Budget Brief 2013-14

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2013-14 FINANCE BILL 2013 HIGHLIGHTSINCOME TAX ORDINANCE, 2001

REVENUE MEASURES

Increased burden on the easiest to tax class of tax payers i.e.salaried class. The tax slabs have been once again changed andmaximum rate of taxation has been proposed to be increased to30% from existing 20%.

Non-salaried individuals and association of persons have alsobeen targeted by increasing the highest rate from existing 25%to proposed 35% with a major focus to discourage non corporateentities in business. Many professional service providers wouldbe mainly at disadvantage by this measure as they are legallynot allowed to form companies.

Inter-corporate dividends have been proposed to be broughtunder the ambit of final tax regime.

Tax under section 148 on imports by person other than industrialundertakings and companies is proposed to be increased to 5.5%from prevailing general rate of 5%.

Non-corporate taxpayers will also be at disadvantage now asincreased withholding taxes on account of payments for sales ofgoods, rendering of services and contracts have been proposed.

The rate for deduction of tax at source on prize on prize bonds orcross-word puzzles has been proposed to be increased fromexisting rate of 10% to a proposed rate of 15%.

Rates of taxation on property and withholding of advance taxtherefrom has been sought to be increased significantly reachingthe highest level at 17.5% as against the existing maximum of10%.

Increase the rate of advance tax on cash withdrawals exceedingRs. 50,000 per day from existing 0.2% to a proposed rate of0.3%.

Rate of minimum tax proposed to be increased from existing 0.5% to 1%.

Minimum tax proposed on builders and land developers based ontheir sales or bookings during the year at Rs. 25 per sq. ft forbuilders and Rs. 50 per sq. yd for developers.

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The prevailing rate of initial allowance for plant and machinery has been proposed to bereduced from existing 50% to 25%, bringing it at par with the allowance on buildings, whichcertainly would increase in taxable profits and thus taxation.

ADVANCE TAX WITHHOLDING / COLLECTION

Persons registered under the Sales Tax Act, 1990 have been proposedto be made obliged to deduct withholding tax under section 153.

Despite the proposal to omit section 153A on collection of withholdingtax from distributors, dealers and wholesalers, 13 sectors have nowbeen proposed where advance tax is required to be collected from thesupply chain partners 0.1% from distributors, dealers andwholesalers and 0.5% from retailers.

Private educational institutions, boutiques, beauty parlours, hospitals,clinics, maternity homes to withhold advance tax from propertyrentals.

Individuals or association of persons also been sought to withholdadvance tax where annual rentals on property is Rs. 1.5 Million orabove.

NCCPL proposed to collect advance tax from margin financiers, tradingfinanciers and lenders providing any margin financing, margin tradingor securities lending.

Lump sum (one-off) payment of advance tax on motor vehicles hasbeen sought to be introduced.

Functions of almost every type are proposed to be brought under theambit of advance tax collections at 10% of total bill includingexpenditure on food. The clubs, restaurants, wedding halls and lawnsare required to act as withholding agents.

Persons responsible for censoring or certifying a foreign- producedfilm, a TV drama serial or a play, for screening and viewing to collectadvance tax at specified rates. Majorly the foreign produced dramashave been proposed to be subjected to Rs.100,000 per episode tax.

PEMRA proposed to collect advance tax upon grant and renewal oflicenses to cable TV operators and other electronic media activitiesbeing regulated by PEMRA.

Educational institutions are being required to collect advance tax at5% on the gross amount of fee where the annual fee exceed Rs.200,000.

Advance tax on dealers, commission agents & arhatis etc. is alsosought to be collected through market committees at the time ofissuance or renewal of licenses.

Advance tax on cash withdrawals exceeding Rs. 50,000 per day fromexisting 0.2% to a proposed rate of 0.3%.

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Rates for collection of advance tax have been proposed to drastically increase from aminimum increment of 33.33% up to 492.59% depending upon the engine capacities.

Advance tax at the time of sale by public auction from prevailing5% of the gross sale price is proposed to increase to a rate of 10%.

Measures have also been taken to increase collections from

minimum tax. WITHDRAWAL OF EXEMPTIONS

Exemption on free or concessional passage provided bytransporters including airlines to its employees (including themembers of their household and dependents).

Exemption available to universities or other educationalinstitutions established solely for educational purposes and not for

purposes of profit.

Exemption on dividend in specie derived in the form of shares in a company.

Tax concession on lying allowance received by specified officials ofPakistan Armed Forces, Pakistani Airlines or Civil AviationAuthority, Pakistan Armed Forces and submarine allowancereceived by the officers of the Pakistan Navy.

Tax concession / rebate of 75% available to full time teachers or researchers.

Exemption of profit on debt on DSCs, SSCs, Savings Accounts orPost Office Savings Accounts, or TFCs requiring tax to be deductedfrom profit on debt on these instruments and accounts irrespectiveof the quantum of investment.

REGULATORY MEASURES

Amendments proposed to Income Tax law endeavoring to override theprovisions of statues regulating the business of banking in Pakistan tomake it obligatory upon banks to provide information of their accountholders and customers to be used only for tax purposes. Specially, detailsof persons depositing more than one million during a particular month isrequired to be reported to tax authorities. Similarly, details of personswhose credit card spending exceed one hundred thousand during aparticular month required to be reported to tax authorities. Taxauthorities direct access to data base has also be sought.

RELIEF MEASURES

It has been proposed to insert a proviso relating to a relief of 1%,reducing the tax rate for companies other than a banking companyfrom existing 35 % to 34% applicable to tax year 2014.

Tax exemption to an enterprise operating in Special Economic

Zones has been proposed to be increased from existing 5 years to10 years.

Enhance relaxation on income tax at import stage based onengine capacity from 25% to 100% of tax upon import of hybridcars.

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Relaxation from the provisions of section 148 is sought to begiven to such industrial undertakings which opt to pay taxliability for the current tax year on the basis of determinedtax liability for preceding two tax years, whichever is thehigher.

It has been proposed to maintain the rate of tax on dividendreceived by a banking company from Money Market Fundsand Income Funds at 25% for tax year 2014 and onwards.

CLARIFICATORY MEASURES

Explanation to section 171 has been proposed to clarify that thedate from which compensation for delayed refund shall becalculated shall be the date of issuance of refund order and not thedate of assessment order. However, even the provisions of existingsection depict so but the in various cases the superior courts havealready ruled that it should be the date of assessment orderbecause on that date commissioner has been treated to haveissued assessment order thus accepting the claim of refund of theappellant.

SALES TAX ACT, 1990

Salient features of the amendments in Sales Tax Act, 1990proposed through Finance Bill 2013 are provided hereunder forperusal.

REVENUE MEASURES

TIME OF SUPPLY

After a long process of litigation, historically the law was amended by

Finance Act, 2007 to restrict the definition of time of supply to thedelivery of goods or rendering of services.

The definition has been proposed to be amended to includeadvance payment / part payment as event of determination of timeof supply. Under the proposed amendment time of supply would beearlier of delivery of goods or time when payment is received.

ENHANCEMENT IN TAX RATES

General rate of sales tax has been proposed to be enhanced from16% to 17%. Consequent to issuance of declaration under TheProvisional Collection of Taxes Act, 1931, this rate would beeffective from 13.06.2013. Following other rate changes have alsobeen introduced.

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2% further tax has once again been introduced for supplies to un-registered persons effectivefrom 13.06.2013. Earlier this further tax was being collected @ 3% and was abolished throughFinance Act, 2004. Now, the further tax has been re-introduced with outsourcing power toFederal Government to announce any exclusions through notification official Gazette;

5% additional sales tax introduced on commercial and industrialelectricity and gas consumers having monthly bill in excess ofRs.15,000. Special procedures rules for collection of abovementioned additional sales tax @ 5% tax have been introduced.

INTRODUCTION OF FIXED TAX REGIMEThrough introduction of new sub-section (1B) in section 3 of the Sales TaxAct, 1990, the bill seeks to empower Board to collect and levy tax:

On production capacity of plants, machinery, undertaking,establishments or installations producing or manufacturingsuch goods; or

On fixed basis, as it may deem fit, from any person who is in aposition to collect such tax due to the nature of the business.

EXPANDING LIST OF ITEMS IN THIRD SCHEDULE

The Third Schedule to the Sales Tax Act, 1990 has been expanded toinclude the following items on which now sales tax would be chargeableon printed retail price at the start of supply chain.

Finished or made-up articles of textile and leather, including garments,footwear, bed ware sold in retail packing;

Household electrical goods, including air conditioners, refrigerators,deep freezers, televisions, recorders and players, electric bulbs, tube-lights, fans, electric irons, washing machines and telephone sets;House hold gas appliances, including cooking range, ovens, geysers and gas heaters;

Foam or spring mattresses, and other foam products for household use;

Auto parts and accessories sold in retail packing;

Lubricating oils, brake fluid, transmission fluid, and other vehicularfluids and maintenance products in retail packing; Tyres and tubes;

Storage batteries;

Arms and Ammunition;

Paints, distempers, enamels, pigments, colors, varnishes, gums, resins,dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold inretail packing; Fertilizers;

Cement sold in retail packing;

Tiles sold in retail packing;

Biscuits, confectionary, chocolates, toffees and candies;

Other goods and products sold in retail packing.

WITHDRAWAL OF EXEMPTIONS

Exemption of sales tax on following items / supplies have beenwithdrawn with effect from 13.06.2013.

Milk preparations obtained by replacing one or more of constituents ofmilk by another substance; and Supplies against international tenders.

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LAW HARMONISING MEASURES

Power to grant 30 days stay against recovery of sales taxdemand in hardship cases has been given to Commissioner(Appeals) just like the power of stay provided in Income Tax Lawthrough Finance Act, 2012.

Rectification of mistake provisions introduced to harmonize theprovisions with Income Tax Ordinance, 2001.

PROCEDURAL STREAMLINING MEASURES

During the period of blacklisting of any registered person, even iffollow the provisions of section 73, the invoices issued by it shallno longer be considered genuine input tax and shall be rejected.

Powers of investigation into the affairs of persons believed to beengaged in issuance of fake or flying invoices, claiming fraudulentinput tax or refunds or does not physically exist or conductbusiness or any other fraudulent activity, have been given to theCommissioner having jurisdiction.

A new section 40C has been proposed to be introduced to providepowers and legal backing to the authorities for maintaining a

monitoring or tracking system by electronic or other means onproduction, sales, clearances, stocks of registered persons. Throughthese powers, the much campaigned tax stamp affixing, banderole,stickers and labels, seems in the planning for tracking the tax paidgoods and identify the black economy.


By adding an explanation paragraph to section 25 Access torecord, documents, etc, the bill seeks to once again empower

the commissioner to himself enjoy the powers of selecting a casefor audit and call for any records necessary. Historically, byintroduction of section 72B by Finance Act, 2010 the power ofselection of cases on parametric balloting was vested to theBoard and courts ruled that Commissioner does not haveindependent power of selection of cases after introduction ofsection 72B.

FEDERAL EXCISE ACT, 2005

REVENUE MEASURES

ENHANCEMENT IN TAX RATES

2% further duty has been introduced for supplies / rendering ofservices to un-registered persons in line with the rate of 2%further tax introduced in Sales Tax.

Rate of duty on aerated waters / beverages enhanced from 6% to9% effective with effect from 13.06.2013.Duty structure on Cigarettes has been changed from three tiers to two tiers.

DUTY ON NEW ITEMS

Duty levied on Oilseeds at the rate of 40 paisa per kg;

10% ad valorem duty levied on Motor cars, SUVs and other motorvehicles of cylinder capacity of 1800 cc or above.

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Duty levied on services provided or rendered by cooperative financingsocieties, Modarbas, Musharika, leasing companies, foreign exchangedealers, assets management companies and other persons dealing inany such services at the rate of 16% of the charges.

FIXED TAX REGIME

Fixed duty @ Rs. 1 per kg on locally produced oil purchased by amanufacturer of vegetable gee and cooking oil, in lieu of duty payable@ 16% effective 13.06.2013;

Fixed duty @ 40 paisa per kg on oilseeds, at the import stage, in lieu ofduty payable at production or manufacturing stage of vegetable gheeor cooking oil effective from 13.06.2013.

WITHDRAWAL OF EXEMPTIONS

Exemption of federal excise duty on following items / supplies have beenwithdrawn with effect from 13.06.2013. Hydraulic cement, lubricating oil and transformer oil.

Services provided or rendered by Asset Management Companies.

LAW HARMONISING MEASURES

Power to grant 30 days stay against recovery of sales tax demand inhardship cases has been given to Commissioner (Appeals) just like thepower of stay provided in Income Tax Law through Finance Act, 2012.

PROCEDURAL STREAMLINING MEASURES

Facility of repayment-cum-drawback of federal excise duty on theexport of vegetable ghee to Afghanistan by the units located in theviolence affected areas withdrawn.A new section 45A has been proposed to be introduced to provide powers

and legal backing to the authorities for maintaining a monitoring ortracking system by electronic or other means on production, sales,clearances, stocks of registered persons.


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By adding an explanation paragraph to section 35 Power of the Commissioner to pass certainorders, the bill seeks to once again empower the commissioner to himself enjoy the powersof selecting a case for audit and call for any records necessary. Historically, by introduction ofsection 42B by Finance Act, 2010 the power of selection of cases on parametric balloting wasvested to the Board and courts ruled that Commissioner does not have independent power ofselection of cases after introduction of section 42B.

2 INCOME TAX ORDINANCE, 2001

SALARIED PERSON TAX RATES

The bill seeks to provide new rates for salaried individuals in Division I Part Iof First Schedule. The existing six slabs of salaried individuals are proposedto be increased to twelve slabs. The provisions relating to marginal reliefunder clause 1A are proposed to be omitted, which certainly would result inlesser take home salary if increase in salaries pushes the person marginallyin the upper tax slab.

The proposed amendment in rates will increase the tax liability of salariedpersons which is a harsh step as these persons are already paying taxes on their

income.

The proposed tax rates are as under:

Salaried Taxpayer

Slab# Taxable income Rate of Tax

1 Upto 400,000 0%

2 400,001 to 500,0005% of the amount exceeding Rs

400,000

3 500,001 to 800,000

Rs 5,000 + 7.5% of the amountexceeding

Rs 500,000

4 800,001 to 1,300,000

Rs 27,500 + 10% of the amountexceeding

Rs 800,000

5 1,300,001 to 1,800,000

Rs 77,500 + 12.5% of the amountexceeding

Rs 1,300,000

6 1,800,001 to 2,200,000

Rs 140,000 + 15% of the amountexceeding

Rs 1,800,000

7 2,200,001 to 2,600,000Rs 200,000 + 17.5% of the amount

exceeding Rs 2,200,000

8 2,600,001 to 3,000,000

Rs 270,000 + 20% of the amount

exceeding

Rs 2,600,000

9 3,000,001 to 3,500,000Rs 350,000 + 22.5% of the amount

exceeding Rs 3,000,000

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The proposed rate will result in increase of tax liability at different levels.A chart showing comparison at different levels of income is as under:

Salaried Taxpayer

Tax LiabilityIncrease

/

IndividualsDifferenc

e

Present

Propose

d

(Decrea

se)

Income (Rs.) Rs. Rs. Rs. %

400,000 - - - -

750,000 17,500 23,750 6,250 35.71

1,500,000 92,500 102,500 10,000 10.81

2,500,000 262,500 252,500 (10,000) (3.81)

4,000,000 720,000 587,500 (132,500) (18.40)

7,000,000 1,320,000 1,412,500 92,500 7.01

8,000,000 1,520,000 1,712,500 192,500 12.66

6,000,000 1,120,000 1,137,500 17,500 1.56

10,000,000 1,920,000 2,312,500 392,500 20.44

NON SALARIED PERSON AND AOP TAX RATES

The bill seeks to provide new rates for business individuals and AOPs inDivision I Part I of First Schedule. The existing five slabs of businessindividuals and AOPs are proposed to be increased to seven slabs.

The proposed amendment in rates will increase the tax liability ofbusiness individuals and AOPs which is a good step as it will bring thebusiness person into tax net.

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The proposed tax rates are as under:

Non Salaried Taxpayer

Sla

b # Taxable incomeRate of Tax

1 Upto 400,000 0%

2 400,001 to 750,000

10% of the amount

exceeding

Rs.400,000

3 750,001 to 1,500,000

Rs.35,000 + 15% of the

amount

exceeding Rs.750,000

4 1,500,001 to 2,500,000

Rs.147,500 + 20% of the

amount

exceeding Rs.1,500,000

5 2,500,001 to 4,000,000

Rs.347,500 + 25% of the

amount

exceeding Rs. 2,500,000

6 4,000,001 to 6,000,000

Rs. 722,500 + 30% of the

amount


7 6,000,001 and above

Rs. 1,322,500 + 35% of the

amount


The proposed rate will result in increase of tax liability at different levels. Achart showing comparison at different levels of income is as under:

Non Salaried Taxpayer

IndividualsTax Liability

Increase/

/Association

Differen

ce (Decrease)

of Persons PresentPropose

d

Income (Rs.) Rs. Rs. Rs. %

400,000 - - - -

750,000 35,000 35,000 - -

1,500,000 147,500 147,500 - -

2,500,000 347,500 347,500 - -

4,000,000 722,500 722,500 - -

6,000,000 1,222,500 1,322,500 100,000 8.18

10,000,000 2,222,500 2,722,500 500,000 22.50

12,000,000 2,722,500 3,422,500 700,000 25.71

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25,000,000 5,972,500 7,972,500 2,000,000 33.49

50,000,000

12,222,50

0

16,722,50

0 4,500,000 36.82

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MINIMUM TAX

The bill seeks to extend the facility of carry forward of unadjusted

minimum tax to individuals and AOPs in the same manner available tocompanies currently.

Additionally, the current reduction by eighty percent in minimum tax onthe turnover under section 113, available to companies, as per Clause 7of Part III of Second Schedule, engaged in business of distribution ofcigarettes manufactured in Pakistan is proposed to be extended toIndividuals and AOPs also.

The bill also proposes to increase minimum tax to 1% which is currentlypayable by companies, certain individuals and AOPs @ 0.5%.

TAX HOLIDAYThe corporate income tax holiday for a period of 5 years is currentlyavailable for projects in the Special Economic Zones as announced by theFederal Government as per Clause 126E of Part I of Second Schedule. Thebill seeks to extend income tax holiday to projects in special EconomicZones for a period of 10 years.

TAX ON MOTOR VEHICLE

The bill seeks to make the withholding tax adjustable, payable on thegoods transport vehicle at the time of payment of provincial motorvehicle tax which is currently final tax on their income.

TAX INCENTIVE ON HYBRID CARS

Through induction of Clause 28 of Part II of Second Schedule, rate of taxon import of hybrid cars is proposed to be exempted up to enginecapacity of 1200cc. Similarly tax on import of hybrid cars of enginecapacity of above 1200cc is proposed to be reduced as below:

Engine Capacity

Rate of

Reduction

Up to 1200 CC 100%

1201 to 1800 CC 50%

1801 to 2500 CC 25%

EXEMPTION FOR INDUSTRIAL UNDERTAKINGS ON IMPORT OF RAWMATERIAL

The bill seeks to provide facility to industrial undertaking of exemptionfrom the provision of section 148 regarding withholding tax on imports ifthe tax liability for the current tax year, on the basis of determined taxliability for any of the preceding two tax years, whichever is higher, hasbeen paid and a certificate to this effect is issued by the Commissioner.

COMPANIES TAX RATE

The rate of tax for companies is currently at 35%. The bill seeks to

reduce the rate of tax for non banking companies from 35% to 34%.

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TAX INCENTIVE ON DIVIDENDS EARNED BY BANKS FROMMONEY MARKET & INCOME FUNDS

The bill seeks to propose tax on dividend received by banks from moneymarket funds and income funds at the rate of 25% for tax year 2014 onwardsfrom currently @ 30%.

INCOME FROM PROPERTY- TAX RATES

The bill seeks to provide new rates for property income in Division V Part IIIof First Schedule. The existing three slabs of property income applicable tocompanies are proposed to be increased to six slabs with maximum rateincreased to 17.5% as under:

Taxable income Existing

Proposed

Rs % %

Upto 400,000 5% No change

400,001 to

1,000,000

Rs 20,000 plus 7.5% of

theNo changeamount exceeding Rs

400,000

1,000,001 to2,000,000 No change

2,000,001 to3,000,000

Rs 165,000 plus 12.5% of

the

Rs 65,000 plus 10% ofthe

amount exceeding

Rs.2,000,000

3,000,001 to4,000,000

amount exceeding Rs

1,000,000

Rs 290,000 plus 15% of

the

amount exceeding

Rs.3,000,000

Above 4,000,001

Rs 440,000 plus 17.5% of

the

amount exceeding

Rs.4,000,000

The existing slabs of property income applicable to all taxpayers other thancompanies are proposed to be increased as under:

Taxable income Existing

Proposed

Rs % %

Upto 150,000 Nil No change

150,001 to

400,000

5% of the amount

exceedingNo change

Rs150,000

400,001 to

1,000,000

Rs 12,500 plus 7.5% of

theNo change

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amount exceeding Rs

400,000

1,000,001 to

2,000,000 No change

2,000,001 to

3,000,000

Rs 157,500 plus 12.5% of

the

Rs 57,500 plus 10% of

the

amount exceeding Rs

2,000,000

3,000,001 to

4,000,000

amount exceeding Rs

1,000,000

Rs 282,500 plus 15% of

the

amount exceeding Rs3,000,000

Above 4,000,001

Rs 432,500 plus 17.5% of

the

amount exceeding Rs

4,000,000

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ADVANCE TAX ON FUNCTIONS

The bill proposes to add new section 236D to impose tax at the rate of10% which shall be collected by the hotels/clubs/marriage halls/restaurants etc from persons arranging functions.

TAX ON ELECTRONIC MEDIA

The bill seeks to impose adjustable withholding tax on renewal andlicense fee of cable operators and other electronic media which shall becollected by Pakistan Electronic Media Regulatory Authority.

TAX ON MARGIN FINANCERS

NCCPL is required to collect advance tax from members of stockexchange in respect of margin financing in share business @ 10%. Thebill proposes to extend the scope of withholding tax to margin financers,

trading financers and lenders in respect of providing any marginfinancing, margin trading or securities lending under Securities(Leveraged Markets and Pledging) Rules, 2011 in share business @ 10%of profit or markup or interest earned by the members, margin financersor securities lender.

TAX ON CASH WITHDRAWALS

The bill seeks to increase the rate of withholding tax on cash withdrawalsfrom banks of amount exceeding Rs. 50,000 from 0.2% to 0.3%.

TAX ON BUILDERS & DEVELOPERS

The bill seeks to impose minimum tax @ Rs. 25 per square foot as perconstruction or site plan approved by the regulatory authority on theincome of a person deriving from business of construction and sale ofresidential, commercial or other buildings and further imposes minimumtax @ Rs. 50 per square yards as per layout or approved site plan on theincome of person deriving from development and sale of residential,commercial or other plots.

TAX ON DISTRIBUTORS, DEALERS AND WHOLSELERS

All manufacturers were made liable to collect adjustable withholding taxfrom distributors, dealers and wholesalers through Finance Act, 2012.

The bill seeks to restrict such withholding tax to every manufacturer or

commercial importer of Electronics, sugar, cement, Fertilizers, Iron, &Steel Products, Motorcycles, Pesticides, Cigarettes, Glass, Textile,Beverages, Paints & Foam sectors and the rate is being reduced to 0.1%which shall be collected at the time of sale to distributors, dealers andwholesalers.

TAX ON MOTOR VEHICLE REGISTRATION

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The bill seeks to enhance tax rates on registration of motor vehicles as below:

Engine CapacityAmount of Tax(in Rs.)

Upto 850cc Rs. 10,000

851cc to 1000cc 20,000

1001cc to 1300cc 30,000

1301cc to 1600cc 50,000

1601cc to 1800cc 75,000

1801cc to 2000cc 100,000

Above 2000cc 150,000

Further the bill seeks to make the tax adjustable collected from any personbeing the owner of goods transport vehicle on the income of such personfrom plying or hiring out of such vehicle.

WITHHOLDING TAX DISPARITY FOR CORPORATE & NON CORPORATE

TAXPAYERSThe bill seeks to propose different rates of withholding tax for corporate andnon corporate sectors as:

(i). The rate of withholding tax in case of sale of goods by persons other thancompanies is proposed to be increased to 4% of the gross amountpayable . However, the rate will remain @ 3.5% of the gross amountpayable in case of companies.

(ii). The rate of withholding tax in case of rendering of services by personsother than companies is proposed to be increased to 7% of the grossamount payable. However, the rate will remain @ 6% of the gross

amount payable in case of companies.

(iii). The rate of withholding tax in case of execution of contracts by personsother than companies is proposed to be increased to 6.5% of the grossamount payable . However, the rate will remain @ 6% of the grossamount payable in case of companies.

TAX ON COMMISSION AGENTS AND ARHATIS

The bill proposes to add a new section through which adjustable advance taxshall be collected by every market committee from dealers, commissionagents or arhatis etc at the rates given below:

Group Amount of Tax(per annum)

Group or Class A Rs. 10,000

Group or Class B Rs. 7,500

Group or Class C Rs. 5,000

Any other category Rs. 5,000

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Any exemption to dividend in specie derived in the form of shares in a company.

II. Any exemption available to free or concessional passageprovided by transporters including air lines to its employees byvirtue of their employment.

III. Taxation at reduced rate of 2.5 % on flying allowance andsubmarine allowance.

IV. 75 % reduction in the tax payable by a full time teacher or aresearcher being misused by high income earners andadministrators.

V. Exemption available to any income of any university or othereducational institution established solely for educationalpurposes and not for purposes of profit.

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3 SALES TAX ACT, 1990

DEFINITIONS

CREST DEFINEDThe bill seeks to introduce definition ofCREST as under:

CREST means the computerized program for analyzingand cross-matching of sales taxreturns, also referred to asComputerized Risk-based Evaluation of Sales Tax.

Provincial Sales Tax on Services Referred

The bill seeks to re-define Provincial Sales Tax in line withrecently enacted laws with respect sales tax on services inthe provinces of Sindh and Punjab.

SUPPLY CHAIN DEFINEDThe bill seeks to introduce definition of supply chain as under:

Supply Chain means the series of transactions betweenbuyers and sellers from the stage of first purchase or importto the stage of final supply.

TIME OF SUPPLY RE-DEFINED

The bill seeks to re-define time of supply in relation tosupply of goods as the time at which goods are delivered ormade available to the recipient of supply or the time whenany payments is received by the supplier, whichever isearlier.

After a long process of litigation, the law was amended byFinance Act, 2007 to restrict the definition of time of supplyto the delivery of goods or rendering of services. Once again,the definition has been proposed to be amended to includeadvance payment / part payment as event of determination oftime of supply. Under the proposed amendment time of supplywould be earlier of delivery of goods or time when payment isreceived.

RATE OF TAX

GENERAL RATE OF TAX

The bill seeks to enhance the standard rate of sales tax to17% as compared to the existing rate of 16%.

FURTHER TAX

The bill seeks to levy further tax at the rate of 2% of value,where taxable supplies are made to a person who has notobtained registration number.

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Earlier this further tax was being collected @ 3% and was abolished through Finance Act,2004. Now, the further tax has been re-introduced with outsourcing power to FederalGovernment to announce any exclusion through notification in official Gazette.

FIXED TAX

The bill seeks to empower the Board to levy and collect sales tax on theproduction capacity of plants or on fixed basis from any prescribed person.

TAX CREDIT NOT ALLOWED

The bill seeks to disallow input tax adjustment on the basis of discrepanciesindicated by CREST or where input tax is not verifiable in the supply chain.

DE-REGISTRATION, BLACKLISTING AND SUSPENSION OF REGISTRATION

The bill seeks to provide for that during the period of blacklisting of anyregistered person, the invoices issued by it shall no longer be consideredgenuine for claiming input sales tax and shall be rejected, even if theprovisions of section 73 are followed.

Further the powers of investigation into the affairs of persons believed to beengaged in issuance of fake or flying invoices, claiming fraudulent input taxor refunds or does not physically exist or conduct business or any other

fraudulent activity, have been given to the Commissioner having jurisdiction.

RECORDS

The bill seeks to insert a new clause to maintain and keep inward andoutward gate passes and transport receipts as records required under thissection.

ACCESS TO RECORD, DOCUMENTS, ETC.

The bill seeks to insert explanation for the purpose of sections 25, 38, 38A,38B and 45A and for removal of doubt, that powers of the Board,Commissioner or Officer of Inland Revenue under these sections areindependent of the powers of the Board under section 72B regarding

selection for audit by the Board.

Once again, this bill proposes to empower the Commissioner himself to enjoythe powers of selecting a case for audit and call for any records. Historically,by introduction of section 72B by Finance Act, 2010 the power of selection ofcases on parametric balloting was vested to the Board and the Courts ruledthat Commissioner does not have independent power of selection of casesafter introduction of section 72B.

POSTING OF INLAND REVENUE OFFICER

The bill seeks to equate powers of Board and Chief Commissioner regardingposting of officers or officials of Inland Revenue to business premises for

monitoring.

MONITORING OR TRACKING BY ELECTRONIC OR OTHER MEANS

The bill seeks to provide for powers and legal backing to the authorities formaintaining a monitoring or tracking system by electronic or other means onproduction, sales, clearances, stocks, etc.

APPEALS

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The bill seeks to provide for powers to the Commissioner Appeals to stay the recovery of anytax levied under this Act for a period of 30 days, which according to his opinion, may causeundue hardship to the taxpayer in line with powers of the Commissioner Appeals to grant stayunder the Income Tax Ordinance, 2001 conferred vide Finance Act, 2012

RECTIFICATION OF MISTAKE

By substituting this section, the bill seeks to harmonize the concept ofrectification of mistake in line with the Income Tax Ordinance, 2001.

REWARD TO INLAND REVENUE OFFICERS AND OFFICIALS

The bill seeks to allow for provision of cash reward to officers and officials

of Inland Revenue on detection of cases of concealment and evasion ofsales tax.

THIRD SCHEDULE TAX TO BE COLLECTED ON RETAIL PRICES

By the proposed amendments to the Third Schedule, the bill seeks toinclude taxable supplies of the following items in this Schedule to chargesales tax on retail price basis.

Finished or made-up articles of textile and leather

Household electrical goods

Household gas appliances

Foam or spring mattresses Auto parts and accessories

Lubricating oils, fluids and maintenance products

Tyres and tubes

Storage batteries

Arms and ammunition

Paints, varnishes, gums, polishes, etc., sold in retail packing

Fertilizers

Cement sold in retail packing

Tiles sold in retail packing

Biscuits, confectionary, chocolates, toffees and candies

Other goods and products sold in retail packing

SIXTH SCHEDULE WITHDRAWAL OF EXEMPTIONS

By the proposed amendments to the Sixth Schedule, the bill seeks towithdraw exemption on the following items as mentioned in thisSchedule.

Table I (Imports or supplies)

Milk preparations obtained by replacing one or more of theconstituents of milk by another substance

Table II (Local supplies only)

Supplies against international tender

NOTIFICATIONS

SRO 500(I)/2013

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Through this SRO, following SROs have been rescinded:

SRO No. & Date Subject of SRO

SRO 646(I)/2005 dated 30th

June,

2005Zero per cent rate of sales tax onsupply ofHydrogen, Nitrogen & Helium toM/sPakistan PTA Limited, Port Qasim,

Karachi byM/s BOC Pakistan Limited, Karachi


February, 2006Exemption from sales tax oncertain goodsimported by a member of PakistanFilmProducers Association (PFPA) forexclusiveuse in the production and/ordisplay of film


August, 2007

Zero per cent rate of sales tax

on rawmaterials, sub-components,components,sub-assemblies and assembliesimported orpurchased locally for themanufacture of

certain goods, subject to certainconditions

SRO 160 (I)/2010 dated 10th

March, 2010Exemption from whole amount ofdefault

surcharge and penalties payableby aregistered person located incertain districtsofKPK

provided outstandingprincipal

amount of sales tax or federalexcise duty is

paid by 30th

June, 2010


March, 2010Exemption from sales tax leviableon supply

of electricity by Peshawar ElectricSupplyCompany to manufacturing unitslocated in

certain districts of KPK


February, 2011Reduced rate of sales on goodsproduced ormanufactured in areas whereSales Tax Act,1990 is not applicable butincluded in thePrime Ministers Fiscal Relief torehabilitatethe economic life in KPK, FATA &PATA, ifsupplied to a person in any areawhere theSales Tax Act, 1990 is applicable


March, 2011Reduced rate of sales on thesupplies made

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of goods, other than cement,sugar,beverages and cigarettes, by theregisteredpersons located in certain districtsof PK

501(I)/2013

Through this SRO, following items have been brought toexemption regime from zero rating regime:

Uncooked poultry meat

Milk and cream

Flavored Milk

Yogurt

Whey

Butter

Desi ghee

Cheese

Processed cheese Cotton seed

Frozen, prepared or preserves sausages

Meat and similar products

Preparations for infant use

Fat filled milk

Soyabean meal

Oil cake and other solid residues

Colours in sets

Writing, drawing and marking inks

Erasers

Exercise books

Directly reduced iron

Pencil sharpeners

Energy Saver Lamps

Sewing machines of household types

Purpose built taxis

Bicycles

Wheelchairs

Vessels for breaking up

Other drawing, marking or mathematical instruments

Pens and ball pens

Pencils including color pencils

Compost produced and supplied locally

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Construction material to GawadarSRO 502(I)/2013

Through this SRO, zero rating on the items mentioned above under SRO501(I)/2013 has been withdrawn.

SRO 504(I)/2013

Through this SRO, changes have made in description of goods and PCTHeading Nos in the Table to the earlier issued SRO 1125(I)/2011 dated31

stDecember, 2011 to exclude finished articles of leather and artificial

leather, finished articles of textiles and textile made ups, carpets in

finished condition, sports goods in finished condition, surgical goods infinished condition, color master batches and shoe adhesives which werechargeable to sales tax at the rate of 2% under SRO 1125(I)/2011.

SRO 505(I)/2013

Through this SRO, the Federal Govt. has expanded the scope of withholdingtax regime by making all withholding agents responsible to withhold wholeamount of sales tax on purchase of taxable goods from unregistered persons.

Earlier, federal and provincial government departments, autonomous bodiesand public sector organizations only were required to withhold whole amount

of sales tax on purchases made from unregistered persons.

SRO 509(I)/2013

Through this SRO, the Federal Govt. has levied extra tax at the rate of 5% oftotal billed amount on supplies of electric power and natural gas to personshaving industrial or commercial connections and whose bill in any monthexceeds Rs. 15,000 but who have not obtained sales tax registration numberor are not on the Active Taxpayers List maintained by the FBR.

SRO 510(I)/2013

Through this SRO a new Chapter has been incorporated in Sales Tax SpecialProcedure Rules, 2007 regarding collection and payment of extra tax on

supplies of electric power and natural gas consumed by unregistered andinactive persons in line with levy of extra tax at the rate of 5% vide S RO509(I)/2013 stated above.

SRO 505(I)/2013

Through this SRO, the Federal Govt. has expanded the scope of withholdingtax regime by making all withholding agents responsible to withhold wholeamount of sales tax on purchase of taxable goods from unregistered persons.

Earlier, federal and provincial government departments, autonomous bodiesand public sector organizations only were required to withhold whole amountof sales tax on purchases made from unregistered persons.

SRO 509(I)/2013

Through this SRO, the Federal Govt. has levied extra tax at the rate of 5% oftotal billed amount on supplies of electric power and natural gas to personshaving industrial or commercial connections and whose bill in any monthexceeds Rs. 15,000 but who have not obtained sales tax registration numberor are not on the Active Taxpayers List maintained by the FBR.

SRO 510(I)/2013

Through this SRO a new Chapter has been incorporated in Sales Tax SpecialProcedure Rules, 2007 regarding collection and payment of extra tax onsupplies of electric power and natural gas consumed by unregistered andinactive persons in line with levy of extra tax at the rate of 5% vide SRO509(I)/2013 stated above.

4 FEDERAL EXCISE ACT, 2005

DUTIES SPECIFIED IN THE FIRST SCHEDULE TO BE LEVIED

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The bill seeks to empower the Federal Government to levy further duty atthe rate of 2% of value, where excisable goods and services are providedto a person who has not obtained registration number in line with therate of 2% further tax introduced in Sales Tax Act, 1990.

RECORDS

The bill seeks to insert a new clause to maintain and keep inward andoutward gate passes and transport receipts as records required underthis section in line with insertion of a similar clause in the Sales Tax Act,1990.

APPEALS TO COMMISSIONER APPEALS

The bill seeks to provide for powers to the Commissioner Appeals to staythe recovery of any tax levied under this Act for a period of 30 days,which according to his opinion, may cause undue hardship to thetaxpayer in line with powers of the Commissioner Appeals to grant stayunder the Income Tax Ordinance, 2001 conferred vide Finance Act, 2012

POWERS OF BOARD OR COMMISSIONER TO PASS CERTAIN ORDERS

The bill seeks to insert explanation for the purpose of section 35, 45 and46 and for removal of doubt, that powers of the Board, Commissioner orOfficer of Inland Revenue under these sections are independent of the

powers of the Board under section 42B regarding selection for audit bythe Board.

Once again, this bill proposes to empower the Commissioner himself toenjoy the powers of selecting a case for audit and call for any records.Historically, by introduction of section 42B by Finance Act, 2010 thepower of selection of cases on parametric balloting was vested to theBoard and the Courts ruled that Commissioner does not haveindependent power of selection of cases after introduction of section 42B.

REWARD TO INLAND REVENUE OFFICERS AND OFFICIALS

The bill seeks to allow for provision of cash reward to officers and officials

of Inland Revenue on detection of cases of concealment and evasion ofduty.

ACCESS TO RECORDS AND POSTING OF EXCISE STAFF, ETC.

The bill seeks to equate powers of Board and Chief Commissionerregarding posting of officers or officials of Inland Revenue to businesspremises for monitoring.

MONITORING OR TRACKING BY ELECTRONIC OR OTHER MEANS

The bill seeks to provide for powers and legal backing to the authoritiesfor maintaining a monitoring or tracking system by electronic or othermeans on production, sales, clearances, stocks, etc.

FIRST SCHEDULE RATE OF DUTY

By the proposed amendments to the First Schedule, the bill seeks to:

1. Enhance the rate of duty on aerated waters from 6% to 9%.

2. Change the value and duty on per thousand cigarettes as follows:

Locally produced cigarettes if their on- Rupees two thousand threehundred pack printed retail price exceeds rupees and twenty five perthousand cigarettes two thousand two hundred and eighty sixper thousand cigarettes

Locally produced cigarettes if their on- Rupees eight hundred andeighty per pack printed retail price does not exceed thousandcigarettes

rupees two thousand two hundred

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and eighty six per thousandcigarettes

3. Levy of duty on Oilseeds at the rate of 40 paisa per kg.

4. Levy of duty on Motor cars, SUVs and other motor vehicles of cylindercapacity of 1800 cc or above at the rate of 10% ad valorem.

5. Levy of duty on services provided or rendered by cooperative financing

societies, modarabas, musharikas, leasing companies, foreign

exchange dealers, assets management companies and other persons

dealing in any such services at the rate of 16% of the charges.

THIRD SCHEDULE WITHDRAWAL OF EXEMPTION

By the proposed amendments to the Third Schedule, the bill seeks towithdraw exemption of duty on hydraulic cement, lubricating oil, transformeroil and on services provided or rendered by Asset Management Companies.

NOTIFICATIONS

SRO 500(I)/2013

Through this SRO, following SROs have been rescinded:

SRO No. & Date Subject of SRO


March,

2010Exemption

from whole amount ofdefault

surcharge

and penalties payableby a

registered person located in certaindistricts

of KPK

provided outstanding

principalamount of sales tax or federalexcise duty is

paid by 30th

June, 2010

SRO 161 (I)/2010 dated 10th March,

2010Exemption

from whole amount ofdefault

Surchar

ge

and penalties payable

by aregistered person located in tribal areasprovided outstanding principal amount ofsales tax or federal excise duty is paid by30

thJune, 2010


March, 2010Exemption from federal exciseduty on goodsproduced or services rendered intribal areas

from 1st

January, 2010 to 30th

June, 2010


March, 2010

Exemption from federal exciseduty on goodsproduced or services rendered incertain

districts of KPK from 1st January,

2010 to 30th

June, 2010


Exemption from federal excise

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March, 2011 duty on thegoods produced or manufacturedin certainnon-tariff areas if brought to thetariff areas.

SRO 503(I)/2013

Through this SRO earlier issued SRO 993(I)/2006 dated September 21, 2006has been amended to withdraw facility of repayment-cum-drawback offederal excise duty on the export of vegetable ghee to Afghanistan by theunits located in the violence affected areas.

SRO 507(I)/2013

Through this SRO rate of duty has been fixed at the rate of Rs. 1 per kgon locally produced oil purchased by a manufacturer of vegetable geeand cooking oil, in lieu of duty payable @ 16%.

SRO 508(I)/2013

Through this SRO rate of duty has been fixed at the rate of 40 paisa perkg on oilseeds, at the import stage, in lieu of duty payable at productionor manufacturing stage of vegetable ghee or cooking oil.

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5 INCOME SUPPORT LEVY ACT,2013

The bill seeks to enact a law namely Income Support Levy Act 2013 to providefor financial resources for running an income support fund for the economicallydistressed persons and their families by imposing a levy to be called IncomeSupport Levy on net moveable wealth.

Net moveable wealth has been defined as the amount by which theaggregate value of moveable assets belonging to a person as declared in thewealth statement for the relevant tax year, is in excess of the aggregatevalue of all the liabilities owed by that person on the closing date of the taxyear.

Income support levy shall be charged for every tax year commencing on andfrom tax year 2013, at the rate of 0.5% of net moveable wealth exceeding onemillion rupees held by a person on the last date of the tax year. A person liableto pay Levy under this Act shall pay the Levy along with wealth statement. Theprovisions of the Income Tax Ordinance, 2001 shall, so far as may be practicable,apply to the collection of Levy under this Act.

6 PUNJAB CAPITALVALUE TAXAMENDMENT INPUNJAB FINANCE ACT,2010

The Punjab Finance bill 2013 seeks to substitute the existing rate table in Punjab Finance

Act, 2010 for imposition of capital value tax.

Following para has been substituted for the existing:

(a) immoveable property other than commercial or industrial

property, a plaza or a multi storyed building, situated in urban area and

the value of which exceeds one million rupees:

S. No. Description Rate of Tax

(i) Where the value of immovable property isrecorded

2% of the recorded value of the

landed area

(ii) Where the value of immovable property isnot recorded

One hundred rupees per squarefeet of the landed area

iii) Where the immovable property isconstructed property

Ten ruppes per square feet of the

constructed area in addition to the

value worked out above

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7 PUNJAB CAPITALGAINS TAX PUNJABFINANCE BILL, 2013

The Punjab finance bill 2013 in section 9 has proposed to levy

capital gains tax on sale of immoveable property in addition tothe capital gain tax levied on sale of immovable propertythrough Finance Act, 2012 in Income Tax Ordinance, 2001.

According to the proposal a gain occurring from sale ofimmovable property by a person in a tax year shall be chargeableto tax in that year at the following rate:

S.No. Description Rate

1.Sale within one yearof

5% of the capital gainor 2%

acquisitionof the recorded valueat the

time of sale,whichever is

higher

2.Sale between morethan one 4% of the capital gainbut within two yearof

acquisition

3.

Sale between more

than two 3% of the capital gainbut within three yearof

acquisition

4.Sale between morethan 2% of the capital gainthree but within fouryear ofacquisition

5.Sale between morethan four 1% of the capital gain

but within five yearofacquisition

6.Sale after five yearsof No taxacquisition

The Collector under the above proposed provisions shall havethe powers to assess the value on the basis of valuation tablenotified under section 27-A of the Stamp Act, 1899. The Collectorshall also have the power to assess and collect the tax using

powers of the Collector to collect CVT under section 6 of PunjabFinance Act, 2010. The regulatory body in this respect shall beBoard of Revenue formed under the Punjab Board of RevenueAct, 1957.

This gain tax has been proposed to be levied on all kind ofpersons including individual, association of person, company,body corporate, foreign government, political subdivision offoreign government and a public international organization.

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means and includes any person who provides the services of transportation orcarriage of passengers, goods, cargo, baggage or mail by aircraftAIRPORTOPERATOR

means and includes the Civil Aviation Authority and anyother authority or organization or office managing oroperating a customs airport, as notified under section 9 ofthe Customs Act, 1969 (Act No. IV of 1969);

APPELLATE TRIBUNALmeans the Appellate Tribunal of the Sindh Revenue Board established under

section 60;

ARCHITECT

means and includes an architect or a town planner as definedin section 2 of the Pakistan Council of Architects and TownPlanners Ordinance, 1983 (Ordinance IX of 1983), and alsoincludes an association of persons or a commercial concernengaged in any manner, whether directly or indirectly, in thefield of architecture or town planning;

ARREARS

in relation to a person, means the tax due and payable by the

person on a day under this Act, which has not been paid bythat day in the prescribed manner;

ASSISTANT COMMISSIONER

means a person appointed as an Assistant Commissioner ofthe Sindh Revenue Board under section 34;

ASSOCIATES ORASSOCIATEDPERSONS refers to

(i)two persons, where the relationship between them is suchthat one may reasonably be expected to act in accordance

with the intentions of the other, or both persons mayreasonably be expected to act in accordance with theintentions of a third person; Provided that two persons shallnot be associates solely by reason of the fact that oneperson is an employee of the other or both persons areemployees of a third person;(ii)without prejudice to the generality of paragraph (i) and subject to paragraph

(iii) ofthis clause, the following persons shall always be treated as associates,namely:

(a) an individual and a relative of that individual;(b) members of an association of persons;

(c)a member of an association of persons and theassociation,

wherethe

member, either alone or together with an associate or associates underanotherapplication of this clause, controls fifty per cent or more of the rights toincome or

capital of the association;

(d)a shareholder in a company and the company,where the

sharehol

der,either alone or together with anassociate or

associates under anotherapplication of

this clause, controlseither directly or through one or more interposedpersons

(i)fifty per cent or more of the voting power in the company;

(ii) fifty per cent or more of the rights to dividends; or(iii) fifty per cent or more of the rights to capital; and

(e) two companies, where a person, either alone ortogether with an associate or associates underanother application of this clause, controls eitherdirectly or through one or more interposed persons

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(i)fifty per cent or more of the voting power in both companies;

(ii)fifty per cent or more of the rights to dividends in both companies;or

fifty per cent or more of the rights to capital in both companies; and

(iii) two persons shall not be associates under sub-paragraphs (a) or (b) of paragraph (ii) of this clause wherethe Commissioner SRB is satisfied that neither person mayreasonably be expected to act in accordance with theintentions of the other;

Explanation: The expression relative in relation to an individual, means

(a) an ancestor, a descendant of any of the grandparents, or anadopted child, of the individual, or of a spouse of theindividual; or

(b) a spouse of the individual or of any person specified at (a) thisexplanation.

ASSOCIATION OF PERSONS

includes a firm, any artificial juridical person and anybody ofpersons formed under a foreign law, but does not include acompany;

AUTHORIZED SERVICE STATION

means a service station or service center, authorized by a motorvehicle manufacturer, whether local or foreign, to carry out anyservice or repair or reconditioning or restoration or decoration ofmotor vehicles, classified under Chapter 87 of the Customs Act,1969 (Act No. IV of 1969), manufactured by such manufacturer;Explanation:The services by authorized service stations include -

(1) the services provided during the warranty period as well asafter the expiry of the warranty period;

(2) the services provided even for the vehicles and machinerynot manufactured by the manufacturer appointing or

authorizing such service station; and(3) the services provided against charges billed by way ofreimbursement, whether from the manufacturer orinsurance companies or leasing companies or other suchpersons;

AUTOMATED TELLER MACHINE

means an interactive automatic machine, whether owned oroutsourced by banks and other financial institutions, designedto dispense cash, accept deposit of cash, transfer moneybetween bank accounts and facilitate other financialtransactions including payments of bills;

AUTOMATED TELLER MACHINE OPERATIONS, MAINTENANCE,AND MANAGEMENT means a service provided in relation toautomated teller machines and includes site selection,contracting of location, acquisition, financing, installation,certification, connection, maintenance, transactionprocessing, cash forecasting, replenishment, reconciliationand value added services;

BEAUTY PARLOUR OR BEAUTY CLINIC

means a person or an establishment providing beauty treatmentservices including hair cutting, hair dyeing, hair dressing, face

care, face treatment, cosmetic treatment, manicure, pedicure,make-up including bridal make-up, and counseling services onbeauty care, face care or make-up or other such identical orsimilar services;

BOARD

means the Sindh Revenue Board established under section 3 ofthe Sindh Revenue Board Act, 2010 (Sindh Act No. XI of 2010);BUSINESS SUPPORT SERVICE

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means services provided in relation to business or commerceand includes evaluation of prospective buyers, telemarketing,call centre facilities, accounting and processing oftransactions, processing of purchase orders and fulfillmentservices, information and tracking of delivery schedules,managing distribution and logistics, customer relationshipmanagement services, operational assistance for marketing,formulation of customer service and pricing policies,infrastructural support services and other transactionprocessing.

Explanation. For the purposes of this clause, theexpression infrastructural supportservices includesproviding office alongwith utilities, lounge, reception withpersonnel to handle messages, secretarial services,telecommunication facilities, pantry and security;

CABLE TV OPERATOR

includes local loop holder and means a person who owns,controls, manages or runs any cable television system and isengaged in reception of broadcast pre-recorded or live signalsfrom different channels for distribution to subscribers througha set of closed transmission path or wireless, and is liable tolicense as a cable TV operator under the Pakistan ElectronicMedia Regulatory Authority Ordinance, 2002 (Ordinance No.XIII of 2002);

CATERER

by whatever name called, means a person who in ordinarycourse of business and in relation to events, functions,ceremonies, parties, get-together, occasions, etc., provides orsupplies, either directly or indirectly, various servicesincluding food, edible preparations, beverages,entertainment, furniture or fixture, crockery or cutlery, pandalor shamiana, ornamental or decorative accessories or lightingfor illumination;

CLUB

includes a membership club and a proprietary club and meansa person, a body of persons, an establishment, anorganization or a place, the membership of which is restrictedto a particular class of people or which is run on the basis ofmutuality or otherwise and provides various services,facilities, utilities or advantages for an amount of fee,consideration, subscription or charges, including those forinitial membership, whether or not it provides food or drinksor has any arrangement for boarding or lodging or games;

COMMISSIONER

means a person appointed as a Commissioner of the SindhRevenue Board under section 34;

COMMISSIONER (APPEALS)

means a person appointed as a Commissioner (Appeals) ofthe Sindh Revenue Board under section 34;

COMMISSIONARTE

means the office of the Commissioner or the Commissioner(Appeals) having jurisdiction specified under this Act and therules made thereunder;

COMMON TAXPAYER IDENTIFICATION NUMBER

means the registration number or any other number oridentification number allocated to a person for the purposes ofthis Act;

COMMODITY BROKER

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means a broker as defined in clause (b) of sub-rule (1) of rule 2 ofthe Commodity Exchange and Future Contracts Rules, 2005,made under section 33 of the Securities and Exchange Ordinance,1969 (Ordinance No. XVII of 1969);

COMPAN

Ymean

s(a) a company as defined in the Companies Ordinance, 1984

(Ordinance No. XLVII of 1984);

(b) a banking company and foreign banking company asdefined in the Banking Companies Ordinance, 1962(Ordinance No. LVII of 1962), and includes any bodycorporate which transacts the business of banking inPakistan;

(c) a non-banking finance company (NBFC) and the notifiedentities as specified in section 282A of the CompaniesOrdinance, 1984 (Ordinance No. XLVII of 1984), read withthe Non-Banking Finance Company (Establishment and

Regulation)Rules, 2003;

(d) a body corporate formed by or under any law in force in Pakistan;

(e) a modaraba company as defined in the ModarabaCompanies and Modaraba (Floatation and Control)Ordinance, 1980 (Ordinance No. XXXI of 1980);

(f) a financial institution as defined in the Financial Institutions(Recovery of Finances) Ordinance, 2001 (Ordinance No.XLVI OF 2001), including a microfinance institution licensedunder the Microfinance Institutions Ordinance, 2001(Ordinance No. LV of 2001) and a Islamic financialinstitution;

(g) a body incorporated by or under the law of a countryoutside Pakistan relating to incorporation of companies;

(h) a trust, a co-operative society or a finance society or anyother society established or constituted by or under anylaw for the time being in force; or

(i) a foreign association, whether incorporated or not, whichthe Board has, by general or special order, declared to bea company for the purposes of this Act.

COMPUTERIZED SYSTEM

means any comprehensive information technology system usedby the Board or any other office as may be notified by the

Board, for carrying out the purposes of this Act;

COURIER SERVICES

includes the services provided or rendered by any personengaged in the transportation, carriage or delivery of time-sensitive documents, goods or articles, whether or not utilizingthe services of a person, directly or indirectly, to collect, carry ordeliver such documents, goods or articles;

CUSTOMS AGENT

means a person licensed under section 207 of the Customs Act,1969, and the rules made thereunder;

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DEFAULT SURCHARGEmeans the default surcharge levied under section 44;

DEFAULTER

means a person or an association of persons and includes everymember of such association, every director of such company and everypartner of such firm and further includes guarantors or successorsthereof, who fail to pay the arrears;

DEPUTY COMMISSIONER

means a person appointed as a Deputy Commissioner of the SindhRevenue Board under section 34;

DOCUMENT

includes, but is not limited to, any electronic data, computerprogrammes, computer tapes, computer disks, micro-films or any othermedium or mode for the storage of such data;

DUE DATE

in relation to the furnishing of a return or a statement or for paymentof tax under the Act, means the 15th day of the month following the

end of the tax period to which it relates, or such other date as theBoard may, by notification in the official Gazette, specify;

ECONOMIC ACTIVITYshall have the meaning given in section 4;

E-INTERMEDIARYmeans a person appointed as electronic-intermediary under section 71;

EVENT MANAGEMENT SERVICES

means a service provided in relation to planning, promotion, organizingor presentation of any arts, business, sports, marital functions, social

functions or any other function or event, and includes any consultationor any ancillary service such as catering, decoration, photography,videography, sound recording, lighting & illumination, DJ, valet parking,etc., provided in this regard;

EXEMPT SERVICEmeans a service which is exempt from tax under section 10;

EXHIBITION SERVICEmeans the service provided or rendered in relation to an exhibition held -

(a)to market; or(b)to promote; or(c)to advertise; or(d)to showcase,

any product, goods or services intended for the growth in thebusiness of the manufacturer, producer, importer, supplier,distributor or provider of such product, goods or services;

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FBR

means the Federal Board of Revenue established under the Federal Boardof Revenue Act, 2007 (Act No. IV 2007);

FINANCIAL YEAR

means a year commencing on the first day of July and ending on thethirtieth day of June in the following year;

FIRM

means the relation between persons who have agreed to share the profits

of a business carried on by all or any of them acting for all;

FOREIGN EXCHANGE DEALER

includes an exchange company or a foreign exchange company or amoney changer authorized or licensed by the State Bank of Pakistan;

FRANCHISE

means an authority given by a franchiser, including an associate of thefranchiser, under which the franchisee is contractually or otherwise grantedany right to produce, manufacture, distribute sell or trade or otherwise dealin or do any other business activity in respect of goods or to provideservices or to undertake any process identified with the franchiser against a

consideration or fee, including technical fee, management fee, or royalty orsuch other fee or charges, irrespective of the fact whether or not atrademark, service mark, trade name, logo, brand name or any suchrepresentation or symbol, as the case may be, is involved:

FREIGHT FORWARDING AGENT

means a person who provides or renders or makes arrangement for hisprincipals or client, the services, for fee or charges or commission orremuneration, for some or all of the services being provided by the shippingagents, clearing agents, stevedores, ship chandlers, port operators,terminal operators, surveyors, persons providing ship managementservices, warehousing services or container provision services or cover or

guarantee in respect of imports or exports of goods, independently or inpartnership or in arrangement with any such service provider or renderer;

GOODS

includes every kind of movable property other than actionable claims,money, stocks, shares and securities and does not include a service orservices described under this Act;

GOVERNMENTmeans the Government of Sindh;

HEALTHCARE CENTER, GYMS OR PHYSICAL FITNESS CENTER, ETC.

includes a health club, gymnasium, reducing or slimming salon or clinic, oran establishment providing the facilities, utilities or advantages of sauna orsteam bath, Turkish bath, solarium, spas, yoga, meditation, massage(excluding therapeutic massage under medical prescription or advice) orsuch other services;

HOTELincludes motels and guesthouses and means a person, establishment,organization or place, by whatever name called, where rooms or suites are letout on rent, whether or not it has any arrangement for catering or functionhalls as a part of the hotel or provides any other services, facilities or utilities,but does not include a home or hostel which is exclusively used for the agedor invalid persons or students and is run by or under the control of such a

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charitable or educational institution as are exempt from the application of theIncome Tax Ordinance, 2001 (Ordinance No. XLIX of 2001);

INPUT TAXin relation to a registered person, means,--

(a) tax levied under this Act on the services received by the person;(b) tax levied under the Sales Tax Act, 1990, on the goods imported by the person;

(c) tax levied under the Sales Tax Act, 1990, on the goods or servicesreceivedby the person; and

(d) Provincial sales tax or Islamabad Capital Territory sales tax leviedon the services received by the person:

Provided that the Board may, by notification in the official Gazette,specify that any or all of the

aforesaid tax shall not be treated as input tax for the purposes of thisAct subject to such conditions and limitations as the Board may specifyin the notification;

INSURANCE

has the same meaning as defined in clause (xxvii) of section 2of the Insurance Ordinance, 2000 (Ordinance No. XXXIX of2000);

INSURERmeans a person as defined in clause (xxxi) of section 2 of the InsuranceOrdinance, 2000 (Ordinance No. XXXIX of 2000);

INTER-BANK RATE

means the Karachi Inter-Bank Offered Rate (KIBOR) prevalent on thefirst day of each quarter of the financial year;

LEGAL PRACTITIONERS AND CONSULTANTS

by whatever name called, means a legal practitioner as defined insection 2 of the Legal Practitioners and Bar Councils Act, 1973 (Act No.XXXV of 1973), and includes a person engaged in providing of servicesin relation to advice, consultancy or assistance in any branch of law orproviding representational services before any court, tribunal or othersuch judicial or quasi-judicial authority;

MANAGEMENT CONSULTANT

means a person engaged, either directly or indirectly, in providing ofservices in connection with the management of any business, organizationor institution in any manner and includes a person who renders advice,consultancy or technical assistance relating to conceptualizing, devising,development, modification, rectification, or upgradation of any workingsystem of such business, organization or institution;

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MARKET RESEARCH AGENCY

means a person engaged, directly or indirectly, in providing of servicesrelating to the study or survey, or both, of any situation in the market forany purpose other than personal, academic or educational requirements;

MARRIAGE HALL AND LAWN

by whatever name called, includes a hall or lawn or a banquet hall or a

function hall or an exhibition hall or lawn, or any building, place, premises ormarquee where parties, receptions, events or functions, more particularly

relating to matrimonial ceremonies, are held, whether or not it has its own

arrangement of event management or provision of food, beverages,

crockeries, cutleries, furniture, fixtures, etc.;

OFFICER OF THE SRBmeans an officer of the Sindh Revenue Board appointed under section 34;

OPEN MARKET PRICEshall have the meaning given in section 6;

OUTPUT TAX

in relation to a registered person, means the tax levied under this Act onthe services provided or rendered by the person;

PERSONmeans (a) an individual;

(b) a company, an agency or an association of personsincorporated, formed,organized or established in Pakistan or elsewhere;

(c) the Federal Government;(d) a Provincial Government;

(e) a Local Authority or Local Government in Pakistan; or(f) a foreign Government, a political sub-division of a foreign

Government, or a public international organization;

Explanation:The use of the word he in this Act shall be taken to referto any or all ofthe persons mentioned in sub-clauses (a) to (f) above.

PLACE OF BUSINESS INSINDH means that a person-

(a) owns, rents, shares or in any other manner occupies a space in Sindhfrom where it carries on an economic activity whether wholly orpartially; or

(b)carries on an economic activity through any other person suchas an agent,

associate franchisee, branch, office, or

otherwise in

Sindh but not including

a liaison

office.

PORT OPERATOR

includes Karachi Port Trust, Port Qasim Authority or any other person ororganization managing the operations of any customs port as declared undersection 9 of the Customs Act, 1969 (Act No. IV of 1969);

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PRESCRIBEDmeans prescribed by rules made under this Act;

PRALmeans the Pakistan Revenue Automation (Private) Limited;

PROVISION OF SERVICE OR PROVIDING OF SERVICE

includes the rendering, supply, initiation, origination, reception,consumption, termination or execution of service, whether in whole or

part, including e-services where the context so requires;

PUBLIC BONDED WAREHOUSEmeans a warehouse licensed under section 12 of the Customs Act, 1969;

REGISTRATION NUMBERmeans the number allocated to a registered person for the purpose of this Act;

REGISTERED PERSON

means a person who is registered or is liable to be registered under thisAct or any other person or class of persons notified by the Board in theofficial Gazette:

Provided that a person liable to be registered but not registered underthis Act shall not be entitled to any benefit available to a registeredperson under any of the provisions of this Act or the rules madethereunder;

REINSURANCE

includes retrocession, and has the same meaning as defined inclauses (lii) and (lv) of section 2 of the Insurance Ordinance, 2000(Ordinance No. XXXIX of 2000);

RESIDENT means(a) an individual who, in a financial year, has -

(i)a place of business, whether whole or part thereof, in Sindh inany mode, style or manner; or(ii)his permanent address, as listed in the individuals national identity card, inSindh; or

(iii)a permanent representative to act on his behalf or to provideservice on his behalf in Sindh;

(b) an association of persons or a company which, in a financial year, has --

(i)its registered office is in Sindh; or

(ii)its place of business, whether whole or part thereof, in Sindh

in any mode, style or manner; or(iii)a permanent representative to act on its behalf or to provideservice on its behalf in Sindh; or

(iv)the control or management of the association of persons orthe company, whether whole or part thereof, situated in Sindh atany time during the financial year;

RESTAURANT

by whatever name called, includes a person, establishment, organization,place, cafe, coffee houses or ice cream parlors where food, beverages orother edible preparations are sold or served to the customers, includingthe customers availing of the take-away service or delivery service or roomservice or catering service, whether or not the restaurant provides anyother services, facilities, utilities or advantages;

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RETURNmeans a return required to be furnished under Chapter-VI of this Act;

RULESmeans the rules made under this Act;

SCHEDULEmeans a Schedule appended to this Act;

SECURITY AGENCY

means a person engaged in the business of providing of services relatingto security of any person or property, whether moveable or immovable,including the services of provision of security personnel, guard or vehicle;

SERVICE OR SERVICES

means anything which is not goods or providing of which is not a supplyof goods and shall include but not limited to the services listed in the FirstSchedule of this Act. Explanation: A service shall remain and continue tobe treated as service regardlesswhether or not the providing thereofinvolves any use, supply or consumption of any goods either as anessential or as an incidental aspect of such providing of service;

SHIPPING AGENTmeans a person licensed as a shipping agent under the Customs Act, 1969(Act No. IV of 1969), or the rules made thereunder, who provides or rendersany service in relation to entrance or clearance of a conveyance at acustoms port and a customs station, as defined in clauses (j) and (k) ofsection 2 of the Customs Act, 1969, and files import or export manifest andissues line or carrier bill of lading, for or on behalf of an airline or shippingline or any other conveyance, and includes non-vessel operating commoncarriers, slot carriers, charterers, international freight forwarders andconsolidators, rendering services in relation to import and export of cargo,independently or as subsidiary of an airline, shipping line, slot carrier,charterer, and non-vessel operating common carrier;

SHIP CHANDLER

means a person licensed as a ship chandler under the Customs Act, 1969(Act No. IV of 1969) or the rules made thereunder;

SHIP MANAGEMENTSERVICES includes --(a) supervision or negotiation for the maintenance, survey and repair of ship;(b) engagement or providing of crew;(c) receiving the hire and freight charges on behalf of the owner;

(d) negotiating contracts for bunker fuel and lubricating oils;

(e) arranging or negotiating arrangements for loading and unloading(f) payment, on behalf of the owners, of the expenses incurred

in providing services or in relation to the management of theship;

(g) entry of the ship on protection or indemnity association;(h) providing or negotiating for victualing or storing of ship;(i) dealing with insurance, salvage or other claims in relation to ship;(j) arranging of insurance in relation to ship; and(k) any other ship management service;

SHORT-PAID

means, where a registered person pays an amount of tax less than thetax due as indicated in the persons return filed under section 30, theamount so involved and also includes the amount of tax due but notpaid owing to miscalculation or incorrect or inadmissible input tax creditor adjustment or incorrect assessment of the tax due for a tax period;

SIMILAR SERVICE

means any other service which is the same as, or closely resembles,the other service in character, quality, quantity, functionality, materials,or re utation;

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SPECIAL AUDITmeans an audit conducted under section 29;

SPECIAL JUDGEmeans a Special Judge appointed under section 37;

SPONSORSHIP

includes naming an event after the sponsor, displaying the sponsorslogo, trade name, brand name or product name, giving the sponsor

exclusive or priority booking rights, sponsoring prizes or trophies forcompetition or game or sports; but does not include financial or othersupport in the form of

donations and gifts, given by a donor, subject to the condition that theservice provider is under no obligation to provide anything in return tosuch donor;

STATEMENTmeans a statement prescribed under the rules or notifications made under this Act;

STEVEDORE

includes a person engaged in handling and loading or unloading of cargo

including containers, pallets and bulk cargo, from ships, vessels,steamers and country crafts in any manner and also includes a personwho hires long shore, dock or harbor workers to load or unload ships,vessels, steamers and country crafts. A person providing or renderingany services related to or ancillary to the handling of or otherwisedealing with such or other cargo at a port or in any area or terminal atthe port in any manner or style shall be included in the terminologystevedores;

STOCKBROKER

means a broker as defined in clause (c) of sub-section (1) of section 2 ofthe Securities and Exchange Ordinance, 1969 (Ordinance No. XVII of

1969) providing services in relation to a Stock Exchange as defined inclause (xxiv) of sub-section (1) of section 2 of the Stock

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Exchange (Corporatization, Demutualization and Integration) Act, 2012(Act No. XV of 2012) ;

SURVEYOR

means a person engaged in the services of insurance survey, marketsurvey, statistical survey, opinion poll survey and survey relating to riskassessment, loss or damage assessment or claim settlement but does notinclude the services conducted by the Federal or Provincial or LocalGovernments for its own purposes and by the recognized educationalinstitutions for the purposes of education and academic research in suchinstitutions;

TAX means-(a) the tax, additional tax, or default surcharge levied under this Act;(b) a fine, penalty or fee imposed or charged under this Act; and

(c) any other sum payable or recoverable under the provisions of thisAct or the rules made thereunder;

TAX CONSULTANT

by whatever name called, includes a person engaged in providing of

services of advice, consultancy or assistance in the matters of any federal,provincial or local government laws in relation to any tax, rate, cess orproviding representational services before any court, tribunal or other such

judicial or quasi judicial authority or the authority administering such taxlaws.

TAX FRAUDmeans knowingly, dishonestly or fraudulently and without any lawful excuse

(a) doing of any act or causing to do any act; or

(b)omitting to take any action or causing theomission of any

action,including

providing of taxable services without

being registered under this Act; or(c) falsifying or causing falsification of tax invoices; or

(d) issuance of invoice or bill of taxable services without the provision ofthat taxable service; or

(e) failure to pay an amount of tax collected under section16, and failureto pay the amount of tax withheld under the provisions of the rulesmade under this Act, in contravention of the duties or obligationsimposed under this Act or rules or instructions issued thereunder withthe intention of understating the tax liability or underpaying the taxliability for two consecutive periods or more or overstating theentitlement of tax credit or tax refund to cause loss of tax revenue;

TAX PERIOD

means a period of one month or such other period as the Board may, bynotification in the official Gazette, specify;

TAXABLE SERVICEshall have the meaning given under section 3;

TELECOMMUNICATION SERVICEshall have the meaning given in clause (v) of section 2 of the Pakistan

Telecommunication (Re-organization) Act, 1996 (Act No. XVII of 1996),

and includes the telecommunication system as defined in clause (u)

thereof and further includes the wireless communication as defined in

clause (1) of section 2 of the Wireless Telegraphy Act, 1933 (Act No. XVII

of 1933) and also includes transfer, assignment or sharing of the right to

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use capacity for transmission, emission or reception of signals and

provision of access to global or local information network;

TERMINAL OPERATOR

includes Karachi International Container Terminal, Pakistan InternationalContainer Terminal and Qasim International Container Terminal or anyon-dock or off-dock terminal or any other person doing similar activitiesand also includes the cargo or baggage shed operators licensed orappointed by the customs authorities at any customs port or customsairport or customs station;

VALUE OF A TAXABLE SERVICEshall have the meaning given under section 5;

PENALTY

Where any person fails to provide the document or record orinformation or data or refuses to allow the officer of the SRB to takeextracts or make copies of the document or record or information ordata or fails to appear before an officer of SRB or fails to answer anyquestions put to him, a penalty of Rs.100,000 has been proposedthrough insertion of clause 15 in section 43. Such person shall furtherbe liable to imprisonment up to one year term or additional fine

Rs.100,000 or both, if convicted by Special Judge.

TAX LEVYSales tax on services has been extended @ 16% on services rendered by:

Marriage halls and lawns falling under heading 9801.3000;

Advertising agents, sponsorship services and business supportservices falling under heading 9805.7000, 9805.9100 and9805.9200 respectively;

Architects and town planners falling under heading 9814.1000;

Professionals and consultants including legal practitionersand consultants, accountants and auditors, managementconsultants, software or IT based system developmentconsultant, tax consultants falling under heading 9815.2000,9815.3000, 9815.4000, 9815.6000 and

9815.9000 respectively;

Security agency and market research agency falling underheading 9818.1000 and 9818.3000 respectively;

Commodity brokers falling under heading 9819.1000;

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Surveyors, outdoor photographers and videographers andmanagement consultants falling under headings 9819.5000,9819.7000 and 9819.9300 respectively;

Specialized workshops or undertakings including auto workshops,workshops for industrial machinery, construction and earth movingmachinery falling under heading 9820.1000 and 9820.2000respectively;

Specified fields including healthcare centers, gyms or physical fitness

center etc, body massage center and pedicure center falling underheading 9821.1000, 9821.4000, 9821.5000 respectively;

Event management services, exhibition services, public bondedwarehouses, Labour and manpower supply services; toll services inmanufacturing for others falling under heading 9824.000, 9828.000,9829.000 and 9830.000 respectively;

Race events entry services @ Rs.200 all other services at race club @16% falling under heading 9831.000.

APPELLATE BENCH

The bill seek to provide for a appellate bench till formation of the appellatetribunal. This is proposed to be comprising of two members and in case ofany difference of opinion the matter shall be referred to the Chairman of theBoard who shall act as referee member of the bench.

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Documents

Budget Brief 2013-14