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Tag: final tax regime

  • Finance Bill 2019: Final Tax Regime withdrawn

    Finance Bill 2019: Final Tax Regime withdrawn

    ISLAMABAD: The government has decided to withdraw Final Tax Regime (FTR) and bring various sectors into the documented economy.

    The FTR has been proposed to be abolished through Finance Bill, 2019 as part of budget 2019/2020, which was presented on Tuesday.

    The Federal Board of Income tax by its inherent nature is tax charged and levied on income.

    However presently persons involved in certain transactions are not required to pay tax on their actual profit.

    Instead, the tax collected or deducted on these transactions is treated as final tax liability.

    This regime is available persons to such as commercial importers, commercial suppliers of goods, contractors, persons deriving brokerage or commission income and persons earning income from CNG stations.

    “The tax collected or deducted from the aforesaid persons shall now be treated as minimum tax liability except for exporters, persons winning prizes and sellers of petroleum products.”

    This measure is designed as a first step for gradual phasing out of the final tax regime and transition to income based taxation for all persons.

  • Chemical merchants advocate FTR continuation for commercial importers

    Chemical merchants advocate FTR continuation for commercial importers

    KARACHI: Chemical merchants have strongly advocated continuation of Final Tax Regime (FTR) for commercial importers in the upcoming budget.

    In a statement issued on Saturday Shahid Vaseem, Chairman, Pakistan Chemicals & Dyes Merchants’ Association (PCDMA), said that because commercial importers pay 6 percent advance non-adjustable tax at import stage, whereas industrial importers of same raw material pay only 5.5 percent adjustable/refundable advance tax or avail tax exemption certificate facility, therefore it was not justified to withdraw Final Tax Regime (FTR) from Commercial importers without giving them options of claiming tax refund and facility for issuance of Tax exemption certificate if excess tax is already paid at import stage.

    In meeting with PCDMA memebers and leading importers of industrial Raw Materials, Chairman PCDMA, said that assessed value for calculation of customs levies of an industrial raw material whether it is imported by industrial importer or commercial importer; remains same either on the basis of valuation ruling (if available), international scan (if available) or custom data; therefore, chances of under-invoicing eliminated on import of industrial raw materials.

    Shahid Vaseem said in his opinion by imposing similar rate of sales tax on industrial raw materials will also eliminate the issue of imports by non-genuine industrial importers and excess imports by the genuine industrial importers, who just import big volumes of industrial raw materials to sale in market at huge profit due to less rate of tax and in some cases got extra ordinary benefits of various SROs. Which resulted in loss of billions of rupees to government revenue.

    Shahid Vaseem demanded the Government to provide a level-playing field for commercial importers who are importing industrial raw material and supply these essential raw materials to industries in SME segment. At import stage commercial importers are paying 17+3= 20 percent sales Tax as compared to 17 percent only, if same items are imported directly by industrial importers, this renders our customer industries in SME segment un-competitive in local as well as export markets, thereby eliminating job opportunities and hurting exports of value-added goods.

    He explained that 3 percent Additional Sales Tax on import of Industrial Raw Materials if imported by Commercial Importers is irrational and unjustified, because 3 percent ADDITIONAL Sales Tax can only be applied if the Value Addition on raw material is assumed 17.65 percent, which is not possible because there is no process of value addition involved and no inputs such as Land, Buildings, Machinery, Labor, Electricity and Gas etc. are used by commercial importers of same industrial raw materials.

    On the contrary the value addition by manufacturers is assumed as 10 percent only and the GST is charged at the rate of 1.7 percent despite all the above inputs.

    He claimed that by implementing same rate of taxes and extending benefits of various SROs to commercial importers, similar to the industrial importers of Raw materials for one year will result in significant drop in import volume by the industrial importers, which will prove the misuse of reduce tax facility by the industrial importers and will provide opportunity to the government to identify non-genuine industrial importers who are only existing for importing raw materials for commercial sales.

  • Textile exporters oppose proposed plan for abolishing zero-rating, FTR

    Textile exporters oppose proposed plan for abolishing zero-rating, FTR

    KARACHI: The textile exporters have strongly opposed to the proposed withdrawal of zero-rating of sales tax and abolishing Final Tax Regime (FTR).

    Chairmen of Value Added Export Sector Associations in a joint Press Conference held at PHMA House Karachi while expressing deep concern stated that discontinuation of zero rated status will result in ruin and disaster of export oriented industries, flight of capital, mass unemployment and huge foreign exchange losses.

    It will also lead to corruption in connivance with dubious FBR officials under the mode of flying invoices, over invoicing, frauds in refunds etc. Further, due to significant volumes of liquidity being stuck in the form of sales tax refunds, export growth will be severely affected and we may even witness a decline in exports.

    More than 200 billion rupees of exporters in Refunds of Sales Tax, Customs Rebate, Withholding Tax, DLTL & DDT are already held up with Government.

    They also conveyed serious apprehension on proposed abolition of Final Tax Regime (FTR) for exporters.

    The Chairmen and Representatives of Council of All Pakistan Textile Mills Associations, Pakistan Apparel Forum, Pakistan Hosiery Manufacturers & Exporters Association, Pakistan Textile Exporters Association, Pakistan Bedwear Exporters Association, Towel Manufacturers Association of Pakistan, Pakistan Cloth Merchant Association, Pakistan Knitwear and Sweater Exporters Association, Pakistan Denim Manufacturers & Exporters Association, All Pakistan Textile Processing Mills Association, Pakistan Readymade Garment Manufacturers & Exporter Association, Pakistan Cotton Fashion Apparels Manufacturers & Exporters Association, The Surgical Instrument Manufacturers Association of Pakistan, Pakistan Leather Garments Manufacturers & Exporters Association, Pakistan Tanners Association, Pakistan Sports Goods Manufacturers & Exporters Association, Pakistan Carpet Manufacturers & Exporters Association, All Pakistan Bedsheets & Upholstery Manufacturers Association have fervently appealed to continue the Zero-Rating Scheme in the national interest to uplift exports. The five zero rated sectors are already documented and contribute 70% of total Nation’s exports and generate 50% of total Nation’s employment.

    They added that collecting sales tax and then refunding – is a futile exercise which creates hassles for exporters and also opens flood gates of corruption. No collection and no refund of sales tax from five zero rated export sectors is a tried and tested formula for increasing revenue and exports. We must not forget that during last two decades the Government had tried to undo zero rating twice but miserably failed, hence, zero rating was reintroduced.

    The zero rated scheme, in consultation with stakeholders, can further be improved for much better outcome.

    They added that the Government rather than involving in futile exercise of collecting sales tax and then refunding should focus its energy on increasing the number of taxpayers. According to FBR, in year 2017 number of active taxpayers was only 1.13 million only (0.51% of total population).

    They warned that Government’s attempt to collect interest free money in shape of sales tax will put the country’s export at stake. Today, in this period of worst economic crisis, can we afford to do away with zero rated status for the five export oriented industries? they questioned. They cautioned that if the Zero-Rating Scheme is discontinued, 30 percent of the export will decline in first year. They urged the Government to broaden the tax-base rather than burdening the existing tax-payers and documented sectors of the economy.

    Pakistan rupee has been devalued approx. 20.16% against dollar from 123.6 to 149.07 in just 9 months. Such state of affairs when the dollar is appreciating and banks are also reluctant to fix dollar rates, the Textile Exporters will be aggrieved in case of BMR because some machineries are delivered in 6 to 8 months and cost of machinery is increased to 20% during the period.

    Previously, on assurances of the Government to continue zero rating, exporters made huge investment in shape of BMR.

    They articulated that the Government focused on enhancing exports and identified the Five Zero-Rated Export Sectors as the main engines of growth for this purpose whereby Power Division vide Notification SRO12(I)/2019 dated 1st January, 2019 has revised the power tariff for zero rated industrial consumers to net 7.5 cents / kwh and OGRA vide Notification dated 18th October 2018 has been fixed Gas tariff for Registered Manufacturers or Exporters of five Zero-Rated sectors and their Captive Power to Rs600/- per MMBTU but discontinuation of zero rating status from the five export sector will put all the hard efforts of the government in vain.

    The Federation of Pakistan Chambers of Commerce & Industry, Karachi Chamber of Commerce & Industry, Lahore Chamber of Commerce & Industry, Faisalabad Chamber of Commerce & Industry & Sialkot Chamber of Commerce & Industry have also supported the stance and demand of Value Added Export Sector Associations to continue zero-rating scheme for the betterment of economy and export enhancement.

  • FBR suggested to abolish FTR for commercial importers

    FBR suggested to abolish FTR for commercial importers

    KARACHI: Federal Board of Revenue (FBR) has been suggested to abolish Final Tax Regime (FTR) for commercial importers and other segment of the economy in order to make the taxation system equitable.

    FBR sources said that suggestions had been received from business community and large business houses to eliminate the FTR and presumptive tax regime.

    The sources said that large private sector entities and chartered accountants urged the newly appointed chairman Shabbar Zaidi, who is also a chartered accountant and had represented Institute of Chartered Accountants of Pakistan (ICAP), to status of normal tax regime for commercial importers should be restored.

    The ICAP in its tax proposal for tax year 2019/2020 said that certain sectors/goods are being taxed under the presumptive/value added/ fixed/ final tax regimes.

    Pakistan Business Council (PBC) also said that the presumptive/value added/fixed/final tax regimes are taxing turnover as opposed to income. In addition, entities availing this regime are not required to file tax returns.

    “Under garb of the FTR, massive evasion of customs duties and sales tax are taking place putting the formal sector under undue pressure.”

    The informal economy has outgrown the formal economy and the major driver of this has been the FTR.

    The FBR said that the chartered accountants were strongly supporting elimination of FTR for commercial importers and recommended: “commercial importers status under Normal Tax Regime as introduced through the Finance Act, 2018 should be restored.”

    They said that the presumptive/ value added/ fixed / final tax regime should be replaced with a normal tax regime.

    Income has to be the only basis for taxation and option to exit the tax chain should not be available for whatever reason.

  • PBC resents restoration of final tax regime for commercial importers

    PBC resents restoration of final tax regime for commercial importers

    The business association representing multinational companies (MNCs), the Pakistan Business Council (PBC), has strongly criticized the proposed restoration of the Final Tax Regime (FTR) for commercial importers, urging the government to reconsider its decision. The PBC’s concerns were voiced in response to the Finance Supplementary (Second Amendment) Bill of 2019.

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