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Tag: exemption

  • Elimination of zero rating, other policy and administrative measures to generate Rs733.47 billion

    Elimination of zero rating, other policy and administrative measures to generate Rs733.47 billion

    KARACHI: Federal Board of Revenue (FBR) to generate additional revenue of Rs733.47 billion during current fiscal year after abolishing zero-rating of sales tax and other policy and administrative measures.

    Pakistan has outlined its strategy for enhancing revenue collection before the International Monetary Fund (IMF) through eliminating exemptions, distortion and other policy and administrative measures.

    These budgetary measures likely enhance tax to GDP ratio by 1.7 in the fiscal year 2019/2020.

    The FBR will generate additional revenue of Rs222.77 billion from measures taken through budget 2019/2020 in the sales tax, which included:

    Petroleum products levy increase to 15 PRs (and set as a floor) and

    GST rate at 17 percent (set as a floor)

    Cancel SRO # 480 and bring steel sector, edible oil and medium to large retailers to 17 percent GST regime

    Extend the list of products under the retail price taxation – Third Schedule (home appliances, paint.., currently under SRO # 480)

    Cancel SRO#1125 and bring exportable sectors to standard GST regime at 17 percent rate, with immediate cash refund for exported goods only

    Remove certain items from exemptions (packaged food), and apply GST tax at 17 percent.

    Increase GST on sugar from 8 percent to 17 percent

    Redefine the exemption available to Cottage Industry

    An additional amount of Rs90.114 billion estimated under Federal Excise Duty (FED) through following measures:

    0.2 Increase of FED on cigarettes and remove the third tier.

    Introduce FED on cigarettes coming from non tariff areas

    Increase/introduce FED on sugary drinks to 13 percent

    Increase FED on cement from 1.5 Rs per kg to 2 Rs

    Additional amount of Rs324.98 billion estimated through eliminating exemptions and other distortions in Income Tax, such as

    Personal Income Tax (PIT): lower the threshold to Rs400,00 and Rs600,000 for non-salaried and salaried individuals respectively, increase tax rates Increase in rate of minimum tax u/s 113 from 1.25 to 1.5 percent

    Extend the regime of higher withholding tax rates for non-filers

    Resume Telecom withholding rate

    Change in income tax regime of Services sector (banks and insurance companies)

    Abolish BMR credit incentives

    Increase the holding period liable to tax for capital gain tax on immovable properties and securities

    Taxation of gifts from unrelated person at standard PIT rate

    Aligning value of immovable properties with the market rates

    Reduction of number of withholdings and simplification of procedures

    Amortization of expenditure in BOT projects over useful life of the project instead of current 10 year amortization

    Long term lease hold right may be considered as purchase of property

    Taxation of formal agricultural sector within the scope of federal government

    Rationalization of tax credit available to Non-profit organizations (NPOs)

    An amount of Rs60 billion has been estimated to be generated through measures taken under Customs duty:

    Increase in Additional Customs Duty Rate on finished and luxury goods

    Withdrawal of exemption on import of LNG and subjected to 5 percent duty

    Revenue administrative measures to generate Rs 35.6 billion through following steps:

    Implement Track and Trace system for Tobacco Products

    Automated monitoring of GST and income at retail (point of sale)

    Changes in ADCIR mechanism

    Separation of audit & adjudication functions

    Making procedure for prosecution easier

    Enabling and strengthening FBR field formations

    Cleansing of databases and integration to enable effective data mining

    Enabling efficient enforcement through investment in FBR

    Infrastructure and process reengineering

    Taxpayer education and facilitation

  • FBR restricts sale of duty free imported motor vehicles, machinery for Thar Coal Field

    FBR restricts sale of duty free imported motor vehicles, machinery for Thar Coal Field

    ISLAMABAD: Federal Board of Revenue (FBR) has imposed restriction on selling the duty free imported goods for machinery and motor vehicles for Thar coal field.

    In order to impose restrictions the FBR on Saturday issued SRO 673(I)/2019 to amend SRO 268(I)/2015 dated April 02, 2015.

    The FBR allowed exemption from whole of customs duty on import of coal mining equipment and machinery including vehicles for site use, if not manufactured locally, imported for Thar Coal Field.

    Through the latest SRO, the FBR said that the goods shall not be sold or otherwise disposed of without prior approval of the FBR.

    “In case such goods are sold or otherwise disposed of after ten years of importation thereof, the same shall be subject to payment of duties and taxes as prescribed by the FBR.”

    In case these goods are sold or otherwise disposed of without prior approval of the FBR or before the period of ten years from the date of importation thereof, the same shall be subject to payment of statutory rates of duties and taxes as were applicable at the time of import.

    “These goods shall, however, be allowed to be transferred to the other entitled projects of the sector, with prior approval of the FBR, subject to payment of duties and taxes, if applicable.”

    The re-export of these goods may also be allowed subject to prior approval of the Chief Collector of Customs.

  • Finance Bill 2019: duty exemptions on various imported goods proposed

    Finance Bill 2019: duty exemptions on various imported goods proposed

    KARACHI: The government has proposed exemptions from customs duty on import of various goods through Finance Bill 2019.

    According to A. F. Ferguson & Co. Chartered Accountants Firm the Finance Bill 2019 has proposed exemption from customs duty is proposed on following items:

    – Various industrial inputs / raw materials

    – Pharmaceutical products

    – Plastic film medical grade

    – Fertilizers

    – Plant and machinery for setting up Hydrocracker plants for oil refining

    – Raw skins and hides

    – Machinery parts and items relating to textile industry

    – Solar air water generator

    – Raw material for paper industry

    – Wood

    – Certain raw materials used in manufacture of home appliances subject to certain conditions

    – Raw material and components for local manufacture of Hemodialyzer, used in hydrolysis equipment by kidney failure patients

  • Exemptions, concessions cost Rs972.4 billion in 2018/2019

    Exemptions, concessions cost Rs972.4 billion in 2018/2019

    ISLAMABAD: The economy has incurred duty and tax losses to the tune of Rs972.4 billion due to exemptions and concessions during the fiscal year 2018/2019, according to Economic Survey 2018/2019 launched on Monday.

    The cost of tax exemptions included: income tax Rs141.6 billion, sales tax Rs597 billion; and Rs233.1 billion as customs duty.

    Income Tax:

    1. Tax credit for charitable donations u/s 61 Rs2.448 billion

    2. Tax credits u/s 64A Rs1.191 billion

    3. Tax credit u/s 64AB deductible allowance on education expenses Rs0.067 billion

    4. Tax credit for employment generation by manufacturers u/s 64B Rs0.0096 billion

    5. Tax credit for investment in balancing, modernization and replacement of plant & machinery u/s 65B Rs90.954 billion

    6. Tax credit for enlistment u/s 65C Rs0.356 billion

    7. Tax credit for newly established industrial undertakings u/s 65D Rs5.487 billion

    8. Tax credit for industrial undertakings established before the first day of July, 2011 u/s 65E Rs6.458 billion

    9. Tax credit u/s 100C Rs13.977 billion

    10. Tax credit for investment in shares and insurance u/62 Rs2.055 billion

    11. Tax loss due to exempt business income claimed by IPPs under clause (132) of Part I of the Second Schedule Rs18.034 billion

    12. Tax loss due to exemption to export of IT services under clause (133) of Part I of Second Schedule Rs0.608 billion

    Sales Tax:

    SRO Loss of sales tax due to exemptions projected for FY2019, based On July-March figures:

    SRO 1125(1)/2011, dated 31.12.2011 (leather, textile, carpets, surgical goods etc.) Rs86.7 billion

    Import under 5th Schedule Rs0.59 billion

    Local supply under 5th Schedule Rs53.5 billion

    Imports under 6th Schedule. Rs53.7 billion

    Local supply under 6th Schedule Rs247.3 billion

    Imports under 8th Schedule Rs62.7 billion

    Local supply under 8th Schedule Rs93.3 billion

    Customs Duty

    Concession of customs duty on goods imported from SAARC and ECO countries Rs348.8 million

    Exemption from customs duty on import into Pakistan from China Rs2.5 million

    Exemption from customs duty on import into Pakistan from Iran under Pak-Iran PTA: no loss

    Exemption from customs duty on imports into Pakistan from under SAFTA Agreement Rs1,614.8 million

    Exemption from customs duty on import into Pakistan from China Rs31,620.7 million

    Exemption from customs duty on goods imported from Mauritius Rs6 million

    Exemption from customs duty on import into Pakistan from Malaysia Rs3,162.7 million

    Exemption from customs duty on import into Pakistan from Indonesia under Pak-Indonesia PTA. Rs3,950 million

    Exemption from customs duty on imports from Sri Lanka Rs2,401.6 million

    Conditional exemption of customs duty on import of raw materials and components etc. for manufacture of certain goods (Survey based) Rs4,755.1 million

    Exemption of customs duty and sales tax to Exploration and Production (E&P) companies on import of machinery equipment & vehicles etc. Rs5,725.7 million

    Exemption from customs duty for vendors of Automotive Sector Rs26,604.4 million

    Exemption from customs duty for OEMs of Automotive Sector Rs38,818.8 million

    Exemption from Customs Duty on Cotton Rs2,275.9 million

    Exemption from Customs Duty for CPEC Rs1,009.2 million

    Exemption from Customs Duty for Lahore Orange Line Metro Train Rs749.1 million

    Chapter 99 Exemptions [Special Classification Provisions] Rs10,530.8 million

    5th Schedule Exemptions/ concessions Rs99,558.0 million

  • Massive cut in tax exemptions, concessions likely in budget 2019/2020

    Massive cut in tax exemptions, concessions likely in budget 2019/2020

    ISLAMABAD: The government has planned to a massive cut tax in exemptions and concessions in the budget 2019/2020, which is scheduled to be announced on June 11, 2019.

    Sources told PkRevenue.com that the government had committed with the World Bank and other international agencies to withdraw large size exemptions given to various sectors and individuals in order to boost revenue collection, especially in the wake of difficult economic situation.

    The sources said that the Federal Board of Revenue (FBR) had already initiated policy making and would introduce phases to withdraw available tax concessions and exemptions.

    According to Pakistan Revenue Mobilization Program funded by the World Bank, the FBR had already launched several initiatives including ongoing review of tax policy to formulate a medium-term tax policy framework and propose measures to reduce tax expenditure for the budget 2019/2020.

    The cost of tax exemptions and concessions in the fiscal year 2017/2018 was around Rs541 billion, which included: income tax Rs61.78 billion; sales tax Rs281 billion; and customs duty Rs198.15 billion.

    The sources said that in the first phase around 50 percent exemptions and concessions would be withdrawn in the budget 2019/2020.

    The World Bank on Pakistan report said multiple exemptions and discounted rates to select industries, economic actors, and economic activities (e.g. sugar, textiles, and fertilizer industries; ‘associations’ in the real estate sector; imports for infrastructure projects under the China-Pakistan Economic Corridor) are granted in each year’s budget law, which distort competition and economic actors’ incentives. In FY2017/18, Pakistan’s tax expenditure (i.e., tax revenue foregone due to exemptions and concessional rates) was estimated at 2 percent of GDP, primarily due to exemptions from General Sales Tax (GST) and customs duties.

    “Substantial exemptions also apply to property taxes, whereby properties below a certain size are exempted regardless of location, while revenue is also lost due to unrealistically low valuations used for taxation purposes.”

    The Capital Gains Tax (CGT) returns negligible receipts due to the zero rate applied to capital gains from the sale of immovable property after more than four years of ownership, and rates of 5-10 percent for properties sold after one to four years of ownership, the report said.

    The present PTI-led government has issued a roadmap for stability, growth and productive employment issued in April 2019 and stated that tax policy has to balance the revenue objective with equity and growth objectives.

    Presently tax policy has a predominant revenue focus and as such is likely to create distortions in the economy which can adversely affect the growth and equity objectives.

    In addition, even the revenue objective is compromised by large scale exemptions. To correct this shortcoming, the government intends the following:

    i) Enact a law to ensure that no tax exemption is allowed through law or notification without an estimate of its cost independently by the tax department as well as the concerned ministry. Such cost will be made public before notification of the exemption.

    ii) Review all existing exemptions, with the purpose of eliminating as many of those as possible. Even if an exemption is to be retained its cost will be determined and made public. Ministry of Finance to publish annually a statement of tax expenditures to show how much revenue is being foregone due to exemptions.

    iii) Ensure that all exemptions, existing or newly proposed, will have a sunset clause (ideally not more than 5 years).

    iv) Publish a list of all government owned, quasi-government and government-linked enterprises availing tax exemption/concession in any way along with quantification of the tax expenditure. In addition, a plan be prepared for phasing out of these concessions.

    v) Withdraw FBR powers to issue SROs to grant exemptions. This power will vest only with the Parliament.

    vi) Ensure that all non-procedural existing SROs will expire at the end of the fiscal year. Steps taken over the last two years to incorporate all exemptions granted through SROs to be made part of the body of law.

  • Sindh exempts sales tax on insurance services

    Sindh exempts sales tax on insurance services

    KARACHI: The Sindh government has exempted the insurance services from payment of sales tax up to June 30, 2019.


    Sindh Revenue Board (SRB) on Wednesday issued a notification stating that with the approval of the provincial government it had exempted the insurance services (other than its related re-insurance services) from the whole of the sales tax payable.


    The SRB said that the exemption is available with the condition that the amount of sales tax already charged, received or collected by the service provider shall be deposited by such service provider to the provincial exchequer.


    The following services have been exempted from sales tax:
    9813.1500 Life Insurance from July 01, 2018 to June 30, 2019
    9813.1600 Health Insurance from July 01, 2016 to June 30, 2019.


    The SRB said that the notification shall not entitle any person, whether a service provider or a service recipient, to any refund or adjustment of tax.
    The notification, if not rescinded earlier, shall stand rescinded at 2359 hours of the 30th day of June 2019.

  • Income Tax Ordinance 2001: total exemption on payment of pension, retirement

    Income Tax Ordinance 2001: total exemption on payment of pension, retirement

    KARACHI: Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement is exempted from income tax.

    The Second Schedule of Income Tax Ordinance, 2001 explained the exemption from total income.

    Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement or, in the event of his death, by his heirs as does not exceed –

    (i) in the case of an employee of the Government, a Local Government, a statutory body or corporation established by any law for the time being in force, the amount receivable in accordance with the rules and conditions of the employee’s services;

    (ii) any amount receivable from any gratuity fund approved by the Commissioner in accordance with the rules in Part III of the Sixth Schedule;

    (iii) in the case of any other employee, the amount not exceeding three hundred thousand rupees receivable under any scheme applicable to all employees of the employer and approved by the Board for the purposes of this sub-clause; and

    (iv) in the case of any employee to whom sub-clause (i), (ii) and (iii) do not apply, fifty per cent of the amount receivable or seventy-five thousand rupees, whichever is the less:

    Provided that nothing in this sub-clause shall apply –

    (a) to any payment which is not received in Pakistan;

    (b) to any payment received from a company by a director of such company who is not a regular employee of such company;

    (c) to any payment received by an employee who is not a resident individual; and to any gratuity received by an employee who has already received any gratuity from the same or any other employer.

  • Eliminating all tax exemptions, concessions planned

    Eliminating all tax exemptions, concessions planned

    KARACHI: The government considering to withdraw all types of tax exemptions and concessions during next few years.

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