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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 updates withholding tax rates for electricity consumers

    FBR updates withholding tax rates for electricity consumers

    ISLAMABAD: Federal Board of Revenue (FBR) has updated withholding tax rate on the amount paid for electricity bills by commercial, industrial and domestic consumers.

    The FBR issued withholding tax card 2020-2021 (updated up to June 30, 2020) incorporating amendment made to Income Tax Ordinance, 2001 through Finance Act, 2020.

    Under Section 235 of Income Tax Ordinance, 2001 person preparing electricity bill shall collect withholding tax from commercial and Industrial consumers of electricity along with payment of electricity consumption charges.

    The withholding tax rates for gross amount of Electricity Bill of Commercial and Industrial consumer:

    Does not exceed Rs. 400: Rs. 0

    Exceeds Rs. 400 but does not exceed Rs. 600: Rs. 80

    Exceeds Rs. 600 but does not exceed Rs. 800: Rs. 100

    Exceeds Rs. 800 but does not exceed Rs. 1000: Rs. 160

    Exceeds Rs. 1000 but does not exceed Rs. 1500: Rs. 300

    Exceeds Rs. 1500 but does not exceed Rs. 3000: Rs. 350

    Exceeds Rs. 3000 but does not exceed Rs. 4,500: Rs. 450

    Exceeds Rs. 4500 but does not exceed Rs. 6000: Rs. 500

    Exceeds Rs. 6000 but does not exceed Rs. 10000: Rs. 650

    Exceeds Rs. 10000 but does not exceed Rs. 15000: Rs. 1000

    Exceeds Rs. 15000 but does not exceed Rs. 20000: Rs. 1500

    Exceeds Rs. 20000: (i) at the rate of 12 percent for commercial consumers; and (ii) at the rate of 5 percent for industrial consumers

    (i) Adjustable In case of company.

    (ii) In case of other than company tax collected on Rs, 360000 amount of annual bill will be minimum tax.

    (iii) in case other than company tax collected on amount over and above Rs 30000/- of monthly bill will be adjustable

    (i) Minimum tax for CNG Stations (Ref S.234A) (3).

    Under Section 235A of the Ordinance, person preparing electricity bill shall collect withholding tax from domestic consumers along with payment of electricity consumption charges.

    Withholding tax rate on domestic consumers:

    (i) if the amount of monthly bill is Rs,75,000/- or more: 7.5 percent

    (ii) if the amount of monthly bill is less than Rs, 75,000: 0 percent

    The tax deducted from billed amount for domestic consumers shall be adjustable.

  • FBR explains amendments to federal excise law

    FBR explains amendments to federal excise law

    ISLAMABAD: Federal Board of Revenue (FBR) has issued explanation to amendment made to Federal Excise Act, 2005 through Finance Act, 2020.

    The FBR through Circular No. 01 of 2020 dated August 06, 2020 explained the following amendments:

    01. ENLARGING THE SCOPE OF SEIZURE AND CONFISCATION OF THE NONDUTY PAID ITEMS SUBJECT TO FED

    In view of increasing trend of non-duty paid products and illicit manufacturing of excisable items and products, all products subject to Federal Excise Duty have now been made liable to seizure in case FED is not paid. Previously, the scope of such seizure was limited to cigarette and beverages sectors only.

    Now, if any product which is subject to FED is seized on account of non-duty payment, that will also be subject to confiscation. Necessary amendments in sections 26 and 27 of 2005 Act have been made accordingly.

    02. BOARD TO KEEP THE PARAMETERS OF AUDIT SELECTION CONFIDENTIAL

    The provisions relating to confidentiality of parameters of audit selection were inserted in the income tax and sales tax statutes in earlier Finance Acts, but the same were missing in the 2005 Act. As a part of the Board’s drive for harmonization of various tax statutes, section 42B has been inserted in the 2005 Act.

    03. OMISSION OF THE CONDITION OF AUDIT TO BE CONDUCTED ONCE IN THREE YEARS

    The provisions relating to condition that audit cannot be conducted more than once in three years were omitted in other statutes, hence for the purpose of harmonization the same has also been omitted from the 2005 Act.

    04. INCREASE IN THE RATE OF FED ON IMPORTED CIGARETTES AND OTHER SIMILAR PRODUCTS AND ELECTRONIC CIGARETTES

    (i) FED on imported cigarettes, cheroots, cigarillos, cigars of tobacco and tobacco substitutes were fixed at 65% of the retail price.

    However, there was no clear distinction between the locally produced cigarettes and the imported ones. To resolve the matter Sr. No. 8 has been substituted and imported cigarettes have been separated from the rest of the categories like Cigars, cheroots, Cigrillos of tobacco or tobacco substitutes. The duty on imported cigarettes has been substituted as 65% of the retail price or the rate of duty as prescribed at Sr. No. 9, of the First Schedule, whichever is higher.

    (ii) At the same time, a separate Sr. No. 8b has been inserted for the rest of the categories like Cigars, cheroots, cigarillos and cigarettes, of tobacco and tobacco substitutes with duty defined as 65% of the retail price or ten thousand rupees per kg whichever is higher.

    (iii) However, there was no duty prescribed for the E-liquids for which the rate has now been notified at Rs.10 per ml. A new Sr. No. 8a has been inserted for this purpose. Thus by charging FED on these liquids, the e-cigarettes or machines have been subjected to FED.

    05. REDUCTION IN THE RATE OF DUTY ON CEMENT

    The rate of FED on Cement has been reduced from Rs. 2 per kg to Rs 1.50 per kg. It is applicable on both import and local supply.

    06. LEVY OF FED IN THE CASE OF 4×4 DOUBLE CABIN PICK UP

    FED structure is already in place for both local and imported motor cars and SUVs excluding auto rickshaw falling under the PCI heading 87.03 i.e primarily passenger transport. However, double cabin pick up vehicles were still outside the ambit of FED despite being primarily used as passenger transport in the country. Keeping in view its usage as a passenger transport vehicle in Pakistan, it has now been brought in the ambit of FED @ 7.5% ad valorem in case of locally manufactured vehicles and @25% in the case of imported ones. However, the locally manufactured vehicles which have been booked on or before the 30th June 2020 will not be subject to FED, subject to the conditions as specified by the Board separately.

    07. INCREASE IN THE RATE OF FED ON FILTER RODS

    Filter rod is basic input material for cigarette manufacturing. Previously, rate of FED on filter rods was Rs 0.75 per filter rod. To enhance the effect of monitoring and discourage tobacco consumption, duty on filter rods has been enhanced to Re. 1 per filter rod.

  • Withholding tax rates for brokerage, commission updated

    Withholding tax rates for brokerage, commission updated

    ISLAMABAD: Federal Board of Revenue (FBR) has updated withholding tax rates for brokerage and commission income for tax year 2021.

    The FBR issued withholding tax card 2020-2021 incorporating amendment to Income Tax Ordinance, 2001 made through Finance Act, 2020.

    Under Section 233 of Income Tax Ordinance, 2001 federal government, provincial government, local authority, company, association of persons (AOP) are required to collect/deduct withholding tax at the time the brokerage or commission is actually paid.

    The deducted amount shall be minimum tax.

    The withholding tax rates for brokerage and commission shall be:

    In case of:

    (i) advertising agents shall pay 10 percent and persons not on the Active Taxpayers List (ATL) shall be 20 percent.

    (ii) life insurance agents where commission received is less than Rs0.5 million per annum the tax rate shall be 8 percent and for persons not appearing on the ATL the tax shall be 16 percent.

    (iii) the persons not covered in 1 & 2 the tax rate shall be 12 percent and for persons not appearing on the ATL the tax shall be 24 percent.

    Under Section 233AA of the ordinance the members stock exchange (margin financier & lenders) trading finance shall pay withholding tax.

    The National Clearing Company of Pakistan Limited (NCCPL) will collect withholding tax at 10 percent of the mark-up or interest from the members stock exchange (margin financier & lenders) trading finance at the time of mark-up / interest is paid.

    The tax is adjustable against total tax liability.

  • FBR asks taxpayers to update profile to avoid penalty

    FBR asks taxpayers to update profile to avoid penalty

    ISLAMABAD: Federal Board of Revenue (FBR) has asked taxpayers to update their profile with necessary information by December 31, 2020 in order to avoid fine and penalty.

    The FBR in a statement on Thursday said that complexity of return forms was an embodiment of the complexity of tax law. “Nevertheless, there is a dire need to simplify return forms without compromising on data required to verify accuracy of the declared version,” it added.

    Instead of endeavoring to obtain all the relevant information in the income tax return, a new section has been introduced under which taxpayers profile may be prescribed in order to capture data relevant to the taxpayer.

    Persons who are already registered before September 30, 2020 and are deriving business income or incomes subject to final taxation, trusts, welfare institutions, non-profit organizations and such other persons prescribed by the board are required to submit updated profit by December 31, 2020.

    Persons who obtain their registration after September 30, 2020 will require to furnish such profile within 90 days of registration. In case of any change in particulars of information, such persons shall update their profile within 90 days of the change in particulars.

    The profile contains information relevant to income regarding bank accounts, utility connections, business premises including all manufacturing, storage or retail outlets operated or leased by the taxpayer, types of businesses etc.

    Moreover, if a person fails to submit updated profile within the due date or time period as extended by the FBR under Section 214A of Income Tax Ordinance, 2001, such person shall not be included in the Active Taxpayers List for the latest tax year ending prior to the aforesaid due date or extended date.

    However, upon filing or updating the profile, such persons shall be allowed to be placed on the active taxpayers list upon payment of surcharge which will be Rs20,000 in the case of a company, Rs10,000 in the case of Association of Persons (AOP) and Rs1,000 in the case of an individual.

    Further, a penalty for non-filing or not updating the profile is also proposed at the rate of Rs2500 for each day of default subject to a minimum penalty of Rs10,000.

  • Duty drawback payment to be made on FIFO basis

    Duty drawback payment to be made on FIFO basis

    ISLAMABAD: Federal Board of Revenue (FBR) has said that payment of duty drawback will be paid on First-in First-out (FIFO) basis taking into account the date of filing of claim.

    The FBR on Thursday issued SRO 714(I)/2020 to issue rules for processing duty drawback claims.

    The FBR said that comprehensive audit of duty drawback payments would be carried out by the Directorate General of Post Clearance Audit 9pcA) of the FBR.

    Any recovery detected by the PCA may be deducted from the next duty drawback claim of the exporter besides initiating recovery proceedings under the recovery rules.

    According to the rules a consolidated discrepancy report would be sent by the Collectorate to State Bank of Pakistan (SBP) on monthly basis. “The SBP shall also send a scroll of all the duty drawback payments made to the exporters,” the FBR added.

    For calculation amount of customs duties paid at the time of import, past six months import data may be used taking the average quantity or value of each class or description of the materials, including packing materials, from which a particular class or description of goods is ordinarily produced or manufactured. Average exchange rates of the same period may be taken into consideration.

    The average amount of customs duties paid on imported materials used in the manufacture of components, intermediate of semi-finished products which are exported as such or further used for manufacture of goods shall be taken into account for the purpose of calculation of duty drawback.

    The average amount of customs duties paid at the effective rate on the imported input materials shall be calculated for the last six months import data.

    The average freight on board (FOB) value of each class or description of the goods exported during the last six months may be taken into consideration for the class or description of goods for which export drawback rates are being determined.

    The FBR said that the duty drawback as may be admissible shall be part of the process of assessment of cargo for export and the amount so admissible to the exporter shall be computed and processed by Customs Computerized System on sale proceeds amount repatriated into the country and Form-E settlement from the commercial bank.

  • New mechanism of case settlement introduced for taxpayers facilitation: FBR

    New mechanism of case settlement introduced for taxpayers facilitation: FBR

    ISLAMABAD: Federal Board of Revenue (FBR) on Thursday said that a new mechanism of settlement of cases has been introduced to facilitate taxpayers. The FBR said that before Finance Act, 2020, a taxpayer aggrieved with an assessment order could file an appeal before the appellate authority and the same time could also avail alternate dispute resolution mechanism.

    (more…)
  • Withholding tax rates on registration, transfer of motor vehicles updated

    Withholding tax rates on registration, transfer of motor vehicles updated

    ISLAMABAD: Federal Board of Revenue (FBR) has updated withholding tax rates on registration and transfer of motor vehicles for tax year 2021.

    The FBR updated the withholding tax card 2020-2021 (up to June 30, 2020) incorporating amendments made to Income Tax Ordinance, 2001 through Finance Act, 2020.

    The withholding tax rate under Section 231B on private motor vehicles

    Under this section motor vehicle registration authority shall collection withholding tax from persons getting new locally manufactured motor at the time of vehicle transferred in their name at the time of registration of new motor vehicle.

    The withheld tax shall be adjustable against liability.

    The tax rate shall be increased by 100 percent for persons not appearing on the Active Taxpayers List (ATL).

    The withholding tax rates under this section shall be:

    Engine CapacityFor ATLFor Non-ATL
    Up to 850CCRs7,500Rs15,000
    851CC to 1000CCRs15,000Rs30,000
    1001CC to 1300CCRs25,000Rs50,000
    1301CC to 1600CCRs50,000Rs100,000
    1601CC to 1800CCRs75,000Rs150,000
    1801CC to 2000CCRs100,000Rs200,000
    2001CC to 2500CCRs150,000Rs300,000
    2501CC to 3000CCRs200,000Rs400,000
    Above 3000CCRs250,000Rs500,000

    Withholding tax under Section 231B(1A)

    Every leasing company, scheduled bank, investment bank development finance institution, non-banking finance institution, MODARBA (Sharia compliant or under conventional mode) shall collect withholding tax from lessee at the time of lease.

    The withheld tax shall be adjustable.

    The tax rate shall be 4 percent of the value of motor vehicle on leasing of motor vehicle to persons not appearing in the Active Payers’ List.

    The withholding tax rates under Section 231B (2)

    Motor Vehicle Registration Authority shall collect withholding tax from person transferring the ownership / registration at the time of transfer.

    The withheld tax shall be adjustable against the liability.

    The rate of tax under sub-section (2) of section 231B shall be as follows-

    Engine CapacityFor ATLFor Non-ATL
    Up to 850CCRs0Rs0
    851CC to 1000CCRs5,000Rs10,000
    1001CC to 1300CCRs7,500Rs15,000
    1301CC to 1600CCRs12,500Rs25,000
    1601CC to 1800CCRs18,750Rs37,500
    1801CC to 2000CCRs25,000Rs50,000
    2001CC to 2500CCRs37,500Rs75,000
    2501CC to 3000CCRs50,000Rs100,000
    Above 3000CCRs62,500Rs125,000

    The withholding tax rates under Section 231B (3)

    Manufacturer of motor vehicle shall collect withholding tax from purchaser at the time of sale of vehicle.

    The withheld tax shall be adjustable against tax liability.

    The withholding tax rates under Division VII, Part IV of First Schedule of the Income Tax Ordinance, 2001 are as follow:

    Engine CapacityFor ATLFor Non-ATL
    Up to 850CCRs7,500Rs15,000
    851CC to 1000CCRs15,000Rs30,000
    1001CC to 1300CCRs25,000Rs50,000
    1301CC to 1600CCRs50,000Rs100,000
    1601CC to 1800CCRs75,000Rs150,000
    1801CC to 2000CCRs100,000Rs200,000
    2001CC to 2500CCRs150,000Rs300,000
    2501CC to 3000CCRs200,000Rs400,000
    Above 3000CCRs250,000Rs500,000
  • FBR issues SOPs for over-ruling objections on refund claims

    FBR issues SOPs for over-ruling objections on refund claims

    ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday issued procedure for over-ruling objections raised by Fully Automated Sales Tax e-Refund (FASTER) in order to facilitate taxpayers in obtaining their stuck up amount.

    The FBR issued Sales Tax Circular No. 01 of 2020 / IR-Operations to unveil the Standard Procedure for Over-Ruling the STARR objections on Sales Tax Refund claims.

    The FBR said that in order to bring uniformity into the system, and avoid discretion and delays in the processing of refund there is need to issue rules for the purpose at the national level.

    Accordingly, in suppression of all previous instructions, SOPs and guidelines on the matter, the new procedure has been laid down. Under the procedure an officer not below the rank of additional commissioner-IR shall over-rule the objections raised by the electronic system after completion of all legal formalities and scrutiny of record of objections.

    The FBR issued details of objections usually pointed out by the electronic system on which the tax officer may over rule.

    The FBR, however, said that the refund claimant shall furnish soft copies of all the scanned documents which are under dispute requiring over-ruling.

    The revenue body further said that where, result of automated processing of refund claims through FASTER or ERS, the claimants are not satisfied with the outcome of automated processing including calculation of refund or carry forward amounts or amounts deferred, the claimant may apply to the FBR through concerned chief commissioner for processing of the refund claim or revision of Annexure – H mentioning the reason.

    After scrutiny of the written request of the claimant, the Chief (Projects & Refunds) may allow reprocessing of the claim or revision of Annexure-H for necessary corrections.

    The FBR said that the procedure for over-ruling has become applicable with effect from August 01, 2020.

  • Withholding sales tax regime streamlined

    Withholding sales tax regime streamlined

    ISLAMABAD: Federal Board of Revenue (FBR) has streamlined sales tax withholding regime for compelling sales tax return filing and realizing full revenue on sale/purchase.

    The FBR issued Circular No. 01 dated August 06, 2020 to explain changes made to Sales Tax Act, 1990 through Finance Act, 2020.

    The FBR said that Eleventh Schedule provides for withholding agents to deduct tax at the time of purchase from both registered and unregistered persons.

    The categories of withholding agents include Federal and Provincial Government departments, companies, public sector organizations and autonomous bodies.

    However, it has been noticed that most of the registered suppliers whose tax has been withheld do not usually file their sales tax returns and resultantly, fail to pay their remaining amount of 4/5th tax in case 1/5th of the tax involved is withheld by the purchaser as aforementioned.

    To enforce returns by the such suppliers and payment of remaining tax involved, the whole concept of withholding has now been linked to the supplier (withholdee) being on the ATL list of the FBR or otherwise.

    The persons other than Active Taxpayers shall be given the same treatment as was previously accorded to unregistered persons i.e. government and public sector enterprises shall deduct whole of the tax involved in case of supplies made by persons other than those on ATL and the companies shall deduct 5 percent of gross value of supplies on supplies by such persons. This aims at promoting return filing and documentation culture in the country.

  • FBR admits Rs232 billion payable as income, sales tax refunds

    FBR admits Rs232 billion payable as income, sales tax refunds

    ISLAMABAD: Federal Board of Revenue (FBR) on Monday admitted to pay an amount around Rs232 billion as sales tax and income tax refunds to taxpayers.

    The FBR disclosed the amount of payable refunds at a meeting that was chaired by Dr. Abdul Hafeez Shaikh, Adviser to the Prime Minister on Finance and Revenue.

    Muhammad Hammad Azhar, Federal Minister of Industries and Production, Muhammad Azam Khan Swati, Minister of Parliamentary Affairs, Abdul Razak Dawood, Adviser for Commerce, Textile and Investment, Naveed Kamran Baloch,  Faizullah Kamoka, Secretary Finance and Chairman FBR Muhammad Javed Ghani were also present in the meeting.

    Dr. Muhammad Ashfaq Ahmed, Member (IR-Operaions), FBR made a presentation on the issue of refunds.

    “The meeting was informed that a total of Rs142 billion of Sales Tax refunds were pending and Rs90 billion of Income Tax refunds were due for payment.”

    The Member also informed the Ministers that export sector had been prioritized and an unprecedented amount of Rs.106 billion had been released to them. It was also explained that during 2020, fresh inflows and refund claims had matched the outflows and a total amount of refund released under the head Sales Tax was Rs.154 billion.

     In order to further facilitate the business community and to resolve their day to day issues on priority, it was advised that a technical committee having representatives of the business community be formed to examine and resolve faster refund related issues. It was also decided that there will be facilitation committees at field office level so that businessmen are able to have their issues resolved at local level.

    It was also decided that a complaint cell be constituted where businessmen lodge their complaints and the complaint cell may pursue the complaints for resolution.

    FBR was also advised to increase its public outreach and hold frequent meetings / media conferences and video conferences with trade associations to hear their viewpoint and issues relating to tax matters.

    It was noted that withholding tax regime increased the cost of doing business and FBR was advised to examine reducing the regime in the coming budget.

    Similarly the legal provisions relating to capping input tax adjustment at 90percent of payable tax in terms of section 8B of the Sales Tax Act were also proposed to be examined in the forthcoming budget exercise.

    Discussing the tax refunds, FBR was advised to focus on pending refunds of both export and non-export sector to give a business stimulus and easy cash flows in the post Covid scenario.

    Further enhancing the stimulus package, FBR was advised to pay Income Tax refunds up to Rs50 million each within one week for which FBR will be provided funds by the Finance Division.

    In order to ensure steady disbursement of refunds, it was also proposed that FBR may examine creating a refund fund from where Income Tax refunds relating to previous years may be paid in routine without hurting collection till the time all the pending refunds are liquidated.

    In juxtaposition to speedy regular disbursal of refunds with faster running in automated mode the importance of post refund audit to counter menace of flying invoices was proposed.

    FBR’s efforts on zero tolerance against corruption were appreciated and FBR was advised to highlight its good initiates including fight against corruption on media as well as on its websites.