Minimum tax regime withdrawn on commercial imports

Minimum tax regime withdrawn on commercial imports

Minimum tax regime has been withdrawn on commercial imports by the government of Pakistan. The importers of finished goods were subject to pay 5 percent minimum tax.

The groundbreaking decision was announced through the Finance Supplementary (Second Amendment) Bill of 2019, presented in the National Assembly on Wednesday. The proposed amendment aims to delete clause (a) of Sub-Section 8 of Section 148 in the Income Tax Ordinance of 2001.

The existing clause (a) outlined that the tax to be collected from an individual under this section would constitute a minimum tax for a given tax year on the import of goods. The condition specified that this minimum tax, applicable to goods sold in the same condition as when imported, would be five percent of the import value, augmented by customs duty, sales tax, and federal excise duty.

With the presentation of the Finance Supplementary (Second Amendment) Bill, the government proposes the exclusion of this clause, thereby rendering the tax collected under this section as final. This move represents a significant shift in the tax structure related to the importation of finished goods.

The imposition of a minimum tax on imported finished goods has long been a point of contention for businesses and importers. Critics argue that it adds an additional financial burden and hampers the competitiveness of businesses in the global market. The withdrawal of this minimum tax is expected to provide relief to importers and stimulate economic activity by reducing financial constraints on businesses involved in importing finished goods.

The Finance Supplementary (Second Amendment) Bill is anticipated to receive thorough scrutiny and debate within the National Assembly in the coming days. If approved, the elimination of the minimum tax on importers of finished goods could have far-reaching implications for the business landscape in Pakistan.

The decision to make the tax collected under this section final, as opposed to a minimum tax, is seen as a move toward simplifying the tax regime and enhancing the ease of doing business in the country. The amendment aligns with the government’s broader efforts to promote a more business-friendly environment and attract investment.

Industry experts and business stakeholders are closely monitoring the developments, acknowledging the potential positive impact on import-dependent sectors. The removal of the five percent minimum tax is expected to contribute to a more competitive market, fostering growth and innovation in industries reliant on the importation of finished goods.

As the Finance Supplementary (Second Amendment) Bill progresses through the legislative process, it will be interesting to observe the discussions and reactions from various sectors. The government’s initiative to revise the tax structure reflects a commitment to economic reforms, and the outcome of this legislative move is poised to shape the trajectory of trade and business activities in Pakistan.