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Category: Trade & Industry

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  • FBR urged to abolish withholding tax, minimum tax for commercial importers

    FBR urged to abolish withholding tax, minimum tax for commercial importers

    KARACHI: Federal Board of Revenue (FBR) has been urged to abolish withholding tax and minimum tax for commercial importers in the upcoming budget 2021/2022.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for the upcoming budget said that commercial Importers of raw material pay withholding tax at 2 percent up to 5.5 percent which can only be possible if the gross profit is 30 percent, while the margin is not more than 2 to 3 percent on raw materials sold without value addition or change in form.

    By amendment to Section 148 of Income Tax Ordinance, 2001 through Finance Bill 2018-19, WHT paid on import of raw materials by commercial importers has been converted to minimum tax and the importers have been taken out of fixed tax regime (FTR).

    The chamber said that the concept of WHT is unique to Pakistan’s Tax regime which in fact is tantamount to putting the burden of tax-collection from undocumented entities on the compliant tax payers and avoiding the responsibility to broaden tax-base.

    After acquiring unprecedented powers to access information under Section 56 A and 56 B in Income Tax Ordinance, 2001, FBR and its subordinate departments must take the responsibility to identify non-compliant and undocumented entities/persons instead of laying the onus on existing taxpayers.

    The chamber proposed that concept of minimum tax and withholding tax may be abolished.

    Tax Payers may be allowed to pay certain Fixed Tax or opt for Audit regime and pay taxes in accordance with actual tax liability on Income.

    Furthermore, all Taxes deducted have to be adjustable against actual tax liability.

    Giving rationale, the chamber said that the commercial importers who are a major source of revenue will be able to resume their business and contribute to revenue as well as promotion of SMEs.

  • Jurisdiction of big taxpayers given to CTO

    Jurisdiction of big taxpayers given to CTO

    KARACHI: Federal Board of Revenue (FBR) has transferred jurisdiction of big volume taxpayers to Corporate Tax Office (CTO) instead of dedicated tax offices for big taxpayers i.e. Large Taxpayers Office (LTO).

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 pointed out that the FBR had created new LTOs which deal with taxpayers having a turnover of Rs.1 billion or more.

    However, FBR has changed the taxpayer’s jurisdictions abruptly without any intimation.

    Jurisdiction of some tax payers has been transferred from LTO to CTO despite having a turnover of Rs.7 to Rs8 billion which has created a great deal of confusion and hardship. Difficulties in transfer of soft data/hard copies of tax records from one jurisdiction to other has created problem in processing of refunds and other issues.

    The chamber urged the FBR to correctly and transparently implement the said policy.

    Transfer of Jurisdiction should be streamlined and made easier with prior intimation and valid reasoning.

    Taxpayer data will be available for longer period to be checked by himself at one place and it will also facilitate taxpayers.

  • Commissioner Appeals should be empowered to grant stay up to 90 days

    Commissioner Appeals should be empowered to grant stay up to 90 days

    KARACHI: Federal Board of Revenue (FBR) has been urged to authorized commissioner appeals to grant stay up to 90 days instead existing 15 days.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 said that currently Commissioner (Appeals) grants stay for 15 days only and after expiry of the stay the taxpayer has to file repeated extensions until the decision of the Appeals. Relevant Sections are: ITO 2001 Section 128 (1A)

    The chamber said that this is a cumbersome process which is quite unnecessary and causes undue hardship.

    The KCCI proposed that amendment should be made to Section 128 (1A) of the ITO 2001, to increase the stay duration to Ninety (90) days instead of 15, and extend order timeline to 180 days instead of the existing 30 days.

    This will eliminate unnecessary documentation and save time of both the taxpayer and the Commissioner (Appeals).

  • KCCI demands restoration of normal business timings

    KCCI demands restoration of normal business timings

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) on Saturday demanded the government of Sindh to restore business timings for markets during the holy month of Ramazan ul Mubarak as restriction imposed on timings may result in disastrous for traders and shopkeepers.

    Chairman Businessmen Group (BMG) Zubair Motiwala and President Karachi Chamber of Commerce and Industry (KCCI) Shariq Vohra, while expressing sheer dismay over Sindh Govt’s decision to allow limited business timings from Sheri to 6:00PM and complete closure of businesses on Saturdays and Sundays, urged to revoke the relevant notification without further loss of time and allow all types of businesses to operate at full capacity throughout Ramazan otherwise the people, instead of dying due to diseases caused by coronavirus, would die themselves because of poverty, unemployment, mental stress, hunger or starvation.

    In a statement issued, Chairman BMG and President KCCI stated that they have been urging the Sindh Government through letters to avoid imposing such unpopular decisions at a very crucial time as this was the peak season and if businesses are disallowed to carry out activities for two consecutive days and compelled to observe limited business timings during the remaining working days, it will prove to be disastrous for them throughout next year.

    “We have sent letters to Chief Minister Sindh, Local Govt. Minister, Chief Secretary and Commissioner Karachi and also dropped messages from time to time but haven’t received any response which is a bit disappointing as we were not expecting this kind of response from Sindh Govt. which has always responded to KCCI’s pleas”, said Zubair Motiwala Chairman BMG, “Closure of businesses for two consecutive days and allowing them to operate with limited timings during the remaining days would result in bankrupting many businesses, trigger massive unemployment and chaos.”

    Referring to large number of complaints being received from the shopkeepers of almost all the commercial markets of Karachi who were constantly seeking KCCI’s assistance, Chairman BMG stressed that the government has to come up with some other feasible solution which could save everyone from the pandemic and also ensure zero damage to the poor shopkeepers and small traders who cannot afford any further shocks. “In this regard, the business and industrial community is ready to fully comply with all the SOPs but closure would bring much more difficulties and miseries than opening and controlling the pandemic through the implementation of SOPs”, he added.

    He further said, “These are challenging times and every member of the civil society is facing problems due to COVID crises. Perhaps, it is time when the government should think about extending monetary help to citizens especially the small shopkeepers who are now in net debt position and even paying rents to owners of their business premises has really become difficult.”

    “It is the finding of our Research Department that many shopkeepers have already gone bankrupt and they are running their businesses in anticipation that this season of Ramazan will pull them out of crises. Hence, it is imperative that government should understand the real situation faced by the trading community”, he added.

    “Yes! it is necessary to implement but these SOPs, as the trading argues, are not seen on roads, mosques, public places and big shopping malls. In such a situation, how Karachiites will be saved from COVID if they are closed for two days”, Zubair Motiwala questioned.

    Chairman BMG, therefore, stressed that the notification must be immediately withdrawn while the administration should be effectively utilized for strict implementation of the Standard Operating Procedures (SOPs). “If the administration was able to strictly get the lockdown enforced last year, then why it is not being used for strict implementation of SOPs”, he asked, adding that the Sindh government will have to alleviate the predicament of businessmen instead of aggravating them.

    President KCCI Shariq Vohra also cautioned that shutting down shops for two days and limited business hours would lead to creating a chaotic situation as the people would find no other option but to come out on streets to protest due to rising unemployment and poverty.

    Keeping in view the overall situation and grievances suffered by the business and industrial community, President KCCI hoped that the Sindh government would look into this serious issue and take steps to save businesses and the economy from further disaster.

    On behalf of the entire business community of Karachi particularly the small traders and shopkeepers, Chairman BMG and President KCCI appealed the government to review the decision to shut down all types of commercial/ business activities for two consecutive days a week and allowing limited business hours till 6:00PM which is tantamount to mass killing of the already perturbed small traders and shopkeepers who are in deep crises and struggling really hard to somehow keep their businesses alive.

  • Exporters welcome duty withdrawal on cotton, yarn import

    Exporters welcome duty withdrawal on cotton, yarn import

    KARACHI: Value-added textile exporters have welcomed the decision of the Economic Coordination Committee (ECC) of the cabinet to remove customs duty on import of cotton and yarn.

    Value-Added Textile Exporters convey sincere gratitude and thanks to Prime Minister Imran Khan, Adviser Commerce Razak Dawood and Federal Cabinet on the ECC for according genuine consideration to the demand of Value Added Textile Export Sector to allow duty free import of cotton yarn till June 30, 2021 which exporters were demanding since October 2020 due to unavailability of cotton yarn in the local market.

    The belated decision, however, shall provide only partial relief in the wake of sea trade congestion as the shipments are taking more than two months time to reach Pakistani ports.

    Therefore, textile exporters are of the opinion and appeal the Government to allow duty free import of cotton yarn till time the government achieves its set cotton production target of 10.5 million bales.

    To ease down the cotton yarn availability crisis, it is also imperative that to also place ban on export of cotton yarn from Pakistan or impose 10 percent duty on export of cotton yarn from Pakistan and take necessary steps and measures to import cotton yarn safely from Central Asian Republics through land route by activating all the transit trade agreements signed with regional countries as the sea route is taking prolong duration due to shortage of containers and vessels.

    The textile exporters once again request the Government to take cognizance over hoarding of cotton yarn and cartelization by concerned which are actionable as per law under the Price Control and Prevention of Profiteering & Hoarding Act 1977 and Competition Act of Pakistan 2010.

    According to the said Act of 1977 cotton yarn is included in the schedule of essential commodities like sugar, wheat, edible oil etc. Therefore, the Government must immediately take action as per the law against spinning mills and  yarn traders involved in monopoly, abusive dominance for exorbitant pricing and hoarding and immediately conduct raids by arresting the culprits and seize the hoarded cotton yarn and also conduct Forensic Audit on the pattern of sugar crisis that will prove it many times bigger scam than the sugar scam as it is learned that approx. 2 million bales have been sold without sales tax and invoices in the local market.

    This joint statement was issued by the Value Added Textile Sector Associations: Jawed Bilwani, Chairman, Pakistan Apparel Forum, Waheed Khaliq Ramay of Power Looms Owners Association, Ijaz Khokhar, Chief Coordinator & Ex-Central Chairman, Pakistan Readymade Garment Manufacturers & Exporter Association, Riaz Ahmed, Central Chairman Mian Farrukh  Iqbal, Senior Vice Chairman, Pakistan Hosiery Manufacturers & Exporters Association, Syed Aasim Shah, Former Chairman, All Pakistan Bedsheets & Upholstery Manufacturers Association, Rafiq Godil Chairman, Former Chairman, Pakistan Knitwear & Sweaters Exporters Association, Dr. Shahzad Arshad, Chairman, Pakistan Cotton Fashion Apparels Mfrs. & Exporters Association, Aamir Lari, Vice Chairman, Towel Manufacturers Association of Pakistan, Abdus Samad, Chairman, Pakistan Cloth Merchants’ Association.

    In another statement Hanif Lakhany, Vice President, Federation of Pakistan Chambers of Commerce & Industry (FPCCI) & Senior Vice Chairman Pakistan Yarn Merchants Association(PYMA) and Vice Chairman Farhan Ashrafi & convener FPCCI’s Central Standing Committee on Yarn Trading, have lauded ECC decision to withdraw customs duty on cotton yarns, and said that ECC of the Cabinet withdrew customs duty on import of cotton yarns under PCT 5205, 5206 and 5207 till 30th June, 2021.

    However, both officials called for the abolition of additional customs duties & regulatory duty on synthetic yarns for countering the negative effects of the Corona epidemic and to continue the production activities. They also reiterated demand to allow import cotton & cotton yarn from India

    In a statement, Hanif Lakhany & Farhan Ashrafi said the ECC was commendable but the removal of additional customs duty & regulatory duty on synthetic yarns should also be abolished to support the textile industry, which is facing hurdles due to unavailability of raw materials and high prices. So immediate permission should be given for cotton & cotton yarn import from India.

    “Due to low production of cotton in the country and huge increase in the price of cotton yarn in the local market, the cost of industrial production has gone up significantly. On the contrary, it is becoming more and more difficult to run industries, which may affect the delivery of export orders”, they pointed out.

    Hanif Lakhany and Farhan Ashrafi requested the government to allow import of cotton & cotton yarn from India in the best interest of the economy to ensure timely fulfilment of export orders. Which will be warmly welcomed by the business and industrial community across the country.

  • FBR recommended to reduce minimum tax for chemical companies

    FBR recommended to reduce minimum tax for chemical companies

    KARACHI: Federal Board of Revenue (FBR) has been urged to reduce minimum tax rate for chemical companies having large turnover with low profit margins.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 submitted to the FBR, recommended that minimum tax rate should be reduced to 0.2 percent for large chemical companies with large turnover with low profit margins.

    It further recommended that clause b of Section 148(7) of Income Tax Ordinance,  2001 as deleted by the Finance Act, 2017 should be restated, which read as follows: “148(7) b fertilizer by manufacturer of fertilizer” to allow adjustment of tax deducted at import stage for fertilizer imported by a fertilizer manufacturer so as not to make it a final tax.

    It recommended that exemption under Clause 42 read with section 153(3) of the Income Tax Ordinance, 2001 be available to all terminals without discrimination. The said clause be re-worded as follows:

    “(42) The provisions of sub-section 3 of section 153 shall not apply in respect of payments received by a resident person for providing services by way of operation of terminal(s) at a sea-port in Pakistan or of an infrastructure project covered by the Government’s Investment Policy, 1997.”

    For the fertilizer industry, the GST on supply of natural gas as feed stock is at 5 percent and as fuel stock is 17 percent. However, the output GST rate on sales of finished goods i.e. urea is 2 percent. This mismatch between input and output GST results in excessive input tax refundable build-up.

    GST rate on supply of natural gas for fertilizer industry should be zero percent.

    For the sales tax rate on raw material of paints, the OICCI made following recommendations:

    i. Sales tax of 25 percent should be imposed on some basic raw materials like Titanium dioxide and other following categories for commercial importers.

    ii. Enforcement measures to be made more effective in consultation with OICCI members, who are established taxpayers, to penalize tax evaders.

    The OICCI highlighted that macro nutrients being imported under Chapter 31 of Pakistan Customs Tariff, enjoy reduced duties and taxes representing only 8 percent of the value imported whilst in case of micronutrients being imported under Chapter 28, the import duties and taxes are quite high representing 29% of import value.

    It recommended to make necessary amendments in the revenue regulation to reduce sales tax and import duties on import of micronutrients.

  • Taxpayers not to worry on system generated past six years audit notices: CCIR

    Taxpayers not to worry on system generated past six years audit notices: CCIR

    KARACHI: Taxpayers should not worry on audit notices of past six years as most of those were system generated and Federal Board of Revenue (FBR) is trying to resolve the issue, a top FBR officials said on Monday.

    While discussing tax issues at Karachi Chamber of Commerce and Industry (KCCI), Dr. Aftab Imam, Chief Commissioner Inland Revenue (CCIR) of Corporate Tax Office (CTO) Karachi explained the issues pertaining to audit notices.

    He said that FBR was well-aware of this issue and it has been observed that most of them were system generated notices and the business community should not worry as FBR was trying its best to resolve this issue.

    “There is no need to re-submit those documents again at the FBR which have already been submitted for audit and only the missing documents should be provided with a covering letter in which it should be clearly mentioned that the following relevant documents have already been provided while the missing documents are being sent,” he added.

    He also assured to analyze the issue of higher turnover tax on yarn traders as compared to the profit margin and look into the possibility of restoring it back to 0.1 percent from 1.5 percent in the next budget.

    The Chief Commissioner CTO mentioned that FBR was seriously working towards creating ease for the business community as the economy would only flourish when the businesses flourish that would automatically improve the tax revenue for the country. “Hence, we want to facilitate the business community and keeping in view FBR’s approach, most of the issues being faced today would be resolved in the next one-an-a-half year as we are very keen to create a tax-friendly environment”, he added.

    He further sought business community’s assistance in identifying those millions of individuals who have been doing businesses of up to billions of rupees but they remain out of the tax net which was the basic reason for the exorbitant tax rates being suffered by the existing taxpayers. “The unregistered individuals have to be taken to task which would reduce the burden on existing taxpayers through reduction in tax rates”, he added.

    Earlier, President KCCI M. Shariq Vohra, while welcoming Chief Commissioner CTO, appreciated that dedicated efforts and prompt response by Chief Commissioner CTO towards amicably resolving the FBR-related taxation issues being faced by business community. “We hope that the FBR would incorporate maximum number of recommendations given by KCCI in its budget proposals which have been recommended in the larger interest of the country”, he said, adding that it has always been KCCI approach to highlight the general issues which are not faced by a few individuals only but by the majority of stakeholders from a particular sector. “Our proposals for upcoming Budget for FY 2021-22 carry pivotal importance and will have a positive impact on business and investment climate, ease of doing business and overall growth of the economy.”

    He was of the opinion that taxpayers face immense hardships in getting petty issues resolved because of the unnecessary hindrances being creates by FBR officials which not only fetches a bad image for the entire department but also discourages new individuals to come into the tax net which was a very issue that requires immediate attention.

    Shariq Vohra pointed out that many members of the business community have been receiving bulk audit notices nowadays in which huge number of documents for six years old cases of 2014 were being demanded which was not making any sense at all and it appears like an attempt to harass the business community. “The FBR, instead of intensifying the hardships for existing taxpayers, must take practical steps to somehow bring more and more people into the tax net which was in the larger interest of the country as it would not only improve the tax revenue but would also bring down the tax rates that would certainly go in favor of the economy”, he added.

    Former Senior Vice President KCCI Ibrahim Kasumbi, in his remarks, particularly mentioned that the furniture industry comprising workshops, employing artisans and manual labor, has been receiving notices from tax authorities and field officers in many parts of Pakistan and they were being compelled to get registered as Tier 1 retailers which was unjust and not practicable for this trade. Hence, FBR must stop harassing shopkeepers, showroom and workshop owners in the name of registration in Tier-1 and the employment of hundreds of thousands skilled workers artisans and laborers has to be protected while this important industry of traditional hand-crafted furniture has to be preserved.

    He further stated that consumption of black tea in Pakistan was 240,000 tons, but the imports through legal channels was hardly 100,000 tons due to high rates of customs duty, sales tax, regulatory duty (RD) and withholding tax (WHT). The remaining requirement was being fulfilled by smuggling, Afghan Transit Trade, and imports under various exemptions/concessions granted to Provincially Administered Tribal Areas (PATA) and Azad Kashmir. Hence, rates of customs duty, sales tax, RD & WHT have to be rationalized to prevent smuggling and massive leakage of revenue, he added.

  • Foreign investors demand pending refunds payment in six months

    Foreign investors demand pending refunds payment in six months

    KARACHI: Foreign investors operating in Pakistan have demanded to clear all pending sales tax refunds in next six months.

    Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of foreign investors, in its proposals for budget 2021/2022 demanded that all pending tax refund be cleared within next six months in an orderly/ prearranged manner.

    The OICCI further suggested that verification process for refunds should start automatically as soon as an application for refund is filed by the taxpayer and tax refunds should be cleared within 45 days.

    With introduction of MIS on IRIS, it has become easy to introduce an online self-verification of refund. Wherein taxpayer after applying for refund verification us 170 may be given an option to select CPRNs online against each section wherein tax deduction/ collection has been made and create a virtual verification file for easy processing by assessing officers. In case of any discrepancy, only missing CPRNs will be verified manually.

    It is suggested that inter adjustment of Income tax and Sales tax refunds should be made part of the law.

    A timely settlement of the determined refunds should be made, and if there is a liquidity issue then issuing marketable government bonds/ securities be considered.

    Amend current fixed interest rate of 10 percent to floating interest rate linked with KIBOR, it is suggested.

  • Listed companies should be exempted from electronic tax surveillance

    Listed companies should be exempted from electronic tax surveillance

    KARACHI: Federal Board of Revenue (FBR) has been urged to exempt listed companies from electronic surveillance of business and records.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 said that through SRO 888 of 2020 dated September 21, 2020, a new chapter was introduced in Sales Tax Rules, 2006 whereby all registered persons are made liable to give continuous and full real-time electronic access to the premises, stocks, record, accounts and data, whether maintained electronically or otherwise, as and when required by an authorized officer as provided under section 38 of the Act.

    The OICCI recommended that the scope should be restricted to the taxpayers having series of defaults or misconduct.

    “Other taxpayers especially listed companies should be exempted from this requirement as they are subject to rigorous external audits, internal audit requirements by SECP and tax audits and monitoring by FBR,” it recommended.

  • Bank account holders should file tax returns, wealth statements

    Bank account holders should file tax returns, wealth statements

    KARACHI: Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP) should devise a framework to ensure all customers of financial institutions whose account show turnover above Rs2 million have filed tax returns and wealth statement.

    “This could be done by the financial institutions simply notifying names/CNIC numbers of such customers to FBR without giving access to bank accounts,” this was recommended by Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022.

    The chamber presented its proposals for broadening of tax base:

    FBR should simplify the tax structure of the country by implementing tax reforms recommendations already been submitted by various forums in the past, and also hold regular round table conferences with leading tax and legal experts to review existing laws for increasing the number of taxpayers and taxable entities.

    Tax authorities should use technology, data analytics including Artificial Intelligence tools and make better/effective utilization of NADRA database and other documented sources to ensure that all income earners are NTN holders and “Filers”, with submission of annual income tax/wealth returns and wealth reconciliation statements. FBR and SBP to devise a framework to ensure all customers of financial institutions whose account shows turnover in excess of PKR two million or more during the year, have filed a tax return and wealth statement. This could be done by the financial institutions simply notifying names/CNIC numbers of such customers to FBR without giving access to bank accounts.

    Art exhibition halls, hospitals where doctors practice, hotels and other public places holding large receptions for fashion houses & designers, sale of branded/designer dresses, airlines, travel agencies, etc should provide names and addresses of the respective persons involved in these business activities to the FBR on a quarterly basis. iv. Once the FBR receives the above information, it should be pro-active and pursue potential taxpayers by sending them income tax return forms requiring them to file tax returns – rather than waiting for the tax returns to be filed.

    Section 111(4) of ITO 2001, last amended in 2018, should be further reviewed to restrict tax free inward foreign remittances to immediate family members only.

    Eliminate culture of Amnesty Schemes as it discourages the honest taxpayers.

    Severe, and visible, penalties should be levied to punish tax evaders, starting with evasions of over PKR one million.

    As Pakistan is a signatory to the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, which became operational from September 2018, regular coordination should be done with relevant authorities of countries, considered as tax heavens for stashing away illegal wealth, for information sharing, and cases of proven tax evasion publicly shared.

    Appropriate laws should be made to enable the government to seize local assets, in equivalent value, or levy appropriate taxes, if any person holds any kind of assets outside the country for which source of income could not be established.