The tax concessions have been granted through Tax Laws (Second Amendment) Ordinance, 2019.
Tax experts at PwC A F Ferguson Chartered Accountants said that pursuant to the agreement between representatives of federal government and trade bodies on October 30, 2019; certain concessions have been allowed to traders through the Second Amendment Ordinance.
The term ‘trader’ has been defined to mean an individual engaged in business of buying and selling of goods in the same state, including a retailer and a wholesaler but excluding a distributor.
(i)The general rate of minimum tax payable (under section 113 of the Income Tax Ordinance 2001) has been reduced from 1.5 percent to 0.5 percent for tax year 2020 for traders having turnover up to Rs100 million.
However, for traders who have filed income tax returns for tax year 2018, the tax liability for tax years 2019 and 2020 should not be less than the tax liability for tax year 2018, to become eligible for reduced rate of minimum tax of 0.5 percent.
(ii)Individual having turnover of Rs. 50 million or more in any of the preceding tax years is liable to deduct tax under section 153 while making payments against supply of goods, services and contracts.
Through the Second Amendment Ordinance, traders being individuals having turnover up to Rs100 million have been exempted from deducting tax under section 153 while making payment against supply of goods, services and contracts.
The board is expected to clarify the year with respect to which turnover of Rs100 million will be calculated by the trader.
ISLAMABAD: A large segment of tax evaders in manufacturing sector and commercial importers are behind the traders’ protest in order to force tax authorities to withdraw condition of computerized national identity card (CNIC).
The condition of CNIC has been introduced in order to identify persons in supply chain and plug leakages of revenue from manufacturing stage to end-consumers.
In recent surveys of the Federal Board of Revenue (FBR) it has been identified that markets are flooded with goods from domestic and import sources and without payment of duty and taxes.
Sources in FBR said that some manufacturers and importers were supplying unreported goods to such retailers, which sold to end-consumers without payment of duty and taxes.
The traders do not want to become part of documented economy on the behest of manufacturers or commercial importers in order to shelter the tax evasion.
In the past several measures were taken by the government to bring retailers into the tax net but all the times such efforts ended in a failure.
The latest wave of protests by the trade community is another bid to force the FBR to bow down their demand. But this time, the FBR chairman, who is from private sector, is committed to bring traders into the tax net.
The traders on Wednesday announced to observe a countrywide shutter-down strike on October 28 and 29, following the failure of talks with FBR officials.
A protest demonstration was held by the traders against the tax reforms introduced by the government.
The protesting traders attempted to move towards the FBR Headquarters.
However, the police stopped the protesters at the Serena Chowk, where they observed a sit-in.
A few enraged protesters attempted to cause damage to the public properties and tried to remove barbwires in the area.
This prompted the law enforcers to baton-charge the protesters. Meanwhile, the FBR decided to hold talks with the protesters, but they failed to yield any results.
The leaders of the protesting traders’ community claimed that the FBR is not ready to listen to their demands and added that they will not pay unjust tax.
They further that the business community will not accept the condition of presentation of a copy of their CNICs for the sale and purchase of goods.
The traders hoped that the present government led by Pakistan Tehreek-e-Insaf (PTI) would reconsider their demands and will provide them the fix tax scheme.
ISLAMABAD: Federal Board of Revenue (FBR) has decided not to take any adverse action under tax laws against traders till September 30, 2019 regarding information obtained through Computerized National Identity Card (CNIC).
FBR Chairman Shabbar Zaidi held a meeting with all groups of traders of Pakistan on Thursday at FBR and discussed various issues about the traders.
It has been agreed with consensus that no adverse action under the Income Tax Ordinance 2001 and Sales Tax Act, 1990 will be undertaken against the traders merely on the basis of information emanating from providing of CNIC under the Sales Tax Act, 1990 as required under the Finance Act, 2019 for traders till September 30, 2019.
There will be discussion between the associations and bodies of the traders for the finalization of Scheme for small shopkeepers for which drafts have been furnished by various trade bodies which will be taken into consideration by the FBR.
The condition of obtaining CNIC number for unregistered persons at the time of supplies by registered person was to applicable from August 01, 2019.
The condition has been proposed to be applicable from July 01, 2019 through Finance Bill 2019.
However, through Finance Act, 2019 this condition was to applicable from August 2019.
An amendment has been introduced through Finance Bill 2019 to Section 23 of Sales Tax Act, 1990 under which it was now required specifically to mention particulars on invoices in Urdu or English language.
Tax Invoice is also required to reflect CNIC Number of recipient in case supplies are made to unregistered person.
The Finance Bill 2019 also proposed to require a supplier of textile yarn and fabric to mention count, denier and construction, in addition to description, on tax invoice at the time of making taxable supply.
ISLAMABAD: Federal Board of Revenue (FBR) has issued simplified tax return and wealth statement forms for traders in order to resolve problems of traders regarding tax compliance.
The FBR on Thursday issued draft simplified scheme for traders and stated that the scheme has been prepared after having practical research and discussion on the subject and exclusive interaction with the trade bodies.
It has been observed that traders’ genuine problems regarding tax compliance have to be addressed. The issues which are considered compelling by all the stakeholders are:-
(i) Complicated tax regime and equally complicated requirement of record keeping;
(ii) Complicated return form and wealth statement;
(iii) Personal interaction and personalized jurisdiction that has high probability of abuse of discretion even leading to corruption and harassment;
(iv) Complicated requirements for compliance such as withholding etc
In the proposed scheme all the four major concerns have been addressed.
Proposals from stakeholders as well as general public are invited for any modification in the above scheme. After public review the scheme will be put before the Federal Cabinet for final approval. It is expected that this reformed simplified procedure will be a new beginning on this subject.
INCOME TAX SPECIAL PROCEDURE FOR TRADERS
1. Scope and commencement.—(1) Subject to Rule 2 and 4, this procedure shall apply to traders including retailers and wholesalers who may opt to file Return under scheme. The procedure shall come into force with effect from Tax Year 2019
2. Persons covered.- For the purposes of this scheme a trader including retailer and wholesaler shall be an individual or association of persons carrying on business of buying and supplying goods to the general public or other businesses for the purpose of consumption, and has (a) turnover less than Rs 50 million;
(b) self-invested equity less than Rs 50 million;
(c ) cost of fixed assets less than Rs 100 million;
(d) number of employees less than or equal to five;
but does not include persons covered under small shopkeepers scheme under section 99B of the Ordinance.
The thresholds as prescribed shall be increased by ten percent each year to account for economic progression in business. The Federal Government shall prescribe the maximum limit when a person under this scheme shall be required to observe general provisions of the Ordinance.
This scheme shall only be applicable for persons resident in Pakistan.
Accounting Method and Computation of Income.- (1) A person accounting for income under the head business opting under this scheme shall derive income when it is received and shall incur expenditure when it is paid on cash basis connected with business. The excess of receipts over expenditure shall be considered as income liable to tax except for the adjustment of opening and closing stocks on a consistent basis if the taxpayer so desires for such an adjustment.
(2) Section 21 shall not apply in such cases except clause (n).
Registration and Filing of Return.- (1) All persons who are not already registered with FBR will be registered under this scheme shall submit the registration form on IRIS through FBR website.
(2) Person who holds NTN but has not filed Return in preceding five tax years may also submit registration form.
(3) Each person falling under this scheme shall electronically file a simplified Return of income accompanied with evidence of payment of due tax and simplified wealth statement. Such return filed shall be treated as assessment order under section 120 for the purposes of the Ordinance.
(4) All persons opting for under this scheme shall be required to file Return by September 30, 2019.
(5) Return and Wealth Statement filed may be revised without approval of CIR within sixty days.
Automated and Non-Jurisdictional system.- (1) There shall be national (central) jurisdiction in respect of persons falling under this scheme.
(2) All persons falling under this scheme shall be communicated through prescribed automated system.
Tax Rate and Payment of Tax.- (1) Income computed under Rule 3 shall be chargeable to under the head ‘Income from Business’ and tax payable thereon shall be computed at the rate prescribed under Division I, Part I of the First Schedule to the Ordinance.
(2) In case of loss for the year or tax liability less than one and half percent of turnover, minimum tax equal to one and half percent of receipts shall be payable.
(3) Tax paid under any provision of the Ordinance shall be minimum tax.
(4) An association of persons shall be liable to tax separately from the members of the association. The amount received by a member of the association in the capacity as member out of the income of the association shall be exempt from tax.
Examination of Return.- (1) Examination of assessment under this scheme shall be limited to activities and purposes within this scheme. The process, procedure and reporting of examination shall be prescribed.
(2) Where a person in respect of income is selected for examination under this scheme, the process of examination shall be undertaken not allowing any personal visit by any tax authority to the premises of the taxpayer, except with the approval of Federal Board of Revenue.
(3) No examination shall be undertaken after the expiry of five years from the date of filing the Return for that tax year.
(4) Definite Information: Where definite information regarding concealment of income or evasion of tax is available as defined under sub section (8) of Section 122 of the Ordinance, particular examination of the taxpayer may be undertaken, notwithstanding the provisions of this scheme. 5) No action under this Section will be undertaken prior to the approval of a Committee constituted by FBR consisting of three persons including a member of trade body not being the employee of the Government.
Dispute Resolution and Appeals.- (1) Where a person is dissatisfied with examination conducted, the matter shall be referred to dispute resolution committee to be formed under this scheme.
(2) The decision of dispute resolution Committee shall be binding on Federal Board of Revenue and not on the taxpayer;
(3) Person dissatisfied with examination conducted or decision of the DRC can file appeal under section 127 of the Income Tax Ordinance, 2001 after payment of 25 percent of tax payable.
(4) Provisions of Par III of Chapter VIII shall remain applicable on cases where there is a dispute on account of examination as undertaken under this scheme.
Withholding Agent.- (1) Person falling under this scheme shall not be required to act as withholding agent under any provision of the Ordinance.
Advance Tax.- Any person falling under this scheme may at its own option pay advance tax equal to one fourth of the tax liability as per last tax year in four equal installments.
Books of Accounts.- Persons falling under scheme shall keep and maintain books of accounts. The cash and bank book so maintained shall be the only ‘Books of Accounts’ required to be kept by the persons falling under this scheme for the purposes of compliance of this Ordinance.
Miscellaneous Provisions.- Source of self-invested equity for any earlier year shall be accepted.
Income under any other head shall be taxable under relevant provisions of the Ordinance.
For the purpose of collection and recovery of tax, provisions of Part IV of Chapter X shall apply.
Provisions of Section 182 and Section 205 shall apply accordingly.
The information disclosed by whistleblower shall be dealt in accordance with section 227B of the Ordinance.
The Federal Government may, from time to time, by notification in the official Gazette, amend the scheme so as to add, alter, omit or modify any provision therein.
Definitions.— Under this scheme, unless there is anything repugnant in the subject or context,—
(1) “Books of Accounts” means the prescribed cash/bank book containing all entries in respect of monies received and paid including those directly entered into bank account.
(2) “Fixed Assets” means under this scheme, property of any kind connected with business held by a person but does not include stock-in-trade.
(3) “Self-invested Equity” means personal funds invested in trade/business other than accumulated profits.
(4) “Turn over” means receipts from the sale of goods.
(5) All other expressions used but not defined in these rules shall have the same meaning as assigned to them under the Income Tax Ordinance, 2001.
RETURN OF INCOME UNDER RULE 4 OF THE TRADERS SCHEME
Form A
CNIC/NTN
Tax Year
Name*
Due Date
Address*
Business Assets
Filing Date
Employees
Equity/Capital
Description
Total Amount
1.
Turnover/Receipts
2.
Cost of Sales
3.
Opening Stock
4.
Purchases
5.
Closing Stock
6.
Other direct Expenses
7.
Gross Profit
8.
Overhead expenditure
9.
Net Profit/ Taxable income
10.
Income from all others sources
11.
Tax chargeable
12.
Minimum Tax
13.
Tax payable whichever is higher
14.
Tax already Paid
15.
Net tax payable/refundable
15.
Bank Account #
Verification
I Mr._____________ holding CNIC ______________do solemnly declare that to the best of my knowledge and belief the information given in this Return is correct and complete in accordance with the provisions of the Scheme.
Signature:
Date
WEALTH STATEMENT UNDER RULE 4 OF THE TRADERS SCHEME
Form B
S. No.
Description
CNIC/NTN
Tax Year
2019
Name
Due Date
1
Property/ Assets
2
House/Plot
3
Shop
4
Vehicle
5
Business Capital
6
Cash in hand/ Bank
7
Investment /Advance
8
Loan/liabilities
9
Net Assets
10
Reconciliation of Net Assets
11
Net Assets Current year
12
Net Assets Previous Year
13
Increase/Decrease in Assets
14
Income as per Return
15
Other inflows (Gift, Loan, remittance etc)
16
Outflows (Gift, Loan etc)
17
Personal Expenses
Verification
I Mr.______ holding CNIC _____
do solemnly declare that to the best of my knowledge and belief the information given in this Return is correct and complete in accordance with the provisions of the Scheme.
