Pkrevenue.com

Category: Budget 2020-2021

  • Budget salient features related to customs duty

    Budget salient features related to customs duty

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

    Industrial Relief Measures

    1. Exemption of additional custom duties on those tariff lines which are now @ 0 percent customs duty in tariff.
    2. Reduction of custom duty on 40 raw materials of various industries.
    3. Tariff rationalization under National Tariff Policy 2019, by reducing customs duty on 90 tariff lines from 11 percent to 3 percent and 0 percent.
    4. Allowing the exemption on import of raw material to those Nashiran-e-Quran also who do not have their own in-house printing facility.
    5. Reduction in regulatory duty from 12.5 percent and 17.5 percent to 6 percent and 11 percent, respectively on Hot Rolled Coils (HRC) of Iron and steel falling under PCT codes 7208 and 7225& 7226, respectively.
    6. On the request of various local industries, a number of their inputs/intermediary raw materials are being allowed concessional import under new serial number of the fifth schedule through IOCO quota determination.

    • Exemption of custom duties on import of raw materials by manufacturers of Butyl Acetate.

    • Exemption of custom duty on import of raw material by manufacturer of syringes and saline infusion sets.

    • Exemption of customs duties on import of raw material by manufacturers of buttons.

    • Reduction in custom duty on import of raw material by manufacturers of interlining/buckram.

    • Reduction of custom duty and exemption of additional custom duty and regulatory duty on import of raw materials by manufacturers of Wire rod

    • Exemption of custom duties and regulatory duty on import of machinery, equipment and other project related items for setting up of internet cable landing stations.

    • Exemption of custom duties on import of raw material by beverage can manufacturers.

    • Reduction in Custom duty and exemption from Additional custom duty on import of raw material by food packaging industry.

    Relief to Common Man

    1. Exemption from customs duties on import of 61 COVID19 related items, which was due to expire on 20th June has been extended due to the continuation of pandemic.
    2. Exemption from 2 percent ACD on import of edible oils and oil seeds under PM’s COVID19 Relief Package has been extended.
    3. Exemption of duties & taxes on import of Dietetic Foods for Children with inherited metabolic disorders.
    4. Exemption of all duties & taxes on import of Diagnostic Kits for Cancer and Corona Virus.
    5. Exemption of Customs duties on inputs of Ready to use Supplementary Foods (RUSF).
    6. Exemption of Customs duties on import of life saving drug Meglumine Antimonite for treatment of leishmaniasis.
    7. Extension up to 2023, in exemption of customs duties on imports for setting up new industries in erstwhile FATA area.

    Miscellaneous

    1. Reduction in regulatory duty on smuggling prone items to bring these items under legal imports
    2. Regulatory duty on several industrial inputs is also being reduced to decrease their cost of doing business
    3. Tariff protection for domestic industry by increasing/levy of regulatory duty on import of those items which are also locally manufactured
    4. Incentivizing soap manufacturing industry by reducing rate of Additional customs duty on Palm Stearin
    5. Enhancing scope of concessions available to Special Economic Zones.
  • Budget 2020/2021 at a glance

    Budget 2020/2021 at a glance

    ISLAMABAD: Hammad Azhar, Federal Minister for Industries and Production, on Friday presented budget 2020/2021 in National Assembly.

    Following is the budget at glance.

  • Budget 2020/2021 unveiled; no new tax; fiscal deficit estimated at 7pc

    Budget 2020/2021 unveiled; no new tax; fiscal deficit estimated at 7pc

    ISLAMABAD: Hammad Azhar, Federal Minister for Industries and Production, on Friday presented budget 2020/2021 on floor of house claiming to be a corona-hit budget with no new tax.

    The budget 2020/2021 has the following salient features:

    The total outlay of budget 2020/2021 is Rs7295 billion. The size is 11 percent lower than the size of budget estimates 2019/2020.

    The budget deficit has been estimated at Rs3,195 billion or 7 percent of the GDP for next fiscal year starting July 01, 2020.

    The net federal revenue has been estimated at Rs3,700 billion and total expenditures has been estimated at Rs7,136 billion. While it is estimated at the provinces would provide Rs242 billion surplus.

    The resources availability during next fiscal year has been estimated at Rs6,315 billion against Rs4,917 billion in the budget estimates of 2019/2020.

    The net revenue receipts for 2020/2021 have been estimated at Rs3,699 billion indicating an increase of 6.7 percent over the budget estimates of 2019/2020

    The provincial share in the federal taxes is estimated at Rs2,873.7 billion during the next fiscal year, which is 11.7 percent lower than the budget estimates for 2019/2020.

    The net capital receipts for 2020/2021have been estimated at Rs1,463 billion against the budget estimates of Rs831 billion in 2019/2020 reflecting an increase of 75.93 percent.

    The external receipts in 2020/2021 are estimated at Rs2,222.9 billion. This shows a decrease of 26.7 percent over the budget estimates for 2019/2020.

    The overall expenditure during 2020/2021 has been estimated at Rs7,295 billion, out of which the current expenditure is Rs6,345 billion.

    The develop expenditure outside PSDP has been estimated at Rs70 billion in the budget 2020/2021.

  • FBR bans use of information system till budget announcement

    FBR bans use of information system till budget announcement

    ISLAMABAD: Federal Board of Revenue (FBR) has put a ban on using information system from June 11, 2020 till announcement of budget 2020/2021, which is schedule for June 12, 2020.

    In an office order, the FBR said that due to budget announcement on June 12, 2020 restrictions on the access of servers/information system running at FBR Headquarters will come in force on June 11, 2020 from 8:00am till the end of budget speech.

    The FBR said that message and engagement features will be disabled and would not be accessible for the internal users of the FBR house.

    Users located in the FBR house premises would only be limited in routing/marking their correspondence in the Wings located within FBR House. However, external users such as RTOs/LTUs/Customs collectorates would be able to mark their correspondence to the internal users/Wings of the FBR.

    The FBR said that access to the system for correction of disposition list, online application of leave and other facilities will be completely banned for field formations.

    However, FBR’s e-Portal/server will remain accessible for authorized users outside FBR headquarter premises but no one within FBR HQ will be allowed to access FBR e-portal during budget exercise.

    STARR and Sales Tax systems/services will remain inaccessible for FBR HQ users, however, authorized users/outside FBR HQ premises will be allowed to access the system/servers.

    While the local network of PRAL HQ and FBR HQ will remain operational individually, transfer to any files/documents from FBR HQ network to PRA HQ network vice versa will be banned.

    Internet services in FBR HQ will remain unavailable in FBR HQ till conclusion of budget speech.

  • Budget 2020/2021 to focus on mitigating COVID-19 impact

    Budget 2020/2021 to focus on mitigating COVID-19 impact

    KARACHI: The government may focus supportive measures in the upcoming budget 2020/2021 in order to reduce the impact COVID-19, analysts said on Tuesday.

    Analysts at Arif Habib Limited highlighted the blueprint of the FY21 Budget whereby the key objective of the government is the revival and stabilization of the economy after being pinned down from the ongoing COVID-19 pandemic, via relief and supportive measures for the masses as well as the business community whilst constraining fiscal imbalances and meeting IMF’s revenue collection target.

    The government is scheduled to present budget 2020/2021 on June 12, 2020.

    They summarized some key expected measures below.

    1. Counter Coronavirus and ensure social security

    a. Allocation of PKR 1.0trn to fight the ongoing COVID-19 contagion with likely allocation to the following:

    I. Daily wagers cash allocation,

    II. Higher allocation to the Ehsaas program (for vulnerable families),

    III. Subsidized electricity for lifeline consumers,

    IV. Enhanced allocation to Utility Stores Corporation (USC),

    V. Higher allocation for health and food supplies,

    VI. Allocation to the National Disaster Management Authority (NDMA), and

    VII. Lowering down taxes on basic essential goods.

    b. SBP has already introduced several measures to contain the economic fallout post Corona pandemic such as:

    1) 525bps cut in interest rate,

    2) announcement of a relief package for households, industries and SMEs,

    3) Refinancing scheme to support employment and avert layoffs,

    4) Relaxation in credit requirement for exports and imports, and

    5) Facilitation of new investments via subsidized interest rates for BMR activities.

    c. Higher allocation of social expenditure under the federal PSDP.

    1. Revive economic growth, increase PSDP allocation along with incentives for industries

    The government has set GDP target for FY21 at 2.3 percent (FY20 estimated at -0.38 percent primarily due to the coronavirus pandemic)

    a. Allocation of PKR 630 billion under the Federal PSDP along with an additional PKR 200 billion under Public Private Partnership Authority (PPPA),

    b. Reduction of custom and excise duty by 3 percent on imports of machinery for agriculture and power sector,

    c. Removal of additional custom duty on different products to support local production and revive demand, and

    d. Removal of import duty on plant and machinery. Cascading duty structure on import of raw materials, intermediate goods and finished goods.

    Mobilize revenue measures to achieve the additional collection target for next year

    Tall revenue target of the FBR at PKR 5.1 trillion with additional requirement amounting to Rs 575 billion (discussed ahead) could be generated by means of:

    a. Amendment in income tax treatment of bad debts, which could generate Rs 100 billion in revenue from the banking sector,

    b. Imposition of luxury tax on luxury houses, farmhouses, mansions and bungalows,

    c. Imposition of import duty on 60 luxury imported items including cars, ceramics and others,

    d. Higher petroleum development levy during FY21, and

    e. Administrative and enforcement actions undertaken by FBR.

    1. Certain expenditures (ex-social spending) to remain uncompromised

    The government has set expenditure target for FY21 at Rs 10.4trn

    a. Defence expenditure likely to go up to Rs 1.4 trillion,

    b. Government is expected to allocate Rs 2.7 trillion for debt servicing in FY21,

    c. Federal PSDP allocation will be targeted at Rs 630 billion.

    1. Scope of documentation drive to be eased and relaxation expected to revive consumer spending

    a. Increase limit of providing CNIC conditions from Rs 50,000 to Rs 100,000,

    b. Withholding tax on remittances to be abolished,

    c. Reduction of 3 percent in further sales tax on supplies to undocumented individuals, and

    d. New sectors to be added to the tax net.

  • Hafeez Shaikh assures business community of presenting relief budget

    Hafeez Shaikh assures business community of presenting relief budget

    KARACHI: Dr. Abdul Hafeez Shaikh, Advisor to Prime Minister on Finance and Revenue, has said that the upcoming budget 2020/2021 will be a relief budget and most of the recommendations of business community will be adopted in the budgetary measures to be announced by the government on June 12, 2020.

    These assurance was given in a meeting held on Monday via video link between the KCCI’s team led by Chairman Businessmen Group & Former President KCCI Siraj Kassam Teli with the advisor to deliberate on the proposals of KCCI for the Federal Budget 2020-21.

    On KCCI’s side, Siraj Teli was accompanied by President KCCI Agha Shahab Ahmed Khan and Former Senior Vice President Ibrahim Kasumbi.

    Officials of the Finance Ministry and Chairperson Federal Board of Revenue Ms. Nausheen Jawed were also present at the meeting which lasted for more than 40 minutes.

    In his opening remarks, President KCCI Agha Shahab Ahmed Khan stated that the budget for the year 2020-2021 is being prepared at a time when the country is facing an unprecedented crisis due to Covid-19 pandemic and every business and industry has been badly affected.

    In these extraordinary circumstances, people of Pakistan in general and the business community in particular are looking forward to a budget which provides substantial relief measures to rescue the economy from the brink of disaster.

    Chairman BMG Siraj Teli highlighted major macroeconomic issues during the meeting and elaborated on the measures which KCCI has recommended to rescue the trade and industry from devastating impact of a global economic meltdown caused by the spread of Covid-19 pandemic.

    He reiterated that today the Name of the Game is survival of trade and industry which should be on top priority in the budget rather than the revenues.

    Revenues can be recovered later only if the trade and industry survives hence the budget should focus on relief through these macroeconomic measures.

    He said that the domestic economy, which contributes 92 percent to the GDP and provides bulk of employment and revenues, has not received the much needed relief and financial assistance.

    He appreciated the reduction in prices of Petroleum products which was earlier proposed by KCCI and also the financial assistance given to the poor segment of population through Ehsaas program which provided much needed relief to the people.

    Siraj Teli proposed that an across the board reduction of 50 percent in the rates of all Taxes including Income Tax, Sales Tax, FED and Customs duties on capital goods and raw materials should be announced in the Budget for one year.

    Further, he suggested that rates of Electricity and Gas should also be reduced to half for at least one year to help revive the domestic economy. These measures may be reviewed when the economy shows improvement.

    Commenting on the incentive scheme announced by the government for Construction Industry, Siraj Teli urged the Advisor Finance that similar incentives should be announced across the board for all sectors.

    He stated that undocumented economy in Pakistan is twice the size of documented economy and a very large amount of capital is blocked in unproductive investments.

    He said that it would immensely benefit the economy to release the blocked capital and encourage investments into all sectors of industry and business.

    The unregistered persons in undocumented economy must be encouraged and allowed to get registered and become part of the documented economy.

    As an incentive, a policy be adopted that no questions will be asked for all such investments. In the present global crisis due to Covid-19 pandemic, no objections are likely to be raised by IMF, World Bank, G20 and FATF etc.

    It is therefore a good opportunity for Pakistan to unlock a huge untapped pool of capital.

    Siraj Teli further added that although the interest rates have been revised downward by the SBP from 13.25 percent to 8.0 percent, it is still not sufficient to stimulate the growth. Reduction in interest rates in piecemeal and installments does not provide the desired impetus to growth.

    To provide thrust the policy rate should be reduced to 4 percent in one go to stimulate growth and reduce cost of doing business.

    All major economies are taking extra-ordinary measures to reverse the decline due to Covid-19 pandemic through quantitative easing and interest rates are down to zero.

    In his presentation, Former Senior Vice President KCCI Ibrahim Kasumbi elaborated on various important proposals of the KCCI for the budget 2020-21.

    These proposals included rationalization of tariff and WHT on industrial raw materials and capital goods, expeditious disbursement on Income Tax Refunds and enhancement of the limit of Rs.5.0 million, prioritizing of refunds on the basis of aging of cases, removal of automobile and motorcycle spare parts from third schedule of Customs Act, reduction in rate of Sales Tax and removal of RD on smuggling prone items.

    In his response to the proposals and suggestions submitted by the KCCI item, Dr. Hafeez Shaikh said that despite the limitations of fiscal space, the Ministry of Finance has approved and adopted a significant number of KCCI’s proposals on the recommendation of the Federal Board of Revenue.

    He emphasized that the government is keen to stand by the business community in these difficult times and maximum relief will be provided in the budget of FY2020-21.  On the question of Income Tax refunds, Dr. Hafeez Shaikh stated that the Ministry of Finance is looking to enhance the amount of refund from Rs5.0 million up to Rs50.0 Million, depending on the available fiscal space.

    In her comments, Ms. Nausheen Jawed, Chairperson FBR informed the KCCI team that their proposals were duly considered and a number of important proposals have been accepted for inclusion in the budgetary measures for FY2020-21.

    Dr. Hafeez Shaikh thanked Siraj Kassam Teli and Agha Shahab Ahmed Khan for a productive meeting and participation of the KCCI team.

    He further assured that he will be available to discuss any issues and remaining anomalies after the budget has been presented in the parliament.

  • Tax officials’ power to select income tax return for audit should be withdrawn

    Tax officials’ power to select income tax return for audit should be withdrawn

    Tax practitioners have called for a significant reform in the income tax audit process, urging that the Federal Board of Revenue (FBR) alone should have the authority to select income tax returns for audit, withdrawing this power from the commissioners.

    (more…)
  • Online verification of tax withheld should be available

    Online verification of tax withheld should be available

    KARACHI: Tax practitioners have urged the Federal Board of Revenue (FBR) to ensure verification of tax withheld on the IRIS portal in order to facilitate taxpayers in making adjustment or claiming refunds.

    Pakistan Tax Bar Association (PTBA) submitted proposals for budget 2020/2021 saying that withholding tax regime should be simplified by reducing the categories of withholding taxes and the rates thereon.

    It said that the withholding agent should be facilitated through robust IRIS; wherein the visibility of tax deduction should be provided to the taxpayer instead of relying on the withholding agents’ certificates.

    The rates of tax for all withholding taxes under one provision of law should be minimized and the differentiation should be on the basis of Active and Non-Active Taxpayer only.

    Withholding agents should be given incentive in the form of tax credit for facilitating the Government withholding/collecting taxes and in identifying potential tax evaders.

    The withholding tax challans should be made available on the IRIS to every registered person, instead of collecting the same from registered person(s) deducting and depositing the tax.

    The concept of Minimum Tax should be done away with for all the corporate Sector companies, who file their tax returns and pay tax on actual income regular basis.

    The government departments including defence should pay the tax withheld on FBR IRIS instead of book adjustment.

    Sales tax (including provincial sales tax on services) and other government levies should be excluded for the purpose of withholding collection of tax.

    A ‘Small Company’ including company having similar business and turnover should be brought at par with an Individual or AOP having turnover limit up to Rs 50 million.

  • CNIC should be made mandatory for purchase of moveable, immovable properties

    CNIC should be made mandatory for purchase of moveable, immovable properties

    KARACHI: Federal Board of Revenue (FBR) has been proposed to make computerized national identity card (CNIC) mandatory for purchase of movable and immovable properties for bringing potential taxpayers into the tax net.

    A presentation made on behalf of Pakistan Tax Bar Association (PTBA) for submission of proposals for budget 2020/2021, it is highlighted that Pakistan has a lower tax-to-GDP ratio as compared to regional and other countries, which is causing serious disparity between various sectors of the Economy.

    All the segments of the society are not contributing their due share of tax on their income in accordance with their contribution in the GDP.

    The number of Active Taxpayers are substantially low, as such broadening of tax base at fast pace is the needed.

    For broadening the tax base and to improve the tax to GDP ratio following recommendations are made:-

    FBR should extract information from withholding statements, details of government supplies and maintain a database of above third party information. Conduct the data mining and data analysis to generate complete profile for cross verification of data of the existing taxpayers as well as discovery of new taxpayers;

    CNIC/NICOP/Passport should be made mandatory for purchase of any moveable or immovable properties, assets and major expenditure;

    Relevant organizations, departments, institutions including utility companies, banks, NADRA and information obtained related to offshore transactions should submit prescribed information on quarterly basis to the FBR.

    Exemption under Section 111(4) of the Income Tax Ordinance, 2001 may be allowed only to the foreign remittance brought into Pakistan through proper banking channel for investment for Balancing, Modernization and Replacement (BMR) of existing industrial undertakings or for making fresh investment in industrial undertakings;

    Effective enforcement should be ensured for compliance of filing of Return of Income under section 114 of the Ordinance, 2001;

    Atleast for five years jurisdiction (other than LTUs, CRTOs) should be made and fixed on territorial basis to avoid slippages of potential taxpayers.

  • PTBA recommends restoring Rs1.2 million threshold for salaried persons

    PTBA recommends restoring Rs1.2 million threshold for salaried persons

    KARACHI: Pakistan Tax Bar Association (PTBA) has recommended to restore basic threshold of Rs1,200,000 for salaried persons in the budget 2020/2021.

    According to a presentation of Zeeshan Merchant, advocate high court, given on behalf of the PTBA, urged the government to restore the basic threshold of Rs1.2 million that was available for tax year 2019 and the rates applicable for tax year 2019 for salaried persons, individuals and Association of Person (AOPs).

    Alternatively, the tax bar urged the authorities to allow a tax reduction of at least 25 percent of the tax payable to individuals and AOPs, who are subject to tax under Part I of First Schedule to the Income Tax Ordinance, 2001.

    The tax bar highlighted that income under the head ‘salary’ is currently taxed on the gross amount. This policy was introduced by bringing down the corresponding rates of tax for each income slab. However, gradually the income slabs as well as rates of tax were enhanced without restoring the deductible allowances when income from salary was taxed at higher rates.

    The PTBA proposed that either rationalize the rates of tax or restore the deductible allowances on account of house rent, utilities, conveyance etc. to minimize the tax burden of salaried individuals.

    Giving rationale, the PTBA said that it is not justified to tax the salaried individuals (particularly in high income slabs) at such a high rate when other taxpayers are subject to tax on their net profits at much lower rates.

    The limit of Rs1,000,000 for loan to employees below benchmark rate provided under Section 13(7) of the ordinance should be increased to Rs3,000,000.