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Category: Taxation

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FY21 tax target requires Rs2,393 billion or 53.4 percent growth in next five months

ISLAMABAD: Federal Board of Revenue (FBR) needs to collect an amount of Rs2,393 billion during next five months of fiscal year 2020/2021 (FY21) to achieve the annual target of Rs4,963 billion.

According to provisional revenue figures released on Saturday, the FBR collected Rs2,570 billion during July – January 2020/2021 as compared with Rs2,416 billion in the corresponding period of the last fiscal year, showing an increase of 6.4 percent.

In order to achieve the revenue collection target the FBR required to maintain 53.4 percent growth in revenue collection during remaining months of the current fiscal year. The FBR collected Rs1,560 billion during February – June of the last fiscal year. However, the revenue body needs Rs2,393 billion in the remaining five months of the current fiscal year.

It is worth mentioning that the revenue collection was adversely affected during March – June 2020/2021 due to spread of coronavirus in the same period. This has cost around Rs500 billion to the revenue collection.

The net collection for the month of January was Rs.364 billion against a target of Rs340 billion, representing an increase of 12.3 percent over last January and 107 percent of the target. This is the first double-digit monthly growth during the fiscal year.

On the other hand, the gross collections increased from Rs.2464 billion to Rs.2699 billion, showing an increase of nearly 10 percent.

The amount of refunds was Rs129 billion compared to Rs69 billion paid last year, showing an increase of 87 percent. This is reflective of FBR’s resolve to fast-track refunds to prevent liquidity issues of the industry.

The improved revenue performance is a reflection of growing economic activities in the country despite facing the challenge of second wave of COVID-19. Going forward, it is expected that this revenue performance would be further strengthened as economic recovery gains more momentum.

January 31, 2021
FBR initiates action against non-filer corporate taxpayers

ISLAMABAD: Federal Board of Revenue (FBR) on Saturday directed tax offices to ensure recovery of penalty amount from corporate taxpayers, who failed to file income tax returns by due date.

The last date for filing income tax returns for tax year 2020 was December 31, 2020. However, the FBR said that a large number of companies had failed to comply with the mandatory requirement.

The revenue body said that the data obtained from PRAL in respect of non-filer companies, which are filers for tax year 2019, goes to reveal that not only that they have not filed tax returns but also that a considerable amount of revenue has not been paid by these taxpayers.

It may be noticed that notices u/s 182 of the Income Tax Ordinance, 2001 were issued to all non-filers currently by the FBR Head Office.

All Chief Commissioners of Inland Revenue (CCIRs) have been directed to monitor progress of penalty progress proceedings particularly in company cases and make sure enforcement of returns and also to realize due revenue. Formation-wise lists of such cases have been sent through email to all concerned.

The FBR directed all the CCIRs to share the progress on enforcement measures in recovery of penal amount and payment of outstanding dues by February 15, 2021.

January 30, 2021
Tax offices directed to issue penalty notices to sugar mills for not complying VAS

ISLAMABAD: Federal Board of Revenue (FBR) has directed tax offices to issue penalty notices to sugar mills, which have failed to install video analytics system, sources said on Saturday.

The FBR directed Chief Commissioners of LTO, MTO, CTO of Karachi, Lahore and RTO Peshawar to issue penalty notices to non-compliant sugar mills which have not followed FBR guidelines.

The FBR also decided to launch stern action from next week against sugar mills and suppliers of video analytics system (VAS), who failed to comply with the mandatory requirement under the law.

“The FBR will take action by imposing heavy penalties on non-compliant sugar mills and non-compliant vendors if they fail to install the video analytic equipment at their factory premises by January 31, 2021,” according to a notice sent to vendors of VAS.

The notice has been sent to all the pre-qualified vendors, included: M/s. AJCL (Pvt) Ltd., M/s. TPL Trekker, M/s. CNS Engineering & Technology, M/s. NRTC and GCS, M/s. COMMTEL, M/s. DWP Technologies and M/s. Focus Technology Pvt Ltd.

The FBR said that it had authorized seven vendors through its report on November 20, 2020 for VAS and the copy was shared with Pakistan Sugar Mills Association (PSMA) and all pre-qualified vendors to initiate the process.

In order to ensure the implementation of VAS, the FBR issued a letter on December 02, 2020 directing the PSMA to provide mill wise update status of deployment of VAS by December 31, 2020, which was further extended up to January 31, 2021.

“In response to the letters only few sugar mills have issued final quotations to the vendors for installation of the system. However, large number of sugar mills is not willing to implement the system as they have either issued provisional quotations or not issued any quotation at all the process of VAS.”

The FBR observed that the pre-qualified vendors had failed to install the video analytics equipment on the sugar mills, which had issued final quotations to the pre-qualified vendors for the system.

It is pertinent to mention that the Video Analytics Rules, 2020 were issued through SRO 889(I)/2020 dated September 21, 2020. These clearly laid down responsibilities of the manufacturer to provide unhindered availability of production facilities for installation of the system.

Besides, Rule 150ZQT(2) of the rules provides severe penalty of non-removal goods from business premises by non-compliant manufacturing units.

January 30, 2021
Salary persons require retaining tax deduction certificate for six years

ISLAMABAD: A person deriving income salary is required to retain salary certificate indicating amount of salary and tax deducted for six years, sources said on Friday.

The sources said that the requirement of retaining record for six years is mandatory under income tax laws.

Similarly taxpayers deriving income from property are required to retain following records for six years:

a. Tenancy agreement, if executed;

b. Tenancy termination agreement, if executed;

c. Receipt for amount of rent received; and

d. Evidence of deductions claimed in respect of premium paid to insure the building, local rate, tax, charge or cess, ground rent, profit/interest or share in rent on money borrowed, expenditure on collecting the rent, legal services and unpaid rent.

In case taxpayers deriving income from capital gains, the following documents shall be retained for six years:

a. Evidence of cost of acquiring the capital assets;

b. Evidence of deduction for any other costs claimed; and

c. Evidence in respect of consideration received on disposal of the capital asset.

In case taxpayers deriving income from other sources are required to keep following records for six years:

a. Dividend; dividend warrants.

b. Royalty; Royalty agreement

c. Profit on debt: Evidence and detail of profit yielding debt; Evidence of profit on debt and tax deducted thereon, like certificate in the prescribed form or bank account statement; and evidence of Zakat deducted, if any.

d. Ground rent, rent from the sub-lease or land or building, income from the lease of any building together with plant or machinery and consideration for vacating the possession of a building or part thereof: Lease agreement; and lease termination agreement.

e. Annuity or pension: evidence of amount received.

f. Prize money on bond, winning from a raffle, lottery or cross word puzzle: Evidence of income and tax deducted thereon, like certificate in the prescribed form.

g. Provision use or exploitation of property: agreement

h. Loan, advance, deposit or gift: evidence of model of receipt of a loan, advance, deposit or gift i.e. by a crossed cheque or through a banking channel.

i. General: Evidence of deduction for any other expenditure claimed.

January 29, 2021
FBR’s representation in bogus refunds rejected

ISLAMABAD: A representation of Federal Board of Revenue (FBR) has been rejected by the President of Pakistan on Friday that was filed against an order passed by the Federal Tax Ombudsman (FTO) in bogus refund case.

According to details, President Dr. Arif Alvi rejected the FBR’s representations directing the tax authorities to recover amount of Rs14 million paid in bogus refund claim.

The President upheld the decision of Federal Tax Ombudsman (FTO) following its suo-moto action against the irregularities committed by the FBR field formations in registering, processing, sanctioning and issuing sales tax refunds to fake refund payments during the period 2012-2013.

President Alvi in his decision wrote: “it was surprising and shocking that FBR failed to investigate fake claims where refund had already been made in full connivance with FBR officials”.

Expressing strong displeasure over the scam, he said: “How can we afford not to recover and criminally charge the fraudsters.”

The President stressed recovery of the embezzled money, saying: “instead of resistance by FBR to the suo-moto action by FTO, they should recover the precious money of the people of Pakistan.”

It is worth-stating that FBR has filed 74 similar representations with the office of the President against the orders of FTO. Out of 74 representations, 22 cases have been decided while 52 are still awaiting adjudication.

Furthermore, according to the relevant record, FBR had allowed Rs 875.277 million to be paid to fake RPs, of which a payment of Rs 223.312 Million has already been made.

The FTO in its verdict, dated April 27, 2020, had directed the Chief Commissioner-Inland Revenue and Corporate Regional Tax Office (RTO), Karachi to investigate and identify the officials involved in registration of fake RPs and initiate disciplinary/criminal action against those found involved and report compliance within 45 days.

The FTO in its decision further directed FBR to initiate appropriate action including criminal proceedings leading to recovery of amount swindled from public exchequer through claiming inadmissible input tax and bogus refund.

Instead of implementing the directives of FTO, the FBR challenged its jurisdiction and filed a representation with the President taking plea that it could not issue such orders and rely on interdepartmental correspondence of FBR.

The President rejected FBR’s representation and made it clear that the body could exercise its power conferred under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 to investigate irregularities in the department.

It is to be mentioned here that the investigations conducted by Directorate General of I&I-IR (Intelligence & Investigation and Inland Revenue), Karachi in case of M/s Z.A. Exports — a fake RP with principal activity as manufacturer of iron and steel — revealed that bogus claims worth Rs 18.519 million were made in tax period 2012-13 against irrelevant invoices.

The President lauded the Directorate General of I&I-IR (Intelligence & Investigation and Inland Revenue) for issuing Red Alerts and detecting fraudulent activities in FBR, and regretted that the “national exchequer was made to suffer colossal loss of revenue”.

January 29, 2021
Rules notified for consignment clearance at border customs stations

ISLAMABAD: Federal Board of Revenue (FBR) on Friday issued draft rules for the clearance of import and export consignments at border customs stations.

The FBR issued SRO 103(I)/2021 dated January 25, 2021 to propose a new sub-chapter XVI to Customs Rules, 2001 for clearance of imports and exports at border customs station.

According to draft rules following are the procedures for clearance of goods at border customs stations:

A. Imports

556H. Data entry of import manifest at the time of terminal gate-entry.-

(1) The person-in-charge of the vehicle carrying imported goods on arrival into Pakistan shall deliver the import manifest in the form as prescribed in these rules to gate-in-officer. On receipt of import manifest, the gate-in-officer shall enter the data of import manifest against the relevant IGM.

(2) Copies of the import manifest shall be given to the representative of FC and the terminal operator at the zero-line, wherein a terminal operator is functioning.

556I. Processing of gate-in.- After recording of import manifest information, the gate-in-officer shall process gate-in of the vehicle and goods in the system on real time basis.

556J. Filing of import goods declaration.- Subsequently the importer or his authorized representative shall file goods declaration against the Index number already generated in the system for prescribed customs processing.

556K. Release of import cargo.- After completion of customs processing of goods declaration including payment of leviable duty and taxes and on receiving authorization from the Pakistan Customs computerized System (PCCS), the terminal officer shall electronically assign vehicle and cargo to the Gate-out-officer for electronic gate-out in the system.

556L. Processing of gate-out.- After receiving the authorization in the PCCS, the gate-out office shall record gate-out event in the system.

B. Exports

556M. Filing of export goods declaration.- The exporter or his authorized representative shall file export goods declaration against the vehicle and goods meant for exports, before the vehicle enters the border custom station.

556N. Processing of Gate-in.- After the filing of export goods declaration by exporter or his authorized representative, the information shall be verified by the gate-in officer. The gate-in officer shall record gate-in event in the system.

556O. Processing of GD and out-of-charge.- After completion of processing, the GD will be out-of-charged and a message will be sent to the terminal operator. After receiving message from the PCCS, the terminal officer shall assign the vehicle and cargo to the cross border officer for electronic cross-border in the system.

556P. Processing of cross border and export confirmation.- The cross border officer shall record the confirmation of export in the system, after physically verifying export cargo at the terminal/station exit gate, and shall generate system based three copies of “Cross-border authorization” to be collected at the zero-line by the officials of Customs, FC and terminal operator respectively, to ensure cross border of the vehicle and cargo.

556Q. Amendment in manifest.- After filing of IGM or EGM, no amendment shall be allowed. In case of any human error, the rectification shall be allowed with the approval of an officer not below the rank of Additional Collector of the concerned MCC (Appraisement & Facilitation).

556R. Import and export of cargo.- The procedure provided in the sub-chapter for import, export and other customs processes shall mutatis mutandis apply herein:

Provided that in case any land customs station does not possess complete infrastructure, facilities or any required components for implementing all provisions relating to Customs Computerized System, the Collector may order such modification in any provision as may be deemed necessary under intimation to the Board, till such time all required facilities and components become available.

556S. Reconciliation of all incoming and outgoing vehicles.-

(1) Everyday in the morning, Customs, FC and terminal operator shall reconcile all the import manifests of the all incoming vehicles of the previous day with a system generated list that GDs have been filed for all incoming vehicles. In case, GD is not filed within forty eight hours of the arrival of the vehicle, the reasons may be ascertained by the Customs for late filing of GD including verification of location of the vehicle inside the custom station or terminal.

(2) At the end of the day, all cross-border authorizations collected by customs authorities as well by FC & terminal operator shall be re- reconciled to ensure that all the requisite transport units which were issued gate-passes have crossed the border.

(3) The daily imports and exports statements reconciled jointly shall be countersigned by the concerned Assistant/Deputy Collector of the Enforcement. While, the Directorate of Transit Trade shall conduct the reconciliation of transit cargo and empty containers as per mechanism given under the rules.

(4) In case of any discrepancy, the incharge of Custom station will initiate action under the relevant provision of the Customs Act, 1969.

(5) A weekly summary of reconciliation shall be forwarded to the respective Collector/Director to apprise them updated.

(6) All concerned authorities i.e., Customs, FC and terminal operator shall keep the original record of import manifests and cross-border authorizations for a period of five years and to made available if required by Custom authorities.

January 29, 2021
FBR issues SRO to withdraw additional customs duty on raw material import

ISLAMABAD: Federal Board of Revenue (FBR) has withdrawn additional customs duty on import of raw materials of around 174 tariff lines.

The FBR on Thursday issued SRO 81(I)/2021 dated January 22, 2021 to abolish additional customs duty on import of raw materials of 174 tariff lines.

The FBR issued the SRO for removal of additional customs duty to comply with the decision of Economic Coordination Committee (ECC) meeting held on January 06, 2021.

The Ministry of Commerce presented a summary regarding removal of additional 2 percent customs duty on raw material, on horizontal basis under National Tariff Policy 2019-2024.

The ECC approved the summary with a direction that budget cycle must be observed while planning important incentives for businesses and industries for smooth planning and subsequent implementation during the financial year.

Through the recent notification the FBR amended the SRO 572(I)/2020 dated June 30, 2020. Through the amendment the FBR replaced the list of raw material that had allowed waiver of additional customs duty on import or raw material on 25 tariff lines.

Through the SRO 572(I)/2020 dated June 30, 2020 the FBR imposed rates of additional customs duty at two, four and seven percent on import of goods.

January 28, 2021
NPOs require to declare donation details above Rs5,000 to avoid cancellation of approval

ISLAMABAD: Non-profit organizations are required to provide details of all donations above Rs5,000 in order to avoid cancellation of approval granted by Federal Board of Revenue (FBR), sources said on Wednesday.

The sources said that under tax laws, an institutions, fund, trust, society or any other non-profit organization established in Pakistan for religious, educational, charitable, welfare or development proposes or for the promotion of an amateur sport shall require approval of the Commissioner of Inland Revenue (CIR) FBR.

Under the law the commissioner has also been authorized to withdraw the approval to NPOs on the basis that the income tax returns were not filed or supported documents have not been provided along with the income tax returns.

The sources said the NPOs are require to declare details of names and addresses of the persons from whom donations, contributions, subscriptions etc. exceeding Rs5,000 have been received during the tax year.

Further, it is also mandatory that statement should contain the names and addresses of donees and beneficiaries etc. to whom payments, services etc. exceeding Rs5,000 have been made during the tax year.

The sources said that the NPOs should provide statement of audited balance sheet and statement of accounts.

Besides, the NPOs are required to provide a detailed performance evaluation report after every three years. “Provided that where such detailed performance evaluation report is not submitted on or before September 30 following every three tax years, the commissioner shall issue a show cause notice for withdrawal of approval to the concerned organization.”

The NPOs are required to keep details of deduction of withholding tax and provide to the FBR as required under Section 165 of the Income Tax Ordinance, 2001.

Further, the names, CNIC/NTN, last income declared, tax year and addresses of the promoters, directors, trustees, president, secretary, treasurer, manager and other office bearers, as the case may be, of the organization and indicating clearly their family relationship with each other.

January 28, 2021
Former tax official Irfan Nadeem dies of COVID

KARACHI: Irfan Nadeem Syed, a former senior officer of Federal Board of Revenue (FBR), Tuesday died of COVID.

He was on ventilator for the last two days to fight against the deadly coronavirus, sources said.

Irfan Nadeem Sayed was senior officer BS-21 of Secretariat Group. However, he served as tax official. He was Member Direct Taxes before joining as additional director general of the Federal Investigation Agency in June 2009.

Tax officials have paid homage to the departed soul.

His namaz e Janaza will be at 10 am on January 27, 2021 at Masjid Bait-us-Salam Phase 4 DHA KARACHI

His Residential address as shared by Madam Zareen is 18/2, M street, Phase IV, DHA KARACHI.

January 27, 2021
Rules notified for goods supplied from tax exempt areas

ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday issued rules for tax treatment of goods supplied from tax exempt areas. In this regard the FBR issued SRO 96(I)/2021 to make amendment in Sale Tax Rules, 2006.

The Sales Tax Act, 1990 defines “tax-exempt areas” as Azad Jammu and Kashmir, Gilgit-Baltistan, Tribal Areas as defined in Article 246 of the Constitution of the Islamic Republic of Pakistan.

According to the rules , the person bringing, or causing to bring, taxable goods from tax exempt area shall be required to be registered under the Act or, as the case may be, the Sales Tax Act, 1990 as adopted in Azad Jammu and Kashmir and all the provisions of the Acts ibid shall apply accordingly.

The liability of payment of tax or taxes and furnishing of prescribed documents shall be on the person bringing, or causing to bring, taxable goods from tax exempt area and supplying the same in taxable area in the course and furtherance of taxable activity.

Subject to the applicable provisions of the Act and the rules made thereunder, a registered person shall be entitled to the adjustment of any input tax paid under the Sales Tax Act, 1990 as adopted in Azad Jammu and Kashmir.

E-transport advice.— Every registered person bringing, or causing to bring, taxable goods from tax-exempt areas into taxable area, in the course and furtherance of taxable activity, shall login to FBR computerized system and electronically generate e-transport advice, with a unique identification number, in the form specified in STR 32. The e-transport advice shall be issued prior to entry of the taxable goods in to the taxable area.

Provided that a registered person shall only be allowed to generate e-transport advice if he is not blacklisted or suspended in terms of section 21 of the Act and he has filed return under section 26 thereof by the due date for the last two immediately preceding tax periods.

Where an e-transport advice has been generated under this rule, but goods are either not transported or are not transported as per the details furnished, the e-transport advice may be canceled within twelve hours of its issuance:

Provided that the e-transport advice shall not be canceled after it has been examined by an authorized officer on any of the check-posts including the designated mobile teams.

E-transport advice shall be valid for a period of up to one day for distances of up to 100 km in the taxable areas and one additional day for every 100 km or part thereof thereafter.

Where due to unavoidable circumstances, the taxable goods cannot be transported within the validity period of the e-transport advice, the concerned Commissioner Inland Revenue, upon receiving application from the registered person, may extend the validity period.

The details of e-transport advice shall be made available to the recipient of the supply who shall convey his acceptance or rejection of the supply of goods through the FBR computerized system:

Provided that where no acceptance or rejection has been communicated by the recipient within forty-eight hours of such intimation or before the delivery of the goods, whichever is earlier, it shall be deemed that he has accepted the supply of the goods:

Provided further that the provisions of this sub-rule shall not apply where the taxable goods are brought in to the taxable area by manufacturer or importer to be sold at self-own, self-managed, self-administrated or self-operated distribution, wholesale or retail outlet.

The registered person may update the particulars of vehicle while the goods are in transit after duly intimating the concerned Commissioner Inland Revenue and providing reasons for the updating.

Only one e-transport advice may be generated against a single invoice or, as the case may be, a stock advice and one conveyance may carry multiple e-transport advices in case it is transporting taxable goods relating to multiple invoices or stock advices:

Provided where e-transport advice has been canceled under sub-rule (2), fresh e-transport advice may be generated against the same invoice or, as the case may be, stock advice.

Prescribed documents.— Every conveyance carrying taxable goods originating from tax-exempt areas and entering taxable area shall carry the following documents at the time of entering into taxable areas namely: –

sales tax invoice, in original, as prescribed under section 23 of the Act or as the case may be, under the Sales Tax Act, 1990 as adopted in Azad Jammu and Kashmir: Provided that where any taxable goods are exempt under the Sales Tax Act, 1990 as adopted in Azad Jammu and Kashmir or any notification issued thereunder, such goods shall be accompanied by a serially number invoice containing all particulars as specified in section 23 of the Act excluding the amount of sales tax and mentioning the legal provision under which exemption is claimed.:

Provided further that where the taxable goods are brought in to the taxable area by a manufacturer or importer to be sold at his self-owned, self-managed, self-administered or self-operated distribution, wholesale or retail outlet or outlets, duly declared in his STR-1 Form, such goods shall be accompanied by serially numbered stock advice in the form specified in STR-33 along with copy of STR-1 Form.

Goods declaration in case of imported goods; and e-transport advice as specified under rule 69D.

The prescribed documents shall accompany the conveyance up to the destination mentioned in the relevant e-transport advice.

Check-posts.— The Board may specify the location and other necessary particulars of check-posts, including mobile teams, if any, through a notification in the Official Gazette.

The Chief Commissioners Inland Revenue of RTO Peshawar, RTO Abbottabad, RTO Rawalpindi, RTO Sialkot and RTO Quetta or any other RTO having jurisdiction over areas adjoining tax exempt areas, shall establish check-post or check-posts, as notified by the Board under sub-rule (1), within the relevant regional territorial jurisdiction.

At the check-posts every conveyance entering into taxable area from tax exempt areas and carrying any taxable goods (including such goods as are prima facie deemed or suspected to be taxable) shall be subjected to scrutiny by the authorized officer.

On the basis of credible information, mobile teams may proceed to intercept, examine and search any conveyance on the routes emanating from tax exempt areas and all the relevant provisions of the Act and these rules shall apply accordingly. A summary report of examination of taxable goods under sub-rule (3) or as the case may be under sub-rule (4), shall be recorded online by authorized officer mentioning the unique identification number of the e-transport advice in respect of the goods examined.

Powers of the authorized officer. — Any taxable goods in respect of which any of the provisions of Act or these rules have been contravened shall be liable to be seized along with the conveyance, if any, in which such goods are laden or have been laden or which has been used for movement, carriage or transportation of such goods. 69H. Confiscation.— (1) The adjudicating authority, by passing an order in writing, shall have powers and authority to confiscate taxable goods which are brought in to taxable areas in violation of the Act and these rules.

When any goods are confiscated under these rules, such goods shall thereupon vest in the Federal Government.

The adjudicating authority after confiscation shall take and hold possession of the goods confiscated, and every officer of Inland Revenue, if required, shall assist him in taking and holding such possession.

Goods in respect of which order under sub-rule (1) has been passed, and in respect of which the option of paying a fine in lieu of confiscation has not been exercised, shall be disposed of in such manner as the Chief Commissioner Inland Revenue, having jurisdiction may direct.

January 26, 2021