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Category: Exclusive

  • All tax exemptions to have sunset clause: MTEF

    All tax exemptions to have sunset clause: MTEF

    ISLAMABAD: The ministry of finance on Monday launched Medium-Term Economic Framework (MTEF), which envisaged that all permanent exemptions to be withdrawn or have a sunset clause.

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

    In addition, even the revenue objective is compromised by large scale exemptions.

    To correct this shortcoming, the government intends the following:

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

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

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

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

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

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

  • Amnesty Scheme 2019 likely be introduced on April 15

    Amnesty Scheme 2019 likely be introduced on April 15

    ISLAMABAD: The government likely to introduce new tax amnesty scheme 2019 for undeclared foreign and local assets from next week.

    In this regard a briefing was give to Prime Minister Imran Khan on Monday.

    According to the sources the amnesty would be introduced from April 15, 2019 and will continue till June 30, 2019.

    The amnesty scheme may be announced through Presidential Ordinance and subsequently passed I Finance Act, 2019 in May or June this year.

    According to documents, all companies and individuals would be qualified for the scheme except: holders of public office since January 01, 2000, their spouses, children, brothers and sisters or lineal ascendant or descendant; proceeds derived from commission of a criminal offence are excluded; cases pending before a court of law with the exception of older pending litigation.

    The amnesty scheme would have conditions, included:

    — filing of income tax returns or revision thereof for 2018 and payment of tax.

    — filing/revising sales tax returns for last completed tax period and declaring last 5 years undisclosed sales and payment of three percent sales tax/Federal Excise Duty.

    –Depositing the case declared in a bank account and retaining the balance till June 30.

    — Gold and precious stones declaration shall not exceed value of Rs5 million.

    According to valuation of assets for the amnesty, the Benami assets would be allowed to declare at 10 percent. Foreign liquid assets repatriated into Pakistan at five percent.

  • Sales Tax Act 1990: buyer, seller jointly responsible for unpaid tax

    Sales Tax Act 1990: buyer, seller jointly responsible for unpaid tax

    KARACHI: Where an amount of tax unpaid in supply chain then registered buyer and seller are both responsible for paying to national exchequer.

    According to updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), the Section 8A explained joint and several liability regarding unpaid tax.

    Section 8A: Joint and several liability of registered persons in supply chain where tax unpaid.

    Where a registered person receiving a taxable supply from another registered person is in the knowledge or has reasonable grounds to suspect that some or all of the tax payable in respect of that supply or any previous or subsequent supply of the goods supplied would go unpaid, of which the burden to prove shall be on the department such person as well as the person making the taxable supply shall be jointly and severally liable for payment of such unpaid amount of tax:

    Provided that the Board may by notification in the official gazette, exempt any transaction or transactions from the provisions of this section.

    Section 8B: Adjustable input tax.

    Sub-Section (1): Notwithstanding anything contained in this Act, in relation to a tax period, a registered person shall not be allowed to adjust input tax in excess of ninety per cent of the output tax for that tax period:

    Provided that the restriction on the adjustment of input tax in excess of ninety percent of the output tax, shall not apply in case of fixed assets or Capital goods:

    Provided further that the Board may by notification in the official Gazette, exclude any person or class of persons from the purview of sub-section (1).

    Sub-Section (2): A registered person, subject to sub-section (1), may be allowed adjustment or refund] of input tax not allowed under sub-section (1) subject to the following conditions, namely:

    (i) in the case of registered persons, whose accounts are subject to audit under the Companies Ordinance, 1984, upon furnishing a statement along with annual audited accounts, duly certified by the auditors, showing value additions less than the limit prescribed under sub-section (1) above; or

    (ii) in case of other registered persons, subject to the conditions and restrictions as may be specified by the Board by notification in the official Gazette.

    Sub-Section (3): The adjustment or refund of input tax mentioned in sub-sections (2), if any, shall be made on yearly basis in the second month following the end of the financial year of the registered person.

    Sub-Section (4): Notwithstanding anything contained in sub-sections (1) and (2), the Board may, by notification in the official Gazette, prescribe any other limit of input tax adjustment for any person or class of persons.

    Sub-Section (5): Any auditor found guilty of misconduct in furnishing the certificate mentioned in sub-section (2) shall be referred to the Council for disciplinary action under section 20D of Chartered Accountants, Ordinance, 1961 (X of 1961).

  • Accountability framework for FBR officials suggested to make tax audit transparent

    Accountability framework for FBR officials suggested to make tax audit transparent

    KARACHI: Pakistan Tax Bar Association (PTBA) has said that there should be accountability framework for tax officers in order to make audit transparent.

    Abdul Qadir Memon, President, PTBA in a message to PTBA Tax Journal outlined eight-point recommendations to tax authorities for making audit system more transparent in order to boost confidence of taxpayers on the authorities.

    Memon said that the accountability framework and service standards should be introduced for the employees of Federal Board of Revenue (FBR), more particularly for the revenue officers in respect of quality of assessment order and standing of their orders in the test of appeal including but not limited to final revenue generated by the exchequer.

    The PTBA said that laws should be formulated in such a manner that there is a clarity, certainty and finality of an assessment, which has been universally recognized as hallmark of audit and an assessment.

    Following are suggestions for effective audit selection mechanism and amendment of assessment based on cogent, honest, justifiable with reasoning and intelligible nexus with the tax affairs of the taxpayers and capacity to pay tax:

    — To place sophisticated tax intelligence system to gather data from withholding collection of taxes and third party information collected on the basis of transactions conducted through computerized national identity cards (CNICs).

    — Cases are selected by the FBR only on the basis of defined risk areas or red flags trigger tax audit. The field forces are restricted to conduct audit of only such cases.

    — The amendment of assessment is framed by the field forces under the following circumstances guided the rules of justice, equity and judicial conscious:

    i. Any income chargeable to tax or sales has escaped assessment, under assessed, assessed at low rate or has been misclassified on the basis of definite information.

    ii. The deemed assessment is erroneous in so far as it is prejudicial to the interest of revenue.

    — In line with global practice (USA, UK, New Zealand, Australia, Canada) to provide a more supportive legislative and administrative environment for existing self-assessment arrangements and to make the taxation system fairer and more certain, it is imperative that a system of Binding Public and Private Ruling for Resident and Non-Residents be introduced.

    — The commissioner should not be empowered to amend the assessment as many times as may be necessary on the same issue or point, which has already been subject matter of reassessment or further assessment proceedings.

    — The time limit for amendment of assessment should be reduced to two years from the end of the financial years in which the commissioner has issued the original order to the taxpayer and one year in case of amended assessment; whichever is later.

    — Relevant laws under the provisions of Direct and Indirect Taxes should be amended in a manner that:

    i. Once the audit for any tax year is conducted/completed under Section 177 read with Section 214C of Income Tax Ordinance, 2001; there should not be any audit of monitoring of withholding/collection of taxes and amendment of assessment unless ‘definite information’ comes into the possession of the commissioner.

    ii. Once the sales tax audit for any year is conducted in respect of registered taxpayer under the Section 72B there should not be audit under Section 25 of the Sales Tax Act, 1990.

  • Sales Tax Act 1990: tax credit not allowed under various conditions

    Sales Tax Act 1990: tax credit not allowed under various conditions

    KARACHI: A registered sales tax person is not allowed to entitle to reclaim or deduct input tax paid on various activities of manufacturing / supplies.

    The Section 8 of updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR) explained where tax credit is not allowed.

    Section 8: Tax credit not allowed

    Sub-Section (1): Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on –

    (a) the goods or services used or to be used for any purpose other for taxable supplies made or to be made by him;

    (b) any other goods or services which the Federal Government may, by a notification in the official Gazette, specify;

    (c)] the goods under sub-section (5) of section 3:

    (ca) the goods or services in respect of which sales tax has not been deposited in the Government treasury by the respective supplier;

    (caa) purchases, in respect of which a discrepancy is indicated by CREST or input tax of which is not verifiable in the supply chain;

    (d) fake invoices;

    (e) purchases made by such registered person, in case he fails to furnish the information required by the Board through a notification issued under sub-section (5) of section;

    (f) goods and services not related to the taxable supplies made by the registered person.

    (g) goods and services acquired for personal or non-business consumption;

    (h) goods used in, or permanently attached to, immoveable property, such as building and construction materials, paints, electrical and sanitary fittings, pipes, wires and cables, but excluding pre-fabricated buildings and such goods acquired for sale or re-sale or for direct use in the production or manufacture of taxable goods;

    (i) vehicles falling in Chapter 87 of the First Schedule to the Customs Act, 1969 (IV of 1969), parts of such vehicles, electrical and gas appliances, furniture furnishings, office equipment (excluding electronic cash registers), but excluding such goods acquired for sale or re-sale;

    (j) services in respect of which input tax adjustment is barred under the respective provincial sales tax law;

    (k) import or purchase of agricultural machinery or equipment subject to sales tax at the rate of 7 percent under Eighth Schedule to this Act;

    (l) from the date to be notified by the Board, such goods and services which, at the time of filing of return by the buyer, have not been declared by the supplier in his return or he has not paid amount of tax due as indicated in his return; and

    (m) import of scrap of compressors falling under PCT heading 7204.4940.

    Sub-Section (2): If a registered person deals in taxable and non-taxable supplies, he can reclaim only such proportion of the input tax as is attributable to taxable supplies in such manner as may be specified by the Board.

    Sub-Section (3): No person other than a registered person shall make any deduction or reclaim input tax in respect of taxable supplies made or to be made by him.

    Sub-Section (4): omitted

    Sub-Section (5): Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of this section, no input tax credit shall be allowed to the persons who paid fixed tax under any provisions of this Act as it existed at any time prior to the first day of December, 1998.

    Sub-Section (6): Notwithstanding anything contained in any other law for the time being in force or any provision of this Act, the Federal Government may, by notification in the official Gazette, specify any goods or class of goods which a registered person cannot supply to any person who is not registered under this Act.

    Sub-Section (7): Omitted.

  • FBR issues notices to 350 Sindh bureaucrats for non-filing

    FBR issues notices to 350 Sindh bureaucrats for non-filing

    KARACHI: Federal Board of Revenue (FBR) has issued notices to 350 senior bureaucrats of Sindh government for non-filing of income tax returns.

    The notices have been issued by Regional Tax Office (RTO) –II Karachi on identification of expenditures through various sources by those provincial government officers.

    The FBR sources said that these government officers had never filed their annual income tax returns and asset declarations with the income tax departments.

    They said that the expenditures details had been obtained through their air travels, banking transactions, purchase of property purchase etc.

    The information of those provincial government officers were obtained from their salary disbursements.

    They said that the tax department would first enforce income tax returns and then would initiate proceedings of concealment.

    The sources said that besides taking action against bureaucrats of Sindh government the RTO –II Karachi was also taking action against 3,000 more salary persons in the private sector to bring them into tax net.

    The sources said that many of these salary persons had never filed income tax returns despite having taxable income as well as other source of income.

  • Sales Tax Act 1990: deduction of input tax by registered persons

    Sales Tax Act 1990: deduction of input tax by registered persons

    KARACHI: A sales tax registered person is allowed to deduct input tax against output tax for determination of taxable supplies made during a period.

    According to updated Sales Tax Act 1990 issued by Federal Board of Revenue (FBR), Section 7 explained the procedure of deduction of input tax by sales tax registered persons.

    Section 7: Determination of tax liability.

    Sub-Section (1): Subject to the provisions of section 8 and, for the purpose of determining his tax liability in respect of taxable supplies made during a tax period, a registered person shall, subject to the provisions of section 73, be entitled to deduct input tax paid or payable during the tax period for the purpose of taxable supplies made, or to be made, by him from the output tax excluding the amount of further tax under sub-section (1A) of section 3 that is due from him in respect of that tax period and to make such other adjustments as are specified in Section 9:

    Provided that where a registered person did not deduct input tax within the relevant period, he may claim such tax in the return for any of the six succeeding tax periods.

    Sub-Section (2): A registered person shall not be entitled to deduct input tax from output tax unless,-

    (i) in case of a claim for input tax in respect of a taxable supply made, he holds a tax invoice in his name and bearing his registration number in respect of such supply for which a return is furnished:

    Provided that from the date to be notified by the Board in this respect, in addition to above, if the supplier has not declared such supply in his return or he has not paid amount of tax due as indicated in his return;

    (ii) in case of goods imported into Pakistan, he holds bill of entry or goods declaration in his name and showing his sales tax registration number, duly cleared by the customs under section 79, section 81 or section 104 of the Customs Act, 1969 (IV of 1969);

    (iii) in case of goods purchased in auction, he holds a treasury challan, in his name and bearing his registration number, showing payment of sales tax;

    Sub-Section (3): Notwithstanding anything in sub-sections (1) and (2), the Federal Government may, by a special order, subject to such conditions, limitations or restrictions as may be specified therein allow a registered person to deduct input tax paid by him from the output tax determined or to be determined as due from him under this Act.

    Sub-Section (4): Notwithstanding anything contained in this Act or rules made there under, the Federal Government may, by notification in the official Gazette, subject to such conditions, limitations or restrictions as may be specified therein, allow a registered person or class of persons to deduct such amount of input tax from the output tax as may be specified in the said notification.

  • Sales Tax Act 1990: rate in force to apply at time of supply

    Sales Tax Act 1990: rate in force to apply at time of supply

    KARACHI: Any change in the rate of sales tax shall apply at the time of supply or clearance of imported goods, as clarified by Section 5 of the Sales Tax Act, 1990, updated by the Federal Board of Revenue (FBR). This section outlines the specific rules for applying sales tax when rates are adjusted and provides detailed guidelines for taxable supplies and imports.

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  • Sales Tax Act 1990: zero rating on export, supply of goods

    Sales Tax Act 1990: zero rating on export, supply of goods

    KARACHI: The sales tax laws have allowed zero rating of sales tax on exports or supply of goods.

    According to updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), the Section 4 of the Act explained the zero rating.

    Section 4: Zero rating

    Notwithstanding the provisions of section 3 except those of sub-section (1A), the following goods shall be charged to tax at the rate of zero per cent:

    (a) goods exported, or the goods specified in the Fifth Schedule;

    (b) supply of stores and provisions for consumption aboard a conveyance proceeding to a destination outside Pakistan as specified in section 24 of the Customs Act, 1969 (IV of 1969);

    (c) such other goods as the Federal Government may, by notification in the Gazette, specify:

    Provided that nothing in this section shall apply in respect of a supply of goods which –

    (i) are exported, but have been or are intended to be re-imported into Pakistan; or

    (ii) have been entered for export under Section 131 of the Customs Act, 1969 (IV of 1969), but are not exported; or

    (iii) have been exported to a country specified by the Federal Government, by Notification in the official Gazette:

    Provided further that the Federal Government may by a notification in the official Gazette, restrict the amount of credit for input tax actually paid and claimed by a person making a zero-rated supply of goods otherwise chargeable to sales tax.

    (d) such other goods as may be specified by the Federal Board of Revenue through a general order as are supplied to a registered person or class of registered persons engaged in the manufacture and supply of goods supplied at reduced rate of sales tax.

  • Sales Tax Act, 1990: collection of excess sales tax

    Sales Tax Act, 1990: collection of excess sales tax

    KARACHI: A person is required to pay sales tax, which was collected under misapprehension of any provision of the act and was not collectable or in excess of tax.

    The FBR recently updated Sales Tax Act, 1990 and its Section 3B explained the collection of excess sales tax.

    Section 3B: Collection of excess sales tax etc

    Sub-Section (1): Any person who has collected or collects any tax or charge, whether under misapprehension of any provision of this Act or otherwise, which was not payable as tax or charge or which is in excess of the tax or charge actually payable and the incidence of which has been passed on to the consumer, shall pay the amount of tax or charge so collected to the Federal Government.

    Sub-Section (2): Notwithstanding anything contained in any law or judgement of a court, including the Supreme court and a High court, any amount payable to the Federal Government under sub-section (1) shall be deemed to be an arrear of tax or charge payable under this Act and shall be recoverable accordingly and any claim for refund in respect of such amount shall neither be admissible to the registered person nor payable to any court of law or to any person under direction of the court.

    Sub-Section (3): The burden of proof that the incidence of tax or charge referred to in sub-section (1) has been or has not been passed to the consumer shall be on the person collecting the tax or charge.