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  • FBR takes measures to facilitate taxpayers in 1HFY22

    FBR takes measures to facilitate taxpayers in 1HFY22

    ISLAMABAD: The Federal Board of Revenue (FBR) has initiated a number of initiatives to facilitate taxpayers during first half of the current fiscal year 2021/2022 (1HFY22).

    According to Mid-Year 2021/2022 progress report issued by the ministry of finance, the revenue agency had done its best to facilitate the taxpayers in order to create congenial environment and to fetch sufficient tax revenues.

    The ministry highlighted the initiatives taken in the Inland Revenue such as:

    READ MORE: Tax incentive granted for revival of sick industrial units

    Track and Trace System:

    Track and Trace Solution has been rolled out for tobacco and sugar sectors and its rolling out for cement, beverages and fertilizer sectors in progress. The system is aimed at enhancing tax revenue, reducing counterfeiting and preventing smuggling of illicit goods through implementation of a robust, nationwide, electronic monitoring system through the affixation of tax stamps on various products at the production stage. This enables FBR to trace the entire suppy chain of manufactured goods.

    Point of Sales (POS):

    Point of Sales (POS) Invoicing System is a pathway towards digitization. Responding to the growing needs of digitization of economic transactions in Pakistan, FBR has launched POS invoicing, which is computerized system for recording sales data, managing inventory and maintaining customer data. It is a real-time sales documentation system that links the electronic systems at the outlets of all Tier-1 retailers with the FBR via the internet. The system is aimed to ensure that all sales are reported in real-time to the FBR and are duly accounted for in monthly sales tax returns of such retailers.

    READ MORE: FBR explains tax amnesty on equity investment

    Automated Issuance of refunds:

    To facilitate taxpayers, centralized automated refund system has been introduced with no requirement for manual application and verification. The system-based verification system issues refund directly into the bank accounts of taxpayers without any requirement with face-to-face interaction with tax authorities. Enabling legal framework has also been provided through insertion of relevant provisions in tax laws.

    Single Sales Tax Portal/Return:

    Building further on its vision to facilitate taxpayers and ensure ease of doing business through automation, digitization and minimization of human interaction with taxpayer, the FBR has launched Single Sales Tax Portal. Under this new portal the sales tax returns of December 2021 were filed in January 2022. This facility will enable taxpayers to file single monthly sales tax returns instead of multiple returns on different portals; thereby, significantly reducing the time and cost of compliance. The system will automatically apportion input tax adjustment as well as tax payments across the sales tax authorities, therefore, eliminating the needs for reconciliation and payment transfers.

    READ MORE: Input tax adjustment restricted for oil, ghee, steel makers

    E-hearing:

    In order to provide faceless tax administration, reducing compliance cost and saving precious time of taxpayers, the mechanism of e-hearing has been devised. Enabling legal provisions for admissibility of evidence collected during e-hearing has been introduced through 227E of Income Tax Ordinance, 2001.

    E-filing of appeal:

    The mechanism of online filing of appeals has been made available to taxpayers. However, enabling legal provisions were lacking which have been introduced through Section 127 of the Income Tax Ordinance, 2001.

    Tax Asaan:

    A mobile application to facilitate taxpayers, available free of cost for Android as well as iOS based smart phones. It offers various facilities to the taxpayers including registration for income tax and sales tax, return filing for salaried individuals and POS invoice verification.

    IREN and Joint Anti-Smuggling field intelligence exercise:

    Establishment of Inland Revenue Enforcement Network (IRWN) to check smuggling and counterfeit products. Inland Revenue Service and Pakistan Customs Service have joined hands for anti-smuggling filed intelligence exercise.

    READ MORE: FBR detects fraudulent declaration of goods in ST returns

    Risk based Audit:

    FBR has developed a centralized risk based audit management system (RAMS) for selection of audit cases centrally on the basis of pre-determined risk parameters. Selection of scientific matrix allowing allocation and distribution of weightage to different parameters in risk grid will segregate the potential and high-risk cases for audit through parametric computer balloting. Subsequently, in September 2020, through Audit Policy 2019, a total number of 12,533 cases were selected for audit for tax year 2018 through RAMS.

    Measures taken in Customs to facilitate trade during Mid-year:

    Pakistan Single Window (PSW):

    The system of Pakistan Single Window (PSW) has been launched to achieve trade facilitation in an automated environment, reduce clearance times for legitimate trade, improved compliance through increased access to regulatory information and functions. It ensures greater collaboration and coordination between customs and other border regulatory agencies at the national and international level for coordinated border management and enhanced transparency in regulatory processes and decision-making.

    Automated Process for Scanning of Cargo:

    The Pakistan Customs Wing has introduced a new automated process for scanning of containerized import consignment of industrial raw materials for their speedy clearance at ports. WeBOC has led to significant reduction in processing time. The introduction of non-intrusive inspection system by customs was a long-awaited initiative aimed at replacing physical inspection of cargo and reducing the dwell time at ports by using the latest scanning technology in line with international best practices.

    Virtual Assessment Module:

    This is a system based automated assessment of goods declared (GD) on the basis of selectivity criteria. The module has been developed and deployed. It will significantly facilitate the assessment process of GD by reducing the clearance time.

    Development of Authorized Economic Operator (AEO) Module:

    The AEO Module has been developed and deployed. It will help in reducing in port dwell time and customs clearance.

    Threshold for Electric/Digital Mode of Payment:

    The Threshold for electric/digital mode of payment has been lowered from Rs500,000 to Rs200,000. The module has been developed and deployed. It will streamline the payment process and would reduce time.

    Common Bonded Warehousing Module:

    The module has been developed and deployed. It will help in streamlining the matters relating to common bonded warehouse.

  • Car sales surge by 53% in nine months despite rupee fall

    Car sales surge by 53% in nine months despite rupee fall

    KARACHI: Sales of locally manufactured / assembled motor cars have registered 53 per cent growth during first nine months (July – March) 2021/2022 of the current fiscal year despite massive depreciation in rupee value.

    According to data released by Pakistan Auto Manufacturers Association (PAMA), the sales of locally assembled cars increased to 205,469 units during the first nine months of the current fiscal year as compared with 134,718 units in the corresponding months of the last fiscal year.

    READ MORE: Investigation into high car prices in Pakistan ordered

    The sales of cars grew to 27,131 units in March 2022 as compared with 21,706 units in February 2022 and 20,813 units in March 2021, showing the increase of 25 per cent and 30 per cent, respectively.

    Analysts at Arif Habib Limited said that despite the ongoing political turbulence and economic uncertainty, auto sales continued depicting a positive growth.

    READ MORE: Pak Suzuki Motor declares Rs2.68 billion annual profit

    They further said that despite the upward revision in car prices and rising inflation, car buyers’ interest remained alive, mainly on account of: anticipation of further price hike amid massive rupee devaluation and surge in cost of production, and; greater demand for locally assembled cars given increasing cost of imported CBUs on the back of higher freight costs and commodity prices (especially steel), substantial currency depreciation, and imposition of temporary loan ban on financing of imported CBUs.

    READ MORE: Rupee makes recovery to dollar for third straight day

    According to data, the sale of cars below 1000 CC surged by 83 per cent to 53,241 units during first nine months of the current fiscal year as compared with 29,038 units in the same months of the last fiscal year.

    The sales of cars with engine capacity up to 1000CC posted a growth of 65 per cent to 34,602 units during the period under review as compared with 20,975 units in the same period of the last fiscal year.

    Meanwhile, sales of 1300CC and above recorded an increase of 35 per cent to 75,207 units as compared with 55,733 units in the corresponding period of the last fiscal year.

    READ MORE: Indus Motors estimates 15% sales dip on PKR fall

    The sales of Indus Motors increased by 33 per cent to 55,567 units during first nine months of the current fiscal year as compared with 42,670 units in the corresponding months of the last fiscal year.

    The sales of Pak Suzuki posted 66 per cent growth to 109,419 units during July – March 2021/2022 as compared with 66,013 units in the same period of the last fiscal year.

    Similarly, the sale of Honda Cars recorded 38 per cent to 30,010 units during first nine months of the current fiscal year as compared with 21,698 units in the same period of the last fiscal year.

  • FSC reserves judgment in Riba free banking case

    FSC reserves judgment in Riba free banking case

    ISLAMABAD: The full bench of Federal Shariat Court has reserved judgment in case of Riba free Islamic banking system in Pakistan, according to a statement issued on Tuesday.

    The full bench of the Court comprising of Justice Muhammad Noor Meskanzai Chief Justice, Justice Dr. Syed Muhammad Anwar and Justice Khadim Hussain M. Shaikh, in exercise of power under Article 203-D of the Constitution of Islamic Republic of Pakistan continued hearing of the Riba case and reserved for judgment.

    READ MORE: Riba case adjourned to April 04

    It is pertinent to mention that Riba case was remanded by Shariath Appellate Bench Supreme Court of Pakistan in 2002.

    The existing bench of the Federal Shariat Court headed by the chief Justice Justice Muhammad Noor Meskanzai took keen and unprecedented interest in this matter.

    During the chairmanship of his lordship of the bench thirty four hearings are conducted.

    READ MORE: Court hearing on Riba-free banking in Pakistan

    Petitioners, their counsels, jurisconsults, Amicus Curiae, Economists, Experts, scholars, chartered accountants, Attorney General, and Advocate Generals advanced their arguments and the Court heard them with patience.

    They also gave suggestions for conversion of the existing banking system into Riba free Islamic Banking system.

    The State Bank of Pakistan (SBP) defines Riba as:

    READ MORE: PMRC, HBL Islamic Banking raise Rs1bn Sukuk

    The word “Riba” means excess, increase or addition, which correctly interpreted according to Shariah terminology, implies any excess compensation without due consideration (consideration does not include time value of money). This definition of Riba is derived from the Quran and is unanimously accepted by all Islamic scholars.

    The meaning of Riba has been clarified in the following verses of Quran (Surah Al Baqarah 2:278-9)

    “O those who believe; fear Allah and give up what still remains of the Riba if you are believers. But if you do not do so, then be warned of war from Allah and His Messenger. If you repent even now, you have the right of the return of your principal; neither will you do wrong nor will you be wronged.”

    READ MORE: SBP issues five-year strategic plan for growth of Islamic banking

    “The origination of term interest dates back to 17th century with the emergence of banking system at global level. Interest means giving and/or taking of any excess amount in exchange of a loan or on debt. Hence, it carries the same meaning/value as that of Riba as defined in the previous question. Further, it is narrated that “the loan that draws interest is Riba”.

    There is consensus among the Muslim scholars of all the fiqhs that interest is Riba in all its forms and manifestations.

  • Rupee makes recovery to dollar for third straight day

    Rupee makes recovery to dollar for third straight day

    KARACHI: The Pakistan Rupee (PKR) made recovery against the dollar for third consecutive day on Tuesday since the massive increase in key policy rate on April 07, 2022.

    The rupee on Tuesday gained 91 paisas to close at Rs182.02 to the dollar from previous day’s closing of Rs182.93 in the interbank foreign exchange market.

    READ MORE: Rupee recovers sharply; dollar eases to Rs182.93

    The State Bank of Pakistan (SBP) on April 07, 2022 issued monetary policy statement to increase the policy rate by 250 basis points to 12.25 per cent from 9.75 per cent. The policy rate was enhanced in an emergent meeting instead of a scheduled meeting.

    The rupee recovered around Rs6.16 against the dollar since the increase in the policy rate. The local currency recorded all-time low of Rs188.18 to the dollar on April 07, 2022.

    READ MORE: Rupee rebounds sharply on massive interest rate hike

    The SBP noted that the recent developments necessitated a strong and proactive policy response.

    Accordingly, the Monetary Policy Committee (MPC) decided at its emergency meeting today, to raise the policy rate by 250 basis points to 12.25 percent.

    This increases forward-looking real interest rates (defined as the policy rate less expected inflation) to mildly positive territory. The MPC was of the view that this action would help to safeguard external and price stability.

    READ MORE: PKR witnesses record single day fall to dollar

    The MPC also noted that SBP is in the process of taking further actions to reduce pressures on inflation and the current account, namely an increase in the interest rate on the export refinance scheme (EFS) and widening the set of import items subject to cash margin requirements. These items are mostly finished goods including luxury items and exclude raw materials.

    The announcement of these measures is expected soon and will complement the action taken by the MPC on interest rates.

    READ MORE: Dollar tops PKR 186.13 at interbank closing

  • Stocks up 1700 points, highest ever single day gain

    Stocks up 1700 points, highest ever single day gain

    KARACHI: Pakistan stocks on Monday posted ever highest single day gain of 1700 points on change in political setup.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) ended 46,145 points from last Friday’s closing of 44,445 points, showing an increase of 1,700 points.

    READ MORE: Weekly Review: stock market likely trade in green

    Analysts at Topline Securities said that it was a historic day at Pakistan Equities where the KSE-100 index posted an ever highest gain of 1,700 points in a given day and closed at 46,145 (+1700 points; up 3.83 per cent) for the day.

    The aforesaid rally is attributed to the change in political setup of the country over the last weekend where PM Imran Khan resigned as a result of successful “Vote of No Confidence” against him.

    READ MORE: Stocks jump up 658 points on Supreme Court decision

    During the trading hours, bullish sentiment hit the roof as massive buying was seen across the board where investors celebrated some resolution of the highly uncertain political environment over the last few days.

    READ MORE: Pakistan stocks shed 324 points on political uncertainty

    Tech, Cements, Banks and Power sector’s stocks contributed positively today to the benchmark index where SYS, LUCK, TRG, HBL & HUBC added 425 points, cumulatively. On the flip side, INDU, FHAM & ABL have seen some profit taking today.

    About 557 million shares traded today at the bourse while total value clocked in at Rs13.6 billion. WTL was the volume leader of the day with the trading of 40.7 million shares in it, today.

    READ MORE: Stocks gain 183 points despite political uncertainty

  • Rupee recovers sharply; dollar eases to Rs182.93

    Rupee recovers sharply; dollar eases to Rs182.93

    KARACHI: The Pakistan Rupee (PKR) made a massive gain of Rs5.25 to the dollar during past two trading sessions due to sharp increase in key policy rate by 2.5 per cent.

    The rupee ended Rs182.93 to the dollar from last Friday’s closing of Rs184.68 in the interbank foreign exchange market.

    READ MORE: Rupee rebounds sharply on massive interest rate hike

    The local currency recorded all- time low against the dollar at Rs188.18 to the dollar on April 07, 2022.

    The SBP on April 07, 2022 announced monetary policy in an unscheduled meeting and surprisingly increased the key policy rate by 250 basis points to 12.25 per cent.

    The SBP noted that the recent developments necessitated a strong and proactive policy response.

    Accordingly, the Monetary Policy Committee (MPC) decided at its emergency meeting today, to raise the policy rate by 250 basis points to 12.25 percent.

    READ MORE: PKR witnesses record single day fall to dollar

    This increases forward-looking real interest rates (defined as the policy rate less expected inflation) to mildly positive territory. The MPC was of the view that this action would help to safeguard external and price stability.

    READ MORE: Dollar tops PKR 186.13 at interbank closing

    The MPC also noted that SBP is in the process of taking further actions to reduce pressures on inflation and the current account, namely an increase in the interest rate on the export refinance scheme (EFS) and widening the set of import items subject to cash margin requirements. These items are mostly finished goods including luxury items and exclude raw materials.

    The announcement of these measures is expected soon and will complement the action taken by the MPC on interest rates.

    READ MORE: Dollar continues record spree against PKR; hits 185.23

  • High interest rate to destroy economy: FPCCI

    High interest rate to destroy economy: FPCCI

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday said that the recent increase in interest rate will result in disaster for the economy.

    Irfan Iqbal Sheikh, President FPCCI, has expressed his profound disappointment and concerns over an unexpected and massive hike in the key policy rate, i.e. 250 bps by the Monetary Policy Committee (MPC) of the State Bank of Pakistan.

    READ MORE: KCCI demands immediate withdrawal of policy rate hike

    He said that the business, industry and trade community is shocked; and, clueless at the same time on how to cope with its fallout on economic activities, viability of doing business in Pakistan and inevitable adverse impacts on exports – in the absence of any governmental support.

    President FPCCI added that a comparative analysis of the interest rates in Pakistan and the regional countries also show a big difference to Pakistan’s disadvantage; namely, Malaysia is at 2 percent China is at 3.7 percent; India is at 4 percent and Bangladesh is at 5 percent. He emphasized that if the interest and export refinancing rates are not decreased drastically in Pakistan, we will not be able to compete with the regional countries as well.

    READ MORE: SBP increases policy rate sharply by 250bps to 12.25%

    Irfan Iqbal Sheikh explained that the current tide of the inflation had nothing to do with the policy rate of SBP; but, it was due to the political uncertainty and lack of any direction in economic policies due to it.

    Additionally, he added, that the inflation in Pakistan has been due to supply-side disruptions and again had nothing to do with the interest rate.

    President FPCCI elaborated that it was business community’s genuine demand, even before the recent interest rate raise, that the policy rate should be gradually brought down from 9.75 percent to ensure availability of capital to businesses at lower and affordable rates. Contrary to what was needed, the interest rate has now been hiked to 12.25 percent; which will put a halt to the economic and commercial activities in the country.

    READ MORE: KATI terms sudden policy rate hike as economic disaster

    Outlining three factors, Irfan Iqbal Sheikh said that volatile rupee-dollar parity, uncertainty in political & economic environment and interest rate hike will totally crush the SMEs; as cost of doing of doing business, ease of doing business, access to capital, access to foreign exchange and remaining profitable will all be next to impossible for SMEs.

    Irfan Iqbal Sheikh said if the authorities do not interfere immediately, there will be a lot of bankruptcies, many export orders would not be fulfilled, huge loss of employment opportunities; and loss of tax revenue will follow. He has called upon the authorities to instantaneously start a consultative process with all the stakeholders to find a workable way out of the current crises.

    READ MORE: SBP intervention sought to stop further rupee devaluation

  • FBR explains tax amnesty on equity investment

    FBR explains tax amnesty on equity investment

    ISLAMABAD: The Federal Board of Revenue (FBR) has explained tax amnesty granted on equity investment for already existing or new industrial under taking.

    The government has granted immunity from questioning of source of funds through Income Tax (Amendment) Ordinance, 2022.

    A new section 100F has been inserted to the Income Tax Ordinance, 2001 to give immunity from probe under Section 111 of the Income Tax Ordinance, 2001.

    READ MORE: Tax amnesty launched for setting up new industrial units

    To explain this important change, the FBR issued an explanation circular No. 13 of 2022.

    The FBR said in order to promote industrialization in the country, immunity from probe under section 111 of the Ordinance has been granted on equity investment made by eligible persons in a new company formed for establishing an industrial undertaking or to an existing company being an industrial undertaking (for investment in expansion and modernization) after paying an amount of tax equal to five percent on such investment and upon fulfilling other conditions as mentioned in this section.

    The amount of undeclared funds for investment has to be credited into a dedicated bank account of such company before due date of filing of statement i.e. September 30, 2022 and can only be used either for purchase or import of plant and machinery including IT hardware through a letter of credit or software and IT services, or for construction of building and structure in case of new industrial undertaking and for construction of only manufacturing premises in case of existing unit.

    The term modernization has been defined in this section which includes acquisition or upgradation of IT hardware, software and IT services.

    READ MORE; FBR launches new Active Taxpayers List; return filing grows by 58%

    The minimum qualifying equity investment to avail benefit under this section is Rs50 million.

    The tax paid under this section is not refundable or adjustable against any other tax liability of the company and the declarant will be entitled to incorporate the amount of declared funds in his wealth statement, financial statements or books of accounts as the case may be.

    The industrial undertaking established under the provision of this section, as the case may be, will have to commence its commercial production by June 30, 2024 and a certificate issued by the Engineering Development Board to that effect is required to be furnished by the company with income tax return for tax year 2024.

    READ MORE: POS invoice verification for prize scheme surges by 63%

    In case of misrepresentation or suppression of facts, statement filed under sub-section (1) will be treated as void ab-initio and all the provisions of Income Tax Ordinance, 2001 will apply accordingly. It is emphasized that investment opportunity offered to investors under this section is not an amnesty scheme. Rather, it is a conditional tax concession.

  • Input tax adjustment restricted for oil, ghee, steel makers

    Input tax adjustment restricted for oil, ghee, steel makers

    ISLAMABAD: The Federal Board of Revenue (FBR) has restricted input adjustment for manufacturers of steel and oil and ghee.

    The FBR issued Sales Tax General Order (STGO) No. 12 of 2022 dated April 07, 2022, regarding input tax adjustment to manufacturers of oil and ghee and steel melters and re-rollers.

    Under the STGO, the sectors of oil & ghee and steel would only avail input adjustment against invoices issued for the same products falling under these sectors.

    READ MORE: FBR detects fraudulent declaration of goods in ST returns

    The FBR said the Sales Tax Act, 1990 mandates a taxpayer registered with FBR to claim input tax credit on import/purchases from registered suppliers only.

    Section 8(1)(a) of the Act restricts the adjustment of input on goods or services used or to be used for any purpose other than for taxable supplies made or to be made.

    Similarly, Section 8(1)(f) and (i) of the Act provide that tax credit shall not be admissible on the goods or services not related to the taxable supplies made by the taxpayer.

    This essentially being a self-assessment based system warrants high standards of responsibility and integrity on part of the UST filers.

    READ MORE: Adjustment restrictions hamper return filing by retailers

    “However, the analysis of the data available in the system has led to conclude that the facilities/benefits provided through automated sales tax return are being misused by the manufacturers of oil & ghee and steel melters and re-rolling mills who are claiming inputs other than their relevant business activities in violation of provisions of law.”

    In order to ensure certainty, transparency across-the-board, it has been decided that input tax adjustment shall not be allowed to the manufacturers of Oil & Ghee and Steel Melters and Re-Rollers on the goods which are not related to their business activity.

    The list of such goods attached as Annexure-I for manufacturers of Oil & Ghee and as Annexure-11 for Steel Melters and Re-Rollers on the basis of PCT heading on which input tax credit shall not be admissible under the law.

    Although, all these PCT headings have been identified after due diligence, yet any hardship caused may be brought to the notice of the Commissioner concerned. This STGO become applicable with effect from April 1, 2022.

  • FBR detects fraudulent declaration of goods in ST returns

    FBR detects fraudulent declaration of goods in ST returns

    ISLAMABAD: The Federal Board of Revenue (FBR) has detected that traders in supply chain fraudulently declaring goods in sales tax returns.

    The FBR issued Sales Tax General Order (STGO) No. 13 of 2022 dated April 07, 2022 regarding purchases and supplies made by importers, wholesalers, dealers and distributors in sales tax return.

    The Sales Tax Act, 1990 mandates a taxpayer registered with the FBR to correctly declaration of purchases and supplies in the monthly sales tax return as filed under section 26 of the Sales Tax Act, 1990.

    READ MORE: Adjustment restrictions hamper return filing by retailers

    This essentially being a self-assessment based system warrants high standards of responsibility and integrity on part of the GST filers.

    “However, the analysis of the data available in the system has led to conclude that the facilities/benefits provided through automated sales tax return are being misused by the importers, wholesalers, distributors who are engaged in business of buying and selling of same state of goods but are fraudulently declaring sales of goods irrespective of their business purchases in violation of provisions of law,” the FBR said.

    READ MORE: FBR announces winners of third POS invoice draw

    In order to ensure certainty, transparency across-the-board, it has been decided that sales of goods by importers wholesalers, Dealers and Distributors under HS Code as declared in Annex-C of the sales tax return shall be allowed on the basis of goods under the said HS Code as declared in Annex-A and Annex-B of sales tax return by these taxpayers.