ISLAMABAD: Federal Board of Revenue (FBR) has explained amendments made through Finance Act, 2021 in Sales Tax Act, 1990 and Federal Excise Act, 2005 for ease of doing business.
(more…)Tag: Finance Act 2021
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FBR constitutes committee for penalty on non-compliance of invoice, packing lists
ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday constituted a committee to formulate parameters for imposing penalties against non-compliance of invoice and packing list.
A spokesman said that the Federal Board of Revenue (FBR) has constituted a committee of senior Customs officers to formulate rules to implement Section 156(I) of the Customs Act, 1969, which was amended through the Finance Act, 2021.
The spokesman said that provision of law prescribes certain penalties for not placing invoice, packing list inside the container or failure to attach or upload mandatory documents with the goods declaration (GD).
The committee will formulate rules to develop parameters to specify the person and circumstances in which the penalty prescribed for non-placement of invoice and packing list shall be imposed.
The committee will also identity different types of GDs and prescribe documents that are considered mandatory for submission along with those GDs.
FBR has explained that the rules will be notified in due course of time and till framing of rules, no action shall be taken in this matter.
FBR has assured the trade bodies that the subject provisions will be applicable only after notification of rules by FBR.
Meanwhile the earlier practice will be continued by the Customs field formations. Moreover, after submission of draft rules by the committee, FBR will publish these draft rules on the FBR website for seeking input from all stakeholders before implementing the same.
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FBR prescribes minimum output of steel products for sales tax payment
ISLAMABAD: The Federal Board of Revenue (FBR) has prescribed minimum production of steel products for payment of sales tax under Thirteenth Schedule of Sales Tax Act, 1990.
According to Finance Act, 2021 an amendment has been made to Section 3 of the Sales Tax Act, 1990 in respect of goods, specified in the Thirteenth Schedule, the minimum production for a month shall be determined on the basis of a single or more inputs as consumed in the production process as per criterion specified in the Thirteenth Schedule and if minimum production so determined exceeds the actual supplies for the month, such minimum production shall be treated as quantity supplied during the month and the liability to pay tax shall be discharged accordingly.
In the Thirteenth Schedule following has been inserted:
Minimum production of steel products.—
The minimum production for steel products shall be determined as per criterion specified against each in the Table below:
S. No. Product Production criteria (1) (2) (3) 1. Steel billets and ingots One metric ton per 700 kwh of electricity consumed 2. Steel bars and other re-rolled long profiles of steel One metric ton per 110 kwh of electricity consumed 3. Ship plates and other re-rollable scrap 85% of the weight of the vessel imported for breaking”; and Procedure and conditions:—
(i) both actual and minimum production and the local supplies shall be declared in the monthly return. In case, the minimum production exceeds actual supplies for the month, the liability to pay tax shall be discharged on the basis of minimum production:
Provided that in case, in a subsequent month, the actual supplies exceed the minimum production, the registered person shall be entitled to get adjustment of excess tax on account of excess of minimum production over actual supplies:
Provided further that in a full year, as per financial year of the company or registered person, or period starting from July to June of next year, in other cases, the tax actually paid shall not be less than the liability determined on the basis of minimum production for that year and in case of excess payment no refund shall be admissible:
Provided also that in case of ship-breaking, the liability against minimum production, or actual supplies, whichever is higher, shall be deposited on monthly basis on proportionate basis depending upon the time required to break the vessel;
(ii) the payment of tax on ship plates in aforesaid manner does not absolve ship breakers of any tax liability in respect of items other than ship plates obtained by ship-breaking;
(iii) the melters and re-rollers employing self-generated power shall install a tamperproof meter for measuring their consumption. Such meter shall be duly locked in room with keys in the custody of a nominee of the Commissioner Inland Revenue having jurisdiction.
The officers Inland Revenue having jurisdiction shall have full access to such meter;
(iv) the minimum production of industrial units employing both distributed power and self-generated power shall be determined on the basis of total electricity consumption.
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Online market places to collect 2% withholding sales tax
ISLAMABAD: The online market places have been brought into the tax net as through the Finance Act, 2021 the owner of online market place has been made withholding agent and made responsible for collecting withholding tax at two per cent on sales made through digital platform.
A new definition has been including in the Sales Tax Act, 1990 through the Finance Act, 2021, which stated: online market place includes an electronic interface such as a market place, e-commerce platform, portal or similar means which facilitate sale of goods, including third party sale, in any of the following manner, namely:—
(a) by controlling the terms and conditions of the sale;
(b) authorizing the charge to the customers in respect of the payment for the supply; or
(c) ordering or delivering the goods.
In the Eleventh Schedule of the Sales Tax Act, 1990, the owner of online market place shall collect two per cent of gross value of supplies from persons other than active taxpayers.
However, the law explained that the provision of this entry would be effective from the date as notified by the FBR.
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Income tax exemption granted to international buying houses
ISLAMABAD: Federal Board of Revenue (FBR) has said that international buying house act as facilitator for exports from Pakistan to their principals abroad.
“In order to reduce disputes the amount remitted in foreign exchange to meet the expense of these buying houses by their principals has been exempted from tax,” the FBR said while explaining the major changes to Income Tax Ordinance, 2001 through Finance Act, 2021.
Moreover, the salary of non-resident foreign experts employed/ engaged by international buying houses has been exempted from tax if such experts perform duties for these international buying houses. These exemptions have been incorporated in clause (149) of Part I of the Second Schedule to the Ordinance.
According to amended clause 149:
Any sum—
(i) remitted to Pakistan through banking channels in foreign currency received by an international buying house from its non-resident principal to meet its expenses in Pakistan; and
(ii) chargeable under the head “Salary” received by a person who, not being a citizen or resident of Pakistan, is engaged as an expert by an international buying house.
Explanation.—For the purpose of this clause international buying house means persons acting as buying offices, buyers’ agents, or representatives of international buyers for facilitating exports from Pakistan and are registered as liaison offices with Board of Investment or companies registered with SECP. Provided that such buying houses act as cost centers with the sole purpose to bring export orders to Pakistan on behalf of their principals and do not enter into any local business transactions in Pakistan and their expenses are remitted to Pakistan.
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Withholding tax exemption allowed on purchase of used motor vehicles
ISLAMABAD: Federal Board of Revenue (FBR) has said that exemption from withholding tax has been granted on purchase of used motor vehicles from general public.
The FBR while explaining major changes made to Income Tax Ordinance, 2001 through Finance Act, 2021 said that used vehicle market is working in an undocumented environment.
In order to promote documentation and corporatization of this sector has been granted exemption from withholding tax on the purchase of used vehicle from general public and reduced minimum turnover tax from 1.5 per cent to 0.25 per cent .
“Necessary changes have been made in clause (45B) of Part IV of Second schedule,” the FBR said.
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IT exports, services granted 100% income tax credit
ISLAMABAD: The government has granted 100 percent tax credit to persons engaged in exports and services of Information Technology (IT), sources in Federal Board of Revenue (FBR) said on Monday.
Through Finance Act, 2021 incomes of persons engaged in IT exports and services have be allowed a tax credit equal to one hundred per cent of the tax payable under any provisions of Income Tax Ordinance 2001, including minimum, alternate corporate tax and final taxes for the period, to the extent, upon fulfillment of conditions and subject to limitations detailed as under:—
— a startup as defined in clause (62A) of section 2 for the tax year in which the startup is certified by the Pakistan Software Export Board and the next following two tax years; and
— Income from exports of computer software or IT services or IT enabled services as defined in clause (30AD) and (30AE) of section 2 upto the period ending on the 30th day of June, 2025:
Provided that eighty percent of the export proceeds is brought into Pakistan in foreign exchange remitted from outside Pakistan through normal banking channels.
The tax credit under shall be available subject to fulfillment of the following conditions, where applicable, namely:—
(a) return has been filed ;
(b) withholding tax statements for the relevant tax year have been filed in respect of those provisions of the Ordinance, where the person is a withholding agent; and
(c) sales tax returns for the tax periods corresponding to relevant tax year have been filed if the person is required to file Sales Tax Return under any of the Federal or Provincial sales tax laws.
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Banks to pay income tax on advance to deposit ratio
KARACHI: The Federal Board of Revenue (FBR) has said that in order to facilitate banking companies on payment of additional tax on earning arising from investment in government securities, a new regime has been introduced.
The FBR said that the income of banking companies earned from additional investment in federal government securities for tax year 2020 and onwards was taxable at the rate of 37.5 per cent instead of rates provided in Division II of Part I of First Schedule.
This provision has been further streamlined for prospective application. For tax year 2022 and onwards, the income arising from federal government securities shall be taxable on the basis of advances to deposit ratios of banks as under:
— 40 per cent instead of rate provided in Division II of Part I of the First schedule if advances to deposit ratio as on last day of the tax year is up to 40 per cent
— 37.5 per cent instead of rate provided in Division II of Part I of the First schedule if the advances to deposit ratio as on last day of the tax year exceeds 40 per cent but does not exceed 50 per cent
— at the rates provided in Division II of Part I of the First schedule if advances to deposit ratio as on last day of the tax year exceeds 50 per cent.
The amendments would reduce disputes regarding the calculation of additional investment and additional earning. Furthermore, the cut off rate to calculate advances to deposit ratio has been specified as last day of tax year.
These changes have been incorporated by amending Rule 6C of the Seventh Schedule.
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Additional tax on transfer of unregistered motor vehicles to continue
ISLAMABAD: The levy of withholding tax to discourage on money on transfer of motor vehicles will continue beyond July 01, 2021.
The Federal Board of Revenue (FBR) in an explanation to Finance Act, 2021 said that application of withholding tax on motor vehicles transferred without registration will continue during current fiscal year and onwards.
The FBR said that in order to discourage ‘on’ money, additional tax of Rs.50,000 , Rs.100,000 and Rs.200,000 for vehicles upto 1000 cc, between 1000cc and 2000cc and beyond 2000cc respectively was imposed where a vehicle is sold within 90 days of its ownership.
This was introduced vide Tax Laws (Amendment) Ordinance, 2021. It was applicable till 30.06.2021. Due to its positive impact, it has been continued. Further, the period of 90 days has been withdrawn.
Now the persons buying motor vehicles would be required to get them registered in their own names otherwise, this tax would be collectable.
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FBR highlights automation of procedures through Finance Act 2021
ISLAMABAD: The Federal Board of Revenue (FBR) has highlighted measures taken through Finance Act, 2021 to automate the procedures for facilitating taxpayers.
The FBR through an income tax circular highlighted the following measures taken for automation of procedures:
Automated issuance of refunds
In order to claim refunds, a taxpayer has to file refund application and provide documents for physical verification. To facilitate taxpayers, centralized automated refund system has been introduced where there will be no requirement for application and verification. The system based verified refunds would be issued directly into the bank accounts of taxpayers without any face to face contact. Enabling legal framework has been provided through insertion of section 170A in the Ordinance.
Prompt issuance of exemption certificate
The delay in the issuance of exemption certificate is a major concern of taxpayers. Time limitation of fifteen days shall be observed for issuance of exemption certificate for all corporate taxpayers which was earlier available to public listed companies only. After the lapse of statutory time limit, the web portal would automatically issue exemption certificate to the taxpayers. Necessary changes have been introduced in Section 153 and 159 of the Ordinance. However, commissioner has been empowered to cancel or modify the certificate with reasons in writing.
E-hearing
In order to provide faceless tax administration, reducing compliance cost and saving precious time of the taxpayers, the mechanism of e-hearing has been devised. Enabling legal provisions for admissibility of evidence collected during e-hearing have been introduced through 227E of the Ordinance.
Minimizing requirements for tax compliance
Taxpayers are subject to multiple compliances. Currently they are required to update their profile periodically. This requirement costs time, energy and resources. In order to facilitate taxpayers in line with ease of doing business this requirement has been withdrawn through substitution of section 114A of the Ordinance.
Electronic filing of appeal
The mechanism of online filing of appeals has been made available to taxpayers. However, enabling legal provisions were lacking which have been introduced through section 127 in the Ordinance.
Removal of requirement of multiple notices in concealment cases
It has been provided under law that where notice for amendment of assessment has been issued confronting taxpayer regarding concealment of income, no separate notice under section 111 will be required.