The Federal Board of Revenue (FBR) in Pakistan announced on Monday the grant of duty exemption on the import of critical oxygen-related goods.
(more…)Category: Taxation
Stay updated on taxation news, tax laws, FBR policies, compliance, audits, income tax, sales tax, and fiscal developments in Pakistan.
-
IR intelligence unearths Rs4.27bn sales tax fraud
ISLAMABAD: The Directorate General of Intelligence and Investigation (Inland Revenue) has unearthed a sales tax fraud to the tune of Rs4.27 billion by M/s. Innovative Biscuits (Pvt).
A statement issued by the Federal Board of Revenue (FBR) on Monday said that the Directorate of Intelligence & Investigation (IR), Lahore on receipt of credible information related to sales tax fraud carried out action under Section 38 read with Section 40 of the Sales Tax Act, 1990 against M/s. Innovative Biscuits (Pvt.) Limited, Lahore.
Assessment order was issued wherein an amount of Rs. 4.27 billion as sales tax along with default surcharge and 100 percent penalty for tax fraud was imposed upon the registered person
Accordingly, accused Sheikh Munir Hussain, one of the Directors of M/s. Innovative Biscuits (Pvt.) Limited was arrested. Due to proper presentation of case by Directorate of Intelligence & Investigation (IR), Lahore, two bail applications filed by the accused were rejected by Special Judge, the FBR said.
Subsequently, the accused filed another application for bail before Lahore High Court. The Lahore High Court, Rawalpindi Bench, Rawalpindi granted post arrest bail to the petitioner on deposit of an amount of Rs 300 million and submission of post dated cheque of Rs. 100 million. The legal process is underway against the accused.
Directorate General of Intelligence & Investigation-IR has performed commendably well in the current Financial Year from July-2020 to April 2021.
The Directorate General has forwarded 653 Investigation Reports involving revenue of Rs. 197.714 billion to the field formations. The Directorate General conducted 40 raids where estimated revenue amounting to Rs. 761 million is involved. Directorate General filed 67 complaints under Anti-Money Laundering Act, 2010 against 75 accused persons involving Rs. 55.385 million. Directorate General also seized 6667 cartons of illegal cigarettes.
-
Procedure issued for enrollment with FBR system of AJK/GB registered persons
ISLAMABAD: The Federal Board of Revenue (FBR) on Monday issued standard operating procedure for enrollment with FBR system of persons registered with Azad Jammu Kashmir (AJK) and Gilgit-Baltistan (GB).
The FBR said that the Sales Tax Act, 1990 mandates a Registered Person (RP) registered with Federal Board of Revenue (FBR) to claim input tax credit on supplies made to RPs registered with Azad Jammu & Kashmir (AJK) Tax Department and vice versa. Rule 161 of the Sales Tax Rules, 2006, however, warrants that RPs registered with AJK Tax Administration to have enrollment with FBR so as to be able to avail the benefits of input adjustments.
Apart from a few isolated memoranda issued every now and then, no systematic set of instructions have so far been formulated. Similar instructional void exists when it comes to Gilgit-Baltistan (GB) registered persons intending to undertake imports/exports and have to enroll with FBR’s WeBOC System.
Sub-rule (3) of Rule 161 supra also stipulates that “when the AJK authorities institute e-filing for their registered persons, the adjustment as aforesaid shall only be available against electronic data of supplies as provided to the Board by AJK authorities.” In the intervening period when AJK Tax Department and Pakistan Revenue Automation Limited (PRAL) were negotiating and signing the Service Level Agreement (SLA), cross adjustment of input tax credit was allowed manually. Rule 161(2) warranted all AJK-RPs to “furnish an undertaking that they will provide their supply record and the return filed in AJK” as and when required by the respective RTO or LTO, where their buyers are registered to ascertain correctness of their sales. In anticipation of signing of the SLA between AJK Tax Department and PRAL, manual adjustments stand disallowed.
Accordingly, it has been decided that hereinafter, in order to ensure certainty, transparency and across-the-board, Standard Operating Procedures (SOPs) are being devised that shall govern enrollment of AJK and GB RPs with FBR systems for all purposes.
A. Status pre-conditions:
All AJK/GB taxpayers seeking enrollment with FBR systems for input adjustment and import/export purposes would need to fulfill the following pre-conditions:-
(i) That, the business is physically located within the territorial boundaries of AJK and GB administrations.
(ii) That, the business should have been registered with the AJK/GB tax roll.
(iii) That, the applicant taxpayer must not be involved in a criminal or tax fraud proceedings at the time of filling of application anywhere in the country.
B. Application requirements
(i) The AJK/GB registered persons intending to enroll with the FBR would make a formal request on its letter head to his Commissioner concerned in AJK/GB duly enclosed by a copy of CNICs of owner(s) of the business, and directors and partners in case of an association of persons or a company along with partnership deed for an AOP, and memorandum of articles of association/ Form 29 for companies.
(iv) A copy of National Tax Number (NTN) certificate issued by the AJK / GB tax department.
(v) A copy of sales tax registration certificate issued by the AJK/GB tax department.
(vi) Proof of being active taxpayer with the AJK/GB’s tax department.
(vii) Online NTN/STRN verification (principal activity manufacturer/importer/exporter from AJK and GB tax department.)
(viii) A copy of NTN of all directors/partners issued by the FBR in case of limited company/AOPs.
(ix) Emails and mobile numbers of the lead/authorized director/partner.
(x) Incorporation number for SECP registered companies.
(xi) The verification report of premises of the AJK/GB taxpayer/manufacturer must be forwarded internally by commissioner Inland Revenue, AJK or GB, as the case may be.
(xii) Undertaking /affidavit by the applicant seeking enrollment as regards provision of documents/records, as and when required by the IR field formations for the FBR in terms of Rule 161 of Sales Tax Rules, 2006.
(xiii) Recommendation of AJK Chamber of Commerce and Industry or GB as the case may be.
(c) Procedures
(i) The aforementioned documents shall be accompanied with the verification of manufacturing unit/business by the AJK/GB Tax Department. The AJK/GB shall forward the request electronically to Registration Cell for Enrollment (RCFE) established in FBR for enrollment with FBR automated system. FBR would establish and notify RCFE as and when automated transmission of data is operationalized by AJK/GB, IR department.
(ii) The RCFE, shall process the application of AJK/GB-RPs in FBR automated system through link as provided by PRAL and generate NTN/STRN in FBR system. The generated NTN/STRN shall be forwarded to IT Wing/PRAL for auto-population in FBR automated system/ WeBOC system with STRN/NTN as issued by the AJK.
(iii) In case of any discrepancy observed in provided data/documents of applicant by Registration Cell, the same shall be referred back to concerned AJK/GB department for removal of same.
The FBR said that the SOPs laid down in this STGO, mutatis mutandis, would also apply to the GD registered persons as and when requirement for the same are met.
-
Tax rate disparity discourages corporatization: PSX
KARACHI: Inequality in tax rates for corporate and non-corporate businesses has discouraging corporatization in the country, Pakistan Stock Exchange (PSX) noted in its proposals for budget 2021/2022.
The stock exchange pointed out that corporate business profits are taxed twice: once at company level at 29 percent and on dividend distribution at 15 percent.
As compare to 44 percent of total tax in case of companies, unincorporated businesses are being taxed from 0 percent to 35 percent in slabs.
This inequity in taxation is discouraging corporatization and documentation as unincorporated businesses are subject to substantially lower taxes.
Absence of clarity in tax laws is causing issues of taxation of Limited Liability Partnerships (LLP5) as companies whereas LLPs are essentially AoPs with perpetual life.
Therefore, the PSX recommended that inequality of taxation of businesses shall gradually be removed by reducing corporate tax rate/increasing tax rates for AoPs [First Schedule Part 1, Division I, II, hA & Ill]. Rationale
It said that equality of tax regime will promote corporatization culture leading towards documentation and will therefore generate more tax revenue.
Adding clarity with respect to status of LLP will encourage more businesses particularly in services sector to opt for this perpetual business structure. It will also help in increasing tax revenue from these segments.
-
FBR enhances refund to export ratio
ISLAMABAD: Federal Board of Revenue (FBR) has revised the processing parameters and increased refund to export ratio to 15 percent.
According to Sales Tax General Order (STGO) No. 05 of 2021, the FBR announced to re-fix the ceiling of parametric refund-to-export ratio from the previous 12 percent to 15 percent of the export value for processing of sales tax refunds of the commercial exporters.
The FBR defined the commercial exporters as those exporters who do not have a manufacturing facility, and are not registered in the manufacturer category under the Sales Tax Act, 1990.
“This shall be maximum ceiling of admissible refund processed through FASTER against valid exports after confirmation of realization of export proceeds as per rule,” the FBR said.
-
IR officer awarded major penalty of removal from service
ISLAMABAD: Federal Board of Revenue (FBR) has imposed major penalty of ‘removal from service’ an officer of BS-18 Inland Revenue Service (IRS) for misconduct.
According to a notification issued by the FBR stated that disciplinary proceedings were initiated against Syed Nasir Jamal Shah (IRS/BS-18) Deputy Commissioner-IR, Corporate Tax Office, Lahore under Rule 7 of Civil Servants (Efficiency & Discipline) Rules, 2020 on account of unauthorized absence from duty w.e.f. September 28, 2020; through Direct Show Cause Notice dated January 11, 2021 on the charges of misconduct.
Syed Nasir Jamal Shah (IRS/BS-18) furnished reply to the show cause notice wherein the officer stated that he applied for leave of 400 days and submitted application to the Commissioner-IR, CTO, Lahore on November 03, 2020 for onward submission to the Member (Admn), FBR, Islamabad and the same was forwarded to the Board on November 09, 2020.
The officer further stated that the allegation of absence without any intimation is based on some omission in record. The accused officer also requested for opportunity of personal hearing before finalization of the proceedings. Secretary, Revenue Division/Chairman, FBR being Authority in the instant case appointed Member (Admn/HR) as Hearing Officer to grant personal hearing to the accused officer under Rule 17 of Civil Servants (Efficiency and Discipline) Rules, 2020.
Hearing Officer/Member (Admn/HR) granted personal hearing to the accused officer on March 15, 2021. During the course of personal hearing the accused officer was asked to put forward his defence, but the accused officer did not have anything substantial to elaborate in his defence.
The contentions of the officer that his higher officers in CTO, Lahore were aware of his leave submission was also found unsatisfactory in purview of the prevailing instruct ions of the government which are very clear i.e. the officer cannot absent himself until and unless the leave applied by the officer is approved by the Competent Authority.
Reference in this regard is made to Establishment Division’s O.M No.1/34/57-ME dated 12-11-1957 which states that “a government servant should not absent himself from office without leave”.
Furthermore, Establishment Division’s O.M.No.6/3/81-RI(DI) dated 26-07-1981 states that “a civil servant continues to be in service till his resignation is accepted and cannot absent himself from his duties without proper leave” Establishment Division’s O.M No.15/6/85-R.2 dated 03-03-1986 states that “if a civil servants absents himself from duty, till his resignation is accepted by the Competent Authority, he is liable to be proceeded against under the (Efficiency & Discipline) Rules which may also result in dismissal from Government Service”. Moreover, leave application of Syed Nasir Jamal Shah (IRS/BS-18) was silent about date of availing of the requested leave.
The failure to comply with the instructions of the government construes misconduct on part of the officer. Furthermore, during the case of personal hearing the accused officer failed to bring up justification/reasons to defend his unauthorized absence from duty. Attitude and conduct of the accused officer was highly casual and irresponsible.
Information collected from field revealed that he is running his own academy in Lahore, doing business and is not at all interested in government service and keeping this as a standby option.
After considering the charges framed in the Show Cause Notice and available record including the reply furnished by the accused officer, the Hearing Officer came to the conclusion that the accused officer has nothing new to add in his defence.
Hearing Officer/Member (Admn/HR) forwarded the case record to the Authority i.e. Secretary, Revenue Division/Chairman, FBR for decision.
Secretary, Revenue Division/Chairman, FBR being Authority in the instant case has decided the major penalty of “Removal from Service” upon Syed Nasir Jamal Shah (IRS/BS-18) Deputy Commissioner-IR, Corporate Tax Office, Lahore under rule 4(3)(d) of Civil Servants (Efficiency & Discipline) Rules, 2020 with immediate effect.
The period of unauthorized absence from duty w.e.f. 28.09.2020 of Syed Nasir Jamal Shah (IRS/BS-18) shall be treated as Extra Ordinary Leave (without pay). Outstanding dues/recoverable amount shall be recovered from Syed Nasir Jamal Shah (IRS/BS-18).
Syed Nasir Jamal Shah (IRS/BS-18) shall have a right to appeal to the Appellate Authority under Civil Servants (Appeal) Rules, 1977 within a period of thirty (30) days from the date of communication of this notification.
-
IR offices issuing incorrect audit notices to avoid time limitation: KTBA
KARACHI: The offices of Inland Revenue are issuing incorrect audit notices in order to avoid restriction of time limit as defined in the Income Tax Ordinance, 2001, tax practitioners alleged the tax authorities on Friday.
The Karachi Tax Bar Association (KTBA) in a letter sent to Inland Revenue offices of Federal Board of Revenue (FBR) located in the metropolis strongly criticized the issuance of faulty audit notices for tax year 2015 in order to avoid time restrictions.
The KTBA wrote letters to chief commissioners highlighting the haste of tax offices in issuing notices under section 122(5) of Income Tax Ordinance, 2001 during past two weeks just to comply with the time limit of initiating audit for tax year 2015.
The tax bar shared following ‘reasons and grounds’ advanced by the field formation officers to assume resource of ‘definite information’.
— Not declared any capital hence income declared under Normal Tax Regime (NTR) and Final Tax Regime (FTR) is out of undisclosed sources of capital whereby closing stock is likely to be added as unexplained income.
— Accretion in wealth is more than income declared/claimed under NTR/FTR and cash available in last year is insufficient either; hence difference is likely to be added as unexplained income.
— Personal expenditure bears a difference between income claimed under FTR and NTR and cash available in last year is insufficient either; hence difference is likely to be added as unexplained income.
— Bank deposits and debit entries are huge which do not commensurate to be declared income version and difference is likely to be added as income from other source.
— Foreign remittance claimed in the return needs to be probed for the purpose of compliance of Section 111(4) of the Income Tax Ordinance, 2001.
— Capital gain on sale of securities and immovable properties claimed in the returns needs to be probed in line with Section 37(3A) and 37A of Income Tax Ordinance, 2001.
— Gift (cash or kind) claimed needs to be probed for the purpose of Section 39 (3) of the Income Tax Ordinance, 2001.
— Total liability in wealth has decreased from previous year which since a liability was definitely paid-off from unexplained source of income and liable to be treated as unexplained expenditure in line with Section 111 of Income Tax Ordinance, 2001.
— Interestingly a number of such notices have also been issued where audits for the tax year 2015 have already been concluded.
The KTBA said that notices had wrongly been issued by the field formation without properly appreciating returns of income tax as well as statements of wealth and also without proper application of mind as host of such cases pertains to income from property, salary, dividend etc. and also because the grounds advanced in the notices do not constitute ‘definite information’ within the meaning of Section of 122(8) of Income Tax Ordinance, 2001.
“As the time limitation prescribed for initiating proceedings for the tax year 2015 draws closer, bar members are afraid of encountering more such weird notices in days to come, which in no way tend to serve the purpose of the Ordinance and are likely to create chaotic situation,” the tax bar said.
-
FBR to refund excess duty, taxes on mobile phone clearance
ISLAMABAD: Federal Board of Revenue (FBR) on Friday said that it will refund excess duty and taxes collected on mobile phone clearance due to glitches found in the WeBOC.
The FBR issued an explanation over excess payment of duty and taxes at the time of clearance of mobile phones.
The FBR said that recently, in a meeting with PTA, it transpired that the passengers can register up to 5 mobile phones on their passports and in case of high end phones of more than USD 500, the difference of duty/taxes between passport and CNIC registration is about Rs. 9,000/.
Accordingly, in order to correct this anomaly and to limit the registration of mobile phone against passport up to one set, the WeBOC module was modified through CRF (change request form).
However, during the process, the exemption of withholding tax was also deleted and thus now the system was showing total taxes on passport as Rs 36,720/-.
FBR stated that the issue has been taken up with Director (R&A) Karachi and the team is reviewing the module to resolve the issue and restore the previous amount of leviable duty/taxes.
The issue will be resolved tomorrow afternoon.
“Due to this glitch in the system, all those who paid more duty would be refunded the excess amount forthwith,” the FBR said.
-
PSX proposes elimination of capital gain tax to attract investors
KARACHI: Pakistan Stock Exchange (PSX) has proposed time-bound elimination of capital gain tax (CGT) in order to attract new local and foreign investors.
(more…) -
Amnesty scheme should be extended for one year: ABAD
KARACHI: The Association of Builders and Developers (ABAD) has demanded the government of extending the amnesty scheme granted for boosting of construction sector.
ABAD Chairman Fayyaz Ilyas in a statement demanded to extend amnesty scheme for real estate and construction industry by at least one year.
He said that due to unprecedented situation created by Corona pandemic all over the country and long delay in approval of building plans in Sindh a number of builders and developers could not register their projects under this amnesty scheme.
Fayyaz Ilyas said that Prime Minister Imran Khan had announced and once extended Special package for real estate and construction industry for economic growth through construction industry because this industry is considered the backbone of the economy all over the world.
Under extended package, source of income will not be asked for investment in real estate and construction upto 30th June, 2021, Fixed Tax Regime for builders and developers upto 31st December, 2021 and project completion period was extended upto 30th June, 2022.
Chairman ABAD requested the government to extend these periods atleast upto 30th June, 2022, 31st December, 2022 and 30th June, 2023 respectively so that those people can avail this package who could not avail due to pandemic and lengthy delay in project approvals.
He said that Pakistan’s economy like other parts of the world has suffered a lot due to corona pandemic.
It is evident that despite the second wave of corona pandemic production of cement, iron bars, paints, tiles etc have created new records, he said adding that to continue momentum of the economic growth the government should extend the Special package for real estate and construction industry otherwise the results achieved through this package will go in the vain.