The Federal Board of Revenue (FBR) has issued a directive for the extension of working hours at Inland Revenue (IR) offices on April 29 and 30, 2022 (Friday and Saturday) for revenue collection.
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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.
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FBR’s database mining suggested for new taxpayers
KARACHI: Federal Board of Revenue (FBR) has been suggested for mining its database in order to identifying new taxpayers and ease burden on the existing taxpayers.
The Pakistan Business Council (PBC) in its proposals for budget 2022/2023 submitted to the FBR, said that the country had low taxpayer base which resulted in reliance on the existing taxpayers.
READ MORE: PBC recommends restriction on cash above certain limit
“The number of taxpayers needs to be significantly increased – the narrow taxpayer base is leading to greater pressure on the existing taxpayers.”
There is need to document the economy and provide level playing field to the formal sector.
READ MORE: FBR proposed to exempt withholding tax on telecom services
The PBC suggested mining of FBR’s database to identify new taxpayers and those not fully discharging their liabilities.
The FBR has got access to financial data in various forms including the monthly statements submitted by withholding tax / collecting agents as per various sections. Information as per Statement under sections 165A, 165B, 175A of Income Tax Ordinance, 2001 and NADRA, FIA, Bureau of Immigration and Overseas Employment records are also available.
READ MORE: Zero rate tax demanded for pharmaceutical API imports
“This can be a start to bringing new taxpayers in the net. In addition, the FBR has also collected data about tax paid by non-filers on vehicles, immovable property and on gains made in the Stock Market,” it added.
Earlier, the PBC also recommended restriction on use of cash above certain limit. “Restrictions on use of cash above a certain limit would also assist,” the PBC said.
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PBC recommends restriction on cash above certain limit
KARACHI: Pakistan Business Council (PBC) has recommended use of cash above certain limit in order to document the economy.
In its proposals for budget 2022/2023 submitted to Federal Board of Revenue (FBR), the PBC recommended that the use of cash in the economy should be discouraged.
READ MORE: FBR proposed to exempt withholding tax on telecom services
“Restrictions on use of cash above a certain limit would also assist,” the PBC said.
The transit treaty with Afghanistan has been misused through diversion of goods to Pakistan.
The Afghan Transit Trade Agreement has expired, with the evolving situation in Afghanistan, Pakistan needs to look to renegotiate the treaty with clauses putting in quantitative and qualitative restrictions on what can transit, insist on letters of credit, charge duty and General Sales Tax (GST) on import which would only be refunded to the Afghan government on exit, track and monitor containers, strengthen inspection of empty containers returning to Pakistan and make physical controls along the border stronger.
READ MORE: Zero rate tax demanded for pharmaceutical API imports
“The civil and military authorities need to be on the same page to do this,” the council recommended.
Electronic Data Interchange with key trading partners should be deployed to check under-invoicing of imports. The provinces have little incentive to check smuggling as customs duty and GST evaded are federal taxes and do not hurt their revenues.
READ MORE: OICCI recommends tax amendment for FMCG
Provinces may be incentivized to conduct raids on shops that deal in smuggled goods. Positive lessons from the success of cell phone registration with Pakistan Telecom Authority (PTA) and Urdu language labelling requirement for imported food items can be applied to other smuggling prone goods.
READ MORE: FBR urged to review minimum tax for OMCs, refineries
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FBR makes tax stamps mandatory for fertilizer bags
ISLAMABAD: The Federal Board of Revenue (FBR) on Tuesday made tax stamps mandatory for packing and supply of fertilizer bags.
The FBR issued Sales Tax General Order (STGO) No. 15 of 2022 to implement track and trace system under SRO 250/2019 related to fertilizer bags.
The FBR said that the provisions of Section 40C (2) of the Sales Tax Act, 1990 read with Rule 150ZF of the Sales Tax Rules, 2006 mandate the revenue body to notify the date for the implementation of Electronic Monitoring of production and sales of goods in the manner prescribed in the law on all manufacturing sites of notified sectors.
READ MORE: FBR directed to bring entire sugar supply chain into tax net
The board further said in exercise of the powers conferred under Section 40C(2) of the Sales tax Act, 1990 and Rule 150ZF of the Sales Tax Rules, 2006 it is hereby notified that no fertilizer bag shall be allowed to be removed from a production site, factory premises or manufacturing plant or import station without affixation of tax stamps/Unique Identification Markings (UlMs) with effect from July 01, 2022, which are to be obtained/procured from FBR’s Licensee M/s. AJCL/MITAS/Authentix Consortium.
Under SRO 250/2019 it has been made mandatory for goods to be affixed with tax stamps, banderoles, stickers, labels, barcodes, etc.
READ MORE: IR officers’ bid to deny tax refund adjustment criticized
It said that every package, including a tin, container or bottle, of the specified goods whether manufactured or imported shall be affixed or printed a tax stamp, banderole, sticker, label, barcode etc.
Provided that in respect of such specified goods which are exempt or meant for export tax stamps shall not be required to be affixed thereon, but shall be clearly, legibly and indelibly marked as “Exempt Goods” or “For Export”, as the case may be.
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FBR directed to bring entire sugar supply chain into tax net
ISLAMABAD: President of Pakistan, Dr. Arif Alvi has directed the Federal Board of Revenue (FBR) to bring entire supply chain of sugar sector into to tax net.
Dr Arif Alvi directed the tax authorities to bring into the tax net the unregistered wholesalers, dealers or distributors of sugar buying huge quantities from sugar mills to broaden the tax base, according to a press statement issued on Monday April 25, 2022.
READ MORE: President Alvi retains major penalty on NAB official
The President observed that despite making huge monetary transactions and the availability of their data with FBR, these unregistered buyers of sugar largely remained outside the tax net and were evading the prime national responsibility of paying taxes.
He passed these directions while upholding a decision of the Federal Tax Ombudsman (FTO) directing FBR to bring unregistered buyers of sugar in bulk into the tax net to improve the collection of sales tax and reporting compliance within 90 days.
As per details, FTO had initiated an Own Motion investigation against the failure of FBR to bring into the tax net the unregistered buyers of sugar from M/s Naudero Sugar Mills (Pvt) Ltd.
READ MORE: President Alvi directs bank to refund unfair recovery
The FTO observed that non-NTN holders had been buying huge quantities of sugar from sugar mills and their data was fully accessible by the FBR but this huge potential for tax collection remained unutilized.
In its report, the FTO highlighted that during the last four years sugar worth Rs 2.7 billion was supplied by the said mills to various unregistered buyers, only three buyers held NTN, and FBR had not paid due attention to broadening the tax base.
It further observed that this low hanging fruit had not yet been harvested and despite making huge monetary transactions, unregistered buyers of sugar remained outside the tax net.
READ MORE: President Alvi rejects FBR plea in maladministration cases
The FTO underscored that unregistered persons were easily identifiable because sugar mills were required to maintain records of supplies made during the tax period and issue tax invoices indicating names, addresses, description, quantity, values of goods, CNIC or NTN of persons to whom the supplies were made under the Sales Tax Act of 1990.
Based on these findings, FTO had directed the Chief Commissioner, Large Taxpayers’ Office, Karachi to enforce compliance after obtaining data of unregistered persons from the sugar mills.
The FBR filed a representation with the President against this order of FTO. President Dr Arif Alvi disposed of the matter with the observations that FBR’s field formations were not vigilant in collecting information related to unregistered buyers and were content with just whatever was being submitted in the monthly sales tax returns of mills.
READ MORE: Dr. Alvi orders action over misconduct with 82-year taxpayer
He regretted that the data of unregistered buyers was not being examined for the purpose of broadening the tax net. He noted that FBR’s field formations held jurisdiction over sugar mills and could secure the complete particulars of all buyers by proper and timely analysis of withholding statements.
Serious negligence and inefficiency on part of the field formations of FBR in the discharge of its duties was tantamount to maladministration, he added.
He observed that FTO’s recommendations were only a reiteration of the duty of FBR to strictly deal with unregistered sugar dealers to bring them under the tax net.
READ MORE: Dr. Alvi rejects banker’s plea in woman harassment case
He directed that FTO’s recommendations must be applied to the entire sugar sector to increase compliance with taxes and to enrol those who were escaping the prime national responsibility of paying taxes.
The President disposed of FBR’s representation with the direction to submit a comprehensive implementation report to FTO within 60 days.
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IR officers’ bid to deny tax refund adjustment criticized
Karachi Tax Bar Association (KTBA) on Monday has strongly criticized the bid of officers of Inland Revenue (IR) to reject adjustment of tax refund against liability.
The tax bar in a letter to the chairman of the Federal Board of Revenue informed that a large number of notices for tax returns filed for tax year 2021 were issued by the IR officers for rectification under Section 221 of Income Tax Ordinance, 2021.
READ MORE: KTBA recommends separate tax fraud proceedings
The tax bar informed that the legal position of provisions of Section 221 of the Ordinance, which empower a Commissioner to amend any order passed by him.
The issue of adjustment of previous years refund, however, does not come within the ambit or scope of rectification of mistake as provided for under Section 221 of the Ordinance. Section 221 of the Ordinance, states that a Commissioner may rectify “ANY ORDER PASSED BY HIM”, while in the instant case, no formal order, using application of mind, has been passed by the learned Commissioner Inland Revenue himself or by any of his learned predecessor. “It would not be out of context to elaborate here that clause (b) of sub-section (1) of section 120 of the Ordinance provides that a return filed to be taken as an assessment order passed by the Commissioner Inland Revenue.”
READ MORE: FBR urged to remove irritants in sales tax refund
The purpose of this letter is to apprise your office, of the illegality, which has been allowed to permeate through the whole process, the KTBA said.
It is by virtue of this deeming provision and the fiction of law, the return filed is treated as an assessment order, which however, by any stretch of imagination, cannot be treated as formal assessment order, which would have factually been passed by a CIR.
It further said it would equally be critical to highlight here that refund becomes due when the assessment order under Section 120 of the Ordinance come into existence and thereafter the refunds of previous years can very much be adjusted against the liability of current year. This legal notion has been endorsed by the judgements of the superior courts as well.
READ MORE: Unified sales tax law for all tax authorities sought
It is a trite law, which the superior courts have held time and again that only those mistakes, of either fact or law, pointed out in the Assessment Order will be treated as mistake liable for rectification for which no further argument or further investigation is required. In case of any controversy, whether factual or legal, exists or where are more than one opinion on the matter, the same does not fit squarely in the definition of “Mistake” liable for rectification as enunciated by courts.
Therefore once after it has been cleared that a Deemed Order cannot be rectified and then the Courts and consequently the Board itself has allowed to adjust the refunds, the mistake pointed in the Notices cannot be called as A “Mistake”. A plain perusal of notices reveals that the Commissioners have embarked upon verification and further investigation or to put in other words necessitates verification and further investigation before any conclusion is drawn. It cannot simply be called a case of Rectification of Mistake. Hence, it falls out of the scope of rectification of mistake given under section 221 of the Ordinance.
READ MORE: Proposals for recovery of sales tax on bad debts
At this juncture we feel it imperative to reposition the stance of our Tax BAR that we completely endorse that any short fall of payment of tax is ought to be made at full and where there has been proved any erroneous adjustment of tax refunds, the same should very much be recovered and paid without any resistance, but only and strictly according to the given and due process of law.
Be that as it may, if there was any shortfall in the return including a short payment of tax and/or incorrect adjustment of tax or incorrect adjustment previous year refund, the correct course of action should have been issuance of notice under sub-section (3) of section 120 of the Ordinance, which provides that where a return is not complete, the CIR shall issue a notice to the taxpayer informing him of the deficiencies in the return of income including short payment of tax payable and asking him to provide such information.
READ MORE: Proposal for withholding on purchases from unregistered
“You would appreciate that where no such notice has been issued in the first place, the Tax Return filed will be taken to be complete and without any deficiencies and, therefore, any assumption of jurisdiction under Section 221 of the Ordinance would fundamentally be incorrect.”Based on above, it should be abundantly clear that the current exercise is without due sanction of law and against the reported judgments of Superior Courts.
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FBR proposed to exempt withholding tax on telecom services
KARACHI: The Federal Board of Revenue (FBR) has been recommended to exempt withholding tax on telecom services to facilitate a large number of population of the country living below poverty line.
Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2022/2023 urged the FBR to rationalize withholding tax on telecom services.
“Rate of withholding tax on subscribers should be abolished completely as majority of the subscriber’s base falls below the taxable limit or the withholding tax reduction made through Finance Act, 2021 should be reinstated i.e. 8 per cent effective Fiscal Year 2023.”
READ MORE: Zero rate tax demanded for pharmaceutical API imports
Advance tax on telecom services was reduced via Finance Act, 2021 from 12.5 per cent to 10 per cent for FY 2021 and to 8 per cent for future years. However, through Finance (supplementary) Act, 2021 the rate of withholding tax increased from 10 per cent to 15 per cent.
Increased tax hampers the affordability of mobile service which is a critical service for entire population and more than 70 per cent population of Pakistan lives below poverty line. Telecom service is also critical for economic growth of a country.
In addition to that Pakistan has the widest gender gap in mobile ownership (34 per cent) and mobile internet use (43 per cent) as compared to its regional peers. Sector-specific taxes increased cost of mobile services which lays a strong impact on the poorest consumers especially women, lessening their ability to become mobile broadband subscribers.
Since more than 70 per cent population lives below the poverty line and the percentage of return filers is also nominal so the implementation of withholding tax to entire subscriber’s base is not logical. Further, the reduction in withholding tax will also promote the affordability of internet and data services to the low-income group people.
READ MORE: OICCI recommends tax amendment for FMCG
The OICCI also pointed out that all four provinces and federal have introduced distinct sales/service tax laws in their respective jurisdictions, with some of the clauses in clear conflict with each other resulting in undue hardships coupled with harassment by the federal and provincial revenue collectors demanding tax on the same transactions tantamount to double taxation. This situation is highly undesirable and creates complexities for taxpayers leading to unnecessary litigations.
Furthermore, there should be a single sales tax rate across all jurisdictions to remove the anomalies and undue hardships being faced by telecom sector in terms of compliances in different jurisdictions, thus, to provide ease of doing business. Telecom services should not be discriminated by being subjected to higher rates of tax, sales tax rates should be in line with other services.
“There should be single sales tax rate across all jurisdictions to remove the anomalies and undue hardships being faced by telecom sector in terms of compliances in different jurisdictions, thus, to provide ease of doing business. Further, in line with International and Regional practices a uniform service tax law may be drafted and agreed upon by the tax authorities of the Provinces and Federal, for implementation in their respective jurisdiction,” it recommended.
READ MORE: FBR urged to review minimum tax for OMCs, refineries
The chamber highlighted advance tax on auction/renewal of licenses, and said this is tax is liable to be collected on “Sale by Auction” of property. Grant of spectrum is not a sale of property.
Firstly, spectrum is not a property, it does not have any physical form as it cannot be seen or is not capable of being in physical possession.
Secondly spectrum is not “sold” only a right to use spectrum for a specified term is granted to telecom operators and licenses are granted for a specific term only.
Therefore, spectrum is never sold to telecom operators, they are only granted licenses for a specified term. While the term “sale” means that the absolute ownership is transferred permanently to the buyer with a right to transfer ownership to another person which is not the case.
Therefore, this tax should be abolished being irrational. Further, Telecom sector has already paid huge amount of advance taxes much beyond its tax liability. Secondly, no such advance tax is collected on grant of other licenses like oil exploration.
READ MORE: Mismatch identified in GST rates on supply, sales by IPPs
“This tax should be removed being irrational and burdensome on CMOs,” it recommended.
As large utility providers, Cellular Mobile Operators’ (CMO) are subject to deduction/collection of withholding of income tax on large number of transactions e.g. electricity bills of cell sites where are thousands in numbers, thus increased the cost and complexity of tax compliance and an additional administrative burden for the telecom sector and negatively impacts the overall business environment.
Furthermore, it is also not possible Tax Authorities to verify the claim of advance tax paid on electricity bills being a very laborious task. Similar exemptions have already been granted to banking sector to curtail the administrative cost.
Exemption should be given to the telecom sector from deduction or collection of all types of withholding taxes, like banking and oil sector. There will be no loss of revenue to the exchequer as the tax collection mechanism will be simplified in terms of real time payment of advance tax Under Section 147 of Income Tax Ordinance, 2001 on quarterly basis.
Furthermore, this measure will also make the tax claims and its verification mechanism more transparent with minimum operational hassles as maintaining the thousands of records especially for advance tax on utility bills and imports is itself a very cumbersome procedure.
The OICCI pointed out custom duty on import of batteries and said reduce the custom duty rates for batteries (8507.6000 & 8507.2000) from 11 per cent and 20 per cent to 5 per cent and abolish Additional Custom duty (2 per cent & 6 per cent) and regulatory duty (5 per cent), as these batteries are used with solar and power systems and are core asset for telecom infrastructure services provider. Reduction in duties will further encourage alternate energy resources for Telecom sector e.g. Solar etc.
READ MORE: Tax rate rationalization proposed for exploration, production companies
“Reduce the custom duty rates for batteries (8507.6000) to 5 per cent and abolish Additional Custom duty and Regulatory duty, as these batteries are used with solar and power systems and are core asset for telecom infrastructure services provider,” it recommended. Reduction in duties will further encourage alternate energy resources for Telecom sector e.g. Solar etc., it added
The chamber said the Finance Act, 2018 inserted a new clause in sub-section (3) of section 101 of the ITO’2001, under which Pakistan source income from business derived by a non-resident person, would include income on account of import of goods, whether or not the title to the goods passes outside Pakistan, if the import is part of an overall arrangement for the supply of goods, installation, construction, assembly, commission, guarantees or supervisory activities and all or principal activities are undertaken or performed either by the associates of the person supplying the goods or its permanent establishment, whether or not the goods are imported in the name of the person, associate of the person or any other person.
Keeping in view the amendment in section 101(3), corresponding amendments have also been made in sub-section (7) of section 152, whereby a taxpayer would invariably now be required to obtain an order of the Commissioner Inland Revenue u/s 152(5A) of the ITO’2001 for making payment on account of such transaction without deduction of tax or at lower rate.
READ MORE: FBR urged to restore sales tax exemption on LED lights
“Since the title of goods passes outside Pakistan, hence deduction of withholding tax at much higher rate i.e. 20 per cent will increase the cost of the equipment as the supplier will jack up the prices by including the withholding tax factor, resultantly, telecom operators will have to bear the extra cost which will halt the expansion of the telecom services, especially in far flung areas where the cost of doing business is already on much higher side,” it recommended.
The telecom equipment constitutes depreciable assets under the Income Tax Ordinance, 2001 which are used by the telecom operators for provision of telecom services which are taxed as an income from business under the national tax regime. Currently, the telecom equipment is not properly classified in Twelfth schedule which is a cause of discrimination between telecom sector and others.
It recommended that telecom equipment should be classified under Part I of Twelfth Schedule of ITO, 2001 to equate the telecom sector with other industries as the telecom equipment is not imported for resale purposes.
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FBR launches online tax monitoring of steel products
ISLAMABAD: The Federal Board of Revenue (FBR) has launched online monitoring of sales and purchases by steel sector.
The FBR issued draft amendment to Sales Tax Rules, 2006 through SRO 541(I)/2022 dated April 22, 2022.
READ MORE: FBR forms committee to resolve pharmaceutical tax issues
The tax body proposed amendment to Rule 150FZ for electronic monitoring, tracking and tracing of production, import and supply of the goods.
The FBR included the steel products in the list of online. At present products of six sectors already in the list, which are: tobacco products, beverages, sugar, fertilizer, cement and petroleum products.
The FBR said that all the specified goods shall be monitored, tracked and traced in the manner provided in this Chapter and any other instructions, procedures and orders issued by the FBR.
READ MORE: FBR allocates quota for industries in erstwhile FATA/PATA
Further that the specified goods, if brought from non-tariff area as defined in the Federal Excise Act, 2005, shall be treated as imported goods for the purposes of this Chapter.
The Rule 150ZH of the this chapter stated that goods to be affixed with tax stamps, banderoles, stickers, labels, barcodes, etc.–
(1)On every package, including a tin, container or bottle, of the specified goods whether manufactured or imported shall be affixed or printed a tax stamp, banderole, sticker, label, barcode, unique identification marking, code], etc., hereinafter referred to as tax stamp, in the manner prescribed under this Chapter:
Provided that in respect of such specified goods which are exempt or meant for export tax stamps whatever the case may be shall be clearly, legibly and indelibly marked as ‘Exempt Goods’ or ‘For Export’, as the case may be.
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(2) Every tax stamp required to be affixed under these rules shall bear such security features as are approved by the Board in order to–
(a) prevent counterfeiting;
(b) enable accounting of production of the specified goods; and
(c) enable any person in the supply chain or an officer authorized by the Commissioner Inland Revenue to authenticate such tax stamp.
(3) The system for imported goods shall be installed in a designated area at the port of importation or a customs bonded warehouse, as the case may be, declared by the importer for this purpose, or any other place approved by the Project Director:
READ MORE: FBR takes measures to facilitate taxpayers in 1HFY22
Provided that the Board may allow tax stamps to be affixed on any specified goods to be imported in a production facility in the exporting country, subject to such conditions as the Board may specify.
(4) No person engaged in manufacturing, sale or purchase or handling of specified goods shall remove or tamper with the tax stamp affixed thereon until these are sold to the final consumer.
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Zero rate tax demanded for pharmaceutical API imports
KARACHI: The Federal Board of Revenue (FBR) has been urged to zero rate sales tax on import of pharmaceutical API and simplification of sales tax refunds.
The Overseas Investors Chamber of Commerce and Industry (OICCI) in proposals for budget 2022/2023, informed the tax authorities that the above sales tax amendment enforced through the Finance (Supplementary) Bill, 2022 in January 2022 will result in huge sales tax refunds which will impact cashflows of pharmaceutical players due to delays in refunds processing by the government authorities.
READ MORE: OICCI recommends tax amendment for FMCG
The OICCI recommended:
i. Pharma API imports should also be ‘zero rated’, to avoid generation of huge Sales tax refunds
ii. Sales Tax refund adjustment should also be allowed against Income Tax liability – Section 10 read with Rule 26 & 28.
iii. The submission of Annexure H as part of the Sales Tax Return should be discontinued since these details are redundant and are utilized as a tool to delay refund processing – Rule 28. Tax Authorities should simplify the documentation requirement for verification of Input Sales Tax payment by limiting it to Goods Declaration, Invoice and Bank Statement as adequate supports.
READ MORE: FBR urged to review minimum tax for OMCs, refineries
The chamber highlighted input sales tax on opening stock of pharmaceutical products and recommended that pharmaceutical products have been zero rated since January 16, 2022. As per FBR release, refunds against input sales tax will be allowed on consumption basis. However, there are no rules promulgated till to date for claiming the input sales tax on opening stock of pharmaceutical goods.
The OICCI pointed out Section 148 of Income Tax Ordinance, 2001 – Withdrawal of withholding income tax for import of drugs pertaining to Rare & Chronic diseases including Multiple Sclerosis, Oncology, Hematology, Eye Blindness, Diabetes, Hypertension and Heart Failure.
READ MORE: Mismatch identified in GST rates on supply, sales by IPPs
It said oncology medicines worth more than tens of millions are being given to deserving patients every year by selected pharmaceutical companies under Patient Assistance Programs (PAP). Advance income tax at 5.5 per cent is currently being charged on import of such medicines whereas no revenue is generated from such free of cost issuance.
The OICCI recommended:
i. Provide exemption from the operation of section 148 to the ITO 2001 on import of pharmaceutical medicines for above mentioned disease areas, through addition of a new clause in the Second Schedule to the ITO 2001.
ii. Allow tax exemptions/ tax credits where companies are offering free benefits to the society through Patient Access programs.
READ MORE: Tax rate rationalization proposed for exploration, production companies
It further highlighted Section 236G and 236H of Income Tax Ordinance 2001 – Collection of Advance Income Tax on sale of pharmaceutical products to distributors, dealers, wholesalers and retailers.
The chamber said it is not clear whether advance tax should be collected on gross sales value or sales value net of discount. A few clarifications issued by regional tax offices require collection of advance tax on sale to doctors and hospital pharmacies. On the other hand, doctors claim exemption being final consumers and state-owned hospitals claim exemption under section 236O of ITO 2001.
Therefore it recommended the FBR should issue clarification in terms of taxable value and specific exemptions from operation of section 236G & 236H to the above extent.
The OICCI also sought clarification in definition under Section 21(O) of Income Tax Ordinance, 2001. It said the current law restricts the admissibility of sales promotion expenditure incurred by pharmaceutical companies up to 10 per cent of their turnover. However, the tax authorities tend to treat the entire marketing expenditure as advertisement, sales promotion and publicity expenditure. Similarly, it is also not clear whether the turnover means “gross sales” or “net sales”.
READ MORE: FBR urged to restore sales tax exemption on LED lights
Therefore, it recommended a new circular explaining the definition of advertisement, sales promotion & publicity as well as turnover should be issued.
It said reduced rate of advance tax on import of pharmaceutical products not manufactured in Pakistan. The facility of reduced rate of advance tax on import is conditional on obtaining certificate from DRAP which adds complexity to the process.
The OICCI recommended one time list of registered drugs not manufactured in Pakistan should be obtained by FBR from DRAP directly and the requirement for companies to obtain certificate from DRAP be waived off by FBR.
The chamber sought exemption of medical equipment imported and supplied and said the said exemption has been deleted vide Finance Supplementary Act 2022, should be re-inserted.
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OICCI recommends tax amendment for FMCG
KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended amendments in tax laws related to taxpayers engaged in business of fast moving consumer goods (FMCG).
The OICCI in its proposals for budget 2022/2023 presented to Federal Board of Revenue (FBR) recommended certain changes for taxpayers engaged in business of FMCG.
READ MORE: FBR urged to review minimum tax for OMCs, refineries
The chamber highlighted issue of imported items in Third schedule of Sales Tax Act, 1990.
It recommended: The words “in retail packing” to be mentioned with tea (serial no. 14) in order to clarify that sales tax at retail price is only applicable in case of imported finished tea in retail packing.
It further highlighted high withholding taxes on milk commission agents and recommended to exempt ‘milk’ from withholding tax whether it is purchased directly from the farmer or through commission agent.
The OICCI pointed out duty on essential diary and juice raw material and recommended:
READ MORE: Mismatch identified in GST rates on supply, sales by IPPs
i. Duties should be withdrawn, or its rate should be minimized on import of raw/packing material for dairy and Juice sector which are not produced locally in sufficient quantity.
ii. Alternatively, duties can be minimized by introduction of quota system by placement of these items under Part III, Fifth schedule of the Customs Act, 1969. Quota can be restricted for registered manufacturers of dairy products only and can be allowed as a proportion of fresh milk purchases of those manufacturers.
The chamber highlighted First Schedule of Federal Excise Duty 2005 and Third Schedule of Sales Tax Act, 1990.
It recommended:
i. Serial No. 1 and 3 of Third Schedule of the Sales Tax Act, 1990 should be deleted.
READ MORE: Tax rate rationalization proposed for exploration, production companies
ii. Whereas Serial no. 4, 5 & 6 of First Schedule of Federal Excise Act, 2005 should be reduced from 13% to 10%, to provide level playing field to the Beverage Industry as given to other food industries.
The OICCI further recommended that the Federal Ministry of Health has been proposing health surcharge on sugary drinks. However, the Health Levy already exists in the form of FED. Hence no additional Health Levy should be considered. If a Health Levy is to be considered then FED can be abolished and a Health Levy in the form of a FED can be re-imposed, in consultation with the aerated waters industry.
READ MORE: FBR urged to restore sales tax exemption on LED lights