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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.

  • FBR launches first phase of pre-filing in tax returns

    FBR launches first phase of pre-filing in tax returns

    ISLAMABAD: Federal Board of Revenue (FBR) on Friday said it has launched first phase of pre-filling of some information enabled for individual taxpayers in annual income tax returns.

    In a statement regarding ongoing reform process, the FBR said that those efforts were bearing fruit.

    According to the statement, FBR has designed simplified income tax returns for individuals and small & medium enterprises (with turnover less than Rs.10 million).

    Auto-calculation and phase 1 of pre-filling of some information has been enabled for individual taxpayers.

     Phase 1 of automated income tax refunds has been enabled.

    The capability to file appeals through the system has been provided via the e-Appeals module.

    Automation of Sales Tax refunds via FASTER has been further improved.

    Similarly, the processing and payment of export duty drawbacks have also been automated.

    The revenue body said that in line with the vision of the Prime Minister as part of its reforms agenda, FBR has placed a lot of focus on facilitation of taxpayers, reducing human interaction, simplification of tax statutes and tax filing procedures through automation, integrity management, enforcement of tax code and policy measures to boost revenue and promote exports through increase in business activity, speedy payment of refunds and drawbacks and better service delivery.

    As a result of this reform process, significant improvement has been seen.

    FBR has exceeded the seven month revenue target for FY 2020 – 2021 by collecting Rs. 2,570 billion against the target of Rs. 2,550 billion.

    This target has been achieved despite the issuance of 80 percent more refunds in comparison with same period last FY (Rs.129 billion against 69 billion for last year). This has helped the business community in reducing cost of doing business and providing working capital for investment.

    A dedicated portal has been created to manage taxpayer complaints and to provide feedback. Large Taxpayers Office (LTO) has been opened in Multan to facilitate large taxpayers.

    Moreover, taxpayer registration for Sales Tax purposes has been enabled on the system (ICT based Sales Tax survey). Simultaneously, on the Customs side, an online import duty calculator has been enabled on WeBOC for the importers / customs agents in order to find the duty / taxes without filing of Goods Declaration.

    The Authorized Economic Operator (AEO) Program has been launched for trusted trade partners. This is also part of the Trade Facilitation Agreement (TFA) under WTO.

    A dedicated portal (Maloomat TaxRay) has been launched for taxpayers to view what information FBR holds about them. Moreover, the systems used for Prosecution, Appellate, and Alternate Dispute Resolution systems have been strengthened, revitalized, and automated.

    Additionally, on the Customs side, the Anti-Smuggling and Confiscation of goods portal has been enabled for data collection and analysis.

    FBR’s Integrity Management Mechanism has been strengthened. FBR Head Office & field formations have been restructured to improve efficiency.

    Customs Duty concessions and exemptions regime continues to be reviewed and simplified in collaboration with the tax policy board to further improve ease of doing business.

    Another positive development has been seen in the number of duty drawback claims processed via Automated Export Duty Drawback payment system. Since its official launch in end-December (as of 15 January 2021), 74 percent of all claims (55,790 out of 75,345) have been automated whilst 71 percent of amount has been remitted.

  • Value of supply defined for applying sales tax

    Value of supply defined for applying sales tax

    Sales Tax Act, 1990 has defined “value of supply” in respect of taxable supply, as the consideration in money including all federal and provincial duties and taxes, if any, which the supplier receives from the recipient for that supply.

    The Sales Tax Act, 1990 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR), explained the value of supply as

    “Value of supply” means:–

    (a) in respect of a taxable supply, the consideration in money including all Federal and Provincial duties and taxes, if any, which the supplier receives from the recipient for that supply but excluding the amount of tax:

    Provided that –

    (i) in case the consideration for a supply is in kind or is partly in kind and partly in money, the value of the supply shall mean the open market price of the supply excluding the amount of tax;

    (ii) in case the supplier and recipient are associated persons and the supply is made for no consideration or for a consideration which is lower than the open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax; and

    (iii) in case a taxable supply is made to a consumer from general public on installment basis on a price inclusive of mark up or surcharge rendering it higher than open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax.

    (b) in case of trade discounts, the discounted price excluding the amount of tax; provided the tax invoice shows the discounted price and the related tax and the discount allowed is in conformity with the normal business practices;

    (c) in case where for any special nature of transaction it is difficult to ascertain the value of a supply, the open market price;

    (d) in case of imported goods excluding those as specified in the Third Schedule, the value determined under section 25 of the Customs Act, including the amount of customs-duties and central excise duty levied thereon;

    (e) in case where there is sufficient reason to believe that the value of a supply has not been correctly declared in the invoice, the value determined by the Valuation Committee comprising representatives of trade and the Inland Revenue constituted by the Commissioner;

    (f) in case of manufacture of goods belonging to another person, the actual consideration received by the manufacturer for the value addition carried out in relation to such goods;

    (g) in case of a taxable supply, with reference to retail tax, the price of taxable goods excluding the amount of retail tax, which a supplier will charge at the time of making taxable supply by him, or such other price as the Board may, by a notification in the official Gazette, specify.

    (h) in case of supply of electricity by an independent power producer or WAPDA, the amount received on account of energy purchase price only; and the amount received on

    account of capacity purchase price, energy purchase price premium, excess bonus, supplemental charges etc. shall not be included in the value of supply;

    (i) in case of supply of electric power and gas by a distribution company, the total amount billed including price of electricity and natural gas, as the case may be, charges, rents, commissions and all duties and taxes local, provincial and federal but excluding the amount of late payment surcharge and the amount of sales tax; and

    (j) in case of registered person who is engaged in purchasing used vehicles from general public on which sales tax had already been paid at the time of import or manufacturing, and which are, later on, sold in the open market after making certain value addition, value of supply will be the difference between sale and purchase price of the said vehicle on the basis of the valuation method prescribed by the Board.

    Provided that, where the Board deems it necessary it may, by notification in the official Gazette, fix the value of any imported goods or taxable supplies or class of supplies and for that purpose fix different values for different classes or description of same type of imported goods or supplies:

    Provided further that where the value at which import or supply is made is higher than the value fixed by the Board, the value of goods shall, unless otherwise directed by the Board, be the value at which the import or supply is made.

  • FBR procures video surveillance system for sugar mills

    FBR procures video surveillance system for sugar mills

    ISLAMABAD: Federal Board of Revenue (FBR) has decided to procure Video Analytic Surveillance (VAS) system from a single vendor to install the equipment at all the sugar mills across the country, sources said on Thursday.

    Earlier, it was decided that the cost of installation has to be borne by sugar mills but ongoing lackluster response and delaying tactics compelled the authorities to purchase the equipment for early solution of transparent monitoring of sugar production and supply.

    On February 08, 2021, the FBR presented a summary regarding procurement of VAS for proper monitoring of the production and sale of sugar in compliance with the directive of the prime minister. The Economic Coordination Committee (ECC) of the Cabinet approved an allocation of Rs350 million as a Technical Supplementary Grant for installation of the most optimal VAS solution at the sugar mills’ premises during the current crushing season as requested by the FBR.

    In order to properly monitor the production and sale of sugar and the attendant sales tax and income tax thereon, Federal Board of Revenue (FBR) issued SRO 889(I)/2020, dated 21.09.2020 warranting all sugar mills to install VAS System expecting that the process would be completed before official onset of the crushing season on 10.11.2020.

    FBR ran a rigorous process of procurement as enshrined under the VAS Rules, 2020, and pre-qualified/approved seven vendors for supply and installation of the System on sugar factories.

    The FBR said that the VAS System, however, has so far been installed only by a few sugar mills and those too are sub-optimal solutions. “Ostensibly, the cost, which under the prevailing rules is to be borne by the sugar mills, has been the key factor towards non-implementation of the VAS System.”

    Sugar mill-owners, in an apparent effort to cut cost, went around getting demonstrations and quotations from all seven vendors consuming unending time in the process.

    Those that went ahead with installation eventually opted for the cheapest and sub-standard solutions.

    A relatively small contract size/volume (80 mills only) to be distributed over seven vendors, also did not prove enough an incentive for the vendors to aggressively invest in procurement of the systems and install in a timely fashion.

    The last deadline, i.e., January 31, 2021 has already expired and it seems unlikely that the system would be installed in a satisfactory manner across the board by all the mills.

    The FBR said that the situation warrants a change in approach.

    Accordingly, FBR has been tasked to select and contract one vendor to install the video-analytics solution across all manufacturers of sugar in Pakistan and in the shortest possible time.

    The cost is to be borne by the government and the vendor will submit its invoices to FBR for payment.

  • Board approves establishment of Tax Policy Unit

    Board approves establishment of Tax Policy Unit

    ISLAMABAD: The Federal Board of Revenue (FBR) Policy Board on Thursday approved establishment of Tax Policy Unit under the administrative control of the Finance Division.

    Federal Minister for Finance and Revenue, Dr. Abdul Hafeez Shaikh, chaired the 5th meeting of the FBR Policy Board at FBR HQs today.

    Federal Minister for Privatization Mohammad Mian Soomro, Adviser to the PM on Commerce Abdul Razak Dawood, Adviser to the PM on Institutional Reforms & Austerity Dr. Ishrat Hussain, SAPM on Revenue Dr. Waqar Masood, Chairman FBR, senior members of FBR and representatives of private sector participated in the meeting.

    The FBR made a presentation regarding establishment of Tax Policy Unit in accordance with the decision of the Cabinet dated 29 November, 2018.

    Members of the Policy Board gave a valuable input highlighting the advantages of keeping tax policy function independent of administrative function.

    After due deliberation, the Chair accorded approval for the establishment of ‘Tax Policy Unit’ under the administrative control of the Finance Division.

    A new setup would be created that will include members from FBR and also engage fiscal and economic experts from academia, think tanks and private sector to present holistic proposals for mobilising revenue generation with greater autonomy.

    Tax Policy Unit would work out policy recommendations for domestic tax collection on the lines of the National Tariff Commission which operates under the Ministry of Commerce.

    FBR’s Technical Committee apprised the Policy Board about the measures taken to identify anomalies and simplify the taxation system for better understanding of the business community.

    FBR requested to include senior representatives from the Ministry of Commerce and Ministry of Industries & Production for better coordination and effective policy making in this regard.

    Chairman, Complaint Oversight Committee (COC) briefed the Policy Board about the working of a newly developed complaint portal which is currently running on trial basis.

    The complaint resolution system is designed to facilitate businessmen, traders, Small and Medium Enterprises (SMEs) and large tax payers.

    All complaints can be filed at one place. SOPs for complaint resolution and oversight by COC are being finalized and system would be formally launched soon.

    The Chair directed to disseminate relevant information about the working of complaint registration mechanism and ensure the contact details are readily available for public consumption.

    The Finance Minister further directed FBR to expedite the process of Income Tax refunds of less than Rs.50 million to uphold commitment of the government to facilitate tax payers.

  • FBR issues rules for direct transfer of income tax refund payments

    FBR issues rules for direct transfer of income tax refund payments

    ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday introduced rules for making payment of income tax refunds directly to taxpayers’ bank account.

    The FBR issued SRO 175(I)/2021 dated February 10, 2021 to notify draft amendments to Income Tax Rules, 2002.

    According to the draft rules, a Centralized Income Tax Refund Office (CITRO) would be established for centralized payment of refunds.

    After completing all codal formalities the Commissioner Inland Revenue shall pass an order under Section 170(4) and transmit the order to CITRO. The same shall be reflected in CITRO in real time.

    The CITRO shall generate an electronic advice of approve amount for onwards submission to the State Bank of Pakistan (SBP) through dedicated VPN tunnel established between FBR and SBP. The SBP shall credit amount directly to the account of taxpayer.

    The SBP shall confirm the transfer of amount to the taxpayers account or vice versa electronically to CITRO.

    The CITRO shall reconcile the payments issued as per instructions during the month with the electronic scrolls received from the SBP and record the outcome of such reconciliation in the system.

    Where any payment instruction is returned back by the SBP due to any reason, the CITRO shall transmit the same to concerned commissioner for correction in payment instructions.

    The FBR shall ensure that complete data of refunds issued is made available to the concerned commissioner electronically.

  • Sales tax law explains ‘time of supply’

    Sales tax law explains ‘time of supply’

    Sales Tax Act, 1990 has explained ‘time of supply’ for collection of sales tax.

    The Sales Tax Act, 1990 [updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR)] explained the term as:

    “Time of supply”, in relation to,–

    (a) a supply of goods, other than under hire purchase agreement, means the time at which the goods are delivered or made available to the recipient of the supply” “or the time when any payment is received by the supplier in respect of that supply, whichever is earlier;

    (b) a supply of goods under a hire purchase agreement, means the time at which the agreement is entered into; and

    (c) services, means the time at which the services are rendered or provided;

    Provided that in respect of sub clause ( a) ,(b) or (c), where any part payment is received, –

    (i) for the supply in a tax period, it shall be accounted for in the return for that tax period; and

    (ii) in respect of exempt supply, it shall be accounted for in the return for the tax period during which the exemption is withdrawn from such supply .

  • Who are Tier-1 retailers under Sales Tax Act?

    Who are Tier-1 retailers under Sales Tax Act?

    The term ‘Tier-1 retailer’ was introduced through Finance Act, 2017 by inserting relevant clause into Sales Tax Act, 1990.

    All Tier-1 retailers are required to integrate all their Point of Sales (POSs) with computerized system of the Federal Board of Revenue (FBR).

    The Sales Tax Act, 1990 (updated up to June 30, 2020 issued by the FBR), defined Tier-1 retailer as:

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

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

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

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

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

    (e) a retailer, whose shop measures one thousand square feet in area or more; and

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

  • FBR warns against issuing manual tax notices

    FBR warns against issuing manual tax notices

    KARACHI: Federal Board of Revenue (FBR) has warned tax officials of initiating disciplinary proceedings for issuing manual tax notices, including audit and assessment.

    The FBR in an official communication sent to Large Taxpayers Offices (LTOs), Regional Tax Offices (RTOs), Corporate Tax Offices (CTOs) and Medium Taxpayers Office (MTO) that instances had been reported to the revenue board that field officers tend to issue manual notices and assessment orders.

    These manual notices have created problems for the taxpayers as they preferred to file appeal and were also adversely affecting the efficiency of the field formations.

    The FBR issued following instructions to the tax offices:

    i. All statutory notices available in IRIS shall be issued electronically without any exception; manual issuance of notices, available in IRIS, is not allowed.

    ii. All orders shall be issued electronically through IRIS; issuance of manual orders is not allowed.

    iii. All Commissioners are requested to conduct periodic inspection to ensure that notices/orders are issued electronically.

    Any divergence from instructions shall be viewed as inefficiency and shall entail disciplinary proceedings, the FBR said.

  • What is tax fraud?

    What is tax fraud?

    Sales Tax Act, 1990 has defined ‘tax fraud’ as doing of any act knowingly without lawful excuse.

    The Sales Tax Act, 1990 [updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR)] explained ‘tax fraud’ as:

    “Tax fraud” means knowingly, dishonestly or fraudulently and without any lawful excuse (burden of proof of which excuse shall be upon the accused) –

    (i) doing of any act or causing to do any act; or

    (ii) omitting to take any action or causing the omission to take any action, including the making of taxable supplies without getting registration under this Act; or

    (iii) falsifying or causing falsification the sales tax invoices,

    in contravention of duties or obligations imposed under this Act or rules or instructions issued thereunder with the intention of understating the tax liability or underpaying the tax liability for two consecutive tax periods or overstating the entitlement to tax credit or tax refund to cause loss of tax.

  • Sales Tax Act defines ‘supply’

    Sales Tax Act defines ‘supply’

    Sales Tax Act, 1990 has explained the word ‘supply’ for the purpose of imposition and collection of tax.

    The Sales Tax Act, 1990 [updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR)] has defined the word ‘supply’ as:

    “Supply” means a sale or other transfer of the right to dispose of goods as owner, including such sale or transfer under a hire purchase agreement, and also includes –

    (a) putting to private, business or non-business use of goods produced or manufactured in the course of taxable activity for purposes other than those of making a taxable supply;

    (b) auction or disposal of goods to satisfy a debt owed by a person;

    (c) possession of taxable goods held immediately before a person ceases to be a registered person; and

    (d) in case of manufacture of goods belonging to another person, the transfer or delivery of such goods to the owner or to a person nominated by him:

    Provided that the Board, with the approval of the Federal Minister-in-charge, may, by notification in the official Gazette, specify such other transactions which shall or shall not constitute supply;

    The law also explained “supply chain” as the series of transactions between buyers and sellers from the stage of first purchase or import to the stage of final supply.