1. Slab rates for super tax introduced for taxpayers having income in excess of Rs 150 million. The Bill earlier proposed such threshold at Rs 300 million at a standard rate of 2 per cent.
2. Super tax rate is enhanced to 10 per cent for certain specified sectors for tax year 2022 whereas for banking companies such enhanced rate of super tax will be applicable for tax year 2023.
6. The revised slab rates for salaried individuals introduced by setting below taxable limit at Rs 600,000 as against the original proposal of Rs 1,200,000. Further, the reduction in tax rates proposed in Finance Bill has not only been reversed but the tax incidence has also been enhanced (as compared to position prior to Finance Bill).
7. The right to carry forward minimum tax retained, however, the period is reduced from five to three years.
8. The tax credit on contributions to Voluntary Pension Scheme retained.
9. The resident individual will now also include a citizen of Pakistan who was not in any one foreign country for more than 182 days.
10. The credit for income covered by final tax in respect of assets declared in wealth statement or books of account in excess of imputable income is inter alia subject to submission of audited financial statements.
ISLAMABAD: Small retailers or a shopkeepers have to pay double the amount of fixed tax in case of not appearing on the Active Taxpayers List (ATL).
The federal government through the Finance Bill, 2022 introduced a scheme of fixed tax for small retailers.
However, the National Assembly approved the bill with certain changes in the fixed tax regime. The Finance Act, 2022 now has binding on the small retailer to register themselves with the tax department and appear on the Active Taxpayers list (ATL) in order to avail the fixed tax facility.
In sub section 9, Section 3 of Sales Tax Act, 1990, a new proviso has been inserted through the Finance Act, 2022, which stated:
“Provided that the above rates of tax shall be increased by one hundred percent if the name of the person is not appearing in the Active Taxpayers List issued by the Board under section 181A of the Income Tax Ordinance, 2001 on the date of issuance of monthly electricity bill.”
Similarly, a new Section 99A has been inserted to the Income Tax Ordinance, 2001 and approved through the Finance Act, 2022, which is as follow:
“99A. Special provisions relating to payment of tax through electricity connections.
(1) Notwithstanding anything contained in the Ordinance, a tax shall be charged and collected from retailers other than Tier-I retailers as defined in Sales Tax Act, 1990 (VII of 1990) and specified service providers on commercial electricity connections at the rates provided in clause (2A) of Division IV, Part IV of the First Schedule.
(2) A retailer who has paid sales tax under sub-section (9) of section 3 of Sales Tax Act, 1990 (VII of 1990), shall not be required to pay tax under this section and the sales tax so paid shall constitute discharge of tax liability under this section.
(3) The tax collected or paid under this section shall be final tax on the income of persons covered under this section in respect of business being carried out from the premises where the electricity connection is installed.
(4) For the purposes of this section, Board with the approval of the Minister in-charge may issue an income tax general order to-
(a) provide the scope, time, payment, recovery, penalty, default surcharge, adjustment or refund of tax payable under this section in such manner and with such conditions as may be specified.
(b) provide record keeping, filing of return, statement and assessment in such manner and with such conditions as may be specified;
(c) provide mechanism of collection, deduction and payment of tax in respect of any person; or
(d) include or exempt any person or classes of persons, any income or classes of income from the application of this section, in such manner and with such conditions as may be specified.”
The rate of tax leviable under section (99A), and collectable under sub section (1A) of Section 235 shall be as under:-
Gross amount of monthly bill
Tax
Where the amount does not exceed Rs. 30,000
Rs. 3000
Where the amount exceeds Rs. 30,000 but does not exceed Rs. 50,000
Rs. 5000
Where the amount exceeds Rs. 50,000 but doesnot exceed Rs. 100,000
Rs. 10,000
Specified retailers and service providers through Income Tax General Order
KARACHI: About four years jail term has been prescribed for tempering data of Pakistan Single Window (PSW).
According to Finance Act, 2022 certain amendments have been made to Customs Act, 1969 to prescribed fine and penalty for attempting to tamper or making unauthorized entry to the online data of PSW.
Offence: If any person makes or attempts to make unauthorized access to information, data or personal details of registered user of Pakistan Single Window system or systems connected or ancillary thereto;
Penalty: Imprisonment which may extend up to six months or with fine which may extend to one hundred thousand rupees or with both.
Offence: If any person makes or attempts to make unauthorized copy, transmission or cause to transmit any data, information or detail in relations to Pakistan Single Window system or systems connected or ancillary thereto;
Penalty: Imprisonment which may extend upto six months or with fine which may extend to one hundred thousand rupees or with both.
Offence: If any person makes unauthorized interference, or attempt to interfere, damage or attempt to damage any part of whole of the Pakistan Single Window system or data or system connected to or ancillary thereto;
Penalty: Imprisonment which may extend to three years or fine which may extend to five hundred thousand rupees or with both.
Offence: If any person makes or attempts to make use of any information system, device or data to make any illegal claim or title or cause any person to part with property or to enter into any express or implied contract or intent to commit fraud by any input, alteration, deletion or suppression of data, resulting in unauthentic data with the intent that such data be considered or acted upon for legal purpose, as if it were authentic in relations to Pakistan Single Window system or Systems connected or ancillary thereto;
Penalty: Imprisonment which may extend to four years or fine which may extend to one million rupees or with both.
Offence: If any person uses, makes, supplies, retains, obtains device, system or software for offences under section 13 of the Pakistan Single Window Act, 2021 (III of 2021);
Penalty: Imprisonment which may extend to six months or with fine which may extend to one hundred thousand rupees or with both.
Offence: If any person obtains, sells, process, uses or transmits another person’s Unique User Identifier or makes an attempt thereof without authorization;
Penalty: Imprisonment which may extend to four years and fine which may extend to one million rupees or with both.
Offence: If any person tampers with or attempts to tamper with, alters, reprogrammes any Pakistan Single Window system or system connected or ancillary thereto for unauthorized use;
Penalty: Imprisonment which may extend to four years and fine which may extend up to one million rupees or with both and any devices or systems used in offence shall be liable to confiscation.
Offence: If any person writes, offers, makes available, distributes or transmits a malicious code or abets in the same, with intent to cause harm to Pakistan Single Window system or data resulting in or intending to result in corruption, destruction, alteration, suppression, theft or loss to the Pakistan Single Window system or data, or any attempt thereof.
Penalty: Imprisonment for a term which may extend to four years and fine which may extend to five million rupees or with both.
The National Assembly passed the Finance Act, 2022 that empowers the government to enforce the laws that were amended through federal budget 2022/2023.
In this regard amendment has been made to Petroleum Products (Petroleum Levy) Ordinance, 1961.
It is worth mentioning that the previous PTI government had not imposed a petroleum levy in order to provide petroleum products at cheaper rates.
However, the current coalition government led by PML-N in its budget 2022/2023 announced on June 10, 2023 estimated collection of Rs750 billion during the current fiscal year.
ISLAMABAD: The Federal Board of Revenue (FBR) has said all pressing demands of IT sector have been accepted in the budget 2022/2023.
In a statement issued on Monday, the FBR has taken an exception to a statement issued by Pakistan Software Houses Association (P@SHA) dated June 25, 2022.
It has reported some facts regarding the exemptions/tax incentives / facilitation given to the IT and IT enabled export services through the Federal Budget 2022, tabled in the National Assembly on June 10, 2022.
Clarifying its position, FBR has stated that in the wake of the Budget, some important meetings were held with the representatives of IT sector through Pakistan Software Export Board (PSEB) and also with Federal Minister for IT, Syed Amin-Ul-Haque, and his team. During these meetings, almost all the key demands of the IT Sector were thoroughly deliberated and largely agreed.
FBR has further clarified that the amended Finance Bill will incorporate some tangible measures to facilitate the exporters of IT and IT enabled services. Almost all the pressing demands of the IT Sector have been accepted. The same have been announced in the speech by the Federal Finance Minister on 24th June, 2022 on the floor of the National Assembly.
i) The sector has been provided a reduced tax rate of 0.25% on their export proceeds which is a quarter of the 1% export tax rate provided to all other exporters of goods.
ii) The sector has been removed from tax credit regime to simplify the tax filing system and to remove hassles of compliance that were earlier required to make them eligible for 100% tax credit to claim tax exemption.
iii) The requirements of filing of Withholding Tax Statements and Sales Tax return have been liberalized for the sector and only those who are required under the law will file WHT Statements or the Sales Tax Returns. For individuals having turnover up to Rs. 100 m per year there is no requirement to file WHT Statement or to deduct tax.
iv) The definition of IT and IT enabled services as provided under the Income Tax Ordinance, 2001 has been liberalized by expanding its scope by making suitable amendments and all inclusive, and “not limited to” definition has been provided.
v) IT and IT enabled services exporters have been provided the facility of obtaining Sales Tax refund in respect of any Sales Tax that has been paid as their input on computers, laptops, stationary other items etc. This facility is not available under the Provincial Sales Tax Law.
vi) The demand of the IT Sector of reviving tax exemption for Venture Capital Fund has been accepted and a new provision has been created for providing Income Tax Exemption to the Venture Capital Fund for three years.
It is pertinent to mention that the above exemptions and tax facilitations to boost exports of IT and IT enabled services were agreed and discussed in the meetings with the Federal Minister for IT, Syed Amin-Ul-Haque, and the representatives of the PSEB. It appears that the above statement given by P@SHA is on account of lack of information about the outcome of the decisions taken by the Honorable Finance Minister in that meeting and announced accordingly.
ISLAMABAD: The salaried class in Pakistan is in shock over the recent changes announced by the government and revert its decision to exempt income of salaried persons up to Rs1.2 million.
The government on June 10, 2022 presented the federal budget 2022/2023 announced major tax relief for salaried class by enhancing threshold from Rs600,000 to Rs1.2 million. Besides, the government also proposed to reduce the number of income slabs.
Through the Finance Bill, 2022 the government on June 10, 2022 proposed the following rates of tax on salary income:
Salary income slabs and tax rates proposed through Finance Bill, 2022:
S#
Taxable Income
Rate of Tax
(1)
(2)
(3)
1.
Where taxable income does not exceed Rs. 600,000
0
2.
Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000
Rs. 100
3.
Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,400,000
7% of the amount exceeding Rs. 1,200,000
4.
Where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,600,000
Rs. 84,000 + 12.5% of the amount exceeding Rs. 2,400,000
5.
Where taxable income exceeds Rs. 3,600,000 but does not exceed Rs. 6,000,000
Rs. 234,000 + 17.5% of the amount exceeding Rs. 3,600,000
6.
Where taxable income exceeds Rs. 6,000,000 but does not exceed Rs. 12,000,000
Rs. 654,000 + 22.5% of the amount exceeding Rs. 6,000,000
7.
Where taxable income exceeds Rs. 12,000,000
Rs. 2,004,000 + 32.5% of the amount exceeding Rs. 12,000,000.”
However, the government has taken a big U-turn and now proposed amendment to the Finance Bill, 2022 and decided to withdraw the exempt income threshold.
As per sources the government has proposed revision in salary tax rates for tax year 2023 effective from July 01, 2022. The following is the proposed rates for next tax year:
01. Where taxable income tax does not exceed Rs600,000: the tax rate should be zero.
02. Where taxable income exceeds Rs600,000 but does not exceed Rs1,200,000: the tax rate should be 2.5 per cent of the amount exceeding Rs1,200,000.
03. Where taxable income exceed Rs1,200,000 but does not exceed Rs2,400,000: the tax rate should be Rs15,000 + 12.5 per cent of the amount exceeding Rs1,200,000.
04. Where taxable income exceeds Rs2,400,000 but does not exceed Rs3,600,000: The tax rate should be Rs165,000 + 20% of the amount exceeding Rs2,400,000.
05. Where taxable income exceeds Rs3,600,000 but does not exceed Rs6,000,000: the tax rate should be Rs405,000 + 25 per cent of the amount exceeding Rs3,600,000.
06. Where taxable income exceeds Rs6,000,000 but does not exceed Rs12,000,000: the tax rate should be Rs1,005,000 + 32.5 per cent of the amount exceeding Rs6,000,000.
07. Where taxable income exceeds Rs12,000,000: the tax rate should eb Rs2,955,000 + 35 per cent of the amount exceeding Rs12,000,000.
The existing rate of income tax on the salary persons for tax year 2022 (July 01, 2021 – June 30, 2022) is as follow:
(2) Where the income of an individual chargeable under the head “salary” exceeds seventy-five per cent of his taxable income, the rates of tax to be applied shall be as set out in the following table, namely:—
1. Where taxable income does not exceed Rs. 600,000: 0%
2. Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000: 5% of the amount exceeding Rs. 600,000
3. Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000: Rs. 30,000 plus 10% of the amount exceeding Rs. 1,200,000
4. Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000: Rs. 90,000 plus 15% of the amount exceeding Rs. 1,800,000
5. Where taxable income exceeds Rs.2,500,000 but does not exceed Rs. 3,500,000: Rs. 195,000 plus 17.5% of the amount exceeding Rs. 2,500,000
6. Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000: Rs. 370,000 plus 20% of the amount exceeding Rs. 3,500,000
7. Where taxable income exceeds Rs. 5,000,000 but does not exceeds Rs. 8,000,000: Rs. 670,000 plus 22.5% of the amount exceeding Rs. 5,000,000
8. Where taxable income exceeds Rs. 8,000,000 but does not exceeds Rs. 12,000,000: Rs. 1,345,000 plus 25% of the amount exceeding Rs. 8,000,000
9. Where taxable income exceeds Rs. 12,000,000 but does not exceeds Rs. 30,000,000: Rs. 2,345,000 plus 27.5% of the amount exceeding Rs. 12,000,000
10. Where taxable income exceeds Rs. 30,000,000 but does not exceeds Rs. 50,000,000: Rs. 7,295,000 plus 30% of the amount exceeding Rs. 30,000,000
11. Where taxable income exceeds Rs. 50,000,000 but does not exceeds Rs. 75,000,000: Rs. 13,295,000 plus 32.5% of the amount exceeding Rs. 50,000,000
12. Where taxable income exceeds Rs. 75,000,000 Rs. 21,420,000 plus 35% of the amount exceeding Rs. 75,000,000.
ISLAMABAD: Pakistan on Friday introduced a fixed tax regime for jewelers and decided to impose the fixed tax on gold shops measures a certain area.
Finance Minister Miftah Ismail while addressing on the floor of the house, stated that only twenty two gold shops out of thirty thousand are registered.
“A fixed tax will be levied on the gold shops measuring up to three hundred square feet whilst sales tax on big jewellery shops has been reduced from seventeen to three percent,” the finance minister said.
He further said withholding tax on sale of jewellery has been reduced to one percent from the current four percent.
Ismail said a fixed tax will also be imposed on car dealers, restaurants and those constructing houses. He said the tax has been imposed on income and not consumption. Therefore, these measures will not cause inflation.
The minister said that the government has decided to levy super tax on the affluent class to reduce budget deficit in order to end reliance on foreign assistance and take the country towards economic sovereignty.
Winding up discussion on the budget for the next fiscal year, he said individuals and companies earning 150 million rupees will have to pay one percent additional tax, two percent additional tax on 200 million rupees income, three percent on 250 million rupees income and four percent additional tax on 300 million rupees income. He said this tax will be for a period of one year.
The Minister for Finance said that thirteen high earning sectors including oil and gas, cigarettes, cement, LNG terminals have also been identified for imposition of ten percent super tax on income of three hundred million rupees. He clarified that this will be one time tax.
Miftah Ismail said that there are nine million retail shops and it has been decided to bring 2.5 million of them to the tax net.
The Minister said after incorporating various suggestions and measures the tax revenue target has increased to 7470 billion rupees for the next fiscal year. He said 4373 billion rupees will be distributed to provinces as their share.
The Finance Minister said that the government has tried to reduce burden on the weak segments of the society. He said that sugar, flour and ghee will be provided to the people at subsidized rates throughout the year at the Utility Stores. He informed the House that one million people have so far registered to avail Sasta Petrol and Sasta Diesel scheme.
The Minister also announced incentives for different sectors. He said the condition of withholding tax and statement for IT companies with the revenue of less than eighty million rupees will be exempted. He said a tax being charged from Oil Marketing Companies at the rate of 0.75 percent has been brought back to 0.5 percent. He said Overseas Pakistanis having NICOP card will be included in the active tax payers’ list. He said income on the plots of the families of martyrs and war injured has been exempted from tax. He said relief has also been given to leather and surgical goods.
The Finance Minister said the government has safe the country from default and know the country will be taken towards development. He said the previous government took an unprecedented loan of twenty-thousand billion rupees in four years. He questioned how a country can remain economically sovereign by taking huge loan that is why we have to revive the stalled IMF program. He said difficult decisions were taken in the national interest after consultations with all the allied parties. He said given the current account deficit which will remain 17.50 billion dollars, we have to agree to the IMF recommendations to safe the country from default.
Miftah Ismail said that this is the most pro-farmer budget ever presented in the last two decades. He said this farmer friendly budget will accrue long term benefits for the country and help bolster agri-products, besides achieving self-sufficiency in edible oil, wheat and other crops.
Talking about recommendations made by the Senate, he said most of the suggestion of the Upper House has been incorporated. He said Senate’s recommendations on pharmaceutical goods will be entertained in the next budget.
A high-level committee of Pakistan’s leading businessmen, tasked with reviewing budget anomalies, has formally recommended lifting the ban on the import of luxury items.
KARACHI: A leading chartered accountancy firm has highlighted tax measures taken by the government through Finance Bill, 2022.
According to PwC A. F. Ferguson&Co. the Finance Bill 2022 represents the First Budget of the current coalition government which has been announced in extremely difficult economic conditions. Due to current account deficit and shortfall in local tax revenue, there has been an increased pressure on the government to adopt certain strict fiscal measures. At the same time, due to higher cost of inflation and cost of living, the government is expected to take some concrete economic decisions which could provide relief to the common man. In the above backdrop, the current budget therefore contains certain proposals which are aimed to increase tax revenue in a manner that only the affluent or well to do class of the country is affected and the burden of such taxes is not passed on to the lower strata of society.
Important measures announced by the Government are listed as under:-
1. Poverty Alleviation tax on persons earning income above Rs 300 million at the rate of 2%.
2. General rate of tax on banking companies enhanced from 35% to 45%.
3. Deemed rental income concept introduced to collect 1% tax on Fair market value of certain immovable properties of resident persons situated in Pakistan.
4. Capital gains tax provisions relating to immovable properties situated in Pakistan revamped aiming to collect tax on sale of open plots held for a period of less than six years.
5. Capital gains on immovable properties held outside Pakistan to be taxed at normal rate irrespective of holding period.
KARACHI: Federation of Pakistan Chamber of Commerce and Industry (FPCCI) has identified anomalies in the federal budget 2022-2023.
In a statement issued on Wednesday, Shabbir Mansha, Acting President FPCCI, expressed his profound concerns on the glaring anomalies in the federal budget 2022 – 2023.
“We have noticed anomalies in custom duties, regularity duties, income tax and sales tax,” he added.
Mansha noted that turnover tax of 1.25 percent for traders, distributors and dealers is unbearable as profit margins are barely 2 percent in market sales and the turnover tax will continue to discourage SMEs to be registered in sales tax.
Acting FPCCI Chief pointed out that 4.5 percent withholding tax on local sale; but, normally trade margins are between 2 – 3 percent and there is no way a business can absorb 4.5 percent withholding tax and continue to operate viably. Therefore, sellers find it more viable to buy goods at 20 percent taxes; when accounted for additional duty of 3 percent on commercial importers on top of 17 percent sales tax and delist from the sales tax.
He demanded that disparities in the rates of sales tax on raw materials at import stage between commercial and industrial importers. The FPCCI chief maintained that under section 8 (b) of sales tax act 1990, input tax adjustment in excess of 90 percent of the output tax is not allowed. This condition should be withdrawn; as the same has been already extended to companies operating in various sectors. Furthermore, withholding tax on import of raw materials should be the same for industrial and commercial importers.
Mansha has proposed that at the stage of deregistering from the sales tax system, the condition of prior audit should be withdrawn to facilitate exit after three years; provided a company, individual or association of persons (AOP) was filling a null return for the past five years due to discontinuation of their businesses.
On the withdrawal of NIC condition through amending the section 23(I)(b), FPCCI has appreciated the government; but, maintained that the Finance Bill 2022 should categorically state that no NIC would be required for sales to non-filers.
Mansha also raised the issue of 12 percent tax under section 233(1). Additionally, freight and transportation charges under section 153(1)(b) at 3 percent should only be applied on final tax region.
