The Federal Board of Revenue (FBR) has unveiled a new module within the WeBOC (Web-Based One Customs) system. This online Customs clearance system is designed to specifically cater to the needs of small and medium enterprises (SMEs), aiming to streamline their operations in the realm of international trade.
(more…)Tag: Federal Board of Revenue
The Federal Board of Revenue is Pakistan’s apex tax agency, overseeing tax collection and policies. Pakistan Revenue is committed to providing timely updates on the Federal Board of Revenue to its readers.
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Sales Tax Act, 1990 updated till June 30, 2021
Following is the complete sections of the Sales Tax Act, 1990 updated up to June 30, 2001 after incorporating changes brought through Finance Act, 2001.
Section 2: Definitions of Sales Tax Act, 1990
Section 3: Chargeability of sales tax at 17% on supply of goods
Section 3B: Overcharging of tax to be deposited in national kitty
Section 4: Zero rated tax under sales tax law
Section 5: Applicable tax rates to be charged under sales tax law
Section 6: Sales Tax Law explains time of payment
Section 7: Determination of tax liability for supplies
Section 7A: Levy and collection of tax on goods
Section 8: Tax credit on certain supplies not allowed
Section 8A: Joint, several liability in tax default
Section 8B: Provision for input tax adjustment
Section 9: Issuance of debit, credit notes on tax adjustment
Section 10: Refund of input
Section 11: Assessment and recovery of tax not levied
Section 11A: Short paid amounts recoverable without notice
Section 11B; Assessment giving effect to an order
Section 11C: Powers of tax authorities to modify orders
Section 13: Sales Tax exemption
Section 14: Sales Tax registration for making supplies
Section 21: De-registration under Sales Tax Act
Section 21A: FBR’s power to issue sales tax Active Taxpayers List
Section 22: Record keeping under sales tax act
Section 23: Issuing tax invoice must for supplier
Section 24: Taxpayers require to retain record of past six years
Section 25: Commissioner empowered to access sales record
Section 25A: IR officer authorized to obtain sample for sales tax
Section 25AA: IR officers may determine fair price in transactions
Section 26: Filing sales tax returns mandatory for registered persons
Section 27, 28 and 29: Filing of special, final returns under Sales Tax Act
Section 30: Appointment of FBR officers for exercising sales tax law
Section 30A: Intelligence officers empowered to exercise sales tax law
Section 30B, 30C, 30D, 30DD, 30DDD: Formation of Directorates under Sales Tax Act
Section 30E: Powers and functions of directorates
Section 31 and 32: Powers, delegation of powers by Inland Revenue officials
Section 32A: FBR authorized to appoint special panels for tax audit
Section 33: Penalty for failure in filing sales tax return
Section 33(2): Penalty for non issuance of sales tax invoice
Section 33(3): Penalty for issuing unauthorized sales tax invoice
Section 33(4): Penalty for failure to notify changes in registration details
Section 33(5): Three-year jail for defaulting sales tax payment
Section 33(6): Penalty for repeated miscalculation in sales tax return
Section 33(7): Imprisonment for selling goods without tax registration
Section 33(8): Penalty for failure to maintain sales tax record
Section 33(9): Up to Rs50,000 penalty for obstructing access to records
Section 33(10): Taxpayers to pay penalty on failure to provide information
section 33(11): Three-year jail for making false statement under tax law
Section 33(12): Imprisonment of 5yrs for denying access to FBR officials
Section 33(13): Imprisonment of five years for fraud under sales tax
Section 33(14): Penalty for violating embargo placed on goods removal
Section 33(15-21): Penalties under Section 33 (15-21) of Sales Tax Act
Section 33(22): Imprisonment for unauthorized access to tax system
Section 33(23): Penalty for selling cigarettes with counterfeit tax stamps
Section 33(24-25): Imprisonment for retailers on tax integration failure
Section 33(26): Penalty on failure to print retail price
Section 33(27): Penalty for bringing goods illegally into Pakistan
Section 33(28): Penalty for denying information sharing
Section 33A: Tax officials may face criminal proceedings under ST Act
Section 34: Default surcharge for failure in timely tax payment
Section 34A: Exemption from penalty and default surcharge
Section 37: Power to order persons to give evidence and produce documents
Section 37A: Commissioner having power to arrest and prosecute
Section 37B: Procedure for IR officers on arrest of person
Section 37C: Special judges may be appointed under Sales Tax Act
Section 37D: Cognizance of offences by special judges
Section 37E: Special Judge to have exclusive jurisdiction
Section 37F: Provisions of code of Criminal Procedure 1898, to apply
Section 37G and 37H: Sales tax cases may be transferred from special court
Section 37I: Tax authorities may appeal against special court order
Section 38: Tax officials authorized to access taxpayers’ premises
Section 38A: IR officials empowered to call for record
Section 38B: Taxpayers require to produce sales records to IR office
Section 40: IR officers empowered for searches under warrant
Section 40B: Deploying IR officers at taxpayers’ premises
Section 40C: IR officers empowered electronic monitoring of taxpayers
Section 40D: Supply of goods from tax exempt areas
Section 40E: Manufacturers require to obtain brand license
Section 45A: Power of the Board and Commissioner to call for records
Section 45B: Filing appeal under Sales Tax Act
Section 46: Filing appeal before Appellate Tribunal IR
Section 47: Making reference against ATIR decision
Section 47A; How to get relief through alternative dispute resolution
Section 48: Recovery of arrears under sales tax law
Section 49: Ownership transfer or termination of taxable activity
section 49A; Commissioner’s power to notify liquidator of company
Section 50: FBR’s powers to make sales tax rules
Section 50A: FBR may prescribe rules for using computerized system
Section 50B: FBR may implement electronic scrutiny, intimation
Section 51: No bar or suit against order passed in good faith
Section 52: Appearance of authorized representative
Section 52A: Persons may be appointed for filing e-return
Section 53: Recovery of tax from estate of deceased person
Section 55: FBR may issue instructions under Sales Tax Act
Section 56: Service of notices, orders under sales tax act
Section 56A: Agreement for the exchange of information
Section 56AB: Real-time access to information and databases
Section 56B: Information exchange under STA should be confidential
Section 56C: Prize scheme on invoices issued by retailers
Section 57: Rectification of mistake in order made by IR officer
Section 58: Tax liability of winding company
Section 58A: Taxpayers allowed to nominate representatives
Section 58B: Liability and obligations of representatives
Section 59: Tax paid on stocks acquired before registration
Section 60: Powers to deliver certain goods without payment of tax
Section 61: Repayment of tax in certain cases
Section 61A: Repayment of tax to registered persons
Section 62: Drawback allowable on re-export
Section 63: Drawback into use between import and re-export
Section 64: FBR may prohibit drawback in case of foreign territory
Section 65: Exemption of tax not or short levied
Section 66: Refund to be claimed within one year
Section 67: FBR to pay additional amount on delayed sales tax refund
Section 67A: Provision to pay sales tax refunds through bonds
Section 68: Liability of the registered person for the acts of his agent
Section 69: Taxpayers can obtain duplicate sales tax documents
Section 70: Computation of limitation period
Section 71: FBR may issue special procedure under sales tax law
Section 72: Obeying FBR’s orders made mandatory
Section 72A: Section 72A of Sales Tax Act
Section 72B: FBR’s computerized selection for audit
Section 72C and 72D: Reward to IR officials, whistleblowers on tax detection
Section 73: Cash transactions above Rs50,000 not admissible
Disclaimer: PkRevenue.com team has endeavored to provide the actual text of the Sales Tax Act, 1990 updated through Finance Act, 2021. However, PkRevenue.com team is not responsible for any error.
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FBR promotes 42 IR officials to BS-16
ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday promoted 42 stenotypists (BS-14) to the post of Assistant Private Secretary (BS-16) in the Inland Revenue Department with immediate effect.
Following are the names of officials and place of present posting:
01. Muhammad Abid, Regional Tax Office 9RTO) Islamabad (Presently posted with CTO, Islamabad).
02. Iftiaq Ahmed, Directorate General Internal Audit, Islamabad
03. Muhammad Tahir, Directorate General Internal Audit, Islamabad
04. Shahid Masood Sheikh, RTO Islamabad (Presently posted with CTO Islamabad)
05. Muhammad Saeed Ahmed, RTO Lahore
06. Shakeel Nagra, RTO Lahore
07. Tasneem Raza, Corporate Tax Office (CTO) Lahore
08. Sufi Irfan Nazar, CTO Lahore
09. Syed Ilyas Ahmed, RTO Lahore
10. Zia ud Din, Large Taxpayers Office (LTO) Lahore
11. Kazam Ali, Directorate of Intelligence and Investigation (IR) Lahore
12. Muhammad Arif Iqbal, Directorate of Intelligence and Investigation (IR) Lahore
13. Fazal Mahmood, CTO Lahore
14. Farrukh Iqbal, RTO-I Lahore
15. Hisaab Khan, RTO-II Lahore
16. Qaiser Raza Hashmi, RTO-II Lahore
17. Syed Pervez Ahmed, LTO Karachi
18.Muhammad Naeem, Medium Tax Office (MTO) Karachi
19. Imam Ali Sial, CTO Karachi
20. Muhammad Ayub, RTO-I Karachi
21. Muhammad Tahir Mushtaq, CTO Karachi (Presently posted with CIR Appeals V Karachi)
22. Saeed Ahmed, MTO Karachi
23. Abdul Saleem Khan, MTO Karachi
24. Hameed Ahmed, LTO Karachi
25. Ahmed Ali, CTO Karachi
26. Iftikhar Ali S/o Intizar Ali, RTO-I Karachi
27. Jabbar Hussain, RTO Rawalpindi
28. Zulfiqar Ali, RTO Peshawar
29. Ms. Aftab Khattak, RTO Peshawar
30. Muhammad Yasin Abbasi, RTO Sukkur
31. Abdul Fatah Mughal, RTO Sukkur
32. Masood Ahmed, RTO Sargodha
33. Muhammad Zulqarnain, RTO Sialkot
34. Muhammad Yousaf, RTO Sialkot
35. Muhammad Abid, RTO Hyderabad
36. Malik Shahid Iqbal, RTO Multan
37. Syed Khawar Hussain Zaidi, RTO Multan
38. Imran Shams, RTO Multan
39. Muhammad Kaleem Ahmed, RTO Bhawalpur (Presently posted with CIR Appeals Bhawalpur)
40. Muhammad Nawaz, RTO Faisalabad
41. Muhammad Abid Mukhtar, RTO Faisalabad
42. Mukhtar Ahmed, RTO Faisalabad
The FBR said that promotion will take effect from the date of their joining in their present places of posting, subject to the condition that no disciplinary / inquiry proceedings are pending against them.
The FBR further said that the officials will be on probation for a period of one year, extendable for further period not exceeding one year, provided that if no order is issued by the day following the termination of probationary period, the appointment shall be deemed to be held until further orders.
The officials who are already drawing performance allowance will continue to draw the same on their promotion, the FBR added.
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FBR bans sugar bags movement without tax stamps
ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday has taken major decision to ban removal of sugar bags from factory premises without affixation of tax stamp.
The condition has been imposed to implement track and trace system for monitoring of production and supply of the commodity for the crushing season 2021-2022.
In order to implement the decision the FBR issued Sales Tax General Order (STGO) No. 05 on November 11, 2021. “No sugar bags shall be allowed to be removed from a production site, factor premises or manufacturing plant without affixation of tax stamps/Unique Identification Marking (UIMs) with effect from November 11, 2021, which are to be obtained/procured from FBR’s Licensee M/s. AJCL/MITAS/Authentix Consortium,” it said.
The purpose of imposing the condition is to launch electronic monitoring of the commodity as the sugar crushing for the season 2021-2022 is about to start.
Sources in the FBR said that the track and trace system was not fully installed at sugar mills. There are still few sugar mills that were in process to install the electronic monitoring system.
In the meantime, the FBR may also deploy tax officials at the sugar mills by invoking Section 40 B of the Sales Tax Act, 1990 for parallel monitoring.
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Petrol tax rate cut by 73% to lower global oil price impact
ISLAMABAD: The federal government has announced a reduction of 73 per cent in sales tax rate on supply of petrol in order lower the impact of high global oil prices.
In this regard the Federal Board of Revenue (FBR) issued a notification i.e. SRO 1450(I)/2021 to reduce the sales tax rate on petrol and High Speed Diesel (HSD).
According to the notification the rate of sales tax has been reduced to 1.43 per cent from the rate of 6.84 per cent. The FBR issued previous notification SRO 1327(I)/2021 on October 7, 2021.
The revenue body also reduced the rate of sales tax on High Speed Diesel (HSD) to 6.75 per cent from 10.32 per cent.
However, the sales tax rates on kerosene and Light Diesel Oil (LDO) have been kept unchanged at 6.70 per cent and 0.20 per cent, respectively.
It is worth mentioning here that the normal rate of sales tax is 17 per cent. The present government has already reduced the rate of sales tax on petroleum products to the lowest level to minimize the impact of sharp rise in global oil prices.
The government on November 04, 2021 notified increased in petroleum prices, which are now all time high.
The petrol was fixed at Rs145.82 per litre instead of Rs137.79, showing an increase of Rs8.03. The price has been increased from previous high of Rs137.79.
Similarly, the price of high speed diesel has been increased by Rs8.14 to Rs142.62 from Rs134.48.
The rate of kerosene oil has been increased by 6.27 per liter to Rs116.53 from Rs110.26. Likewise, the price of light diesel oil has been increased by Rs5.72 per liter to Rs114.07 from Rs108.35.
A notification issued by the Finance Division stated that on November 01, 2021, the prime minister had not agreed with the proposals worked out by the Oil and Gas Regulatory Authority (OGRA) and the finance division directed to maintain the prices as notified on October 16, 2021.
It is pertinent to mention that maintaining the October 16, 2021 petroleum prices had some underlying concerns for cash flow issues due to short recovery of the cost, according to the statement.
It is important to note that in the previous petroleum prices, already a significant relief was provided to the consumers. The government is cognizant of its responsibility to provide maximum relief to the consumers.
“This has dented the petroleum levy budget of Rs152.5 billion during July – September, 2021 as compared to Rs20 billion realized only,” it said.
Foregoing in view, prices of petroleum products have been increased partially as compared to the prices being worked out by the OGRA. If the government had accepted OGRA’s recommendations, the new prices would have been much higher.
Infact, the government has absorbed the bulk of the pressure after making adjustment after making adjustment in the sales tax and petroleum levy. The collection of petroleum levy is far short of its fixed target for the first quarter of the fiscal year 2021/2022, it added.
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Rules for computing capital gains on listed securities
Eight Schedule of Income Tax Ordinance, 2001 has explained the rules for computing capital gains on listed securities.
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LTO Karachi, PBC discuss tax issues
KARACHI: A team of senior officials from Large Taxpayers Office (LTO) Karachi visited Pakistan Business Council (PBC) on Wednesday.
Shahid Iqbal Baloch, Chief Commissioner Inland Revenue, Large Taxpayers Office (LTO) Karachi headed the team of tax officials. Kazi Hifzur Rehman, Commissioner Inland Revenue, Audit Zone-ll, LTO, Karachi also part of the team.
LTO Karachi is the major revenue collecting arm of the Federal Board of Revenue (FBR).
CEO PBC Ehsan Malik, Director Research PBC Samir S Amir and other member taxpayers of PBC attended the meeting.
The chief commissioner highlighted the role of LTO, Karachi in collection of all domestic taxes particularly with reference to members of the PBC, who are the highest taxpayers of the country.
The members of the Pakistan Business Council shared their views and issues of taxation with the Chief Commissioner-IR, LTO, Karachi who also ensured their timely completion and highlighted that the team of officers posted at LTO, Karachi are thorough professionals and it was reiterated that all their pending issues related to taxes shall be completed as per law accordingly.
Aman Ghanchi, Company Secretary, Unilever Pakistan Limited proposed that to better understand various business cycles and processes, workshops may be arranged so that the department would better understand the trade of the taxpayers for effective implementation of the policies of the Board. That would also help improve the taxation within the country.
Ehsan Malik, CEO, Pakistan Business Council also highlighted the exchange of industry notes by virtue of which old settled issues would not be repeated and resultantly there would be less pressure on the appellate side and precious time of the tax machinery as well as the businessmen would be saved.
The members of the PBC appreciated the efforts of FBR in effective implementation of the policies of Government of Pakistan in a very effective and efficient manner.
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FBR’s power to issue sales tax ATL
Section 21A of the Sales Tax Act, 1990 grants the Federal Board of Revenue (FBR) the authority to compile and maintain an Active Taxpayers List (ATL).
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Income tax computation of banking companies
Seventh Schedule of Income Tax Ordinance, 2001 has explained the income tax computation of banking companies.
The Federal Board of Revenue (FBR) issued the Income Tax Ordinance, 2001 updated up to June 30, 2021. The Ordinance incorporated amendments brought through Finance Act, 2021.
Following is the text of Seventh Schedule of Income Tax Ordinance, 2001:
1. Subject to the provisions of Chapter VII and VIII, income, profits and gains of a banking company shall be taken to be the balance of the income from all sources before tax, disclosed in the annual accounts required to be furnished to the State Bank of Pakistan subject to the following provisions, namely:—
(a) Deduction shall be allowed in respect of depreciation, initial allowance and amortization under sections 22, 23 and 24 provided that accounting depreciation, initial allowance or amortization deduction shall be added to the income. No allowance or deduction under this rule shall be admissible on assets given on finance lease.
(b) Section 21, sub-section (8) of section 22 and Part III of Chapter IV shall, mutatis mutandis, for computation of a banking company apply.
(c) Provisions for advances and off balance sheet items shall be allowed upto a maximum of 1% of total advances; and provisions for advances and off-balance sheet items shall be allowed at 5% of total advances for consumers and small and medium enterprises (SMEs) (as defined under the State Bank Prudential Regulations) provided a certificate from the external auditor is furnished by the banking company to the effect that such provisions are based upon and are in line with the Prudential Regulations. Provisioning in excess of 1% of total advances for a banking company and 5% of total advances for consumers and small and medium enterprises (SMEs) would be allowed to be carried over to succeeding years:
Provided that if provisioning is less than 1% of advances, for a banking company then actual provisioning for the year shall be allowed:
Provided further that if provisioning is less than 5% of advances for consumers and small and medium enterprises (SMEs) then actual provisioning for the year shall be allowed and this provisioning shall be allowable from the first day of July, 2010.
Explanation.- For removal of doubt, it is clarified that-
(i) provision for advance and off balance sheet items allowed under this clause, at the rate of 1 percent or 5 percent, as the case may be, shall be exclusive of reversals of such provisions;
(ii) reversal of “bad debts” classified as “doubtful” or “loss” are taxable as the respective provisions have been allowed under this clause; and
(iii) with effect from tax year 2020 and onward; reversal of “bad debts” classified as “loss” are taxable as the respective provisions have been allowed under this clause.
(d) The amount of “bad debts” classified as “sub-standard” “or doubtful” under the Prudential Regulations issued by the State Bank of Pakistan shall not be allowed as expense.
(e) Where any addition made under sub-rule (d) is reclassified by the taxpayer under the Prudential Regulations issued by the SBP, ‘loss’, provision of sub-rule (c) shall mutatis mutandis apply in computing the provision for that tax year.
(f) Where any addition made under sub-rule (d) is reclassified by the taxpayer in a subsequent year as ‘recoverable’, a deduction shall be allowed in computing the income for that tax year.
(g) Adjustment made in the annual accounts, on account of application of international accounting standards 39 and 40 shall be excluded in arriving at taxable income.
Explanation.─ For removal of doubt, it is clarified that nothing in this clause shall be so construed as to allow a notional loss, or charge to tax any notional gain on any investment under any regulation or instruction unless all the events that determine such gain or loss have occurred and the gain or loss can be determined with reasonable accuracy.
(h) An adjustment shall be made for exclusions from income on account of paragraph (g) for determining the cost of related item in the financial statement in the year of disposal of such item or asset or the discharge of the liability, as the case may be.
Explanation.- For removal of doubt, it is clarified that nothing contained in this Schedule shall be so construed as to restrict power of Commissioner, while conducting audit of the income tax affairs under section 177, to call for record or such other information and documents as he may deem appropriate in order to examine accounts and records to conduct enquiry into expenditure, income, assets and liabilities of a banking company and all provisions of this Ordinance shall be applicable accordingly.
2. (i)Where a deduction is allowed for any expenditure (other than on account of charge for irrecoverable debt) in the manner referred to in rule 1 and the liability or a part of the liability to which the deduction relates is not paid within three years of the end of the tax year in which the deduction was allowed, the unpaid amount of the liability shall be chargeable to tax under the head “Income from Business” in the first tax year following the end of three years.
(ii) Where an unpaid liability is chargeable to tax as a result of the application of sub-rule (i) and such liability or a part thereof is subsequently paid, a deduction shall be allowed for the amount paid in the tax year in which the payment is made.
(iii) Loss on sale of shares of listed companies, disposed of within one year of the date of acquisition, shall be adjustable against business income of the tax year. Where such loss is not fully set off against business income during the tax year, it shall be carried forward to the following tax year and set off against capital gain only. No loss shall be carried forward for more than six years immediately succeeding the tax year for which the loss was first computed.
3. Treatment for shariah compliant banking.—
(1) Any special treatment for ‘Shariah Compliant Banking’ approved by the State Bank of Pakistan shall not be provided for any reduction or addition to income and tax liability for the said ‘Shariah Compliant Banking’ as computed in the manner laid down in this schedule.
(2) A statement, certified by the auditors of the bank, shall be attached to the return of income to disclose the comparative position of transaction as per Islamic mode of financing and as per normal accounting principles. Adjustment to the income of the company on this account shall be made according to the accounting income for purpose of this schedule.
4. Head office expenditure.—
(1) In case of foreign banks head office expenditure shall be allowed as deduction as per the following formula, namely:—
Head office expenditure = (A/B) XC
Where—
A. is the gross receipts of permanent establishment in Pakistan;
B. is the world gross receipts; and
C. is the total Head Office expenditure.
(2) The head office expenditure shall have the meaning as given in sub-sections (3) and (4) of section 105.
(3) The head office expenditure shall only be allowed if it is charged in the books of accounts of the permanent establishment and a certificate from external auditors is provided to the effect that the claim of such expenditure:
(i) has been made in accordance with the provision of this rule; and
(ii) is reasonable in relation to operation of the permanent establishment in Pakistan.
5. Advance tax.—
(1) The banking company shall be required to pay advance tax for the year under section 147 in twelve installments payable by 15th of every month. Other provisions of section 147 shall apply as such.
(1A) A banking company required to make payment of advance tax in accordance with sub-rule (1), shall estimate the tax payable by it for the relevant Tax Year, at any time before the installment payable on 15th June, of the relevant year is due. In case the tax payable is likely to be more than the amount it is required to pay under sub-rule (1), the banking company shall furnish to the Commissioner an estimate of the amount of tax payable by it and thereafter pay in the installment due on 15th June the difference, if any, of fifty per cent of such estimate and advance tax already paid upto 15th June, of the relevant tax year. The remaining fifty per cent of the estimate shall be paid after 15th June in six equal installments payable by 15th of each succeeding month of the relevant tax year.
(2) Provisions of withholding tax under this Ordinance shall not apply to a banking company as a recipient of the amount on which tax is deductible.
6. Tax on income computed—Income computed under this Schedule shall be chargeable to tax under the head “Income from Business” and tax payable thereon shall be computed at the rate applicable in Division II of Part I of the First Schedule.
6C. Enhanced rate of tax on taxable income from Federal Government securities.- (1) The taxable income arising from additional income earned from additional investment in Federal Government securities for the tax years 2020 and 2021, shall be taxed at the rate of 37.5% instead of the rate provided in Division II of Part I of the First Schedule.
(2) A banking company shall furnish a certificate from external auditor along with accounts while e-filing return of Income certifying the amount of the money invested in Federal Government securities in preceding tax year, additional investments made for the tax year and mark-up income earned from the additional investments for the tax year.
(3) Notwithstanding anything contained in this Ordinance, the Commissioner may require the banking company to furnish details of the investments in Federal Government securities to determine the applicability of the enhanced rate of tax.
(4) “Additional income earned” means mark-up income earned from additional investment in Federal Government securities by the bank for the tax year.
(5) “Additional investments” means average investment made in Federal Government securities by the bank during the tax year, in addition to the average investments held during the tax year 2019.
(6) The taxable income arising from additional investment under sub-rule (1) shall be determined according to the following formula, namely:-
Table income subject to enhanced rate of tax = A x B/C
Where –
A. is taxable income of the banking company;
B. is mark up income earned from the additional investment for the tax year; and
C. is the total of the mark-up income and non-make-up income of the banking company as per accounts.
(6A) For tax year 2022 onwards, the taxable income attributable to investment in the Federal Government securities shall be taxed at the rate of—
(i) 40% instead of rate provided in Division II of Part I of the First schedule if the assets to deposit ratio as on last day of the tax year is upto 40%;
(ii) 37.5% instead of rate provided in Division II of Part I of the First schedule if the assets to deposit ratio as on last day of the tax year exceeds 40% but does not exceed 50%; and
(iii) at the rates provided in Division II of Part I of the First schedule if assets to deposit ratio as on last day of the tax year exceeds 50%.
7A. The provisions of section 113 shall apply to banking companies as they apply to any other resident company.
(7B) From tax year 2015 and onwards, income from Dividend and income from Capital Gains shall be taxed at the rate specified in Division II of Part I of First Schedule.
(7C) For tax year years 2015 and onwards the provisions of section 4B shall apply to banking companies and shall be taxed at the rate specified in Division IIA of Part I of First Schedule:
Provided that brought forward losses, if any, shall be excluded from income computed under this Schedule for the purpose of section 4B of this Ordinance.
7D. Reduced rate of tax on additional advances for micro, small and medium enterprises.– (1) The taxable income arising from additional advances to micro, small and medium enterprises, for the tax years 2020 to 2023, shall be taxed at the rate of 20% instead of the rate provided in Division II of Part I of the First Schedule-
(2) A banking company shall furnish a certificate from external auditor along with accounts while e-filing return of Income certifying the amount of such advances made in preceding lax year, additional advance made for the tax year and net mark-up earned from such additional advances for the tax year.
(3) Notwithstanding anything contained in this Ordinance, the Commissioner may require the banking company to furnish details of the advances to micro, small and medium enterprises to determine the applicability of the reduced rate of tax.
(4) For the purposes of this rule, the term ”micro, small and medium enterprises” shall have the same meaning as provided in Prudential Regulations issued by the State Bank of Pakistan.
(5) “Additional advances” means any average advances disbursed in addition to average amount of such advances made in such sector by the bank for the tax year.
(6) The taxable income arising from additional advances under sub-rule (1) shall be determined according to the following formula, namely:-
Taxable income subject to reduced rate of tax = A x B/C
Where-
A. is taxable income of the banking company;
B is not mark up income earned from such additional advances for the tax year as declared in the annual accounts; and
C is total of the net mark-up and non mark-up income of the banking company as per accounts.
7E. Reduced rate of tax on additional advances for low cost housing.- (l) The taxable income arising from additional advances for low cost housing, for the tax years 2020 to 2023, shall be taxed at the rate of 20% instead of the rate provided in Division II of Part I of the First Schedule:
Provided that the taxable income arising from additional advances to Naya Pakistan Housing and Development Authority for low cost housing schemes shall be taxed at the rate of 10%.
(2) A banking company shall furnish a certificate from external auditor along with accounts while e-filing return of income certifying the amount of such advances made in preceding tax year, additional advance made for the tax year and net mark-up earned from such additional advances for the tax year.
(3) Notwithstanding anything contained in this Ordinance, the Commissioner may require the banking company to furnish details of the advances made for low cost housing to determine the applicability of the reduced rate of tax.
(4) For the purposes of this rule, the term “low cost housing” shall have the same meaning as provided in Prudential Regulations issued by the Stare Bark of Pakistan.
(5) “Additional advances” means any average advances disbursed in addition to average amount of such advances made in such sector by the bank for the tax year 2019.
(6) The taxable income arising from additional advances under sub rule.(1) shall be determined according to the following formula. namely:-
Taxable income subject to reduced rate of tax = A x B/C
Where-
A. is taxable income of the banking company;
B. is net mark-up income earned from such additional advances for the tax year as declared in the annual accounts; and
C. is total of the net mark-up and non mark-up income of the banking company as per accounts.
7F. Reduced rate of tax on additional advances as Farm Credit.– (1) The taxable income arising from additional advances for Farm Credit in Pakistan for the tax years 2020 to 2023, shall be taxed at the rate of 20% instead of the rate provided in Division ll of Part 1 of the First Schedule.
(2) A banking company shall furnish a certificate from external auditor along with accounts while e-filing return of income certifying the amount of such advances made in preceding tax year, additional advance made for the tax year and net mark-up earned from such additional advances for the tax year.
(3) Notwithstanding anything contained in this Ordinance, the Commissioner may require the banking company to furnish details of the advances made for Farm Credit to determine the applicability of the reduced rate of tax.
(4) For the purposes of this rule, the term ”Farm Credit” shall have the same meaning as provided in Prudential Regulations issued by the State Bank of Pakistan for agriculture financing excluding such advances made to a company as defined in section 80.
(5) “Additional advances” means any average advances disbursed in addition to average amount of such advances made in such sector by the bank for the tax year 2019.
(6) The taxable income arising from additional advances under sub-rule (1) shall be determined according to the following formula namely:-
Taxable income subject to reduced rate of tax = A x B/C
Where-
A. is taxable income of the banking company;
B. is net mark-up income earned from such additional advances for the .tax year as declared in the annual accounts: and
C. is total of the net mark-up and non mark-up income of the banking company as per accounts.
8. Exemptions—(1) Exemptions and tax concessions under the Second Schedule to this Ordinance shall not apply to income of a banking company computed under this Schedule.
(1A) The accumulated loss under the head “Income from Business” (not being speculation business losses) of an amalgamating banking company or banking companies shall be set off or carried forward against the business profits and gains of the amalgamated company and vice versa, up to a period of six tax years immediately succeeding the tax year in which the loss was first computed in the case of amalgamated banking company or amalgamating banking company or companies.
(2) The provisions relating to group relief as contained in section 59B shall be available to the banking companies provided the holding and subsidiary companies are banking companies. The accounts of the group companies shall be audited by the chartered accountants firm on the panel of auditors of the State Bank of Pakistan. The surrender and claim of loss would be subject to the approval of the State Bank of Pakistan.
(3) The holding and subsidiary companies of 100% owned group of banking companies may opt to be taxed as one fiscal unit as per the provisions of section 59AA relating to group taxation subject to the approval of the State Bank of Pakistan.
8A. Transitional provisions.— (1) Amounts provided for in the tax year 2008 and prior to the said tax year for or against irrecoverable or doubtful advances, which were neither claimed nor allowed as a tax deductible in any tax year, shall be allowed in the tax year in which such advances are actually written off against such provisions, in accordance with the provision of section 29 and 29A.
(2) Amounts provided for in the tax year 2008 and prior to the said tax year for or against irrecoverable or doubtful advances, which were neither claimed nor allowed as a tax deductible in any tax year, which are written back in the tax year 2009 and thereafter in any tax year and credited to the profit and loss account, shall be excluded in computing the total income of that tax year under rule 1 of this Schedule.
(3) The provisions of this Schedule shall not apply to any asset given or acquired on finance lease by a banking company up to the tax year 2008, and recognition of income and deductions in respect of such asset shall be dealt in accordance with the provisions of the Ordinance as if this Schedule has not come into force:
Provided that un-absorbed depreciation in respect of such assets shall be allowed to be set-off against the said lease rental income only.
9. Provision of Ordinance to apply— The provisions of the Ordinance not specifically dealt with in the aforesaid rules shall apply, mutatis mutandis, to the banking company.
10. The Federal Government may, from time to time, by notification in the official Gazette, amend the schedule so as to add any entry therein or modify or omit any entry therein.
(Disclaimer: The text of above section is only for information. Team PkRevenue.com makes all efforts to provide the correct version of the text. However, the team PkRevenue.com is not responsible for any error or omission.)
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FBR decides posting officials for sugar crushing 2021-22
ISLAMABAD: The Federal Board of Revenue (FBR) has decided to deploy officials at sugar mills for monitoring of production and supply of sugar, sources said on Tuesday.
The sources said that the tax offices having jurisdiction over sugar mills would post their officials for the crushing season 2021-2022.
In this regard the FBR would invoke Section 40B of Sales Tax Act, 1990 for physical monitoring of manufacturing and supply of the commodity.
In this regard, tax offices in Lahore have initiated the process for deploying the officials at the sugar mills. The Regional Tax Office (RTO) Lahore has placed its officials at the disposal of chief commissioner Inland Revenue, Large Taxpayers Office (LTO) Lahore.
The sources said that the monitoring would help bringing down retail price of the commodity in the local market.
It is worth mentioning that the sugar prices have gone up to Rs160 per kilogram in some parts of the country. However, as the crushing is coming near the prices have come down.
This year the FBR has planned to document all the supply chain from manufacturing to the retail sale of the sugar.
Through Finance Act, 2021 the treatment of sales tax on supply of sugar was changed and it was brought taxation at the retail price. The FBR through Circular No. 02 of 2021 stated: “Currently, the price of white crystalline sugar is fixed at Rs60 per kg in terms of SRO 812(I)/2016 dated September 02, 2016, which is considerably below the actual market price of the commodity.
“In order to address this anomaly, sugar is proposed to be included in Third Schedule of the Sales Tax Act, 1990, so that sales tax is charged and collected on actual retail price of the product at the manufacturing stage.
“This measure would not only ensure due payment of tax but also help in putting a more effective price control mechanism in place for sugar.”
The rate of sales tax at 17 per cent on retail price was to be applicable on sugar supply from July 01, 2021. However, the implementation was deferred till November 30, 2021. Therefore, the normal sales tax rate on sugar supply will be applicable from December 01, 2021.
Meantime, the FBR has increased the minimum sales tax rate on domestically produced sugar to Rs72.22 per kg from Rs60 per kg.