Karachi, October 26, 2024 – The Federal Board of Revenue (FBR) has detailed the process for collecting advance tax at the import stage for the fiscal year 2024-25. According to the FBR, this process is primarily governed by Section 148 of the Income Tax Ordinance, 2001.
The ordinance, recently updated to reflect amendments until June 30, 2024, specifies the collection of tax for various classes of imported goods, emphasizing compliance at customs points across Pakistan.
The FBR clarified that all importers are required to pay an advance tax on imported goods, with rates specified in Part II of the First Schedule of the Income Tax Ordinance. Under this provision, the Collector of Customs is tasked with collecting advance tax on goods classified in Parts I to III of the Twelfth Schedule. These classifications determine the applicable rates, with adjustments or amendments allowed by the FBR through official Gazette notifications. The board also reserves the right to classify imported goods, allowing flexibility for products used both as raw materials and finished goods, particularly if imported for personal or business-specific purposes.
Under subsection (5), the FBR specified that this advance tax is collected simultaneously with customs duty. If certain goods are exempt from customs duty, the tax is collected at the point when customs duty would otherwise be applicable. This allows the FBR to apply tax consistently, irrespective of duty exemptions, ensuring that all importers contribute tax revenue based on the assessed value of imported goods.
The Customs Act of 1969 serves as the framework for FBR’s procedures regarding the collection of import taxes, specifically when it pertains to the valuation of imported goods. Further, subsection (6A) of Section 148 authorizes the FBR to establish a minimum value for goods at which advance tax is calculated, making valuation adjustments to avoid discrepancies at customs checkpoints. This valuation considers the retail price of goods or, if the goods are not subject to retail price tax, the value as determined under the Customs Act. The cumulative customs duty, federal excise duty, and sales tax, if applicable, are added to the value for a more accurate tax assessment.
In another key provision, subsection (7), the FBR classifies the advance tax collected on imported goods as a “minimum tax” on income derived from imports. However, for industrial businesses importing goods strictly for their own use, this minimum tax clause does not apply. To clarify further, certain essential goods—such as edible oils, packaging materials, paper, paperboard, and plastics—are subject to a special category under subsection (7A), with the FBR authorized to revise this list through Gazette notifications.
For clarity, FBR has defined specific terms in subsection (9) to aid in the enforcement of Section 148. The “Collector of Customs” refers to officials appointed under the Customs Act, 1969, encompassing additional or deputy collectors responsible for overseeing the customs process. The “value of goods” is calculated based on either the retail price or an adjusted customs valuation that incorporates any applicable federal excise duty and sales tax.
The FBR’s recent explanation aims to ensure compliance across all importers, maintain transparency in tax collection, and streamline revenue contributions from imports. This comprehensive tax structure strengthens revenue from imports and aims to facilitate efficient tax collection aligned with the country’s fiscal policies.