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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.

  • FBR defers digital payment provision for one month

    FBR defers digital payment provision for one month

    ISLAMABAD: The Federal Board of Revenue (FBR) has deferred the implementation of a digital mode of payment for one month.

    The digital mode of payment has been made mandatory for the corporate sector, which was to be implemented from November 01, 2021.

    The FBR issued Circular No. 09 of 2021-22 on Monday to allow an extension in the deadline for implementation of digital mode of payment up to November 30, 2021.

    The new provision was introduced through Tax Laws (Third Amendment) Ordinance, 2021.

    The FBR in its explanation through Circular No. 07 dated September 23, 2021 said: to improve documentation, a new clause (la) has been inserted in section 21 of the Ordinance.

    Previously payments under a single head account exceeding two hundred and fifty thousand rupees, made by any taxpayer were required to be made through crossed cheque or crossed baking instruments including digital payments.

    “Through this amendment, payments made by a company under a single head of account exceeding two hundred and fifty thousand rupees other than by digital means from business bank account of the taxpayer notified to the Commissioner under section 114A of the Ordinance shall not be admissible as deductions.”

    However, certain expenditures on account of utility bills, freight charges, travel fare, and payment of taxes and fines would continue to be admissible even though paid in cash or via traditional banking instruments.

    The purpose behind this legislative enactment is to encourage digital payments and discourage traditional mode of transactions by the corporate sector in the first phase.

    However, owing to lack of total digital readiness by some corporate taxpayers, the corporate taxpayers are allowed to switch to this mode w.e.f. 01.11.2021.

    In the intervening period they may use digital payments or continue with the existing procedure of making payments by a crossed cheque drawn on a bank or by crossed bank draft or crossed pay order or any other crossed banking instrument showing transfer of amount from the business bank account of the taxpayer.

    Furthermore, any salary paid or payable exceeding twenty five thousand rupees per month has to be made through cross cheque or direct transfer of funds to the employee’s bank account under clause (m) of section 21 of the Ordinance. In order to bring this provision in conformity with newly inserted clause (la) ibid, in case of payments against salary in excess of twenty five thousand rupees per month, the mode of digital payment has been added to the available modes referred to above.

    The Pakistan Tax Bar Association (PTBA) last week in a letter to the FBR chairman stated that the implementation of digital payment was not practical at the moment.

    The PTBA made the following submissions to substantiate its claim:

    (i) It is impossible to make payment to goods carriage/transport sector by the digital means, which will create complete unrest in the goods carriage and transport sector.

    (ii) Presently, port terminal charges, wharfage charges, charges for clearance of delivery orders are paid in advance through crossed cheques or payorders. It will not be out of place to mention here that the port terminal operators and shipping lines, are unaware and are not ready for implementation of the ‘digital mode of payment.’

    (iii) It is routine business practice that advance against delivery of goods, the buyer submits its payment by way of post-dated cheques, which normally accepted by the other party and inherently a secured way of making payment. We are afraid that this law of ‘digital mode of payment’ is surely going to hamper the business activities, as it does not cater the situation and solution of such transactions.

    (iv) The similar issues are likely to arise and are to be faced by the companies for making payments to the growers of various agricultural crops such as fruits, sugarcane, rice, cotton, wheat, etc.

    (v) The various banks have fixed their own limitation on the quantity of making digital / online payments in a day and have also fixed the threshold of the amount and they do not allow to exceed the threshold limit fixed by them. In our view, this also needs a proper campaign without which the implementation of the law is not possible.

    (vi) The digital mode of payment is also impractical and is likely to affect the business transaction in the cases where petty cash payments, in aggregate exceed millions of rupees, which cannot be made digitally.

    (vii) It will not be out of place to mention that online transactions are still considered as unsecured mode, due to various type online frauds and hacking of software.

    Furthermore, a cyber attack on Pakistan’s leading bank last Friday also made the implementation in jeopardy. The PTBA has also pointed its concerns about the cyber security issue.

    FBR applies digital payment amid cyber security incident
  • Tax exemption from total income during tax year 2022

    Tax exemption from total income during tax year 2022

    the Federal Board of Revenue (FBR) has granted tax exemptions from total income during the tax year 2022 to various classes of individuals and entities under Part 1, Second Schedule of the Income Tax Ordinance, 2001.

    (more…)
  • FBR allows tax exemption on import of Chinese drones

    FBR allows tax exemption on import of Chinese drones

    The Federal Board of Revenue (FBR) has announced income tax exemption on the import of drones donated by the Chinese Ministry of Agriculture and Rural Affairs.

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  • Tax rate on right to use machinery during Tax Year 2022

    Tax rate on right to use machinery during Tax Year 2022

    The rate of advance tax on right to use machinery during tax year 2022 will be applicable under Second Schedule of Income Tax Ordinance, 2001.

    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 tax rate on right to use machinery under Section 236KQ of Income Tax Ordinance, 2001:

    Rate of collection of tax under section 236Q shall be 10 percent of the amount of payment.

    Following is the text of Section 236Q of Income Tax Ordinance, 2001:

    236Q. Payment to residents for use of machinery and equipment.—(1) Every prescribed person making a payment in full or in part including a payment by way of advance to a resident person for use or right to use industrial, commercial and scientific equipment shall deduct tax from the gross amount at the rate specified in Division XXIII of Part IV of the First Schedule.

    (2) Every prescribed person making a payment in full or in part including a payment by way of advance to a resident person on account of rent of machinery shall deduct tax from the gross amount at the rate specified in Division XXIII of Part IV of the First Schedule.

    (3) The tax deductible under sub-sections (1) and (2) shall be minimum tax on the income of such resident person.

    (4) In this section ―prescribed person means a prescribed person as defined in sub-section (7) of section 153.

    (5) The provisions of sub-section (1) and (2) shall not apply to—

    (a) agricultural machinery; and

    (b) machinery leased by a leasing company, an investment bank or a modaraba or a scheduled bank or a development finance institution in respect of assets owned by the leasing company or an investment bank or a modaraba or a scheduled bank or a development finance institution.

    (Disclaimer: The text of the 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.)

    Tax rate on immovable property purchase during TY 2022
  • FBR’s collection up by 30.5% to Rs440 billion in Oct 2021

    FBR’s collection up by 30.5% to Rs440 billion in Oct 2021

    The Federal Board of Revenue (FBR) has reported a significant achievement in revenue collection for the month of October 2021, surpassing the figures from the same period last year.

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  • Tax rate on immovable property purchase during TY 2022

    Tax rate on immovable property purchase during TY 2022

    The rate of advance tax on purchase of immovable properties during tax year 2022 will be applicable under Second Schedule of Income Tax Ordinance, 2001.

    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 tax rate on purchase of immovable properties under Section 236K of Income Tax Ordinance, 2001:

    The rate of tax to be collected under section 236K shall be 1 per cent of the fair market value.

    Following is the text of Section 236K of Income Tax Ordinance, 2001:

    236K. Advance tax on purchase or transfer of immovable property.—(1) Any person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect from the purchaser or transferee advance tax at the rate specified in Division XVIII of Part IV of the First Schedule.

    Explanation,—For removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society, public and private real estate projects registered/governed under any law, joint ventures, private commercial concerns and registrar of properties.

    (2) The advance tax collected under sub-section (1) shall be adjustable:

    Provided that if the buyer or transferee is a non-resident individual holding a Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) or Computerized National ID Card (CNIC) who has acquired the said immovable property through a Foreign Currency Value Account (FCVA) or NRP Rupee Value Account (NRVA) maintained with authorized banks in Pakistan under the foreign exchange regulations issued by the State Bank of Pakistan, the tax collected under this section from such persons shall be final discharge of tax liability for such buyer or transferee.

    (3) Any person responsible for collecting payments in installments for purchase or allotment of any immovable property where the transfer is to be effected after making payment of all installments, shall at the time of collecting installments collect from the allotee or transferee advance tax at the rate specified in Division XVIII of Part IV of the First Schedule:

    Provided that where tax has been collected along with installments, no further tax under this section shall be collected at the time of transfer of property in the name of buyer from whom tax has been collected in installments which is equal to the amount payable in this section.

    (4) Nothing contained in this section shall apply to a scheme introduced by the Federal Government, or Provincial Government or an Authority established under a Federal or Provincial law for expatriate Pakistanis:

    “Provided that the mode of payment by the expatriate Pakistanis in the said scheme or schemes shall be in the foreign exchange remitted from outside Pakistan through normal banking channels.”

    (Disclaimer: The text of the 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.)

    Rate of tax on education fee during tax year 2022
  • Levy and collection of tax on goods

    Levy and collection of tax on goods

    Section 7A of Sales Tax Act, 1990 has defined levy and collection of tax on goods.

    The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.

    Following is the text of section 7A  of Sales Tax Act, 1990:

    7A. Levy and collection of tax on specified goods on value addition. – (1) Notwithstanding anything contained in this Act or the rules made there under, the Federal Government may specify, by notification in the official Gazette, that sales tax chargeable on the supply of goods of such description or class shall, with such limitations or restrictions as may be prescribed, be levied and collected on the difference between the value of supply for which the goods are acquired and the value of supply for which the goods, either in the same state or on further manufacture, are supplied.

    (2) Notwithstanding anything contained in this Act or the rules made thereunder, in respect of the goods or class of goods specified in the Twelfth Schedule, the minimum value addition tax, against the value added by the registered person, shall be payable, at the rate and by the registered persons or class of registered persons, specified therein, subject to the conditions, limitations, restrictions and procedure specified therein:

    Provided that the Federal Government may, through a notification published in the official Gazette, amend any provision of the said Twelfth Schedule.

    (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.)

    Determination of tax liability for supplies under tax law
  • FBR applies digital payment amid cyber security incident

    FBR applies digital payment amid cyber security incident

    ISLAMABAD: The Federal Board of Revenue (FBR) is all set to apply a digital mode of payment from November 01, 2021, for corporate entities as one of the largest banks in the country reported a cyber security incident.

    The digital mode of payment has been made mandatory from November 01, 2021. The FBR has already made necessary amendments to relevant tax laws to implement the digital payment system.

    The new provision of law was promulgated through Tax Laws (Third Amendment) Ordinance, 2021, where a new sub-section (la) was inserted in Section 21 of the Income Tax Ordinance, 2001.

    The State Bank of Pakistan (SBP) on Saturday stated that the National Bank of Pakistan (NBP) had reported a cyber security related incident which is being investigated.

    “The bank has not observed any data breach or financial loss. No other bank has reported any such incidence,” the central bank said. The SBP added that it was monitoring the situation closely to ensure safety and soundness of banking system.

    Interestingly, a day earlier, the apex tax bar of the country Pakistan Tax Bar Association (PTBA) in a letter to FBR chairman mentioned about the cyber security issues while implementing the mandatory digital mode of payment.

    “It will not be out of place to mention that online transactions are still considered as unsecured mode, due to various type online frauds and hacking of software,” according to the PTBA’s letter.

    The apex tax bar urged the tax authorities to defer the condition as the implementation was not practical at present.

    “The condition for allowable expenditure through digital mean is a contradiction with the other modes of payment through banking channels, which is historically remained in practice and accepted under the provisions of the Income Tax Ordinance, 2001 and this provision of law is incorporated without taking the stakeholders into confidence and it is not practically possible for many business houses,” the PTBA said.

    PTBA declares implementing digital payment not practical
  • Determination of tax liability for supplies under tax law

    Determination of tax liability for supplies under tax law

    Section 7 of Sales Tax Act, 1990 has defined determination of tax liability for supplies made by registered persons.

    The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.

    Following is the text of section 7 of Sales Tax Act, 1990:

    7. Determination of tax liability. – (1) Subject to the provisions of section 8 and 8B, for the purpose of determining his tax liability in respect of taxable supplies made during a tax period, a registered person shall, subject to the provisions of section 73, be entitled to deduct input tax paid or payable during the tax period for the purpose of taxable supplies made, or to be made, by himfrom the output tax excluding the amount of further tax under sub-section (1A) of section 3. That is due from him in respect of that tax period and to make such other adjustments as are specified in Section 9:

    Provided that where a registered person did not deduct input tax within the relevant period, he may claim such tax in the return for any of the six succeeding tax periods.

    (2) A registered person shall not be entitled to deduct input tax from output tax unless,-

    (i) in case of a claim for input tax in respect of a taxable supply made, he holds a tax invoice in his name and bearing his registration number in respect of such supply, or in case of supply of electricity or gas, a bill bearing his registration number and the address where the connection is installed:

    Provided that from the date to be notified by the Board in this respect, in addition to above, if the supplier has not declared such supply in his return or he has not paid amount of tax due as indicated in his return;

    (ii) in case of goods imported into Pakistan, he holds bill of entry or goods declaration in his name and showing his sales tax registration number, duly cleared by the customs under section 79, section 81 or section 104 of the Customs Act, 1969 (IV of 1969);

    (iii) in case of goods purchased in auction, he holds a treasury challan, in his name and bearing his registration number, showing payment of sales tax;

    (3) Notwithstanding anything in sub-sections (1) and (2), Board, with the approval of the Federal Minister-in-charge, may, by a special order, subject to such conditions, limitations or restrictions as may be specified therein allow a registered person to deduct input tax paid by him from the output tax determined or to be determined as due from him under this Act.

    (4) Notwithstanding anything contained in this Act or rules made there under, the Federal Government may, by notification in the official Gazette, subject to such conditions, limitations or restrictions as may be specified therein, allow a registered person or class of persons to deduct such amount of input tax from the output tax as may be specified in the said notification.

    (5) Notwithstanding anything contained in this Act or the rules made thereunder, the Board, by notification in the official Gazette, may impose restrictions on wastage of material on which input tax has been claimed in respect of the goods or class of goods.

    (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.)

    Sales tax law explains time of payment
  • Sales tax law explains time of payment

    Sales tax law explains time of payment

    Section 6 of Sales Tax Act, 1990 has defined sales tax law explains time of payment.

    The Federal Board of Revenue (FBR) issued the Sales Tax Act, 1990 updated up to June 30, 2021. The Act incorporated amendments brought through Finance Act, 2021.

    Following is the text of section 6 of Sales Tax Act, 1990:

    6. Time and manner of payment. – (1) The tax in respect of goods imported into Pakistan shall be charged and paid in the same manner and at the same time as if it were a duty of customs payable under the Customs Act, 1969 and the provisions of the said Act including section 31A thereof, shall, so far as they relate to collection, payment and enforcement including recovery of tax under this Act on such goods where no specific provision exists in this Act, apply,

    (1A) Notwithstanding anything contained in any other law for the time being in force, including but not limited to the Protection of Economic Reforms Act, 1992 (XII of 1992), and notwithstanding any decision or judgment of any forum, authority or court whether passed, before or after the promulgation of the Finance Act, 1998 (III of 1998), the provisions of section 31-A of the Customs Act, 1969 (IV of 1969), referred to in sub-section (1) shall be incorporated in and shall be deemed to have always been so incorporated in this Act and no person shall be entitled to any exemption from or adjustment of or refund of tax on account of the absence of such a provision in this Act, or in consequence of any decision or judgment of any forum, authority or court passed on that ground or on the basis of the doctrine of promissory estoppel or on account of any promise or commitment made or understanding given whether in writing or otherwise, by any government department or authority.

    (2) The tax in respect of taxable supplies made during a tax period shall be paid by the registered person by the date as prescribed in this respect:

    Provided that the Board may, by a notification in the Official Gazette, direct that the tax in respect of all or such classes of supplies (other than zero-rated supplies) of all or such taxable goods, as may be specified in the aforesaid notification, shall be charged, collected and paid in any other way, mode, manner or at time as may be specified therein.

    (3) The tax due on taxable supplies shall be paid by any of the following modes, namely:-

    (i) through deposit in a bank designated by the Board; and

    (ii) through such other mode and manner as may be specified by the Board.

    (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.)

    Applicable tax rates to be charged under sales tax law