Pkrevenue.com

Category: Budget

This is parent category of budgets presented by Pakistan government. Here you will find year-wise federal and provincial budgets.

  • FPCCI proposes duty free import of used cars for subsequent export

    FPCCI proposes duty free import of used cars for subsequent export

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed duty free import of used cars and their subsequent export after repair.

    The apex trade body in its proposals for budget 2020/2021 said that the UAE had developed Export Processing Zone (EPZ) for duty free import of used cars, their repair and subsequent export to different countries especially those of Africa.

    “On similar pattern a ‘Used vehicles EPZ’ be set up in Karachi, Port Qasim or Gwadar and import of both right hand and left-hand drive vehicles may be allowed under this EPZ for their export to different countries. Because of its more feasible sea route to Africa and land route to Central Asian markets, cheap labour, painters and mechanics, the proposed EPZ may turn out to more attractive than the ones in UAE.”

    The FPCCI also highlighted issue of import of stock lot and job lot goods. The apex trade body said that despite the fact that stock lot and job lot goods are available in the world at lower prices, but for the protection of local industry, their import is banned.

    Maintaining the ban for home consumption, permission may be granted for import of stock lot and job lot goods under Export Facilitation Schemes on 100 percent export basis.

    The FPCCI also said that import of used clothing and their exports after sorting, repair, washing and packing is allowed to exporters operating in EPZ.

    However, this facility is not allowed under DTRE scheme and is denied under other Export Facilitation schemes too. If the same is allowed, Pakistan can capture a bigger share because of its cheap labour.

    The FPCCI said that the global warehousing market is more than $ 1.0 trillion and is growing at a very fast pace. The Export Policy Order vide para 9(g) allows export of imported goods in same state – unprocessed form from bonded warehouse and the imported goods already cleared from home consumption.

    The FPCCI said that this is not in line with this global business practice. “Singapore, Malaysia, Sri-Lanka and a number of other countries allows such export, which helps in earning FE and generates employment,” it added.

    The issue is that re-export of imported goods in the same state is allowed but there is no procedure which allows refund of duty and taxes paid, neither such imports are covered under DTRE or any other export facilitation scheme (manufacturing bond, temporary imports, export oriented unit etc).

    No importer can import goods, ware house it and re-export after payment of import duty and taxes. He can re-export to mitigate his loss but cannot adopt it as a business to utilize cheap warehousing in Pakistan.

    It proposed the Ministry of Commerce and FBR to allow import for re-exportation under DTRE Rules subject to value addition of 5percent or 10 percent.

  • Manufacturers demand domestic supplies against FE should be treated as exports

    Manufacturers demand domestic supplies against FE should be treated as exports

    KARACHI: Manufacturers have urged the government to treat goods booked abroad on which foreign exchange (FE) has been transferred should be treated as export.

    Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021, said that some manufacturers (like Dawlance etc.) are demanding that overseas Pakistanis may be allowed to send foreign exchange to manufacturers through banking channel for delivery of goods to their blood relations / relatives in Pakistan, which may be treated as export.

    Some stores outside Pakistan have contacted the manufacturers for delivery of goods in Pakistan. These stores in foreign countries will make consolidated payment in FE through banking channel to manufacturers in Pakistan.

    They have requested the manufacturers in Pakistan to send samples for booking of orders. The issue is that after payment of duty and taxes the goods made in

    Pakistan become more expensive.

    The Pakistanis expatriates abroad then prefers to purchase smuggled goods from the open market or send goods in baggage (better quality and less cost) declaring it as old and used goods after removing its packing etc.

    Store owners abroad have shown keen interest in booking Pakistani manufactured goods to be delivered in Pakistan.

    “It is, therefore, proposed that such goods, where orders are booked from abroad and foreign exchange is sent in Pakistan through banking channels, may be treated as exported goods and may be exempted from local duty and taxes or partial exemption may be given in the form of fixed duty drawback / rebate of tax to be notified.”

  • New slab for withholding tax on motor vehicle purchase recommended

    New slab for withholding tax on motor vehicle purchase recommended

    KARACHI: Regional Tax Office (RTO) – II Karachi has recommended revision in slab for withholding tax collection on purchase of new motor vehicles from next fiscal year.

    The RTO-II Karachi in its proposals for budget 2020/2021 suggested revision in existing slabs for withholding tax collection on motor vehicles.

    The RTO-II Karachi proposed to create a new rate of withholding tax on purchase of motor vehicle engine capacity below 850CC.

    At present the FBR is collecting Rs7500 as withholding tax on registration of new motor vehicle engine capacity up to 850CC. The RTO-II Karachi proposed to exempt withholding tax on vehicles of engine capacity up to 250CC.

    The tax office suggested to create slab of Rs3,000 for registration of new motor vehicles with engine capacity between 251CC to 650CC.

    Similarly, the RTO-II Karachi also suggested to bring change slabs of withholding tax rate on transfer of ownership of motor vehicles.

    At present motor vehicles up to 850CC is exempted from tax at the time of transfer first tax rate is applicable at Rs5000 on engine capacity between 851CC to 1000CC.

    The RTO-II Karachi suggested that the withholding tax rate should be exempted on transfer of motor vehicle up to 650CC. The tax office suggested that the tax rate for first slab should be Rs5000 for the motor vehicle transfer of engine capacity between 651CC to 1000CC.

    The regional tax office recommended change in slabs of motor vehicle tax. Whereas, at present the motor vehicle tax on engine capacity up to 1000CC is Rs800.

    The tax office proposed that motor vehicle tax rate should be exempted on vehicle with engine capacity up to 250CC. Meanwhile, the motor vehicle tax should be Rs800 on engine capacity between 251CC to 1000CC.

  • Sindh urged to bring down sales tax rate at 10 percent

    Sindh urged to bring down sales tax rate at 10 percent

    KARACHI: Sindh Revenue Board (SRB) has been suggested to bring down sales tax on services rate to 10 percent from existing 13 percent to encourage registration of more taxpayers.

    Overseas Investors Chambers of Commerce and Industry (OICCI) in its budget proposals 2020/2021 submitted to the SRB, said that the expectations of the investors that the SRB will continue the reduction of Sales Tax rate on services to 13 percent, as done in fiscal year 2016-17, remained unrealized.

    “Although, investors appreciate that the Sales Tax rate in Sindh province at 13 percent is the lowest in the country, it remains higher than comparative regional tax rates.”

    The OICCI suggested that to keep in-line with the regional developing countries, reduction in sales tax on services should be made by 1 percent in the Sindh Finance Act 2020-2021 and gradually reduced to 10 percent over the next three years for registered entities, whilst the current rate should be maintained for unregistered entities.

    This will encourage registration to avail the benefits of input adjustment.

    The OICCI also suggested that the option to opt for the basic rate or normal regime should be given to all the service providers who fall under the reduced/fixed rate regime.

    This option will reduce the cost of doing business for recipient of services as lower tax is not available for input tax adjustment, the OICCI added.

  • Federal, provincial tax conflict hampers FDI

    Federal, provincial tax conflict hampers FDI

    KARACHI: Foreign investors have said that duplication of taxes due to lack of coordination between federal and provincial tax authorities are hampering foreign direct investment (FDI) into Pakistan.

    The Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of foreign investors in Pakistan, said that duplicate taxation is causing hardships to taxpayers and has given rise to unnecessary litigations and is one of the deterrents in attracting FDI in Pakistan.

    The OICCI in its budget proposals for 2020/2021 submitted to Sindh Revenue Board (SRB) said that all the four provinces and the federal government have introduced distinct sales/service tax laws for their respective jurisdictions, with some of the clauses in clear conflict with each other resulting in foreign investors being pursued and harassed by the federal and provincial revenue collectors (FBR, PRA, SRB, KPRA and BRA) demanding tax on the same transactions creating undue hardship and double taxation claims for taxpayers.

    “This situation is highly undesirable and creates complexities for investors,” the OICCI said.

    Giving an example, the OICCI said that a service provider registered in Sindh providing taxable services to recipient in Punjab is liable to pay sales tax in Sindh whereas the withholding agent (recipient of service) is registered in Punjab and is liable to withhold sales tax and pay the same to Government of Punjab.

    Although, some improvements have been noted in the coordination between the revenue authorities, investors’ concerns continue, for e.g. the issue of levy of sales tax at ‘origination’ and ‘termination’ of service in both the provincial legislations on services has still not been resolved.

    Section 60A and 60B of the Income Tax Ordinance, 2001 has not been amended to allow contribution to Provinces in respect of WWF and WPPF.

    The OICCI recommended:

    In line with International and Regional practices a uniform service tax law may be drafted and agreed upon by the tax authorities of the Provinces and Federal Government, for implementation in their respective jurisdiction. Furthermore, a uniform tax return may also be introduced for the taxpayers.

    The above points can be addressed by taking the following steps which will lead to effective management and expansion of the tax base:

    i. A policy board comprising of the Chairmen of the Federal and Provincial revenue authorities (FBR, PRA, KPRA, BRA and SRB) should be formed to ensure synchronization of the policies, standard tax rates, basis of apportionment of revenues and removal of all anomalies/ conflicts between the laws of the different revenue boards (for example issues of jurisdiction, sales tax on toll manufacturing, clarity on jurisdiction and deductibility of WPPF/WWF expenses paid to the provinces).

    ii. Revenue authorities should decide the basis of levy of indirect tax, which can be origination or termination, to establish jurisdiction of taxation of services;

    iii. To promote transparency and uniform interpretation, a ‘Standard schedule’ should be introduced covering all services along with standard Tariff Headings and Standard definitions. The standard schedule should be adopted by all provinces and Islamabad Capital Territory while levying sales tax on services in their respective jurisdictions

    iv. One return may be filed with identification of provincial head of account and direct deposit of share of tax of each province.

    v. SRB to resolve with FBR for appropriate amendment in IT Ordinance, 2001 to ensure that payments made to the provincial tax authorities on account of WWF and WPPF are allowed as tax deductible expense.

    vi. SRB should take up the matter with FBR for the proper mechanism for adjustment of input tax on franchise service payable in reverse charge mode.

  • Adjustable advance income tax recommended on sale of agri produce

    Adjustable advance income tax recommended on sale of agri produce

    KARACHI: The tax authorities have been recommended to collect adjustable advance income tax on sale of agriculture produce in order to broaden tax base.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for provincial budget 2020/2021 submitted to Sindh government, recommended that adjustable withholding tax should be introduced on sale of agricultural produce, such as sugar cane, wheat, cotton and others.

    The OICCI said that as per the constitution of Pakistan, right of taxing income lies with the federal government except income from agriculture which is taxable under the respective provincial laws.

    Agriculture related activities contribute approximately 20 percent of the overall national production. However, the collection of agricultural income tax is estimated to be even less than 1 percent of total collection of Federal and Provincial taxes.

    The disparities in tax levies between different incomes segments need to be addressed.

    “Therefore Sindh government/revenue authorities should take appropriate measures to increase revenue collection from the agriculture sector.”

    The original rationale of keeping agriculture out of tax net to facilitate small agriculturists is not applicable, due to non-implementation of land reforms, and the benefit of the tax exemption is being availed, as per common perception, by big landowners earning huge incomes and unscrupulous elements by transfer of income and wealth to businesses fronting as agriculture sector.

    Some of the key issues related to agriculture income are identified as follows:

    Principle of Non-Discrimination: In principle, income from all sources, including agriculture, if exceeding the minimum threshold applicable for other sources of income should be taxed without any discrimination.

    Determination Basis: A transparent, easily understandable and applicable manner of determining such income should be designed.

    Flexible Income Based System: The current agricultural income tax has effectively become a land tax, based on land holding, that leads to the perception that there is no tax on agricultural activities.

    Identification and Linkage with National Tax Number: There is no identification of even the small number of agricultural income taxpayers as they are not on the national tax number (NTN) system.

    The OICCI recommended:

    Income Based System: At present, tax is payable on ‘land holding’ or ‘net income’ whichever is higher. However, the manner of determination of net income is complicated and therefore in almost 100 percent of the cases tax is received on land holding basis. Therefore taxability of income on land holding should be abolished and taxes collected on ‘net income basis’.

    There are only around 10 to 15 agencies and enterprises which acquire such crops. The advance tax should be adjustable against income tax payable on net income basis. Rates of withholding and the threshold for the same should be aligned with other products – for example any payment exceeding Rs 25,000 should be subject to advance tax at the rate of 1 to 3 percent as the case may be. Federal taxation system may be used for such collection on behalf of the provincial government in the same manner as is being done in other cases by the provincial government.

    Link and Interface with the National Tax Number: All persons holding land should be required to obtain a Provincial Tax Number (PTN), like the NTM maintained by FBR, modified by adding one or two digits so as to identify that source of income is agriculture.

    Definition of Agricultural Activity: Definition of agricultural income should be amended to include all agricultural activities like non-corporate dairy farming, poultry etc.

    Rent for the Use of Agricultural Land: Under the specific provision, the rent for use of agricultural land, which is general practice, especially for large landowners, is an agriculture income. There is effectively no mechanism to ensure completeness of recovery of taxes from such receipts. Such rent income should be subject to same rate of tax as is currently in vogue on property income under the FBR system.

  • Changes to CNIC condition likely in budget

    Changes to CNIC condition likely in budget

    ISLAMABAD: Federal Board of Revenue (FBR) may introduce changes to mandatory CNIC (Computerized National Identity Card) condition in the upcoming budget 2020/2021 in to facilitate registered taxpayers.

    At present unregistered purchasers, excluding end-consumers, of above Rs50,000 are required to provide a copy of CNIC in order bring the sales into the documented economy.

    The business community raised concern over the low purchase limit. The sources said that the FBR is considering to enhance the limit to Rs200,000.

    In the last budget the government made it mandatory for registered persons to obtain CNIC of unregistered person at the time of sale above Rs50,000.

    The amendment was brought to Section 8 and Section 23 of Sales Tax Act, 1990 under which in case of invoices issued without CNIC or National Tax Number (NTN) of buyer, related input tax was disallowed on prorate basis except in cases where supplies are made to end consumers not exceeding Rs. 50,000.

    Condition of providing CNIC number of buyers on invoices, to claim input tax adjustment, have benefitted unorganized sector more than the already documented sector.

    Due to the condition, buyers prefer to purchase from unregistered suppliers as they do not ask for CNIC numbers. On the other hand, registered persons and corporate entities, who were already facing resistance from buyers for charging sales tax and further tax, have been facing severe deterrence from buyers who are resisting provision of CNIC numbers.

    Consequently, the compliant taxpayers are forced to either provide CNICs of their employees, relatives, truck drivers, etc. or to shut down their businesses as they are at a competitive disadvantage with the unorganized sector.

    This condition has also encouraged cash economy as taxpayers have been withdrawing their money from banks and are dealing in cash only.

    According to a report despite massive changes in sales tax laws in Finance Act 2019 to force and mandate sales tax registration and filing of sales tax returns, there is only about 7 percent annual increase in sales tax returns filed from 146,922 return filers in June 2019 to 158,206 in December 2019.

    Out of 11,284 additional returns, only 2,769.are payment returns while rest is Nil and Null returns.

    The condition of CNIC on unregistered sales has been introduced in the Finance Act 2019 but it was not implemented in July 2019. While, from August 2019 to January 2020, the condition was relaxed through agreement between shopkeepers and FBR.

    The FBR sources said that business community had also recommended changes in provisions related to CNIC conditions.

    Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021 suggested to enhance the purchase limit to Rs100,000.

    It also pointed out that CNIC condition has been causing cashflow issues since its implementation which will further intensify during the current pandemic of CoVid-19, especially for registered taxpayers.

    Therefore, the FPCCI sought a general amnesty through legislation in the next budget regarding CNIC condition for the whole tax year 2020 starting from August 2019 to June 2020.

  • Tax credit for final, minimum regimes may be withdrawn

    Tax credit for final, minimum regimes may be withdrawn

    ISLAMABAD: The tax authorities may withdraw tax credit available to taxpayers falling in final and minimum tax regimes, sources in Federal Board of Revenue (FBR) said.

    The sources said that the Large Taxpayers Unit (LTU) Karachi has submitted its proposals for budget 2020/2021 and recommended withdrawal of tax credit for final tax and minimum tax regimes.

    The sources said that the elimination of tax credit likely to generate Rs5 billion during the next fiscal year.

    The LTU Karachi suggested amendment in Section 65B, 65D and 65E of Income Tax Ordinance, 2001 to withdraw tax credit for taxpayers falling in minimum tax and final taxation.

    The LTU Karachi said that allowing tax credits against minimum tax and final taxes payable under the Ordinance is against the principal of fairness and final tax regime.

    It further said that the withdrawal of tax credit to such taxpayers would help the revenue body to get additional Rs5 billion during the next fiscal year.

  • FBR advised to allow examination before filing GDs

    FBR advised to allow examination before filing GDs

    KARACHI: Federal Board of Revenue (FBR) has been advised to allow examination/ weighment should be allowed before filing goods declaration (GDs) in order to verify contents of containers.

    Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for budget 2020/2021 submitted to the FBR said that as per proviso of para 1 Section 79 of Customs Act, 1969, in case of used goods, before filing of goods declaration, the owner can make a request to an officer of customs to permit the owner to examine the goods and thereafter make entry of such goods by filing a goods declaration.

    “As per KYOTO Convention of WCO guidelines Standard 3.9 “Before lodging the goods declaration the declarant shall be allowed, under such conditions as may be laid by the customs (a) to inspect the goods; and (b) to draw samples,” the FPCCI said.

    The apex trade body proposed that examination / weighment may be allowed before filing of goods declaration, in all cases, where the owner is in doubt about the contents of the consignment, especially in cases of machinery, fabrics, article of plastic and food items etc.

    “Keeping in view the above facts, the weighment / examination before filing of goods declaration may be allowed for all class of goods,” the FPCCI advised.

    The FPCCI also highlighted an issue related to time duration related to decision of cases as heavy demurrages were hampering economic activities.

    The FPCCI said that as per sub-section 3 of Section 179 of Customs Act 1969 (IV of 1969) the cases are required to be decided within 90 days of the issuance of show cause notice or within such period extended by the collector for which reason shall be recorded in writing, but such extended period shall in no case exceed sixty days.

    The FPCCI proposed that the period specified to decide the cases under sub-section 3 of section 179 should be fifteen working days instead of existing period i.e. 90 days and further the extended period of 60 days should be reduced to 07 working days as an estimated cost Rs.15000 to 20000 per day is incurred on a 40 ft container.

    Therefore, to reduce the cost of doing business and trade facilitation the cases should be decided within 15 working days.

  • FPCCI demands elimination of discretionary powers of tax officials

    FPCCI demands elimination of discretionary powers of tax officials

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has demanded withdrawal of discretionary powers of tax officials including multiple selection of audit and entering business premises.

    Mian Anjum Nisar, President and Zakaria Usman, Convener, Budget Advisory Council of the FPCCI urged the FBR to withdraw the discretionary powers vested with the tax officials to avoid their misuse, provide relief to the taxpayers, simplify taxation law and restore the diminishing confidence of the assessees in the taxation laws – a pre-requisite for success of any scheme.

    The proposal is made as a part of the FPCCI presentation being made to the concerned quarters including Dr. Hafeez Shaikh, Advisor to the PM on Finance and Revenue, Razak Dawood, Adviser to PM for Commerce, Textile and Investment and Nausheen Javaid Amjad, Chairperson, FBR for incorporation in the forthcoming Federal Budget 2020-2021.

    He added that the FPCCI after identifying a series of such provisions vesting discretionary powers had given concrete proposals to safeguard the interest of the taxpayers against the misuse of discretionary powers.

    Regarding discretionary powers of conducting Multiple Audits / Amendment of Assessment under Sections 177, 214C and 122of Income Tax Ordinance, they elaborated, “Although a return filed, U/S 114 of ITO 2001, within time limit does qualify for Universal Self-Assessment Scheme (USAS) and considered to be Assessment Order deemed to have been passed U/S 120(1) of the Ordinance on the date of filing the return, but even then it may be amended as many times as may be necessary by the Inland Revenue officials within 5 years from the end of the financial year in which the return is filed which results in multiple tax assessments”.

    They therefore, proposed that the power to select the return of income may rest only with the FBR who is already having the powers to select the audit cases randomly through Computer U/S 214C of the Ordinance.

    However, they added, “In case where definite evidence is available with the department then the audit be initiated upto the transaction in question only”.

    These discretionary powers provide sufficient incentives to the Inland Revenue Officials to serve Audit Notices to the commercial importers and other such assessees who have already discharged their tax liability as full and final at the time of clearance of goods at customs stage and as such promote direct contact between a taxpayer and tax officials which is against the government policy as it encourage tax evasion and corruption.

    The FPCCI Chief Mian Anjum Nisar also lamented posting of Inland Revenue Officer at Business Premises under Section 40B of Sales Tax Act, 1990 to monitor production, sales of goods, stock position etc as it is out dated and unnecessary in the modern era of computerization and available methods of monitoring the entire production and supply chain.

    He argued, “It gives a perception of anti-business and anti-investment government policies, creates harassment and tantamount to revival of supervise clearance scheme of Central Excise in Sales Tax Act, 1990”.