ISLAMABAD: President of Pakistan has summoned the budget session of the National Assembly (NA) on June 10, 2019.
A letter of the national assembly secretariat on Friday said that the President has been pleased to summon the 11th session (Budget 2019/2020) of the National Assembly to meet in the Parliament House, Islamabad on Monday, June 10, 2019 at 4:00 p.m.
KARACHI: Pakistan Tax Bar Association (PTBA) has advised the Federal Board of Revenue (FBR) to revisit law related to arrest and prosecution under Sales Tax Act, 1990.
In its tax proposals for budget 2019/2020, the apex tax bar said that under the existing law, every director and officer of the Company is liable to be arrested if the officer has reasons to believe that such director or officer is personally responsible for actions of the Company contributing tax fraud.
Accordingly, a person who is a nominee director or employee director can be held responsible for the liability of the company.
The PTBA said that as per interpretation of the law nominee or employee directors be who are not involved in the administrative matters of a taxpayer are being held responsible for the liability of the taxpayer.
“It is a trite law that before any coercive action is taken against any person; it is the duty of the Revenue Officer to provide proper opportunity of being heard and pass a judicious order to establish that the act of the registered person is willful and there was an element of mens rea.”
In the Income Tax Ordinance, 2001 such matters are covered under Section 139 thereof which comprehensively deals with the liability both in case of company and association of Persons. “Section 139 needs to be replicated in the Sales Tax Act, 1990 on the similar lines.”
The PTBA said that the proposed amendment would protect interest of the nominee/employee directors.
Pointing out the issue of recovery of arrears under sales tax law, the PTBA said under Section 48 which deals with recovery of arrears does not provide any time limit to initiate the recovery proceedings.
“By virtue of section 45B of the Act, a registered person aggrieved by any decision, may file an appeal within thirty days of the date of receipt of the order. On the contrary, under Rule 71 of the Sales Tax Rules, proceeding of recovery of impugned tax may be initiated after thirty days from the date of order.”
In addition, recovery proceedings may be initiated as soon as Commissioner Inland Revenue (Appeals) confirmed the Order under Section 45B of the Sales Tax Act or Section 33 of the Federal Excise Act.
The PTBA said that the section 45B, 48 and the rule are not harmonized. Sometimes order is served to the registered person after many days of the date of order and the recovery proceedings may be initiated under the Rule even if the time limit provided for filing of the appeal has not lapsed.
Therefore, it is recommended that Rule 71 should be amended to provide commencement of recovery proceedings after thirty days from the date of receipt of the order.
Similarly, time limit of 30 days from the date of receipt of the order should be provided in section 48 to bring harmony between the Act and Rules.
The PTBA suggested that thirty days shall also be allowed for initiation of recovery proceedings in case demand is confirmed by the Commissioner Inland Revenue (Appeals) while disposing appeals filed under section 45B of STA and 33 of FEA.
Giving rationale to the proposal, the PTBA said that it would keep harmony between the Act and the Rules in the spirit of natural justice.
KARACHI: Federal Board of Revenue (FBR) has been urged to reduce withholding tax rate to 0.2 percent for distributors of Fast Moving Consumer Goods (FMCG) companies as higher rate is increasing the cost of doing business.
The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020, said that the distribution of FMCG is a high turnover and low margin business.
This fact has also been acknowledged to some extent by the FBR by prescribing minimum taxation rate for the distributors of FMCG Companies at 0.2 percent of their turnover i.e. reducing the basic rate of minimum tax by 80 percent.
The OICCI suggested that the basic rate of withholding tax under section 153 for distributors of FMCG sector should be reduced to 0.2 percent in line with section 113 of income tax ordinance, 2001.
Giving rationale, it said that the high rate of withholding tax is increasing the cost of doing business as the existing withholding tax rate is higher than the net margin of distributors.
Another proposal, the OICCI said that ‘Aerated waters’ is the only item within food and beverage industry that is subject to both sales tax (third schedule of the Sales Tax Act, 1990) and FED (First Schedule of Federal Excise Act, 2005), while all other beverages (like: Juices, Tea & Milk based drinks) are only subject to sales tax at 17 percent.
Earlier in 2011-2012, FED rate was reduced from 12 percent to 6 percent with commitment that it shall be eliminated in 2 to 3 years but this was not implemented.
The OICCI recommended that the Federal Excise Duty (FED) should be decreased from 11.5 percent to 8.5 percent, and eliminated gradually.
The chamber pointed out that after the withdrawal of 58R of Special Procedure Rules, 2007, relating to the payment of Extra Tax on Specified Goods vide SRO 608(I) 2014 dated 02/07/2014, Large Trading Houses are now unable to issue sales Tax Invoice to Customers.
Resultantly, all Professional Customers are inclined to directly purchase from Manufacturers as they are issuing Sales Tax Invoice to their Customers.
Therefore, it recommended that Rule 58R which was withdrawn vide SRO 608(I) 2014 be restored only for Large Trading Houses operating as Wholesale-cum-retail under Chapter-XII.
Giving rationale, it said that it would create level playing field for Large Trading Houses.
The OICCI also submitted proposal for input Sales Tax on purchase of electrical and gas appliances.
The Sales Tax Act, 1990 does not permit adjustment of Input Sales Tax on purchase of electrical and gas appliances (including visi-coolers & industrial gas appliances etc.) under section 8(1)(h) of the Act.
The Act should be amended to allow for adjustment of such input sales tax.
Visi-Coolers are an integral part of beverage business and inadmissibility of input tax places beverage business at a disadvantage vis-à-vis other businesses, besides such inadmissibility escalates the cost of doing business.
In other industries, it is reiterated, that all input tax relatable to ‘taxable supplies made or to be made’ is admissible. Removal of restriction shall provide level playing field.
The OICCI on the issue of further tax on sales to retailers, said with reference to section 14 of the Act, retailers are required to obtain sales tax registration excluding those retailers who are required to pay sales tax through their electricity bill.
Moreover, as per section 3(1A) further tax at the rate of 3 percent is to be charged where supplies are made to unregistered person other than those mentioned in SRO 648 dated July 9, 2013.
Therefore it is recommended that retailers who pay their sales tax through electricity bill to be excluded from further tax through inclusion in SRO 648 dated July 9, 2013.
It will clear the ambiguity regarding applicability of further tax on these retailers.
KARACHI: Federal Board of Revenue (FBR) may recommend amending application of super tax in the forthcoming budget 2019/2020 to generate around Rs2 billion.
FBR sources said that the tax authorities had recommended amendments to Section 4B of Income Tax Ordinance, 2001 through Finance Bill, 2019.
The sources said that it had been recommended to apply super tax on the income computed under Fourth, Fifth, Seventh and Eighth Schedules ‘other than brought forward depreciation and brought forward business losses.
According to the recommendation, the proposed amendment would bring uniform chargeability of super tax to all taxpayers including taxpayers falling within the purview of Fourth, Fifth, Seventh and Eighth Schedules of Income Tax Ordinance, 2001.
As per the ordinance the fourth schedule covers insurance companies, fifth schedule covers exploration and production companies, seventh schedule for banking companies and eighth schedule covers capital gains and National Clearing Company Pakistan Limited.
The sources said that the proposed amendment will help the FBR to generate around Rs2 billion as revenue.
KARACHI: Federal Board of Revenue (FBR) has been urged to allow multiple businesses on one sales tax registration for better documentation of the economy.
In its tax proposals for budget 2019/2020, the Pakistan Tax Bar Association (PTBA) said that after amendment in Sales Tax Act, 1990, through Finance Act, 2008, FBR has directed to cancel multiple registrations under single proprietorship.
It said that proprietor having two businesses faces with the dilemma to show his entire sales under one business, which is creating hardship for his customers in their respective returns.
Moreover, tax department often raise queries as to how a registered person can raise a invoice relating one business if he is registered with the department under another ‘business category’.
“FBR should issue necessary instructions to incorporate multiple business features in its web-portal to facilitate taxpayers,” the PTBA suggested.
The PTBA said that by implementing this suggestion it would result in better documentation of economy and proper maintenance of records of taxpayer.
Highlighting another issue, the PTBA said that the definition of time of supply as amended through the Finance Act, 2013 stating receipt of advance as subject to sales tax, has created number of practical problems because of which sales tax on advance was earlier withdrawn by Finance Act 2007.
The registered persons besides other practical issues has to undertake a tremendous exercise of reconciliation between the books of account where sales is recorded on the basis of delivery of goods with the sales tax returns where sales tax is paid on advance receipts.
Furthermore, this also leads to discrepancies in CREST resulting in hardships to taxpayers as well as to the department.
Therefore, the tax bar proposed withdrawal of the amendment made through the Finance Act, 2013.
It said that it will help taxpayers to avoid unnecessary hassle as well as for the department; as charging of sales tax on advance receipts will not create any additional revenue for the Government.
The PTBA also pointed out ‘hire purchase’ transaction involves periodical installments received/earned over a period of time.
Currently, Sales Tax is being charged on full amount at the time of signing (entered into) of hire purchase agreement.
The registered is burdened with increased amount of output tax on hire purchase sale at the time of sale although the amount is received from the customers in installments.
Definition of time of supply’ may be amended and tax should not be levied at the time of signing of HP arrangement.
Instead, tax should be levied at the time when installment is effected / paid.
Further, the element of interest embedded in such installment should also be excluded for assessment of sales tax.
Charging sales tax on full amount at the signing of hire purchase agreement is not justified and is in conflict with the definition of value of supply which states that it is the consideration which the supplier receives from the recipient for the supply.
ISLAMABAD: Prime Minister Imran Khan on Tuesday reviews preparations for budget 2019/2020.
The prime minister chaired the preparatory meeting for budget 2019-20 wherein he was briefed in detail about the revenue and spendings.
The federal budget scheduled to be announced on June 11, 2019 for fiscal year 2019/2020.
The meeting was attended by Finance Advisor Abdul Hafeez Sheikh, Commerce Advisor Abdul Razak Dawood, Planning Minister Khusro Bakhtiar, State Minister for Revenue Hammad Azhar, Special Assistant to Prime Minister Dr Sania Nishtar, Chairman of Federal Board of Revenue Shabbar Zaidi and senior government officers, a Prime Minister Office statement said.
KARACHI: Federal Board of Revenue (FBR) has been advised to stop practice of issuing revision in sales tax on petroleum products on monthly basis.
The Overseas Investors Chamber of Commerce and Industry (OICCI) in tax proposals for budget 2019/2020, presented suggestions regard powers to issue notifications for change in rate of sales tax – Section 3(2)(b) of Sales Tax Act, 1990.
According to the present law the federal government may, by notification in the official Gazette, declare higher or lower rates of sales tax in respect of any taxable goods, provided that the bill for such change has been passed by the Majlis-e-Shoora.
From 1 July 2016 to date, there have been around half a dozen notifications for changing the rates of sales tax on petroleum products.
The rates have varied from zero percent to 36.5 percent during this period.
The Supreme Court of Pakistan took a suo motu notice for a similar notification on June 21, 2013 and held that the federal government had no authority to levy and recover sales tax without getting the respective bill passed from the National Assembly.
Given the Supreme Court’s verdict on the subject matter, questions arise as to whether the frequent changes in the rates of sales tax for petroleum products are maintainable under law.
Moreover, so many changes on such frequent notice are in itself a challenge for industries which have to go through a lengthy systematic implementation process, each time such rates are notified.
Therefore, the OICCI recommended that that changes in sales tax rates are legally vetted by the Parliament and this monthly practice of issuing notifications at the government’s behest is abolished.
ISLAMABAD: Federal Board of Revenue (FBR) has imposed several restrictions to prevent unauthorized access to documents of budget 2019/2020 till June 11, 2019. This restriction included inactive internet connection and ban on transferring any file.
In an office order issued on Monday, the FBR said that internet connections, except for Chairman and Members FBR shall become inactive on June 10 and June 11, 2019 till conclusion of Budget Speech of the Finance Minister.
Internet connection of Coordinators/ Deputy Coordinators (if needed) will only be made active with prior approval of Chief Management/ Coordinator Budget.
The FBR said that due to budget announcement on June 11, 2019 restrictions on the access of servers/information system running at FBR HQ will come in force on June 10, 2019 from 8:00 am till the end of budget speech as per following details:
E-Dox:
a. Message and Engagement will be disabled and would not be accessible for the internal users of FBR House.
b. Users located in the FBR house premises would only be limited in routing/ marking their correspondence in the wings located within FBR House. However, external users such as Regional Tax Offices (RTOs), Large Taxpayers Units (LTUs) and Mode Customs Collectorates (MCCs) would be able to mark their correspondence to the internal user/Wing of FBR.
c. All training versions of the e-Dox system would be inaccessible during the budget days.
d. Held desk for e-Dox will be closed.
HRIS:
a. Access to the system for correction of disposition list, online application of leave and other facilities will be completely banned for field formations.
b. Help desk for HRIS will be closed.
e-FBR portal:
a. FBR e-portal/server will remain accessible for authorized users outside FBR HQ premises but no one within FBR HQ will be allowed to access FBR e-portal during budget exercise.
STARR & SALES TAX SYSTEMS:
a. STARR & Sales Tax System / Server will remain inaccessible for FBR HQ users, however, authorized users / outside FBR HQ premises will be allowed to access the system/server.
PRAL & FBR Network:
a. While the local networks of PRAL HQ/CDA Block II offices and FBR HQ will remain operational individually, transfer to any files/documents from FBR HQ Network to PRAL HQ/CDA Block II offices network and vice versa will be banned.
b. Internet services in FBR HQ will remain unavailable in FBR HQ till conclusion of budget speech by the finance minister.
KARACHI: The stock market lost around 470 points on Monday, the last session before week-long Eid holidays, due to concerns over measures to be announced in the budget 2019/2020 on June 11, 2019.
The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 35,505 points as against 35,975 points showing a decline of 470 points.
Analysts at Arif Habib Limited said that the last trading session before Eid and budget ended negative for the bourse.
Although clarity on EMOF and SEF was given by ECC last week, but investors’ seemed concerned over Budget, which is likely to adopt tough budgetary measures to bring fiscal discipline.
Besides, rapidly falling international crude prices brought selling pressure in E&P sector that accentuated the impact on market.
Banking sector led the volumes table with 39 million shares followed by Technology (24 million). Amongst scrips, BOP scored 25 million shares followed by WTL amongst Technology scrips with 20 million shares. MLCF ranked amongst top 10 volume scrips for the second consecutive day, amidst selling pressure.
Sectors contributing to the performance include E&P (-205 points), Fertilizer (-80 points), Cement (-57 points), O&GMCs (-40 points), Textile (-33 points), Banks (+22 points).
Volumes declined significantly from 199 million shares in last trading session to 124.6 million shares (-37 percent DoD).
Average traded value also declined by 47 percent to reach $31.7 million as against $ 60.3 million.
Stocks that contributed significantly to the volumes include BOP, WTL, MLCF, OGDC and KEL, which formed 50 percent of total volumes.
Stocks that contributed positively include HBL (+61 points), MCB (+51 points), EFUG (+7 points), ABOT (+6 points) and HASCOL (+6 points). Stocks that contributed negatively include PPL (-80 points), POL (-62 points), OGDC (-42 points), EFERT (-32 points) and LUCK (-31 points).
KARACHI: Federal Board of Revenue (FBR) has been advised to relax export conditions to Afghanistan in order to improve exports and inflows of foreign exchange.
Institute of Chartered Accountants of Pakistan (ICAP) in its tax proposals for budget 2019/2020 said that as per SRO 190(I)/2002 dated April 2, 2002, zero rating on Exports under section 4 of the Sales Tax Act is not applicable in respect of supply of certain categories of goods, exported by air or via land route to Afghanistan and through Afghanistan to Central Asian Republics.
Categories of goods specified in SRO 190(I)/2002 have been reproduced below for ready reference:
“(a) manufactured in the Export Processing Zones or in manufacturing bonds;
(b) exported, other than against irrevocable letters of credit, or advance payment, in convertible foreign currency;
(c) exported without fulfilling the conditions prescribed in paragraphs 8, 12B, entry 9 of the Schedule I and Schedule IV to the Export Policy and Procedure Order, 2000; and
(d) specified in the list below, namely: –
(i) cigar, cheroots, cigarillos, and cigarettes of tobacco or of tobacco substitutes;
(ii) dyes and chemicals;
(iii) yarn all types;
(iv) PVC and PMC materials;
(v) polyester metalized film;
(vi) ball bearings;
(vii) vegetable ghee and cooking oil (if exported from Export Processing Zones or manufacturing bonds); and
(viii) all petroleum products whether imported or produced locally (unless there is a Government to Government contract done through oil marketing companies only).”
The ICAP said that similar restrictions, on exports to Afghanistan and through Afghanistan to Central Asian Republic as specified in clause (a), (b) and (d) above are also part of the Export Policy Order, 2016 issued vide SRO 344(I)/2016 dated April 18, 2016.
The ICAP said that goods manufactured in manufacturing bonds are subjected to strict scrutiny by the Customs authorities from import until the final exports stage in accordance with the procedure given in Customs SRO 450(I)/2001 dated June 18, 2001.
Therefore, goods manufactured in the manufacturing bonds are less prone to be used for unscrupulous activities.
The ICAP further noted it understand that restriction on zero rating facility on all items, as per SRO 190(I)/2002 dated April 2, 2002 and SRO 344(I)/2016 dated April 18, 2016, should be revisited, in order to increase overall exports and to prevent other countries like India to capture the market in Afghanistan.
Considering such a situation, the ICAP recommended the following restrictions:
(i) restriction on exports via manufacturing bond be removed and only conditions relating to exports against irrevocable letters of credit, or advance payment, in convertible foreign currency should remain intact owing to the fact that goods manufactured through the manufacturing bond facility are subject to strict scrutiny of the Customs authority;
(ii) for export, other than through manufacturing bond, of goods specified in clause “(d)” of SRO 190(I)/2002 as well as items specified in Schedule III of the Exports Policy Order, 2016, exporters should be made liable to comply with the following conditions:
(a) export transactions must be executed against irrevocable letters of credit, or advance payment, in convertible foreign currency;
(b) zero rating be allowed only in case of exports by Manufacturers from Pakistan to manufacturers in Afghanistan;
(c) where the proof that goods exported have reached Afghanistan has been verified on the basis of a copy of import clearance documents by Afghan Customs Authorities; and
(d) exports should only be routed through authorized export land routes i.e. Torkham, Chaman, Ghulam Khan and Qamar Uddin Karez (when it becomes operational).
It said that restrictions under SRO 190(I)/2002 and SRO 344(I)/2016 were imposed to prevent misuse of zero rating benefits by traders by exporting goods to Afghanistan and thereafter re-importing the same via unlawful means.
The institute believed that a blanket restriction, on all goods manufactured in the manufacturing bond as well as on specific items, instead of bringing the desired results, has dented our Exports market and has also helped the other countries like India, to increase their exports to Afghanistan, which otherwise would have been supplied from Pakistan.
“These suggestions, if implemented in true spirit, will not only increase the overall Exports and Foreign Exchange reserves but will also encourage documented sectors thereby resulting in a major barrier for operations of undocumented sector,” the ICAP said.