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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.

  • Zero rate sales tax suggested for public welfare services

    Zero rate sales tax suggested for public welfare services

    KARACHI: The Federal Board of Revenue (FBR) has been urged to zero rate the sales tax on supplies of goods made to charitable or non-profit organizations providing public welfare services.

    Karachi Tax Bar Association (KTBA) in proposals for budget 2022/2023, suggested amendments to sales tax laws regarding charitable or Non-Profit Organizations (NPOs), including hospitals and educational institutions.

    READ MORE: Advance tax on individuals must be for Rs10mn turnover

    The tax bar said that contrary Income Tax Law, there is no clear concept to determine a Charitable or Non-Profit Organizations in Sales Tax Act, 1990 and consequent to amendments brought in Fifth and Sixth Schedules, via Finance Supplementary Act, 2022 the situation has become more grave for these taxpayers.

    “Public welfare services provided by such charitable, hospitals and educational institutions has become expensive as a good chunk of their revenue (donations/ grants) ends up in payment of sales taxes. This being contrary either to agreements signed by the Government with other States and international donors,” the tax bar said.

    READ MORE: Eliminating commissioner audit selection power sought

    It is suggested that supplies of goods to these institutions be charged to tax at the rate of zero percent and following new entry be inserted to Fifth Schedule: “Supplies to a Non-Profit Organization as determined U/s. 2(36) of Income Tax Ordinance, 2001″.

    Earlier, the KTBA proposed the discretionary power of commission Inland Revenue to select audit cases should be eliminated.

    “The power to select should only be exercised by the Federal Board of Revenue (FBR) under Section 214C of Income Tax Ordinance, 2001,” the tax bar proposed in its proposals.

    READ MORE: Threshold be doubled for domestic electric consumers

    The tax bar said Sub-Section (2) of Section 138 provides that If the amount referred to in the notice issued under sub-section (1) is not paid within the time specified therein or within the further time, if any, allowed by the Commissioner, the Commissioner may proceed to recover the tax in the prescribed manner.

    “The tax authorities construe that term ‘payment’ mentioned in the section 140 does not cover amount recovered from the tax payer,” it added.

    READ MORE: Genuine NPOs unable to get benefit of 100% tax credit

    The KTBA said that rigorous proceedings causing hardship to taxpayers and leading protracted departmental and appellate proceedings.

    “The power to select the return of income may rest only with the FBR already having the powers to select the case randomly through Computer U/s. 214C of the Ordinance,” it recommended.

  • Tax incentive granted for revival of sick industrial units

    Tax incentive granted for revival of sick industrial units

    ISLAMABAD: The Federal Board of Revenue (FBR) on Friday explained tax incentives granted for revival of sick industrial units.

    The FBR issued Circular No. 13 of 2022 dated April 07, 2022 to explain amendments to Income Tax Ordinance, 2001 brought through Income Tax Ordinance (Amendment) Ordinance, 2022.

    The FBR said that in order to initiate revival of sick industrial units, a new section 59C has been inserted in the Income Tax Ordinance, 2001 under which an acquiring company is allowed to adjust loss for the latest tax year and brought forward assessed business losses, excluding capital loss, of acquired company flick industrial unit’) by way of acquisition of its majority share capital.

    READ MORE: FBR explains tax amnesty on equity investment

    The acquiring company can adjust said losses for a period of three tax years up to tax year 2026.

    Failure to revive sick industrial unit by tax year 2026 shall entail acquiring company to reverse the adjustment of loses in the preceding three tax years and offer income for tax which was set-off due to adjustment of loses of the acquiring company in Tax Year 2027.

    The acquiring company is entitled to adjust above said losses in proportion to share capital acquired subject to the conditions referred in sub-section (2) of the section 59C of the Ordinance.

    READ MORE: Input tax adjustment restricted for oil, ghee, steel makers

    Any leftover loss of acquired company by the end of tax year 2026 will not be available to the acquiring company for further set-off of losses in Tax Year 2027 against its own income, however, the acquired company can carry forward its losses in accordance with section 57 of the Ordinance.

    The benefit under this section shall not be available to any scheme of amalgamation or merger.

    The definition of a sick industrial unit, whose losses are available for adjustment under this scheme, has been provided in this section.

    READ MORE: FBR detects fraudulent declaration of goods in ST returns

    Revival of sick industrial unit require attaining maximum production capacity that was obtained before such company went sick.

    Such revival will be certified by the Engineering Development Board and the acquired company is required to file said certificate along with return of income for tax year 2026.

  • FBR explains tax amnesty on equity investment

    FBR explains tax amnesty on equity investment

    ISLAMABAD: The Federal Board of Revenue (FBR) has explained tax amnesty granted on equity investment for already existing or new industrial under taking.

    The government has granted immunity from questioning of source of funds through Income Tax (Amendment) Ordinance, 2022.

    A new section 100F has been inserted to the Income Tax Ordinance, 2001 to give immunity from probe under Section 111 of the Income Tax Ordinance, 2001.

    READ MORE: Tax amnesty launched for setting up new industrial units

    To explain this important change, the FBR issued an explanation circular No. 13 of 2022.

    The FBR said in order to promote industrialization in the country, immunity from probe under section 111 of the Ordinance has been granted on equity investment made by eligible persons in a new company formed for establishing an industrial undertaking or to an existing company being an industrial undertaking (for investment in expansion and modernization) after paying an amount of tax equal to five percent on such investment and upon fulfilling other conditions as mentioned in this section.

    The amount of undeclared funds for investment has to be credited into a dedicated bank account of such company before due date of filing of statement i.e. September 30, 2022 and can only be used either for purchase or import of plant and machinery including IT hardware through a letter of credit or software and IT services, or for construction of building and structure in case of new industrial undertaking and for construction of only manufacturing premises in case of existing unit.

    The term modernization has been defined in this section which includes acquisition or upgradation of IT hardware, software and IT services.

    READ MORE; FBR launches new Active Taxpayers List; return filing grows by 58%

    The minimum qualifying equity investment to avail benefit under this section is Rs50 million.

    The tax paid under this section is not refundable or adjustable against any other tax liability of the company and the declarant will be entitled to incorporate the amount of declared funds in his wealth statement, financial statements or books of accounts as the case may be.

    The industrial undertaking established under the provision of this section, as the case may be, will have to commence its commercial production by June 30, 2024 and a certificate issued by the Engineering Development Board to that effect is required to be furnished by the company with income tax return for tax year 2024.

    READ MORE: POS invoice verification for prize scheme surges by 63%

    In case of misrepresentation or suppression of facts, statement filed under sub-section (1) will be treated as void ab-initio and all the provisions of Income Tax Ordinance, 2001 will apply accordingly. It is emphasized that investment opportunity offered to investors under this section is not an amnesty scheme. Rather, it is a conditional tax concession.

  • Input tax adjustment restricted for oil, ghee, steel makers

    Input tax adjustment restricted for oil, ghee, steel makers

    ISLAMABAD: The Federal Board of Revenue (FBR) has restricted input adjustment for manufacturers of steel and oil and ghee.

    The FBR issued Sales Tax General Order (STGO) No. 12 of 2022 dated April 07, 2022, regarding input tax adjustment to manufacturers of oil and ghee and steel melters and re-rollers.

    Under the STGO, the sectors of oil & ghee and steel would only avail input adjustment against invoices issued for the same products falling under these sectors.

    READ MORE: FBR detects fraudulent declaration of goods in ST returns

    The FBR said the Sales Tax Act, 1990 mandates a taxpayer registered with FBR to claim input tax credit on import/purchases from registered suppliers only.

    Section 8(1)(a) of the Act restricts the adjustment of input on goods or services used or to be used for any purpose other than for taxable supplies made or to be made.

    Similarly, Section 8(1)(f) and (i) of the Act provide that tax credit shall not be admissible on the goods or services not related to the taxable supplies made by the taxpayer.

    This essentially being a self-assessment based system warrants high standards of responsibility and integrity on part of the UST filers.

    READ MORE: Adjustment restrictions hamper return filing by retailers

    “However, the analysis of the data available in the system has led to conclude that the facilities/benefits provided through automated sales tax return are being misused by the manufacturers of oil & ghee and steel melters and re-rolling mills who are claiming inputs other than their relevant business activities in violation of provisions of law.”

    In order to ensure certainty, transparency across-the-board, it has been decided that input tax adjustment shall not be allowed to the manufacturers of Oil & Ghee and Steel Melters and Re-Rollers on the goods which are not related to their business activity.

    The list of such goods attached as Annexure-I for manufacturers of Oil & Ghee and as Annexure-11 for Steel Melters and Re-Rollers on the basis of PCT heading on which input tax credit shall not be admissible under the law.

    Although, all these PCT headings have been identified after due diligence, yet any hardship caused may be brought to the notice of the Commissioner concerned. This STGO become applicable with effect from April 1, 2022.

  • FBR detects fraudulent declaration of goods in ST returns

    FBR detects fraudulent declaration of goods in ST returns

    ISLAMABAD: The Federal Board of Revenue (FBR) has detected that traders in supply chain fraudulently declaring goods in sales tax returns.

    The FBR issued Sales Tax General Order (STGO) No. 13 of 2022 dated April 07, 2022 regarding purchases and supplies made by importers, wholesalers, dealers and distributors in sales tax return.

    The Sales Tax Act, 1990 mandates a taxpayer registered with the FBR to correctly declaration of purchases and supplies in the monthly sales tax return as filed under section 26 of the Sales Tax Act, 1990.

    READ MORE: Adjustment restrictions hamper return filing by retailers

    This essentially being a self-assessment based system warrants high standards of responsibility and integrity on part of the GST filers.

    “However, the analysis of the data available in the system has led to conclude that the facilities/benefits provided through automated sales tax return are being misused by the importers, wholesalers, distributors who are engaged in business of buying and selling of same state of goods but are fraudulently declaring sales of goods irrespective of their business purchases in violation of provisions of law,” the FBR said.

    READ MORE: FBR announces winners of third POS invoice draw

    In order to ensure certainty, transparency across-the-board, it has been decided that sales of goods by importers wholesalers, Dealers and Distributors under HS Code as declared in Annex-C of the sales tax return shall be allowed on the basis of goods under the said HS Code as declared in Annex-A and Annex-B of sales tax return by these taxpayers.

  • Advance tax on individuals must be for Rs10mn turnover

    Advance tax on individuals must be for Rs10mn turnover

    KARACHI: The Federal Board of Revenue (FBR) has been proposed to increase the turnover from one million rupees to 10 million rupees for individuals to made advance payment.

    Karachi Tax Bar Association (KTBA) in its proposals for budget 2022/2023, stated that Section 147 of the Income Tax Ordinance, 2001 relates to quarterly payment of advance tax.

    READ MORE: Eliminating commissioner audit selection power sought

    The subsection 6 entitles a taxpayer to file a lower estimate. Vide Finance Act 2018 condition has been added that the lower estimate be accompanied with prescribed details.

    Subsection 4A as substituted vide Finance Act 2015 states that the taxpayer shall estimate the tax payable for the tax year, by the second installment due date and if the tax payable is likely to be more than the amount payable under sub-section (4), the taxpayer shall furnish an estimate of the amount of tax payable and discharge fifty per cent by the second quarter installment. The remaining fifty per cent to be discharged by the due date of the third and fourth quarter of the tax year.

    READ MORE: Threshold be doubled for domestic electric consumers

    The requirement of quarterly payment of advance tax is comfortable for the companies and AOPs as they are regularly operated entities. While the condition of income more than one million for the individual cause workload for the registered individuals to face notices and quarterly compliance of advance tax. Unease of doing business and rigorous compliance requirement.

    The requirements to file prescribed details along with the lower estimate is against the scheme of deemed assessment and concurrent legislation as well since the section 205 mandates the taxpayer to discharge ninety percent of the tax liability by way of advance tax.

    READ MORE: Genuine NPOs unable to get benefit of 100% tax credit

    “The amendment shall be made in the threshold of one million rupees. It should be increased to ten million,” it is recommended.

     Sub-section147(4A) may be restored to the position prior to amendment vide Finance Act 2015 requiring taxpayers to file an estimate of higher side. While the ultimate objective of section 147 is to discharge tax liability of 90 percent this is well achieved vide pre-amended position with check as per section 205 of the Ordinance.

    READ MORE: Changes sought in withholding on non-resident payment

    The requirements under subsection 6 as inserted vide Finance Act 2018 tantamount to disturbing the concept of deemed assessment and should be deleted.

    Giving rationale, the KTBA said this will save individuals from cost burdens of quarterly compliance And decrease the workload of individual tax-payers.

  • FBR exempts customs duty on import of oxygen gas

    FBR exempts customs duty on import of oxygen gas

    The Federal Board of Revenue (FBR) has issued an exemption on customs duty for the import of oxygen gas and oxygen cylinders.

    (more…)
  • FBR raises steel valuation amid high commodity prices

    FBR raises steel valuation amid high commodity prices

    ISLAMABAD: The Federal Board of Revenue (FBR) on Tuesday increased the valuation of steel products considering rising commodity prices in the international markets.

    The FBR has fixed the valuation of steel products for the collection of sales tax, instead of the prevailing rates in the open market.

    The fixed valuation is the minimum price on which sales tax is to be collected on the supply of steel products.

    The FBR issued SRO 489(I)/2022 on April 05, 2022.

    Previously, the FBR issued SRO 1465(I)/2021 dated November 15, 2021 in this regard. The FBR issued SRO 985(I)/2021 dated August 04, 2021, to introduce the valuation for collection of sales tax at 17 per cent on supply of steel products.

    The FBR enhanced the valuation to Rs164,037 per metric ton from Rs153,000 per metric ton on the supply of steel bars and other long profiles.

    READ MORE: FBR increases valuation of steel products

    The value has been increased to Rs133,813 metric tons from Rs131,000 per metric ton on supply of steel billets.

    However, the value of steel ingots has been kept unchanged at Rs126,000 per metric ton for the collection of sales tax.

    The value of ship plates has been increased to Rs129,584 per metric tons from Rs126,000 per metric ton for collection of sales tax.

    The value of other re-rollable iron and steel scrap has been increased to Rs125,688 per ton from Rs119,000 per metric ton for the purpose of sales tax.

    The FBR further said that in case notified value of supply of the goods is higher than the value fixed, the value of goods shall be the value at which the supply is made.

  • FBR issues list of 185 retailers for mandatory integration

    FBR issues list of 185 retailers for mandatory integration

    ISLAMABAD: The Federal Board of Revenue (FBR) on Tuesday issued a list of 185 retailers for mandatory integration with online tax system.

    The FBR directed the retailers to integrate with the online tax system by April 10, 2022 in order to avoid harsh action.

    The revenue body issued Sales Tax General Order No. 11 of 2022 asking Tier-1 retailers for integration with FBR’s Point of Sale (POS) system.

    READ MORE: FBR issues list of 1,358 retailers for mandatory POS

    The FBR said that the Finance Act, 2019 added sub-section 6 to section 8B of the Sales Tax Act, 1990 whereby a Tier-1 retailer, who did not integrate its retail outlet in the manner prescribed under sub-section 9A of Section 3 of the Sales Tax Act, 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 through Finance Act, 2021.

    The FBR further said that in order to operationalize the important provision of law, a system-based approach has been adopted whereby all Tier-1 retailers, who are liable to integrate but have not yet integrated, with effect from July 2021 (sales tax return filed in August 2021) are to be dealt with as per the procedure laid down in STGO No. 1 of 2022 issued on August 3, 2021.

    READ MORE: Prize scheme on invoices issued by retailers

    As per latest the STGO a list of 185 identified Tier-1 retailers has been issued allowing them to integrate with FBR’s system by April 10, 2022 and the procedure of exclusion from the list of 185 identified retailers shall apply as laid down in Para 2 of STGO 1 of 2022 dated August 03, 2021.

    The FBR said upon filing of sales tax return for the month of February 2022 for all notified Tier-1 retailers 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.

    READ MORE: FBR decides penal action against defaulting retailers

  • Eliminating commissioner audit selection power sought

    Eliminating commissioner audit selection power sought

    KARACHI: The Karachi Tax Bar Association (KTBA) has proposed the discretionary power of commissioner Inland Revenue to select audit cases should be eliminated.

    (more…)