Karachi, June 18, 2024 – The Federal Board of Revenue (FBR) is set to gain new powers to determine the value of imported goods for collecting advance income tax. This shift in authority is outlined in the recently presented Finance Bill 2024.
Previously, the value of imported goods for tax purposes was determined by established procedures. However, the Finance Bill proposes a significant change. A new sub-section, Section 6A, will be introduced to the Income Tax Ordinance, 2001. This section empowers the FBR to notify a minimum value for imported goods through official gazettes. This notified minimum value will then be used as the basis for collecting advance income tax.
According to a budget commentary by KPMG Taseer Hadi & Co., the Finance Bill further proposes an extension to the definition of “value of goods.” This definition will now encompass the minimum value notified by the FBR, treated as if the goods were subject to a standard import duty, along with any applicable federal excise duty and sales tax.
Tax experts at A. F. Ferguson & Co. highlight the potential implications of this change. For goods subject to this new minimum value, advance income tax will be collected based on the notified minimum value, further increased by applicable customs duty and sales tax. This could create a scenario where the value of imported goods differs for the purpose of collecting indirect taxes (like customs duty and sales tax) versus direct taxes (like advance income tax).
The impact of this new authority granted to the FBR remains to be seen. While the aim might be to streamline tax collection and potentially address undervaluing of imports, concerns exist around potential discrepancies in valuation for different tax purposes. The coming weeks will be crucial as the Finance Bill progresses through the legislative process, and the specific details of this new FBR power are further clarified.