efforts towards simplification of the withholding tax regime, the following withholding tax provisions are being deleted:

Section 236R: Collection of advance tax on education related expenses remitted abroad

Section 235B: Tax on steel melters and composite units

Section 156B: Withdrawal of balance under pension fund

Section 148A: Tax on local purchase of cooking oil or vegetable ghee by certain persons

Section 236D: Advance tax on functions and gatherings

Section 236F: Advance tax on cable operators and other electronic media

Section 236J: Advance tax on dealers, commission agents and arhatis etc.

Section 236U: Advance tax on insurance premium

Section 236X: Advance tax on tobacco

This measure would reduce the cost of the compliance of taxpayers, enhance the control of FBR over the withholding tax regime and would be pivotal in promoting ease of doing business.

• Enhancement of Threshold for Becoming Prescribed Person for Withholding of Tax on Supplies, Services and Contracts from fifty to hundred million rupees and a similar threshold of hundred million rupees is being prescribed for a sales tax registered person to become a withholding agent.

• Reduction in Holding Period and Tax Rates for Capital Gain on Immoveable Property to incentivize and propel economic activity in the real estate sector, the bifurcation of plots and constructed property for determining holding period of capital gains is being done away with i.e. the holding period for taxation of capital gains on disposal of immovable property is being restricted to 4 years. In addition, rates are also being reduced on capital gains emanating from disposal of immoveable property.

• Increase in Threshold of Section 21(l) per transaction delineated under section 21(l) is being increased from Rs. 10,000/- to Rs. 25,000/-. Similarly, the threshold of payments under a single from Rs.50,000/- to Rs.250,000/-.

• Increase in Threshold of Section 21(m) from Rs. 15,000/- per month to Rs.25,000/- per month.

• Enabling Adjustability of Property Expenses for All Individuals/AOPs

• Exempting Withholding Tax on Cash Withdrawal to the extent of Foreign Remittances

• Promoting Investment in Government Debt Instruments through a foreign bank account, a non-resident rupee account repatriable or a foreign currency account.

• Issuance of Centralized Income Tax Refunds

• Hajj Operators to be Exempted from Withholding Tax on Payments to Non-Residents

• Explanation for excluding Vehicles Up to 200cc from the Ambit of Advance Tax

• Advance Tax on Auction of Immovable Property to be Collected in Installments

• Prompt Issuance of Exemption Certificates to Public Listed Companies within 15 days

• Collection of Advance Tax by Educational Institutions not to Apply to Persons on the ATL

• Rationalizing Tax on Imports by shifting from person-specific rates to goods specific rates cascaded according to the type of goods, with tax @1% for capital goods, 2% for raw materials and 5.5% for finished goods irrespective of status of the importer. However, the prevailing concessional rates on certain items such as remeltable scrap of iron and steel, potassic and urea fertilizers, LNG, Gold, Cotton, goods that were importable by manufacturers under the rescinded SRO 1125(I)/2011 dated 31.12.2011, mobile phones etc. are being maintained.

• Agreed Assessment through arbitration by Assessment Oversight Committee

• Strengthening Alternate Dispute Resolution Mechanism

• Taxation Of Resident Shipping Companies as per latest marine policy

PROCEDURAL MEASURES

• Taxpayer’s Profile Automated Adjusted Assessment to rectify computational errors and wrongly claimed credits

• Real-Time Access to Databases of Certain Organizations

• Audit on the Basis of Benchmark Ratios

• Enabling E-Audit

• Strengthening Compliance Regime of Non-Profit / Welfare Organizations

• Electricity Expense to be Treated as an Inadmissible Business Deduction subject to non-disclosure of name of actual user from 01.01.2021

• Disallowance of Business Expenditure Proportionate to Sales Made to Sales Tax Unregistered Persons

• Rationalizing Depreciation Deduction based on the Half Year Rule

• Limiting Interest Deductibility to Foreign Affiliates

TECHNICAL MEASURES

• Rationalization of Cost of Transport Vehicle for Claiming Deduction on Account of Lease Rentals

• Filing of Withholding Statements under section 165 on Quarterly Basis

• Incentivizing and Promoting the Construction Industry

• Tax Exemptions and Concessions for the Gwadar Port and the Gwadar Free Zone

• Incorporation of Relief measures provided through SROs during the COVID pandemic.

June 12, 2020
Budget salient features related to Sales Tax, FED
ISLAMABAD: Federal Board of Revenue (FBR) issued budget salient feature related to sales tax and federal excise duty (FED) presented through Finance Bill, 2020.

RELIEF MEASURES
1. The minimum threshold of supplies by retailers for obtaining CNIC of the buyers is proposed to be increased from Rs 50,000 to 100,000;
2. In wake of COVID-19, the Federal Government granted exemption to health related items and equipment through SRO 237(I)/2020 dated 20-3-2020 which is going to expire on 19-6-2020. In the present circumstances vis-à-vis COVID-19, the said period is being extended for another three months starting from the 20th June 2020.
3. Exemption allowed on import of dietetic foods intended for special medical purposes for the children suffering from Inherited Metabolic Syndrome;
MEASURES FOR REMOVAL OF ANOMALIES

3(a) In order to encourage documentation, it has been decided to provide relief to organized retail sector which is integrated online with FBR through Point of Sale system. Their existing sales tax rate is proposed to be reduced from 14 percent to 12 percent

STREAMLINING MEASURES
1. Concept of conducting audit proceedings through electronic means introduced;
2. Ninth Schedule is proposed to be amended in line with Mobile Manufacturing Policy approved by the ECC of the Cabinet;
3. Insertion of the Tax Laws Amendment Ordinance 2019, relating to tax concessions and exemptions to Gawadar Port and Gawadar Free Zone, in the Finance Bill 2020;
4. To strengthen the Alternate Dispute Resolution process and to make it more taxpayer-friendly, it is proposed that the taxpayer is allowed to withdraw his case from any court of law or any appellate authority after decision of ADRC. Furthermore, the decision of ADRC, once it is conveyed by the taxpayer to the tax authorities, is binding upon the tax authorities;
5. The scope of section 73 is proposed to be widened to cover all registered persons supplying taxable goods;
6. Board is empowered to fix minimum production on the basis of single or more inputs and for fixation of wastage;
7. Real-time access to information and databases to the Board by various authorities such as NADRA, FIA, provincial excise & taxation departments etc.
SALIENT FEATURES

FEDERAL EXCISE DUTY

The proposed budgetary measures pertaining to Federal Excise Duty (FED) for FY 2020-21 are:

HEALTH RELATED MEASURES
1. Increase in the rate of FED on cigars, cheroots , and cigarillos and cigarettes from 65 percent to 100 percent of retail price; increase in the rate of FED on filter rods from Rs 0.75 to Rs 1 per filter rod;
2. Levy of FED on e-liquids of electric cigarettes @ Rs 10 per ml.
3. Levy of FED on caffeinated energy drinks @ 25 percent;
MEASURES FOR REMOVAL OF ANOMALIES
1. Levy of FED @ 7.5 percent ad valorem in case of locally manufactured double cabin (4×4) pick-up vehicles and @ 25 percent in the case of imported ones.
4(a) In the wake of worsening affect of COVID-19 and reduction in production of cement, it has been proposed to reduce FED on cement from Rs. 2 per kg to Rs. 1.75 per kg.

STREAMLINING MEASURES
1. Board is empowered to fix minimum production on the basis of single or more inputs and for fixation of wastage;
2. The scope of seizure of non-duty paid goods is extended to all products subject to FED besides cigarettes and beverages;
3. Real-time access to information and databases to the Board by various authorities such as NADRA, FIA, provincial excise & taxation departments etc.
June 12, 2020