Tag: retailers

FBR invites proposals for new retailers tax scheme

ISLAMABAD: The Federal Board of Revenue (FBR) is formulating new tax scheme for retailers and in this regard the authority has invited proposals from stakeholders.

The Chairman FBR invited proposals regarding the features of the proposed tax scheme that would serve the purpose of facilitating filing of income tax returns as well as ensuring revenue for the country.

READ MORE: Pakistan amends laws to tax retailers

The government has withdrawn the fixed tax on retailers through the recently promulgated Ordinance. Any new scheme of tax on retailers will be planned and implemented in consultation with the traders.

The Chairman FBR held a detailed meeting with the representatives of traders from all across the country at the FBR House Islamabad on Thursday afternoon. About 21 representatives of Markazi Tanzeem e Tajiraan Pakistan attended the meeting and some participants joined through video link.

READ MORE: FBR allows tax refund deducted through electricity bills

The traders appreciated the initiative of active consultative approach taken by the FBR and put forth various suggestions on the issue.

Earlier on August 25, a meeting with the representatives from all across Pakistan under All Pakistan Anjuman e Tajiraan was also held by the Chairman FBR in Islamabad.

READ MORE: Pakistan decides to roll back fixed tax scheme

While addressing the participants of the two meetings, the Chairman FBR resolved to keep follow-up meetings at the FBR headquarters and also at the regional level so that, through consultation and consensus, a feasible and workable scheme of taxation for retailers & traders is evolved.

The traders were requested to make in-house deliberations amongst themselves and firm up their suggestions for the future tax scheme to be rolled out next month.

The next round of meetings will be held with the traders’ bodies next week.

READ MORE: FTO investigates tax collection through electricity bills

September 1, 2022
Pakistan amends laws to tax retailers

ISLAMABAD: Pakistan on Monday revised laws to impose tax on retailers after suspending fixed tax scheme. President Arif Alvi has signed the bill namely Tax Laws (Second Amendment) Ordinance, 2022 to promulgate the revised taxation on the retailers.

Through the immediate ordinance, amendments have been made to Sales Tax Act, 1990 under which retailers are required to pay sales tax through electricity bill.

READ MORE: FBR allows tax refund deducted through electricity bills

The retailers/shopkeepers are now required to pay 5 per cent of the electricity bill is amounting up to Rs20,000.

The rate of tax is not applicable on the Tier-1 retailers as a separate mechanism for charging sales tax is in vogue.

The sales tax rate shall be 7.5 per cent in case the electricity bill is above Rs20,000.

The amendments have been applicable from July 01, 2022. This means the retailers have to pay the tax on their electricity bill issued for the month of July 2022.

A commissioner of Inland Revenue, Federal Board of Revenue (FBR) has been authorized to issue order to the electricity supplier regarding exclusion of a person who is either a Tier-1 retailer or not a retailer.

READ MORE: Pakistan decides to roll back fixed tax scheme

According to the latest ordinance, notwithstanding anything contained in this Act, the Federal Government may, in lieu of or in addition to the tax under sub-section (9), by notification in the official Gazette, levy and collect such amount of tax at such rates and from such date as it may deem fit, from retailers, other than those falling in Tier-1, through their monthly electricity bill, and may also specify the mode, manner or time of payment of such tax:

Provided that different rates or amounts of tax may be specified for different persons or class of persons.

The ordinance also amended Income Tax Ordinance, 2001 and introduced special provision relating to payment of tax through electricity connections.

READ MORE: FTO investigates tax collection through electricity bills

It said that notwithstanding anything contained in the Ordinance, a tax shall be charged and collected from retailers other than Tier-I retailers as defined in the Sales Tax Act, 1990 (VII of 1990) and specified service providers on commercial electricity connections at the rates specified in the income tax general order issued in terms of sub-section (2).

Sub-Section (2): For the purposes of this section, the Federal Government or the Board with the approval of the Minister in-charge pursuant to the approval of the Economic Coordination Committee of the Cabinet may, issue an income tax general order to-

(a) provide the scope, time, payment, recovery, penalty, default surcharge, adjustment or refund of tax payable under this section in such manner and with such conditions as may be specified;

(b) provide the collection of tax on the amount of bill or on any basis of consumption, in addition to or in lieu of advance tax collectible under sub-section (1) of section 235, at such rates or amounts, from such date and with such conditions as may be specified;

READ MORE: Withdrawal of sales tax through electricity bills demanded

(c) provide record keeping, filing of return, statement and assessment in such manner and with such conditions as may be specified;

(d) provide mechanism of collection, deduction and payment of tax in respect of any person;

(e) include or exempt any person or classes of persons, any income or classes of income from the application of this section, in such manner and with such conditions as may be specified; and

(f) provide that tax collected under this section shall in respect of such persons or classes of persons be adjustable, final or minimum, in respect of any income to such extent and with such conditions as may be specified.

The provisions of sub-section (1) of section 235 shall apply to the persons as specified therein unless specifically exempted under the income tax general order issued under sub-section (2).

The provisions of section 100BA and rule 1 of the Tenth Schedule shall not apply to the tax collectible under this section unless specifically provided in respect of the person or class of persons mentioned in the income tax general order issued under sub-section (2).”

August 22, 2022
Inquiry ordered into collection of increased sales tax ratio

The government on Sunday ordered an inquiry into the collection of sales tax at increased rates from retailers. Prime Minister Muhammad Shehbaz Sharif directed the investigation, focusing on the imposition of a higher sales tax ratio on small traders through electricity bills, which exceeded the agreed-upon rate.
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August 21, 2022
FBR allows tax refund deducted through electricity bills

KARACHI: The Federal Board of Revenue (FBR) has allowed tax refund deducted through electricity bills, sources said on Thursday.

The sources said that electricity supply companies had started adjusting the amount deducted as sales tax on monthly bills of commercial connection holders.

READ MORE: Pakistan decides to roll back fixed tax scheme

In this regard the FBR circulated the recent decision of a committee regarding fixed tax regime for retailers.

Sources in K-Electric, the power producing and supply company mainly for residents of Karachi, said that the utility was adjusting the electricity bills of those consumers who have days for due date in payment of electricity charges.

Furthermore, those who had paid their bills along with sales tax will be adjusted in the next bill, the sources added.

The power companies are making adjustment against the paid amount on the directives of the FBR, the sources further added.

READ MORE: FTO investigates tax collection through electricity bills

In order to review the fixed tax regime a meeting was held on August 04, 2022 at the ministry of finance to finalize the collection of sales tax through electricity bills.

The meeting was presided over by Finance Minister Dr. Miftah Ismail. The meeting decided that the fixed tax scheme introduced through Finance Act, 2022 would be rolled back ab initio and the retailers would continue to pay taxes as per previous (pre-budget) mechanism and rates.

The meeting decided that for the next three months i.e. July to September 2022, the previous tax rates would continue to apply on retailers.

It was decided that the government would review the situation and would notify new tax rates effective from October 01, 2022.

For reversal of fixed tax scheme, necessary legislation would be enacted by the FBR as soon as possible.

The fixed tax rate was implemented and the FBR started collection through electricity bills effective from July 01, 2022. The power utility on the behalf of the FBR applied the fixed tax on all the commercial connections irrespective of nature of business, including service providers.

The illogical application of fixed tax regime invited huge and cry from the several quarters, which forced the government to review its decision.

READ MORE: Withdrawal of sales tax through electricity bills demanded

Recently, the Federal Tax Ombudsman (FTO) launched investigation in a complaint received regarding sales tax collection through electricity bills.

The FTO on July 29, 2022 issued notices to Secretary, Revenue Division, Chief Commissioner and Commissioner Inland Revenue Large Taxpayers Office (LTO) Karachi, in the complaint filed by Mrs. Fauzia Salman against illegal and unlawful collection of taxes through electricity bills by K-Electric Limited.

READ MORE: Tax through electricity connections on retailers, service providers

August 11, 2022
Tax through electricity bills not taken back: clarification

ISLAMABAD: The federal government on Thursday clarified that the tax through electricity bills has not been taken back so far.

A clarification has been issued through official media of the government of Pakistan that news being released by some media channels that the government has taken back the decision of tax on electricity bills.

READ MORE: Pakistan’s tax agency collects Rs458 billion in July 2022

“It is clarified that there is no authenticity in such news and no decision has so far been taken by the govt. However talks are been held with traders and business community on taxes on electricity bills.”

The power utilities across the country have started collection of sales tax on retailers through the electricity bills for the month of July 2022.

The tax has been imposed on all commercial connections irrespective the nature of work or business at the premises where the electricity meter is installed.

READ MORE: FTO investigates tax collection through electricity bills

Following the issuance of bills for the month of July 2022 a huge resentment was seen from the retailers as well as service providers.

Service providers say that they were not liable to pay sales tax to the federal government as the provincial governments have jurisdiction over it.

READ MORE: Super tax to hammer auto business in Pakistan: Honda Atlas

However, Finance Minister Miftah Ismail recently held talks with business community and retailers to resolve the issue.

The finance minister promised that the issue would be resolved soon. He said that bills below 150 units would not be subject to the tax. The finance minister also assured the business community that other taxes on the electricity bills would also be withdrawn once the issue of fixed tax regime for retailers was settled.

READ MORE: FBR starts filling 502 vacancies in Inland Revenue

August 4, 2022
Tax through electricity connections on retailers, service providers

ISLAMABAD: The Federal Boar of Revenue (FBR) has issued explanation to tax collection through electricity connections from retailers and service providers.

In this regard the FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments introduced through the Finance Act, 2022 to the Income Tax Ordinance, 2001.

The FBR said that in order to collect income tax from certain retailers and specified service providers a special fixed tax regime has been introduced though insertion of section 99A of the Income Tax Ordinance, 2001.

READ MORE: FBR explains income tax on export of services

Now retailers, other than Tier-I retailers as defined in Sales Tax Act, 1990, and specified service providers will pay fixed income tax through their commercial electricity bills which has been provided in clause (3) of Division IV of Part IV of First Schedule to the Ordinance in the following manner:

Where the gross amount of monthly bill does not exceed Rs30,000: the tax rate shall be Rs3,000

Where the gross amount of monthly bill exceeds Rs30,000 but does not exceed Rs50,000: the tax rate shall be Rs 5,000.

READ MORE: FBR restores 100% depreciation deduction

Where the gross amount of monthly bill exceeds Rs50,000 but does not exceed Rs100,000: the tax rate shall Rs.10,000.

Retailers and service providers as notified by the Board in the income tax general order: the tax shall be up to Rs.200,000.

The FBR said that this is final tax on the income of persons covered in this section in respect of business being carried out from the premises for which tax is collected under this section.

READ MORE: FBR notifies graduated tax rates on disposal of securities

Retailers from whom tax has been collected in terms of sub-section (9) of section 3 of Sales Tax Act, 1990 shall not be required to pay tax under section 99A of the Ordinance and the tax collected under the Sales Tax Act, 1990 is also a final discharge of income tax liability under section 99A of the Ordinance.

The Board with the approval of Minister in-charge is empowered to determine the scope, mode, manner, record keeping, mechanism of collection and deduction etc and to include or exempt any person or class of person, any income or class of income though issuance of income tax general order for the purpose of this section.

READ MORE: FBR applies separates CGT rates on immovable properties

Furthermore, enabling provision has been provided by inserting sub-section (1A) in section 235 of the Ordinance to collect tax through electricity bills from retailers other than Tier-I retailers as defined in Sales Tax Act, 1990 and specified service providers for the purpose of this section.

The FBR issued another Circular No. 09 of 2022/2023 (Sales Tax, Federal Excise and ICT tax on service). According to this circular, the fixed tax regime for the retailers has been rationalized and now instead of percentage of the amount of monthly electricity bill, tax shall be charged on their monthly electricity bills as; Rs. 3000 for monthly bill upto Rs30,000, Rs5,000 if the monthly bill exceeds Rs30,000 but does not exceed Rs50,000 and Rs10,000 for monthly bill over Rs50,000.

This shall constitute full and final discharge of tax liability of such persons under both Income Tax Ordinance, 2001, and Sales Tax Act, 1990.

However, these tax amounts shall be doubled if the name of the retailer is not appearing on the Active Taxpayers List (ATL) issued by the Board under section 181A of the Income Tax Ordinance, 2001 on the date of issuance of monthly electricity bill, the FBR added.

In addition to the above, the Board has been empowered to notify through a Sales Tax General Order (STGO) persons or class of persons required to discharge their sales tax liability through payment of a fixed amount along with their monthly electricity bills.

July 23, 2022

Non-ATL retailers to pay double amount of fixed tax

ISLAMABAD: Small retailers or a shopkeepers have to pay double the amount of fixed tax in case of not appearing on the Active Taxpayers List (ATL).

The federal government through the Finance Bill, 2022 introduced a scheme of fixed tax for small retailers.

However, the National Assembly approved the bill with certain changes in the fixed tax regime. The Finance Act, 2022 now has binding on the small retailer to register themselves with the tax department and appear on the Active Taxpayers list (ATL) in order to avail the fixed tax facility.

Otherwise, in case of not appearing on the ATL, the small retailer is required to pay one hundred per cent more on the amount of fixed tax.

In order to collect the tax under this regime, the government decided to recover the amount through electricity bill.

In this regard certain amendments have been made to Sales Tax Act, 1990 and Income Tax Ordinance, 2001.

In sub section 9, Section 3 of Sales Tax Act, 1990, a new proviso has been inserted through the Finance Act, 2022, which stated:

“Provided that the above rates of tax shall be increased by one hundred percent if the name of the person is not appearing in the Active Taxpayers List issued by the Board under section 181A of the Income Tax Ordinance, 2001 on the date of issuance of monthly electricity bill.”

Similarly, a new Section 99A has been inserted to the Income Tax Ordinance, 2001 and approved through the Finance Act, 2022, which is as follow:

“99A. Special provisions relating to payment of tax through electricity connections.

(1) Notwithstanding anything contained in the Ordinance, a tax shall be charged and collected from retailers other than Tier-I retailers as defined in Sales Tax Act, 1990 (VII of 1990) and specified service providers on commercial electricity connections at the rates provided in clause (2A) of Division IV, Part IV of the First Schedule.

(2) A retailer who has paid sales tax under sub-section (9) of section 3 of Sales Tax Act, 1990 (VII of 1990), shall not be required to pay tax under this section and the sales tax so paid shall constitute discharge of tax liability under this section.

(3) The tax collected or paid under this section shall be final tax on the income of persons covered under this section in respect of business being carried out from the premises where the electricity connection is installed.

(4) For the purposes of this section, Board with the approval of the Minister in-charge may issue an income tax general order to-

(a) provide the scope, time, payment, recovery, penalty, default surcharge, adjustment or refund of tax payable under this section in such manner and with such conditions as may be specified.

(b) provide record keeping, filing of return, statement and assessment in such manner and with such conditions as may be specified;

(d) include or exempt any person or classes of persons, any income or classes of income from the application of this section, in such manner and with such conditions as may be specified.”

The rate of tax leviable under section (99A), and collectable under sub section (1A) of Section 235 shall be as under:-

Gross amount of monthly bill	Tax
Where the amount does not exceed Rs. 30,000	Rs. 3000
Where the amount exceeds Rs. 30,000 but does not exceed Rs. 50,000	Rs. 5000
Where the amount exceeds Rs. 50,000 but doesnot exceed Rs. 100,000	Rs. 10,000
Specified retailers and service providers through Income Tax General Order	Rs.50,000

July 5, 2022

Fixed tax rates for retailers, payable through electricity bills

ISLAMABAD: The government has announced a fixed tax regime for small retailers, which will be collected their monthly electricity bills.

The fixed tax regime has been proposed through budget 2022/2023, which was announced on June 10, 2022.

Through Finance Bill, 2022 amendment has been made to Income Tax Ordinance, 2001 to propose special provisions relating to payment of tax through electricity connections.

Finance Minister Miftah Ismail on the floor of the house while presenting the federal budget said a fixed tax regime for small retailers is being proposed wherein tax will be collected along with electricity bills along with simplified registration and reporting regime.

“The proposed tax will range from Rs.3000 to Rs.10,000 and this will be a final discharge of tax liability. I can reassure the business community that FBR will not probe further after payment of the fixed tax by a retailer,” the minister added.

Through the Finance Bill, 2022 a new Section 99A has been inserted to the Income Tax Ordinance, 2001, which is as follow: