Tag: KTBA

KARACHI: Karachi Tax Bar Association (KTBA) has sought unified law for federal and provincial tax authorities in order to remove friction in classification of goods and services.

The KTBA in its proposals for budget 2022/2023 stated that friction between Federal Board of Revenue (FBR) and Provincial Revenue Boards / Authorities on classification of goods and services and Single Sales Tax Return.

READ MORE: Proposals for recovery of sales tax on bad debts

Even after ten years of devolution the Federal Board of Revenue and Provincial Revenue Boards/Authorities are at variance with respect to classification of services and goods

This has created extreme unrest and constant problem amongst business community and causing lot of chaos, confusion, harassment and litigation.

To resolve the variance on the subject it is better if a unified law is draft and adopted by all tax jurisdictions. Additionally it is proposed that issue of variance on goods and services may be settled by commonly adopting anyone of the following classifications: (a) First Schedule to Pakistan Customs Tariff / PCT code used for classify goods and services in custom duties; and (b) WIPO’s NICE Classification used to classify goods and services in trademark matters.

READ MORE: Proposal for withholding on purchases from unregistered

The harmonization will provide clarity and ensure better business environment to promote trust amongst and will avoid discord amongst Federation and Provinces

Earlier, the KTBA submitted proposal for making changes regarding recovery of sales tax on bad debts.

It said that the Section 7 of Sales Tax Act, 1990 lays a timeline of 180 days to claim input tax on purchases and there is no provision to allow supplier reversal if corresponding receivable are not recovered and is written off.

READ MORE: Zero rate sales tax suggested for public welfare services

Sales Tax is a consumption tax and it has to be neutral for the businesses. Therefore, as per best practices of VAT concept- based tax laws around the globe, supplier is allowed adjustment on account of irrecoverable sales tax in subsequent tax periods.

It is proposed that section 7 be amended to include a provision for allowing adjustment of irrecoverable sales tax paid against a valid tax invoice subject to appropriate conditions. It is likely to reduce the cost of business for the registered taxpayers.

READ MORE: Advance tax on individuals must be for Rs10mn turnover

KARACHI: Karachi Tax Bar Association (KTBA) has submitted proposal for making changes regarding recovery of sales tax on bad debts.

The KTBA in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR) said that the Section 7 of Sales Tax Act, 1990 lays a timeline of 180 days to claim input tax on purchases and there is no provision to allow supplier reversal if corresponding receivable are not recovered and is written off.

READ MORE: Proposal for withholding on purchases from unregistered

Sales Tax is a consumption tax and it has to be neutral for the businesses. Therefore, as per best practices of VAT concept- based tax laws around the globe, supplier is allowed adjustment on account of irrecoverable sales tax in subsequent tax periods.

It is proposed that section 7 be amended to include a provision for allowing adjustment of irrecoverable sales tax paid against a valid tax invoice subject to appropriate conditions.

READ MORE: Zero rate sales tax suggested for public welfare services

It is likely to reduce the cost of business for the registered taxpayers.

Earlier, KTBA recommended amendments in withholding sales tax regime on purchases from unregistered taxpayers.

It said that the move was intended to increase the cost of doing business for unregistered taxpayers, which otherwise is counterproductive and has impacted the documented sector more adversely resulting in high cost of doing business for compliant taxpayers. On the other hand, no significant increase in registration has been witnessed as result of enhanced withholding rate.

READ MORE: Advance tax on individuals must be for Rs10mn turnover

It is proposed that either the withholding rate be reduced to 1% else tax withheld be allowed as admissible input tax to the registered taxpayers upon providing CNIC/ NTN of such unregistered suppliers so that FBR can trace those unregistered taxpayers and bring them into tax net.

It is likely to reduce the cost of doing business for the compliant registered taxpayers who are compelled to purchase their raw materials from the unregistered taxpayers owing to market practices.

READ MORE: Eliminating commissioner audit selection power sought

KARACHI: Karachi Tax Bar Association (KTBA) has recommended amendments in withholding sales tax regime on purchases from unregistered taxpayers.

The KTBA in its proposals for budget 2022/2023, informed the Federal Board of Revenue (FBR) that the the move was intended to increase the cost of doing business for unregistered taxpayers, which otherwise is counterproductive and has impacted the documented sector more adversely resulting in high cost of doing business for compliant taxpayers. On the other hand, no significant increase in registration has been witnessed as result of enhanced withholding rate.

READ MORE: Zero rate sales tax suggested for public welfare services

It is proposed that either the withholding rate be reduced to 1% else tax withheld be allowed as admissible input tax to the registered taxpayers upon providing CNIC/ NTN of such unregistered suppliers so that FBR can trace those unregistered taxpayers and bring them into tax net.

It is likely to reduce the cost of doing business for the compliant registered taxpayers who are compelled to purchase their raw materials from the unregistered taxpayers owing to market practices.

READ MORE: Advance tax on individuals must be for Rs10mn turnover

Another proposals, the tax bar said further tax at 3 per cent has been levied on taxable supplies made to a taxpayer who has not obtained sales tax registration number.

The expressions “person who has not obtained registration number” is quite vague and inadvertently covers all taxpayers whether required to be registered or not. This creates undue tax burden on taxpayers like service providers who otherwise are not required to be registered under the Act.

The expression “a person who has not obtained sales tax registration number,” as used in Section 3(1A) is required to be replaced with the following expression: “The person who are required to be registered but are not registered under the Act.” Alternatively a suitable explanation may also be inserted to amend SRO 648(I)/2013.

READ MORE: Eliminating commissioner audit selection power sought

Taxpayers not subject to tax under the Act dealing in non-taxable or exempt goods will be excluded from the purview of further tax and litigations pending before appellate forum will be settled.

The tax bra further highlighted that the FBR on the strength of Notification No.SRO 1222(1)/2021 has levied extra tax on supplies of electric power and natural gas to taxpayers having industrial or commercial connections, who either have not obtained sales tax registration number or are not on the Active Taxpayers List maintained by the Federal Board of Revenue under sales tax regime.

READ MORE: Threshold be doubled for domestic electric consumers

The expression “persons having industrial or commercial connections, but have either not obtained sales tax registration number or are not on the Active Taxpayers List maintained by the Federal Board of Revenue” is quite vague and inadvertently burdened all taxpayers like service providers, suppliers of exempt goods with extra tax.

It is proposed that expression “either in Income Tax or Sales Tax regime” be inserted in SRO 1222(1)/2021 after the words “Federal Board of Revenue”.

The issue is contentious and proposal is likely to rest all controversies.

KARACHI: The Federal Board of Revenue (FBR) has been urged to zero rate the sales tax on supplies of goods made to charitable or non-profit organizations providing public welfare services.

Karachi Tax Bar Association (KTBA) in proposals for budget 2022/2023, suggested amendments to sales tax laws regarding charitable or Non-Profit Organizations (NPOs), including hospitals and educational institutions.

READ MORE: Advance tax on individuals must be for Rs10mn turnover

The tax bar said that contrary Income Tax Law, there is no clear concept to determine a Charitable or Non-Profit Organizations in Sales Tax Act, 1990 and consequent to amendments brought in Fifth and Sixth Schedules, via Finance Supplementary Act, 2022 the situation has become more grave for these taxpayers.

“Public welfare services provided by such charitable, hospitals and educational institutions has become expensive as a good chunk of their revenue (donations/ grants) ends up in payment of sales taxes. This being contrary either to agreements signed by the Government with other States and international donors,” the tax bar said.

READ MORE: Eliminating commissioner audit selection power sought

It is suggested that supplies of goods to these institutions be charged to tax at the rate of zero percent and following new entry be inserted to Fifth Schedule: “Supplies to a Non-Profit Organization as determined U/s. 2(36) of Income Tax Ordinance, 2001″.

Earlier, the KTBA proposed the discretionary power of commission Inland Revenue to select audit cases should be eliminated.

“The power to select should only be exercised by the Federal Board of Revenue (FBR) under Section 214C of Income Tax Ordinance, 2001,” the tax bar proposed in its proposals.

READ MORE: Threshold be doubled for domestic electric consumers

The tax bar said Sub-Section (2) of Section 138 provides that If the amount referred to in the notice issued under sub-section (1) is not paid within the time specified therein or within the further time, if any, allowed by the Commissioner, the Commissioner may proceed to recover the tax in the prescribed manner.

“The tax authorities construe that term ‘payment’ mentioned in the section 140 does not cover amount recovered from the tax payer,” it added.

READ MORE: Genuine NPOs unable to get benefit of 100% tax credit

The KTBA said that rigorous proceedings causing hardship to taxpayers and leading protracted departmental and appellate proceedings.

“The power to select the return of income may rest only with the FBR already having the powers to select the case randomly through Computer U/s. 214C of the Ordinance,” it recommended.

KARACHI: The Federal Board of Revenue (FBR) has been proposed to increase the turnover from one million rupees to 10 million rupees for individuals to made advance payment.

Karachi Tax Bar Association (KTBA) in its proposals for budget 2022/2023, stated that Section 147 of the Income Tax Ordinance, 2001 relates to quarterly payment of advance tax.

READ MORE: Eliminating commissioner audit selection power sought

The subsection 6 entitles a taxpayer to file a lower estimate. Vide Finance Act 2018 condition has been added that the lower estimate be accompanied with prescribed details.

Subsection 4A as substituted vide Finance Act 2015 states that the taxpayer shall estimate the tax payable for the tax year, by the second installment due date and if the tax payable is likely to be more than the amount payable under sub-section (4), the taxpayer shall furnish an estimate of the amount of tax payable and discharge fifty per cent by the second quarter installment. The remaining fifty per cent to be discharged by the due date of the third and fourth quarter of the tax year.

READ MORE: Threshold be doubled for domestic electric consumers

The requirement of quarterly payment of advance tax is comfortable for the companies and AOPs as they are regularly operated entities. While the condition of income more than one million for the individual cause workload for the registered individuals to face notices and quarterly compliance of advance tax. Unease of doing business and rigorous compliance requirement.

The requirements to file prescribed details along with the lower estimate is against the scheme of deemed assessment and concurrent legislation as well since the section 205 mandates the taxpayer to discharge ninety percent of the tax liability by way of advance tax.

READ MORE: Genuine NPOs unable to get benefit of 100% tax credit

“The amendment shall be made in the threshold of one million rupees. It should be increased to ten million,” it is recommended.

 Sub-section147(4A) may be restored to the position prior to amendment vide Finance Act 2015 requiring taxpayers to file an estimate of higher side. While the ultimate objective of section 147 is to discharge tax liability of 90 percent this is well achieved vide pre-amended position with check as per section 205 of the Ordinance.

READ MORE: Changes sought in withholding on non-resident payment

The requirements under subsection 6 as inserted vide Finance Act 2018 tantamount to disturbing the concept of deemed assessment and should be deleted.

Giving rationale, the KTBA said this will save individuals from cost burdens of quarterly compliance And decrease the workload of individual tax-payers.

KARACHI: The Karachi Tax Bar Association (KTBA) has proposed the discretionary power of commissioner Inland Revenue to select audit cases should be eliminated.

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KARACHI: Federal Board of Revenue (FBR) has been suggested to double threshold for collection of withholding tax on consumption of electricity by domestic users.

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KARACHI: Karachi Tax Bar Association (KTBA) has highlighted that genuine Non-Profit Organizations (NPOs) are unable to gent benefit of 100 per cent ax credit.

In its proposals for budget 2022/2023, the tax bar informed the Federal Board of Revenue (FBR) that through Finance Act 2017 an additional condition was inserted to avail the benefit of 100 per cent tax credit.

READ MORE: Changes sought in withholding on non-resident payment

Also, provision for taxation of surplus funds has also been introduced. The condition debarred the NPO could be from having admin and management expenses of more than 15 per cent of its total receipts.

The legitimately collected funds properly invested in specified securities are subjected to tax.

“These harsh provisions was introduced in the wake of the trust gap between the FBR and the NPO’s whereby certain cases found susceptible of the genuineness or negligent toward compliances,” the tax bar said, adding that the condition was imposed across the board on all NPOs regardless of the fact that nature of some of the NPOs activities is such that it is impossible for them to restrict these expenses under the threshold of 15 per cent.

READ MORE: FBR urged to allow all tax adjustment in salary income

This has resulted in many genuine NPOs being unable to claim the benefit of 100 per cent tax credit.

It is recommended that NPO’s should be categorized according to their nature objectives and purposes and not one single standardized rule should be made applicable. The said condition be deleted or a clarification should be issued whereby certain nature of NPO’s are excluded from this condition.

Alternatively, the provision for taxation of surplus funds should not be applicable in case those funds are invested in Federal Government securities.

This will ensure that genuine NPOs are not punished for the compliances under which they have no control.

READ MORE: PYMA seeks duty, taxes cut on yarn in budget 2022/2023

The tax bar further informed the FBR that the Rule 214 of the Income Tax Rules, 2002 spells that approval of the Commissioner shall be valid for three years unless withdrawn.

Despite this position as per the Rules, the Commissioner in general issue certificates valid for only one year or even half year.

A clarification is proposed U/s. 2(36) of the Ordinance that approval of Commissioner shall be deemed in conformity with the Rule 214 of the Rules. To bring consistency between the law and the procedures in place.

Entitles not registered as Trust, Society or company. A condition has been imposed a requirement for NPOs to be formed and registered by or under any law as a non-profit organization.

READ MORE: CGT exemption on private company shares suggested

This has caused hardship to the entities that are not registered as Trust, Society or Section 42 company who yet completely fall within the four corners of Non- Profit

The law should be appropriately amended to exclude this requirement. Following amended words are suggested: “formed or registered by or under any law for the time being enforce”

It is a cardinal principal that income tax law is self-regulated law. Its applicability should not be linked with any other statutory status.

KARACHI: Karachi Tax bar Association (KTBA) has sought amendment to withholding on payments to non-resident persons under Section 152(5A) of Income Tax Ordinance, 2001.

The tax bar in its proposals for budget 2022/2023 informed the Federal Board of Revenue (FBR) that in case of payment to non-resident where the payment is not likely to be chargeable to tax, the payer is required to file an intimation to the Commissioner and the Commissioner is required to make an order within 30 days.

READ MORE: FBR urged to allow all tax adjustment in salary income

The period of 30 is on higher side and in certain cases, the non-resident recipient cannot be kept to wait for this long and gets practically in possible. Further, there is no mention in the law that if a Commissioner does not pass an order within 30 days, what should be the outcome.

READ MORE: PYMA seeks duty, taxes cut on yarn in budget 2022/2023

The KTBA suggested that the period of 30 days be curtailed to 15 days. Further, a proviso should be inserted that if the taxpayer is not served with an order within 15 days, the notice shall be taken as grant of exemption from withholding tax.

Furthermore, in case of multiple payments of the same nature a formal agreement / approval by the Commissioner for should be treated as enough for all other similar payments.

READ MORE: CGT exemption on private company shares suggested

The desired amendment will save the Commissionerate of the unnecessary administrative hassle, the tax bar added.

It further highlighted payment of Dividend to non-resident persons under Section 152 of the Income Tax Ordinance, 2001.

Section 152 broadly covers withholding tax incidences in the case of non-resident persons. The dividend is excluded from this purview. Bringing withholding tax regime at equity; and entitling non-residents to avail treaty benefits.

READ MORE: KTBA proposes up to 20% capital gain tax on real estate

The tax bar proposed that this section should include dividend paid to non-resident which are currently covered under section 150. Dividend to non-residents currently falls in section 150. Though the Board has clarified that DTT rates should apply however amendment in law is required. If fall U/s. 150, reduced treaty rates u/s 152(5) would be applicable for withholding agents for remitting dividend.

KARACHI: The Federal Board of Revenue (FBR) has been urged to allow complete tax adjustment at the time of deduction by employee on the time paid as salary under Section 149 of the Income Tax Ordinance, 2001.

Karachi Tax Bar Association (KTBA) in its proposals for budget 2022/2023 informed the FBR as per section 149, every person paying salary to employee shall deduct tax from the amount paid at specified rate after making tax adjustment of tax credit U/s. 61, 62, 63 and 64 and other adjustments.

READ MORE: PYMA seeks duty, taxes cut on yarn in budget 2022/2023

Complete tax credits though legally available are not adjusted in payroll, the tax bar said.

“This section should include all tax credit under Part X Chapter III as are admissible against salary income,” it suggested.

The current scheme has apparently missed tax credit U/s. 62A. The proposed amendment would cater all the current credits and those to be introduced from time to time.

READ MORE: CGT exemption on private company shares suggested

The tax bar also suggested amendment related to Employer contribution to Provident Fund under Section 12 of the Income Tax Ordinance, 2001.

Under Clause (3), Part I, Sixth Schedule, the employer’s contribution in the recognized provident fund in excess of Rs.150,000 (increased from Rs.100,000 by Finance Act, 2016) is deemed to be income of the employee.

This provision is invalid as the accumulated balance (it includes employer’s contribution) due and becoming payable to an employee participating in a recognized provident fund is totally exempt from tax under Clause (23), Part I, Second Schedule.

READ MORE: KTBA proposes up to 20% capital gain tax on real estate

Without prejudice to foregoing, since employer’s contribution does not constitute an actual receipt as the same is not at the disposal of an employee and therefore tax incidence should not be levied at the time of contribution.

Clause (3) Part 1, Sixth Schedule be amended to exempt employer contribution to bring it at par with clause (23) Part 1, Second Schedule.

READ MORE: FBR urged to issue rules for WHT on digital transactions

Alternatively, the threshold be based as Rs 150,000 or 1/10th of the salary whichever is higher.

Since employer’s contribution does not constitute an actual receipt as the same is not at the disposal of an employee and therefore tax incidence should not be levied at the time of contribution, the tax bar said.