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Tag: FBR

FBR, Pakistan’s national tax collecting agency, plays a crucial role in the country’s economy. Pakistan Revenue is committed to providing readers with the latest updates and developments regarding FBR activities.

  • Further tax collection on pharmaceutical products unlawful: KTBA

    Further tax collection on pharmaceutical products unlawful: KTBA

    Karachi Tax Bar Association (KTBA) on Thursday termed the collection of further tax on sales of pharmaceutical products to unregistered persons as unlawful.

    In a letter sent to Asim Ahmad, Chairman of Federal Board of Revenue (FBR), the tax bar informed that substances registered as drugs under the Drugs Act, 1976 were earlier exempt from levy of sales tax under the Sales Tax Act, 1990, the Finance (Supplementary) Act, 2022, withdrawn, and the pharmaceutical products were made zero rated in terms of Serial No.19 to the Fifth Schedule of the Act.

    READ MORE: Non-filers will not be included in ATL 2022

    Later one, through the Finance Act 2022, Serial No.19 of the Fifth Schedule was omitted and a new Serial No.81 was introduced in Table-1 of the Eighth Schedule to the Act is as follow:

    Serial No.DescriptionHeading Nos. of the First Schedule to the Customs Act, 1969 (IV of 1969)Rate of Sales TaxCondition
    (1)(2)(3)(4)(5)
    81.Manufacture or import of substances registered as drugs under the Drugs Act, 1976 (XXXI of 1976)Respective Heading1%Subject to the conditions that:   (i) Tax charged and deposited by the manufacturer or importer, as the case may be, shall be final discharge of tax in the supply chain.   (ii) No input tax shall be adjusted by the manufacturer or importer.

    The tax bar stated that it becomes clear that Serial No.81 created the sales tax charge at the rate of 1 per cent on manufacturer/importer of drugs and that the tax so charged and deposited by a manufacturer would be treated as final discharge of sales tax liability for the entire supply chain.

    READ MORE: FBR directs BS-21 officers to submit declaration of assets

    Therefore, once the manufacturer/importer has charged and deposited the sales tax at 1 per cent, the rest of the entire supply chain would be ousted from levy of sales tax.

    KTBA invited the attention of the FBR chairman towards a clarification C.No. 3(16)ST&FE-Policy/2022/230285-R issued by the FBR on November 23, 2022, which has asked to pay further tax at 3 per cent on sale of drugs to unregistered persons.

    READ MORE: Customs Intelligence Gwadar auctions motor vehicles on December 12

    The tax bar said clarification and its directions are contradictory to the legal position. It is being re-iterated that Serial No.81 in Table-1 of the Eighth Schedule to the Act categorically states that tax collected and discharged by the manufacturer of drugs under the Drugs Act, 1976 is final discharge of tax for the entire supply chain.

    Therefore, if further tax is asked to be levied on sale by the manufacturer/importer, it stands exactly opposite to the substantive law for declaring collection and discharge of tax by manufacturer/importer as final tax.

    READ MORE: Separate property declaration under Section 7E only for returns already filed

    “Needless to mention that the term ‘final tax’ in itself implies that no further collection of tax would be made under the Act irrespective of the nature/class/category/registration status of a person,” the tax bar added.

    The FBR chairman has been urged that above clarification may be re-clarified in the light of decisions given by higher courts and Appellate Tribunal.

    The position taken by the FBR yet for the second time and too knowingly, on the same issue, does not signify anything and is uncalled for on the part of Regulator. It is apprehended that the matter will yet again land in High Courts and will not yield anything but unnecessary and avoidable litigation.

  • Non-filers will not be included in ATL 2022

    Non-filers will not be included in ATL 2022

    KARACHI: Non-filers of income tax return will not be included in the Active Taxpayers List (ATL) 2022, officials in the Federal Board of Revenue (FBR) said.

    The last date for filing income tax returns for tax year 2022 is December 2022. The date has already been extended twice. The actual last date for filing income tax return for tax year 2022 was September 30, 2022. But it was extended up to October 31, 2022 and then up to November 30, 2022.

    READ MORE: FBR directs BS-21 officers to submit declaration of assets

    The FBR officials said that according to tax laws persons failing to file annual returns would not be included in the ATL.

    The ATL for tax year 2022 will be issued on March 01, 2023.

    Section 182A of the Income Tax Ordinance, 2001 explained repercussions of return not filed within due date.

    READ MORE: Customs Intelligence Gwadar auctions motor vehicles on December 12

    The text of the section is as follow:

    182A. Return not filed within due date.—(1) Notwithstanding anything contained in this Ordinance, where a person fails to file a return of income under section 114 by the due date as specified in section 118 or by the date as extended by the Board under section 214A or extended by the Commissioner under section 119, as the case may be, such person shall—

    (a) not be included in the active taxpayers’ list for the year for which return was not filed within the due date:

    READ MORE: Separate property declaration under Section 7E only for returns already filed

    Provided that without prejudice to any other liability under this Ordinance, the person shall be included in the active taxpayer ‘ list on filing return after the due date, if the person pays surcharge at Rupees-

    (i) twenty thousand in case of a company;

    (ii) ten thousand in case of an association of persons;

    (iii) one thousand in case of an individual.

    “Explanation.—For the removal of doubt it is clarified that the provisions of this section shall apply from tax year 2018 and onwards for which the first Active Taxpayers List is to be issued on first day of March, 2019 under Income Tax Rules, 2002; and

    READ MORE: Tax on deemed income from immovable property under Section 7E

    (b) not be allowed, for that tax year, to carry forward any loss under Part VIII of Chapter IV;

    (c) not be issued refund during the period the person is not included in the active taxpayers’ list; and

    (d) not be entitled to additional payment for delayed refund under section 171 and the period the person is not included in the active taxpayers’ list, shall not be counted for computation of additional payment for delayed refund.

  • FBR directs BS-21 officers to submit declaration of assets

    FBR directs BS-21 officers to submit declaration of assets

    ISLAMABAD: Federal Board of Revenue (FBR) has directed BS-21 officers to submit their declaration of assets otherwise their names will not be considered for promotion to next grade.

    In an official communication issued on Monday, the FBR directed BS-21 officers of Inland Revenue Service (IRS) and Pakistan Customs Service (PCS), who are in promotion zone, to ensure completion of their Performance Evaluation Reports (PERs) and Declaration of Assets.

    READ MORE: Customs Intelligence Gwadar auctions motor vehicles on December 12

    The FBR said the Establishment Division has informed that a meeting of high powered selection board (HPSB) for promotion to BS-22, is scheduled to be held shortly and cases for the promotion shall be submitted to the Establishment Division for HPSB by December 10, 2022.

    All the BS-21 officers of IRS and PCS in the promotion zone are directed to ensure that their PERs and Declaration of Assets up to June 30, 2022 are submitted to the Board latest by December 09, 2022, positively.

    READ MORE: Separate property declaration under Section 7E only for returns already filed

    Completion of PERs and submission of Declaration of Assets are the pre-requisites for promotion to selection grades under Civil Servants (Promotion to the post of Secretary BS-22 and equivalent) Rules, 2010.

    READ MORE: Tax on deemed income from immovable property under Section 7E

    The FBR is trying hard to ensure that all eligible officers should be considered for promotion in the forthcoming HPSB meeting. However, cooperation from the officers in timely completion of service record is equally essential.

    The revenue body warned that any officer who fails to furnish the documents by due date of December 09, 2022 will himself/herself be responsible for non-consideration / deferment / supersession.

    READ MORE: Supreme Court discourages taxpayers seeking relief in show cause notices

  • FBR nominates focal persons for resolving issues of IT industry

    FBR nominates focal persons for resolving issues of IT industry

    ISLAMABAD: Federal Board of Revenue (FBR) has nominated focal persons for resolving issues related IT industry.

    The following chief commissioners Inland Revenue (by designation) are nominated as focal persons for resolving problems and issues related to IT industry for the regions mentioned against each:

    Chief Commissioners – IR, Corporate Tax Office (CTO), Lahore, Islamabad and Karachi have been nominated as focal person for resolving problems and issues related to IT Industry regarding matter pertaining to Inland Revenue field formations within Lahore, Islamabad & Rawalpindi and Karachi.

    READ MORE: No audit of IT sector due to fixed tax regime: FBR chairman

    In October 2022, FBR Chairman Asim Ahmad said there is no audit of the IT sector due to fixed tax regime. There is no audit of IT sector export-oriented companies through budgetary measures in the current financial year for ensuring ease of doing business and reducing the cost of tax compliance.

    “As fixed and final tax regime has been introduced in this fiscal year therefore, no tax or audit notices will be sent to the IT sector professionals and easier documentation will be the priority,” FBR chairman said.

    READ MORE: Electricity withholding tax not applicable on ATL domestic consumers

    Special Assistant to the Prime Minister on youth affairs Miss Shaza Fatima and the Prime Minister’s task force on Information technology and Telecom sector, convened a meeting in the Prime Minister’s office to discuss IT sector exports taxation issues and the impact thereof particularly of small and medium IT companies and software houses, with Chairman FBR Asim Ahmad, officials of the Ministry of IT and representatives of PASHA.

    The Prime Minister Mian Shehbaz Shareef constituted a task force to devise ways to increase the Information Technology exports by $3 billion till 2023.

    On the note of exemption from the proposed 0.25 per cent tax, this will remain and it is a quarter of what the other exporters pay.

    In the Final Tax Regime, the Federal Board of Revenue has agreed in principle to resolve sales tax registration and return filing issues.

    READ MORE: Tax rates on goods, passenger transport vehicles during 2022-2023

    The definitions of IT in the June 2022 Finance Act were deliberated upon, and found to be all inclusive. The Federal Board of Revenue has also agreed in principle to propose necessary changes in law for all IT exports to attain the benefit of final tax regime.

    In principle the FBR agreed upon the proposal that if the Provincial consensus is reached, Federal Excise Duty (FED) can be reduced from 19.5 per cent to 17 per cent for Telecom sector.

    The funds received by the IT sector through applications like Payoneer etc. will be given the benefit of final tax regime through necessary changes in the law, if required.

    READ MORE: FBR notifies tax rates on brokerage, commission during 2022-2023

  • Pakistan sets up commission to eradicate black economy

    Pakistan sets up commission to eradicate black economy

    Pakistan has constituted a high powered commission for making suggestion to end the black economy or parallel economy. Finance Minister Ishaq Dar last week constituted a high powered tax commission for identifying bottlenecks in tax system and recommending pro-economic policies.

    (more…)
  • Separate property declaration under Section 7E only for returns already filed

    Separate property declaration under Section 7E only for returns already filed

    A separate declaration for immovable property income has been allowed only for those returns filed prior October 13, 2022.

    The FBR issued SRO 2068(I)/2022 dated December 01, 2022 to enforce the draft amendments issued through SRO 2052(I)/2022 dated November 22, 2022.

    As per the instant SRO 2068(I)/2022, the FBR said that where return has been furnished prior to coming into force of notification No. SRO 1891(I)/2022, dated October 13, 2022, the form specified in the said notification shall be furnished separately by December 31, 2022.

    Form 7E

    Through Finance Act, 2022 deemed income on immovable property has been imposed from tax year 2022 (July 01, 2021 – June 30, 2022) and declaration has been made mandatory of the deemed income along with annual return by December 15, 2022.

    READ MORE: Tax on deemed income from immovable property under Section 7E

    According the FBR, a new section 7E has been introduced through Finance Act, 2022 whereby for tax year 2022 and onwards, a resident person is treated to have derived income equal to five percent of fair market value of the capital assets situated in Pakistan which will be chargeable to tax at the rate of 20 per cent under Division VIIIC of Part I of First Schedule of the Ordinance.

    Following exclusions have been provided to which this section will not apply:

    (i) One capital asset owned by the resident person;

    (ii) Self-owned business premises from where the business is carried out by the persons appearing on the active taxpayer’s list at any time during the year;

    (iii) Self-owned agriculture land where agriculture activity is carried out by the person but excluding farmhouse and annexed land. Farmhouse has been defined in this section;

    READ MORE: Supreme Court discourages taxpayers seeking relief in show cause notices

    (iv) Capital asset allotted to —

    (a) A Shaheed or dependents of a Shaheed belonging to Pakistan Armed Forces;

    (b) A person or dependents of a person who dies while in the service of Pakistan armed forces or federal or provincial government;

    (c) A war wounded person while in service of Pakistan armed forces or federal or provincial government;

    (d) An ex-serviceman and serving personnel of armed forces or ex-employees or serving personnel of federal and provincial governments who are original allotees of the capital asset as duly certified by the allotment authority;

    (v) Any property from which income is chargeable to tax under the Ordinance and tax leviable has been paid;

    (vi) Capital asset in the first year of acquisition on which tax under section 236K has been paid;

    READ MORE: Member Customs assures swift clearance of export consignments

    (vii) Where fair market value of the capital assets in aggregate excluding capital assets mentioned in serial nos. (i) to (vi) above does not exceed rupees twenty-five million;

    (viii) Capital assets which are owned by a provincial government or local government;

    (ix) Capital assets owned by local authority, a development authority, builders and developers for land development and construction subject to the condition that such persons are registered with Directorate General of Designated Non-Financial Businesses and Professions.

  • Customs duty for motor vehicle kits of new models reduced to 15pc

    Customs duty for motor vehicle kits of new models reduced to 15pc

    The Federal Board of Revenue (FBR) has announced a reduction in customs duty to 15% for components used in the assembly or manufacture of cars in any kit form.

    (more…)
  • FBR detects big retailers for online integration of transactions

    FBR detects big retailers for online integration of transactions

    ISLAMABAD: Federal Board of Revenue (FBR) has detected about 89 big retailers for a compulsory integration of their transactions.

    FBR in this regard issued Sales Tax General Order (STGO) No. 05 of 2023 for Tier-1 retailers to integrate their businesses with the FBR’s Point of Sale (POS) System.

    According to Sales Tax Act, 1990 updated up to August 22, 2022, the definition of Tier-1 Retailer is:

    “Tier-1 retailer” means a retailer falling in any one or more of the following categories, namely:-

    (a) a retailer operating as a unit of a national or international chain of stores;

    (b) a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;

    (c) a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees twelve hundred thousand;

    (d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers”;

    (e) a retailer, whose shop measures one thousand square feet in area or more or two thousand square feet in area or more in the case of retailer of furniture;

    (f) a retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by State Bank of Pakistan;

    (g) a retailer whose deductible withholding tax under sections 236G or 236H of the Income Tax Ordinance, 2001 (XLIX of 2001) during the immediately preceding twelve consecutive months has exceeded the threshold as may be specified by the Board through notification in the official Gazette; and

    (ga) a person engaged in supply of articles of jewellery, or parts thereof, of precious metal or of metal clad with precious metal excluding a person whose shop measures three hundred square feet in area or less;

    (h) any other person or class of persons as prescribed by the Board.

    The latest STGO stated that the Finance Act, 2019 added sub-section (6) to section 8B of the Sales Tax Act, 1990 whereby a Tier-1 Retailer “(T -lR)” who did not integrate its retail outlet in the manner prescribed under sub-section (9A) of section 3 of the STA, 1990 during a tax period, its adjustable tax for that period would be reduced by 15 per cent.

    The figure of 15 per cent has been raised to 60 per cent vide Finance Act, 2021.

    In order to operationalize this important provision of law, a system-based approach has been adopted whereby all T-IRs who are liable to integrate but have not yet integrated, with effect from July-2021 (Sales Tax Returns filed in August, 2021) are to be dealt with as per the procedure laid down in STGO No.1 of 2022 issued on August 03, 2021.

    Vide the instant Sales Tax General Order, a list of 89 identified T-IRs has been placed on FBR’s web portal at www.tbr.gov.pk allowing them to integrate with FBR’s system by December 12, 2022 and the procedure of exclusion from this list of 89 identified T-1Rs shall apply as laid down in STGO No. 17 of 2022 dated 13.05.2022.

    Upon filing of Sales Tax Return for the month of November, 2022 for all hereby notified T-1Rs not having yet integrated, their input tax claim would be disallowed as above, without any further notice or proceedings, creating tax demand by the same amount.

  • Tax commission constituted to make pro-economic growth policies

    Tax commission constituted to make pro-economic growth policies

    ISLAMABAD: Finance Minister Ishaq Dar has constituted a high powered tax commission for identifying bottlenecks in tax system and recommending pro-economic policies.

    The Federal Board of Revenue (FBR) issued a notification on Thursday regarding constitution of Reforms and Resource Mobilization Commission (RRMC).

    The commission comprising following members:

    READ MORE: FBR notifies circular to allow third extension in date of return filing

    01. Ashfaq Tola, Chairman of the commission

    02. Asif Haroon

    03. Haider Ali Patel

    04. Abdul Qadir Memon

    05. Dr. Veqar Ahmed

    06. Saqib Sherazi

    07. Ghazanfar Bilour

    08. President of FPCCI or his nominee

    READ MORE: FBR collects Rs2.69 trillion in 5MFY23 despite tax free petroleum products

    09. President Pakistan Tax Bar Association

    10. Chairman FBR

    11. Member (Reforms & Modernization) FBR Secretary to the Commission

    Subject Experts included:

    12. Nisar Muhammad-Customs

    13. Dr. Muhammad Iqbal-Income Tax

    14. Abdul Hameed Memon-Sales Tax

    According to Terms of Reference (TORs), the commission will advise and made recommendations to the finance minister on the following areas:

    READ MORE: Tax return filing date extended up to Dec 15, 2022

    (i) To review existing revenue policies, evaluate FBR data and macro level, and identify initiatives/measures/policies for resource mobilization, ease of doing business and pro-economic growth.

    (ii) To identify issues/difficulties/snags/risks of the existing tax system and recommend remedial measures.

    (iii) To review the budget proposals, evaluate their consequences on business, and advise the finance minister on practical aspects of budget proposals.

    (iv) To review the proposed amendments in Finance Bill and make recommendations to the finance minister on implications of proposed amendments on businesses.

    (v) To review the complexities of tax legislation and recommend simplification e.g. different compliance level for different categories of taxpayers.

    READ MORE: FBR sets up check posts for monitoring supplies from tax exempt areas

    (vi) To suggest action plan to curb the parallel economy and to make recommendations for improving financial inclusion in the documented system.

    (vii) To review and recommend a robust IT system on modern lines and upgrade existing IT facilities to maximize tax compliance, enforcement, broaden the tax base and provide taxpayer facilitation.

    (viii) To make recommendations for minimizing taxpayer/tax collector interaction and maximizing trust between the FBR and the taxpayers.

    (ix) To revie and advise restructuring of FBR from the following perspectives:

    a. To evaluate the possibility of making FBR autonomous.

    b. To evaluate the possibility of establishing and independent audit system.

    c. To evaluate the possibility of establishing a separate legal department.

    (x) To make recommendations on harmonization of GDT between the Federation and provinces and development of a single portal for filing of sales tax returns.

    (xi) Any other related matter.

    According to the notification, the commission:

    READ MORE: Tax on deemed income from immovable property under Section 7E

    (i) Shall be independent and headed by a full-time chairman; its chairman shall report directly to the finance minister.

    (ii) May interact with stakeholders and form sub-group, and evaluate their proposals for the federal budget.

    (iii) May co-opt any other person with the prior approval of the finance minister.

    (iv) May avail services of any expert (s) on need basis.

    (v) Will have a full-time secretariat at FBR Headquarter, and FBR shall provide logistic and human resource support to the commission.

    (vi) Shall take decision by majority vote of all members.

    (vii) Shall submit its first report by mid of April 2023.

  • FBR notifies circular to allow third extension in date of return filing

    FBR notifies circular to allow third extension in date of return filing

    ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday issued a circular to notify the third extension in date for return filing tax year 2022.

    The FBR issued Circular No. 18 of 2022 to further extend the date for filing annual return for tax year 2022 up to December 15, 2022 from November 30, 2022.

    Further extension in date for filing tax returns has been granted in view of requests received from various trade bodies and tax bar associations.

    The last date for filing income tax return was September 30, 2022 for all taxpayers except companies, which are required to file their returns up to December 31, 2022.

    However, previously through Circular No. 16 of 2022 and Circular No. 17 of 2022, the FBR granted date extension twice due to current flood situation in the country and request from various trade bodies and tax bar associations.

    According to leading tax practitioners although the FBR had extended the date for return filing and resolved many issues pertaining to the return filing yet the taxpayers are facing problems related to calculation of deemed income under Section 7E of the Income Tax Ordinance, 2001.

    A day earlier, the Karachi Tax Bar Association (KTBA) demanded an extension to file annual return and statement of income for tax year 2022.

    The tax bar in a letter sent to the chairman of Federal Board of Revenue (FBR) on November 29, 2022 informed that neither taxpayers nor the consultants would able to complete return filing task by November 30, 2022.

    KTBA President Syed Rehan Hasan Jafri stated that during recent Karachi visit of the FBR chairman bottlenecks in return filing were discussed. The issue of filing the newly introduced 7E Form was also discussed at length.

    “Our meeting remained very conducive wherein it was ensured that all the issues and concerns and the glitches would be removed at priority basis to ease and expedite preparation and the filing work both for taxpayers and the tax advisors,” the KTBA president said.

    Our meeting was followed by another very successful meeting at your directions, with the following members and the Chief Commissioner, Corporate Tax Office, Inland Revenue, Karachi on November 07, 2022 for the purpose of facilitation and resolution of the issues.

    The FBR chairman has been apprised that all the concerns which were shared, either these were related to return filing in general or filing of 7E form in particular are still pending unsolved.

    The taxpayers and their counsellors both are faced with the stigma of Status Quo. Subsequently a notification has been issued vide SRO 2052 on November 22, 2022 whereby the date for filing 7E annexure has been extended for those who already had filed their return before the form of 7E Annexure was introduced on October 13, 2022.

    This is another task assigned to the Taxpayers / Tax Advisors to complete it as per the stipulated times mentioned therein per SRO cited above and yet the Form to be submitted is still pending issued, which need to be issued as soon as possible in order to facilitate the Taxpayers within the stipulated time given to Taxpayers.

    Therefore, the KTBA urged the FBR chairman to extend the date for all the taxpayers at par instead, along with the resolution of these errors and mistakes.