Budget Commentry 2015-16

Advocates & VAT Consultants

PAKISTAN BUDGET CHEMISTRY 2015-16

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HEADINGS SECTIONS PAGE

SALIENT FEATURES

INCOME TAX

DEFINATION 01

SUPER TAX 01

PUBLIC COMPANY 01

CAPITAL GAINS 01

POWERS OF FEDERAL GOVERNMENT 02

TAX CREDITS 02

OTHERS 02-05

INCOME TAX SCHEDULE SECTION 2(1) 05-07

SECOND SCHEDULE 08

EXEMPTIONS WITHDRAWN FROM THE SECOND

SCHEDULE 08-09

3rd TO 8th SCHEDULE 09

SALES TAX

ACTIVE TAXPAYER SECTION 2(1) 10

APPELLATE TRIBUNAL SECTION 2(1A) 10

COTTAGE INDUSTRY SECTION 2(5AB) 11

RETAILER SECTION 2(28) 11

SUPPLY SECTION 2(33) 11-12

WHISTLE BLOWER SECTION 2(46-) 12

FURTHER SALES TAX SECTION 3(1A) 12

POWER TO COLLECT SALES TAX AT HIGHER RATE SECTION 3(2B) 13

TIME AND MANNER OF PAYMENT SECTION 6(1) 13

DETERMINATION OF TAX LIABILITY SECTION 7(2)II 13-14

TAX CREDIT NOT ALLOWED SECTION 8(1)H 14

TAX CREDIT NOT ALLOWED SECTION 8(1)J-K-L & 8A 14

EXEMPTION SUBJECT TO APPROVAL SECTION 13 (2)A 15

EXEMPTION SUBJECT TO APPROVAL SECTION 13 (2)B 16

EXEMPTION THROUGH NOTIFICATION TO PLACE

BEFORE NATIONAL ASSEMBLY

SECTION 13 (6)(7) 16

REGISTRATION SECTION 14 (1), (2) & (3) 16-17

ACTIVE TAXPAYERS LIST SECTION 21 (A) 17

ACCESS TO RECORD, DOCUMENTS SECTION 25 (3) 17

SPECIAL AUDIT BY AUIT PANELS SECTION 32A (1)&(4) 17-18

OFFENCES AND PENALTIES SECTION 33 SERIAL (1) (5) 18

MONITORING OR TRACKING BY ELECTRONIC OR

OTHER MEANS

SECTION 40C (2) 19

AFFIXING STAMPS, STICKERS, BANDROLE AND

LABELS IN RESPECT OF SPECIFIED GOODS

SECTION 40D 19

POWER OF THE BOARD AND COMMISSIONER TO

CALL FOR RECORDS

SECTION 45A (4) 19

AGREEMENT FOR THE EXCHANGE OF INFORMATION SECTION 56A 20

DISCLOSURE OF INFORMATION BY A PUBLIC

SERVANT

SECTION 56B 20

PRICE SCHEME TO PROMOTE TAX CUTURE SECTION 56C 20-21

REWARD TO WHISTLEBLOWERS SECTION 72(D) 21

FIFTH SCHEDULE SERIAL NO 12 21-23

EXEMPTIONS SIXTH SCHEDULE TABLE 1 23-25

SIXTH SCHEDULE TABLE 3 25

EIGHT SCHEDULE TABLE 1 26-31

EIGHT SCHEDULE TABLE 2 31

NINHT SCHEDULE 31

SALES TAX ON SERVICES ON FEDERAL CAPTIAL

ISLAMBAD TERITORRY

I.C.T ORDINANCE 31-39

FEDERAL EXCISE DUTY

PROVISIONS ARE INSERTED /MODIFIED IN ACCORDANCE WITH SALES TAX ACT

39 DUTIABLE ITEM FIRST SCHEDULE 39

EXEMPTION FROM F.E.D. THIRD SCHEDULE 39-40

SALIENT FEATURES


SALIENT FEATURES OF THE BUDGET

BUDGETARY ALLOCATIONS AND TARGETS

The total outlay for Budget FY16 is estimated at PKR 4.45tn, higher 3.5% then actual budget estimates of

FY15.

GOP has estimated a GDP growth of rate of 5.5% in FY16, compared to actual/revised growth rate of

5.1/4.2% in FY15. Furthermore, the GoP plans to bring the reach the 7% growth mark by FY18.

Total revenue receipts for FY16 are estimated at PKR 4.16trn compared to budgeted receipts of PKR

4.07trn in FY15, up by 2.23%. On the other hand, total expenditures are budgeted at PKR 4.45trn as

compared to PKR 4.30trn budgeted for in FY15, up by 3.48%. Consequently, GoP plans to resort to bank

borrowing of 283bn to meet its budget deficit.

On the expenditure front, subsidies have been slashed by 32% from last year’s targets to PKR 138bn.

Bulk of the cost cutting can be attributed to reduction in subsidies to power sector, including

WAPDA/PEPCO and KEL.

Collection from tax revenues have been budgeted to increase by 9.24% to PKR 3.4trn, whereas non tax

revenue is budgeted to increase by 9.58% in FY16.

Current expenditure for FY16 has been estimated at PKR 3.48tn, against PKR 3.46tn budgeted for in

FY15.

Public Sector Development Program (PSDP) has been estimated at PKR 1,513bn (4.9% of GDP), up

27%/29% compared to FY15R/FY15 allocations. On a comparative basis, Federal PSDP has been raised by

33% YoY to PKR 700bn, whereas provincial share of PSDP has been jacked up 25% to PKR 813.7bn. Major

beneficiaries of increase in Federal PSDP include NHA, whose allocation has been increased by 43%, and

introduction of Special Development Program for IDPs which has been allocated PKR 100bn.

TAXATION MEASURES

Corporate taxation rate has been reduced from 33% to 32%.

WHT on dividends has been increased by 2.5% to 12.5% for filers, whereas tax for non-filers has been

increased from the current 15% to 17.5%.

SALIENT FEATURES


Currently, banking sector income is taxed at 35% besides dividend income (10-25%) and income on

capital gains (10-12.5%). Under the FY16 budget, all income sources of banks have been proposed to be

taxed at 35%.

Super tax has been introduced in FY16 budget with a view to provide funding for temporary displaced

persons. Accordingly, a one-off tax would be charged to companies, individuals and AoPs with income

exceeding PKR 500mn @ 4% for banks and 3% for income for all others.

Under the FY16 budget, companies (with the exception of banks and modarbas) that do not pay

dividends within six months of the end of a tax year, or make distributions in a manner that their reserve

position post distribution exceeds 100% of such company’s paid up capital, will have to pay tax at the

rate of 10% on such excess earnings.

The current taxation measures do not address the issue of taxation of dividends to unit holders of REITs.

To bridge the gap, FY16 budget proposes dividends from REITs be treated @ 10%.

After already having passed on the burden of increased CGT to investors in the previous year, the

current budget saw the GOP deciding to further increase the quantum and rates on sale of securities.

CGT on sale of securities disposed off within one year of holding has been increased from 12.5% to 15%,

whereas securities sold between 1-2 years will now be charged CGT @ 12.5% compared to 10%

previously. Additionally, the GoP has proposed the introduction of a new slab of CGT for disbursement

of securities between 2-4 year period @ 7.5%

SALES TAX

The budgetary measures pertaining to Sales Tax& Federal Excise are primarily aimed at:

1. The rate of further tax for supplies to unregistered persons is being enhanced to 2%.

2. Restriction of zero-rating on dairy products to milk for baby formula.

3. Exemption of sales tax on local supply of raw hides and skins to be granted.

4. Sales Tax Rules – provisions for temporary registration are introduced to facilitate the

manufacturers. (Amending notifications are awaited)

5. The limit of utility bills for cottage industry is being enhanced from 700,000 to 800,000 rupees.

6. Input tax adjustment on Pre-fabricated buildings being allowed.

7. The refund on monthly basis to be allowed to persons making reduced rate supplies under SRO

1125(I)/2011 dated 31.12.2011 (Amending notification are awaited)

8. Sales tax exemption on appliances for colostomy, colostomy / urosotomy bags and tubular

daylight devices is being granted

9. Rationalization of sales tax on steel sector melters, re-rollers and, ship breakers. (Amending

notifications is awaited to be issued)

10. sales tax on rates on mobile phones are doubled to Rs. 300, 500 and 1000, from Rs. 150, 250

and 500, respectively, depending on features in the mobile set

SALIENT FEATURES


11. Certain services to be added in the Islamabad Capital Territory in order to align the taxation

regime on services with provinces.

12. Sales Tax Exemption is granted to bricks and crushed stones up-till June 2018.

FEDERAL EXCISE DUTY

1. Enhancement of rates of Federal Excise Duty on locally produced cigarettes. Average tax

incidence to increase from 58% to 63%

2. The rate of Federal Excise Duty on aerated waters is being enhanced from 9% to 12% of retail

price.

3. The electronic monitoring system is proposed to be introduced to monitor the production of

specified sectors i.e. cigarettes, beverages, cement, fertilizer and sugar; and also to monitor the

sales of restaurants etc.

OTHER MAJOR FEATURES

Tax credit for companies planning to get listing on the stock exchange has been raised from 15%

currently to 20%.

To promote a culture of investments, tax credit on investments in shares of new securities has been

raised from PKR 1mn to PKR 1.5mn.

FY16 budget aims at widening the tax net of the country. Accordingly, additional rate of tax would being

charged to non-filers of income tax, where commission agents and contractors will have to pay

additional tax @ 3%, while suppliers would pay additional tax @ 2%.

Salary and pensions have been budgeted to increase by 7.5%

SALIENT FEATURES


FY16 Budget Snapshot

PKR bn Rev. Budget

FY14 Rev.

Budget

FY15

Budget FY16

Total Budget Outlay 3,985 4,235 4,451

Resources 3,681 3,833 4,168

Internal Resources 2 966 3 122 3 367

Revenue Receipts 2,184 2,378 2,463

Capital Receipts 600 603 606

Estimated Provincial Surplus 183 141 297

External Resources 714 710 802

Expenditure 4 057 4 235 4 451

Current Expenditure 3,198 3,481 3,482

Development Expenditure 858 754 969

• Federal PSDP including ERRA 425 542 700

• Development loans & Grants to

Provinces

144 132 164

Other Development Expenditure 289 80 105

Bank borrowing 376 402 283

INCOME TAX

PAKISTAN BUDGET CHEMISTRY 2015-16 Page 1

DEFINATION

The definition of “Consumer Goods” and “Fast Moving Consumer Goods” has been introduced and will

give clarity for the eligibility for the reduction in Minimum Tax.

Definitions related to “Real Estate Investment Trust” and “Pakistan Mercantile Exchange Limited” have

been introduced with regard to new taxation measures.

SUPER TAX

For the Tax Year 2015, Banking Company, and Other Person having income equal to or exceeding to

Rs.500 million, will additionally be subjected to Super Tax for Rehabilitation of Temporarily Displaced

Persons (Super Tax) at the rate of 4% and 3% respectively. Final tax related income will be calculated

through imputable tax basis for the calculation of Super Tax chargeability.

PUBLIC COMPANY

From Tax Year 2015, the Public Company (excluding banking companies, public companies in which not

less than 50% shares are held by the Government and a modaraba) derives profit for tax year and having

undistributed tax reserves exceeding 100% of its paid up capital after paying dividend (if any), so much

of its reserves as exceed 100% of its paid up capital shall be treated as income and will be subjected to

tax at the rate 10%.

Fixed Tax regime on Profit on Debt has been revised where maximum tax rate has been increased to

15% from earlier 10% in case the profit on debt exceeds Rs 25 million; in a progressive manner and will

be treated as separate block of income.

CAPITAL GAINS

Rates on Capital Gains on disposal of securities have been revised. Such gains are subject to 12.50% and

15% tax for Tax Year 2015 & 2016 respectively if the security sold having holding period of one year or

less. Whereas, if the holding period of security is between twelve months and twenty four months, gains

are subject to 10% and 12.50% tax for Tax Year 2015 & 2016 respectively. However, for the Tax Year

2015, there will be no tax if the holding period of the security sold exceeds twenty four months but for

the Tax Year 2016, such gains will attract tax at the rate 7.5%.

POWERS OF FEDERAL GOVERNMENT

INCOME TAX


The power of the Federal Government for allowing exemptions and concession under the Income Tax

Ordinance, 2001(ITO) have been made subjected to the approval for Economic Coordination Committee

of Cabinet, that too, on the basis of specific purposes and circumstances as defined in the law.

TAX CREDITS

The maximum limit of Rs.1.000 Million has been increased to Rs.1.500 Million for taxThe Tax Credit

available for Profit on House Loan/Debt has been replaced by deductible allowance for house loan/debt

and its maximum limit has been enhanced to Rs.1.000 million for Rs.0.750 million.

A new Tax Credit has been introduced for Employment Generation by Manufacturers. Setting up new

manufacturing units (between July 1, 2015 to June 30th, 2018), will be eligible for a tax credit of 1% of

tax payable (subject to maximum of 10% of tax payable) for every fifty employees’ registration with EOBI

and ESSI. The company can avail the Tax Credit for a period of ten years.Tax credit under section 65B,

65D and 65E were allowed against the final/minimumtaxation but due to section 169(2) and 113(1)

there was confusion in eligibility of such tax credit. A new sub section has now been introduced for the

resolution of said ambiguity as tax credits under said sections are already allowed against

final/minimum tax.

Tax Credit for the Company Opting for Enlistment in any registered stock exchanges in Pakistan has

been increased to 20% from existing 15%.

The time frame for the Tax Credit under Section 65E of ITO has been rationalized by allowing five years

from the date of setting up or commencement of commercial production from the new plant or

expansion project, whichever is later.

OTHERS

In order to exchange information with regard to double taxation and prevention of fiscal evasion, the

Federal Government will be authorized to enter into agreements with Government or Governments of

foreign countries or tax jurisdictions. In addition, the Federal Government is seeking the confidentiality

of such sort of information under the cover of “Notwithstanding” clause. Similar authority has also been

introduced in the Sales Tax as well as Federal Excise laws.

Tax on Builders introduced through Finance Act, 2013 has been suspended till June 30th, 2018.

INCOME TAX


Minimum Tax on Land Developers has been introduced at the rate of 2% of the value of land notified by

any authority for the purpose of stamp duty.

Taxpayer has been authorized to revise the Tax Return without the prior approval of Commissioner, if

the Revised Tax Return is filed within 60 days of filing of the Original Tax Return.

The Commissioner (Appeals) may extend the stay for another thirty days after hearing the

Commissioner against whose order and appeal has been made, provided that order on appeal shall be

passed within the said period of thirty days.

The period for the recovery of tax under an assessment order or an amended assessment order or any

other order issued by the Commissioner has been extended to thirty days from existing 15 days.

However, the period of sixty days allowed for the provisional assessment under Section 122C of the ITO

has been reduced to forty five days.

Tax payer is now required to estimate its Tax Liability for the Tax Year before the end of its second

quarter instead of the prevailing requirement before the end of fourth quarter. In case, the tax payable

for the tax year is likely to be more than the amount required to be paid as per provisions of law, the tax

payer is required to pay 50% of such tax liability by due date of second installment and the balance 50%

in two equal installments payable by the due dates of third and fourth quarters of the Tax Year.

The Permanent Establishment in Pakistan of a Non-Resident Person is now entitled to apply

Commissioner for tax exemption/reduction certificate on account of payments made under Section

152(2A) of the ITO.

Tax deducted while making payment to companies on account of services rendered has been made

adjustable for the Companies Rendering Services with effect from tax year 2009 and such payments to

other than companies shall be minimum. This seems to be a settlement of an old issue account of

proper amendment proposed in the ITO, 2001.

Tax deducted at the rate of 10% while making payment to a Sportsperson has been declared Final Tax

with effect of Tax Year 2013. This seems to be a settlement of an old issue account of proper

amendment proposed in the ITO, 2001.

Exporters have been provided with an irrevocable option to opt for filing of normal income tax return

under Section 114 of the ITO, 2001 instead of filing statement of final taxation under Section 115(4) of

the ITO, 2001. However, no incentives have been provided in this regard as tax deducted on the exports

proceeds shall be minimum tax for such tax year.

Rate of Default Surcharge on account of non-deduction/payment of tax has been reduced to 12% from

18% whereas additional payment for delayed refund payable by Board has also been reduced to KIBOR

plus 0.5% from 15%.

INCOME TAX


A new section 165B has been introduced to empower the Board to procure information related to non-

resident persons from financial institutions including banks to discharge its duties under bilateral or

multilateral treaties/agreements.

The concept of “Special Audit Panels(SAP)” has been introduced this year which will be comprising of

two or more members, consisting of an officer of the Inland Revenue, a firm of Chartered Accountants, a

firm of Cost and Management Accountants or any persons as directed by Board. SAP will be headed by

the chairman who shall be an Officer of Inland Revenue. Such SAPs, after getting approvals from the

Commissioner, may exercise powers under Sections 121, 176, 177, 210 and 211 of the ITO, 2001.

Individuals’ Computerized National Identity shall be used as National Tax Number from the tax year

2015.

Minimum Penalty of ten thousand rupees instead of fifty thousand rupees for Non-Filing of statement

of final taxation and withholding tax statements has been brought in the main section from the

respective schedule. The penalty for non-filing of wealth statement and wealth reconciliation statement

has been enhanced from 100/per day of default to the higher of0.1% of the taxable income per week or

Rs.20,000.

A Retailer registered under Special Procedure Rules, 2007, will automatically be selected for Audit of its

Income Tax affairs to be conducted under section 177 of the ITO, 2001, in case of non- compliance of

the parameters specified under section 214D(3) which require that the retailer should be an active

taxpayer, duly filing of Income Tax Return along-with tax.

A concept of whistle blower has been introduced in Income Tax, Sales Tax and Federal Excise laws for

the person who reports concealment or evasion of income tax, fraud, corruption or misconduct by

providing credible information leading towards detection of tax and related recovery. The Board may

sanction reward to such whistle blowers subject procedures to be prescribed in this behalf.

For the purpose of collection of advance tax from the domestic consumers monthly limit of electricity

bill is proposed to be reduced from Rs. 100,000 to Rs. 75,000.

Advance tax rates applicable on telephone services expanded to include internet services in their ambit

for deduction of tax.

Collection of advance tax has been abolished on purchase of air tickets for travelling to Baluchistan

Coastal Belt, Azad Jammu and Kashmir, FATA, Gilgit-Baltistan and Chitral.

Fertilizer has been excluded from the ambit of advance tax on sales to retailers or wholesalers. The

Finance Bill has included the wholesalers simultaneously in the ambit of advance tax; if the transaction is

between the wholesalers.

INCOME TAX


Collection of advance tax by Educational Institutions from non-resident person has been relaxed on the

premise that the non-resident has no Pakistan source income and fee is remitted directly to the bank

account of educational institution from abroad through normal banking channels.

For Non-Filers, all banking transactions related to transfer and purchase of banking instruments,

exceeding fifty thousand rupees a day, will be liable to adjustable advance tax at the rate of

0.6%.

Payment to a resident person for rent to use commercial, industrial, scientific equipment or machinery

has been made subject to deduction of Income Tax at the rate of 10% which would be Final Tax on such

income.

Education related expenses remitted abroad will also be made liable subjected to deduction of

adjustable advance tax at the rate of 5%. Tax shall be collected from the payer of education related

expenses.

Dividend in specie has also been made liable for deduction of advance tax at the rates applicable to cash

dividend i.e. 12.50% on filers while 17.50% on Non-Filers.

Pakistan Mercantile ExchangeLimited is required to collect advance tax from purchase, sale and

commission on future commodity contracts at the rate of 0.1%. The aforementioned collection of tax

shall be a minimum tax.

INCOME TAX SCHEDULE SECTION 2(1)

Finance bills proposes to provide a slight reduction of Income tax to tax payers having their income from

Rs. 400,000-Rs. 500,000 by reducing their tax rate.

Salaried individuals tax rates are reduced from 5% to 2% while other individuals tax rates are reduced

from 10% to 7%.

� REDUCTION OF TAX RATES FOR COMPANIES

Tax rate on Company, other than Banking Company, has been reduced to 32% for the Tax Year 2016.

� RATES OF SUPER TAX (TY 2015 only)

Banking Company 4%

Other than Banking Company (having income ≥ Rs. 500 Million) 3%

� INCREASE IN WITHHOLDING RATES FOR NON-FILERS

INCOME TAX


After introduction of concept of Filer & Non filer in Finance Bill 2014, it has been proposed to further

expand its scope to encourage filing of returns. The details of additions and enhancement of withholding

rates are as follows:

Category Filer Non Filer

Capital Gains Tax Company

� Stock Funds 10% 25%

� Other than Stock Funds 25% 25%

Capital Gains Tax Individuals & AOPs 10% 17.5%

Specified Imports 1% 1.5%

Import Pulses 2% 3%

Commercial Imports 3% 4.5%

Import of Ships 4.5% 6.5%

Execution of Contracts

� Company 7% 10%

� Others 7.5% 10%

� Sports Person 10% 10%

Commission on Petroleum products 12% 15%

Brokerage & Commission

� Advertisements 10% 15%

� Others 12% 15%

Other industries & Companies 5.5% 8%

Other Persons 6% 9%

Dividend 10% 17.5%

Profit for Debt 10% 17.5%

Permanent Establishment

� Company 4% 6%

� Other 4.5% 6.5%

Non Resident Other than Transport

� Company 8% 12%

� Others 10% 15%

Non Resident Contracts

� Company 7% 10%

� Others 7.5% 10%

� Sports Person 10% 10%

Supply of Goods (Local)

� Company 4% 6%

� Other 4.5% 6.5%

Goods Transport Vehicles(per kg) Rs.2.5 Rs.4

Passenger Transport Vehicles

INCOME TAX


� Per Seat Capacity (Rs.) 50-300 100-500

� Private Vehicles (Rs.) 800-10000 1200-30000

Cash Withdrawal Bank 0.3% 0.6%

Other transactions with Bank 0.3% 0.6%

Advance Tax on Purchase of vehicles

� Minimum up to 850 CC (Rs.) 10000 10000

� Maximum above 3000 CC (Rs.) 250000 450000

Advance Tax on Transfer of vehicles

� Minimum up to 850 CC (Rs.) 0 5000

� Maximum above 3000 CC (Rs.) 62500 300000

Fertilizer dealer/wholesaler 0.7% 1.4%

Transaction other than cash through Bank (exceeding 50,000

in a day)

Nil 0.6%

Services (Local)

� Company 8% 12%

� Other 10% 15%

WITHHOLDING RATES FOR CERTAIN TRANSACTIONS

In addition to the enhancement of Tax Withholding rates for non- filers, following rates have been

modified in the finance bill:

Particulars Proposed Rate

Mobile, Internet and cards 14%

Rental of Machinery 10%

International Travel

First/Executive Class Rs. 16,000

Other than economy Rs. 12,000

Sale/purchase of future commodity 0.1%

Commission on above 0.1%

Education expenses remittance abroad 5%

Withdrawal of cash by licensed Exchange Companies 0.15%

SECOND SCHEDULE

INCOME TAX


Income tax exemption is proposed to be granted to profit and gains of the following:

Description Period of Exemption

China Overseas Ports Holding Company from

Gwadar port

Upto February 06, 2030

Developmental REIT scheme Upto June 30,2020

Manufacture of Plant and Machinery used for

renewable energy resources

Five years from July 01, 2015

Operation of warehousing or Cold Chain

facilities for agricultural produce

03 years of commercial operations.

Industrial undertaking involved in Halal Meat

production including export receipts

04 years of commercial operations.

Manufacturing unit setup in the Province of KPK

(setup between July, 2015 to June 2018)

05 years of commercial operation

/Production.

Operators and Owners of LNG Terminals 05 years of commercial operation /

Production.

Taxpayers establishing Transmission Line

Project setup on or after July 01, 2015 to June

30, 2018.

No specific period mentioned

Following major emptions are also proposed to be included in the Second Schedule:

� Contribution on account of Social Security to Social Security Departments shall be exempt.

� Minimum Tax Exemption to following persons and business:

� Coal supplies from Sindh for Power Generation.

� Operators and Owners of LNG Terminals

� Taxpayers In most affected areas of KPK, FATA or PATA from

� Rice Mills (for Tax Year 2015 only)

� Tax on Cash withdrawal by exchange companies @ reduced rate of 0.15%.

� Incentive available to green field undertakings in the form of Non-disclosure of source of income

has been extended to June 30, 2017.

� Finance bill proposed that section 113 and 153 remain not applicable to trading houses where

sale of in house produced and processed food and allied items to customers doesn’t exceed 2%

of total sales.

EXEMPTIONS WITHDRAWN FROM THE SECOND SCHEDULE

� Capital Gains from sale of shares of Public Companies set up in Special Industrial Zone.

INCOME TAX


� Payment to electronic and Print Media.

� Import of Petroleum Products.

� Income from Hajj Operations.

� Rate of Income tax (2%) on purchase of locally produce Oil and ghee manufacturer purchases.

� Minimum tax exemption is withdrawn from KAPCO

3RD TO 8TH SCHEDULE

The finance bill seeks to tax the Capital gains and chargeability of super tax on the dividend income of

different sectors.

SALES TAX


ACTIVE TAXPAYER SECTION 2(1)

Bill proposed to insert definition of active tax payer in the Sales Tax Act through amendment in

subsection 2(1). Earlier the definition was provided under sales tax general order.

According to the definition Active Taxpayers persons means a person who does not fall under

following category :-

(a) A person who is blacklisted or whose registration is suspended or is blocked in terms of

section 21;

(b) A person who fails to file the return under section 26 by the due date for two consecutive

tax periods;

(c) A person who fails to file an Income Tax return under section 114 or statement under

section 115, of the Income Tax Ordinance, 2001(XLlX of 2001), by the due date;

and

(d) A person who fails to file two consecutive monthly or an annual withholding tax statement

under section 165 of the Income Tax Ordinance, 2001;

In our opinion linking compliance of income tax statement for a registered person to remain as

active taxpayer in sales tax is not correct considering the impact of penalties provided in both

the law for non-compliance. Furthermore, the mere non filing of income tax withholding

stamen in this case may cause serious implication such as non-availability of input tax

adjustment, inadmissibility of supplies under reduced rate etc.

APPELLATE TRIBUNAL SECTION 2(1A)

Definition of “Appellate Tribunal” is proposed to be renumbered only.

SALES TAX


COTTAGE INDUSTRY SECTION 2(5AB)

The bill is proposed increase for threshold of cottage industry. At present persons having

annual utility bills during the last 12 months of Rs. 700,000/- are define as “Cottage Industry”,

The limit of utility billsare proposed to be increase to Rs. 800,000/- considering the inflationary

impact and increasing utility cost.

RETAILER SECTION 2(28)

Bill proposed exclusion of threshold limit for retailer having combine business of importer or

manufacturer. Earlier the threshold limit of 5 million is also available to importer cum retailer or

manufacturer cum retailer. However since threshold limit for both manufacturer and retailer

were already been withdrawn. The limit for retailer having joint business of import or

manufacturing is also proposed to be omitted.

SUPPLY SECTION 2(33)

The bill is proposed to amend definition of supply in order to give legal cover for sales tax

collection on supply upon toll manufacturing.

A new sub section “d” is accordingly proposed defining expanded scope of supply in cases of

manufacture of goods belonging to another person, the transfer or delivery of such goods to

the owner or to a person nominated by him.

Here it is important to note the dispute over rights to claim sales tax on toll manufacturing

service is prevailing among provinces and Federal Government. The board though has

strengthened their stance on their right to collect sales tax on toll manufacturing. The issue will

not resolve until unless provincial governments delete the entry of Sales Tax on Toll

manufacturing from their charging Schedule of respective Sales tax Act.

SALES TAX


Having said that in our opinion, the right to collect and levy sales tax on toll manufacturing

activity was always rest with Federal Government since in its law under section 2(16) and 2(17)

the activity was already well covered.

WHISTLE BLOWER SECTION 2(46-)

The bill is proposed to insert definition of whistle blower under S.T.A. 1990. Accordingly to

proposed definition under section 2(46)A whistle blower means a person who reports

concealment or evasion of sales tax and tax fraud leading to detection or collection of taxes,

fraud, corruption or misconduct, to the competent authority having power to take action

against the person or a sales tax authority committing fraud, corruption, mis-conduct or

involved in concealment or evasion of sales tax.

FURTHER SALES TAX SECTION 3(1A)

The bill proposed increase in rates of further sales tax from 1% to 2%. The further sales tax

requires to be paid by a registered person on supplies to un-registered person. The

rationale behind increase of further sales tax is burdening additional cost on unregistered

segment of the trade as well as to recover some contribution of taxes indirectly.

The board has provided some exclusion to person who are liable to pay sales tax on their

end consumer price such as person falling under third schedule of the S.T.A. 1990,

However, we have observe some industrial segments who are paying sales taxes at

incremental value addition up-to final stage are not given exclusion from levy of further

sales tax, the board is therefore requires to review the case in extend exclusion to them as

well. The controversy on this account is already been brought up before High Court.

The further sales tax is not adjustable from excessive input in sales tax return during the tax

period and thus the amount of further tax is requires to be paid in full. The further tax in

our opinion is made adjustable as it was prevails in past

SALES TAX


POWER TO COLLECT SALES TAX AT HIGHER RATE SECTION 3(2B)

The power to collect sales tax at higher rate granted to the board under clause b of the sub-

section 3(2)is proposed to be modified. The amendment is technical in nature to align the

existing provision of the law only.

TIME AND MANNER OF PAYMENT SECTION 6(1)

The Bill is proposed to extend powers of recovery of sales tax to Customs authority.

Accordingly, amendment to insert provision of recovery is inserted under section 6 of the Sales

Tax Act., 1990.

The amendment though apparently seems to be a technical nature to broaden the scope for

time and manner of payment along with recovery for sales tax collected at Customs stage, it’s

implications are very interesting.

In our opinion, it suggests in case of short payment of sales tax on Customs Stage, the Custom

authorities may initiate legal proceeding for its recovery by virtue of this amendment.

DETERMINATION OF TAX LIABILITY SECTION 7(2)II

The bill proposed to allow input tax adjustment on provisionally cleared bill of entry under

section 7 of the S.T.A 1990..

At present under section 7 of the Sales Tax Act., 1990 the input tax adjustment is admissible

against bill of entries cleared under section 79 or 104 of the customs Act., 1990 only. Therefore

bill of entries cleared under provisional assessment could not be taken into account and

number of taxpayers were unable to report their import in their sales tax returns. The issue was

comes into lime light in a recent past year when the reporting of the import and export were

electronically linked with the systems operative at Customs station to curb incorrect reporting.

However while introducing the measure due to legal restriction under section 7 the system did

not auto upload bill of entries cleared in customs under section 81 of the Customs Act., related

to provisional clearance and assessment.

SALES TAX


The board upon representation of various tax bodies and experts has reviewed the matter and

accordingly proposed amendment under section 7 of the Sales Tax Act., 1990 to give legitimacy

to claim input tax adjustment and reporting of bill of entry cleared under section 81 of the

Customs Act., 1969.

The amendment is beneficial in nature and address anomaly of the law under this section.

TAX CREDIT NOT ALLOWED SECTION 8(1)H

The bill proposed to exclude restriction on input tax adjustment placed under section 8(1) h

from pre-fabricated buildings.

The amendment is beneficial in nature as well as quite interesting. Earlier, the tax officers are

on a view that input tax adjustment on building material is not admissible. Now if the legislation

is made allowing input tax adjustment on fabricated building, We believe on same grounds and

rationale there is no reason to disallow input tax adjustment on construction material used to

build a factory or premises used for production and taxable activity.

TAX CREDIT NOT ALLOWED SECTION 8(1)J-K-L

The bill proposed to place restriction on input tax adjustment against services in respect of

which adjustment is barred by the respective provincial sales tax laws. The amendment seems

to bring harmony between Provincial and Federal Sales Tax law.

Likewise, since the rate of sales tax on agricultural machinery and equipment are reduced to 7%

from 17%, input tax adjustment is also restricted on it.

The restriction is also proposed to put such goods and service which at the time of filing of

return by the buyer have not be declared by the supplier in their return. The effective date of

this particular restriction will be notified by the board.

Here it is important to note that similar sort of restriction is already provided under 8(1)( c a)

and interestingly, Lahore High Court has already declared the provision ultra vires and un-

constitutional.

SALES TAX


SECTION 8-A

The bill is proposed to place burden on tax department to discharge onus of burden in respect

of unpaid amount of sales tax under section 8-A. The amendment is very important in nature

considering the frequent abuse of this section by the field formation in past against the spirit of

the law.

The responsibility were usually placed frequently on both buyer and seller as well it expanded

to entire supply chain without discharging the onus of burden to prove that all the person(s) all

involved jointly in cases where the amount of sales tax remain unpaid.

This simple amendment of law promises more equitable and fair exercise of vast powers

granted under this particular section of the law.

EXEMPTION SUBJECT TO APPROVAL SECTION 13 (2)A

The bill proposed made Federal Governments power to grant exemption subject to to the

approval of the Economic Coordination Committee of Cabinet.

The exemption can be granted by the Federal Government through a notification whenever

circumstances exist to take immediate action for the purposes of national security, natural

disaster, national food security in emergency situations, protection of national economic

interests in situations arising out of abnormal fluctuation in international commodity prices,

removal of anomalies in taxes, development of backward areas and implementation of bilateral

and multilateral agreements, by notification in the official Gazette, exempt any taxable supplies

made orimport or supply of any goods or class of goods, from the whole or any part of the tax

chargeable under this Act, subject to the conditions and limitations specified therein after

approval of the economic coordination committee of the cabinet.

The amendment seems good and an effort to bring transparency and supremacy of the law.

SALES TAX


EXEMPTION SUBJECT TO APPROVAL SECTION 13 (2)B

The bill proposed to withdraw powers to grant sales tax exemptions available under section

13(2)(b) to the Federal Board of Revenue. The powers to grant exemption in rest with the

Federal Government only subject to certain condition and approval as explained above.

EXEMPTION THROUGH NOTIFICATION TO PLACE

BEFORE NATIONAL ASSEMBLY

SECTION 13 (6)(7)

The Bill proposed to bound Federal Government to place all notifications granting exemption

issued in a financial year under this section before the National Assembly to seek it’s

confirmation or to made it a part of Act.

The exemption notifications under this section are now become time bound expiry and stands

withdrawn if not already rescinded.

The amendment is positive in nature and seems to bring transparency and supremacy of

the law.

The bill proposed to bring basic registration law within the ambit of Sales Tax Act., 1990.

Earlier in 2004, even the basic sales tax registration laws were transferred into sales tax

rules. -Every person engaged in making taxable supplies in Pakistan, including zero-rated

supplies, in the course or furtherance of any taxable activity carried on by him, falling in

any of the following categories, if not already registered, is required to be registered under

section 14 of this Act, namely:-

(a) a manufacturer who is not running a cottage industry;

(b) a retailer who is liable to pay sales tax under the Act or rules made thereunder,

excluding such retailer required to pay sales tax through his electricity bill under

sub-section (9) of section 3;

(c) an importer;

REGISTRATION SECTION 14 (1), (2) & (3)

SALES TAX


(d) an exporter who intends to obtain sales tax refund against his zero-rated supplies;

(e) a wholesaler, dealer or distributor; and

(f) a person who is required, under any other Federal law or Provincial law, to be

registered for the purpose of any duty or tax collected or paid as if it were a levy of

sales tax to be collected under the Act;

(2) Persons not engaged in making of taxable supplies in Pakistan, if required to be

registered for making imports or exports, or under any provisions of the Act, or any other

Federal law, may apply for registration.

The powers to regulate the sales tax registration under this Act shall were also provided to

the Board who may by notification define complete process in sales tax rules.

The bill proposed to delegate powers to the board to prepare and maintain active

taxpayers list in the manner as prescribed through rules.

The rules under this section with condition and limitation are supposed to be formulate by

the board shortly.

The bill proposed to omit reference of section 36 from section 25. The amendment seems to a

mere technical correction of law, since section 36 was omitted way back in 2012.

The bill proposed to expend the scope of Special Audit to the panel of persons. Earlier the

provisions of special audit were restricted to the extent of Chartered and Cost Accountants.

Now following persons were declared to be included in a panel for conducting special audit.

ACTIVE TAXPAYERS LIST SECTION 21 (A)

ACCESS TO RECORD, DOCUMENTS SECTION 25 (3)

SPECIAL AUDIT BY AUIT PANELS SECTION 32A (1)&(4)

SALES TAX


(a) An officer or officers of Inland Revenue;

(b) A firm of chartered accountants as defined under the Chartered Accountants

Ordinance, 1961 (X of 1961);

(c) A firm of cost and management accountants as defined under the Cost and

Management Accountants Act, 1966 (XIV of 1966); or

(d) Any other person as directed by the Board,

The bill proposed to grant authority to board or Commissioner to conduct audit of a registered

person, including refund claim and forensic audit. The scope of the audit shall be determined by

the board or Commissioner on case to case bases.

The concept of joint audit is further introduced in this bill. The board where consider

appropriate get the special audit or the forensic audit conducted jointly through a penal of

special audit headed by the Chairman who shall be an officer of the Inland Revenue. The

proceeding will remain continue even in absence of any one member of the panel and could

not be termed invalid on this ground.

The bill proposed to reduce the time limit of fifteen days to ten days for application of

minimum amount of penalty in delay in filing of sales tax return.

The minimum amount of Rs. 100/- per day penalty is now provided if the sales tax return is filed

delayed up-till next ten days.

Likewise,minimum penalty amount of Rs. 500/- per day is now provided if the due amount of

sale tax is paid within next ten days. Earlier this provision is available up-to 15 days.

OFFENCES AND PENALTIES SECTION 33 SERIAL (1) (5)

SALES TAX


The bill proposed to replace labels with barcode under the condition provided in section 40-C

deals with the goods which cannot be sold without affixing the tax stamp, banderole, sticker by

the manufacturer, importer or any other person from such date as prescribed by the board.

Bill proposed addition of a new section 40-D in the sales tax Act., empowering the board to

require the registered person to provide tax stamp, banderole, stickers, barcode, etc. acquire

from a licensee appointed by the board for the purpose, against price approved by the board

which shall include the cost of equipment install by such licensee in the premises of the said

registered person.

The amendment seems to be special in nature and only applies in specific scenario, the same is

yet be revealed through further notifications.

However apparent it seems against the spirit of the self-assessment scheme which is the

essence of the prevailing value added sales tax regime.it’s merits and demerits are yet to be

assess once the board reveals complete details.

The bill proposed to clarify the powers for recalling of an order under this section in exercise of

its own motion or otherwise well.

The amendment seems corrective in nature. Earlier the tax officer appears confused while

exercising these powers upon request of a taxpayer who point outs apparent glaring mistake

and mis-understood that powers under this section can only be exercise upon its own motion.

MONITORING OR TRACKING BY ELECTRONIC OR

OTHER MEANS

SECTION 40C (2)

AFFIXING STAMPS, STICKERS, BANDROLE AND LABELS

IN RESPECT OF SPECIFIED GOODS

SECTION 40D

POWER OF THE BOARD AND COMMISSIONER TO CALL

FOR RECORDS

SECTION 45A (4)

SALES TAX


The bill proposed to grant powers to the Federal Government who may enter into agreement,

bilateral or multilateral with the government or governments of foreign countries for the

exchange of information including automatic exchange of information with respect to sales tax

imposed under this Act or any other law for the time being in force and under the

corresponding laws in force in that country, and may, be notification in the official Gazette

make such provisions as may be necessary for implementing the agreement.

In this connection the existent provisions under section 107 of the Income Tax Ordinance, 2001

shall, mutatis mutandis, apply;

The bill proposed bar on public servant to disclose the material information in terms of bilateral

or multilateral agreement or tax information exchange agreement. The information shall be

considered confidential and no public servant save as provided under section 216 of the Income

Tax Ordinance, 2001 may disclosure any such information;

In this connection existent provisions of section 216 of Income Tax Ordinance 2001 shall,

mutatis mutandis, apply;

The bill propose to authorized Federal Board of Revenue to introduce prize schemes to

promote tax culture.-

In order to encourage the general public to make purchases only from registered persons

against issuing tax invoices the board may introduce incentive in terms of cash, prize or as they

deem fit.

AGREEMENT FOR THE EXCHANGE OF INFORMATION SECTION 56A

DISCLOSURE OF INFORMATION BY A PUBLIC SERVANT SECTION 56B

PRICE SCHEME TO PROMOTE TAX CUTURE SECTION 56C

SALES TAX


The provision seems to be a positive approach by the government to use policy of carrot and

stick together.

The bill proposed to grant powers to Federal Board of Revenue to sanction reward to

whistleblowers in cases of concealment or evasion of tax, tax fraud, corruption or misconduct

providing credible information leading to such detection of tax fraud.

The detail procedure on this regard are expected to be notify soon by the board through official

Gazette. The reward however would not be allowed if:-

• The information provided is of no value

• The Board already had the information

• The information was available in public records; or

• No collection of taxes is made from the information provided from which the Board can

pay the reward

The definition of the “whistleblower” also provided by inserting sub section 4 which includes

whistle blower means a person:-

• who reports concealment or evasion of sales tax and tax fraud leading to detection or

collection of taxes, fraud, corruption or misconduct, to the competent authority having

power to take action against and

• The person or a sales tax authority committing fraud, corruption, misconduct, or involved

in concealment or evasion of taxes.”

Zero rating facility proposed to be withdrawn form following items:-

REWARD TO WHISTLEBLOWERS SECTION 72(D)

FIFTH SCHEDULE SERIAL NO 12

SALES TAX


1. Flavoured milk 0402.9900

2. Yogurt 0403.1000

3. Cheese 0406.1010

4. Butter 0405.1000

5. Cream 04.01 and 04.02

6. Desi ghee 0405.9000

7. Whey 04.04

8. Milk and cream, concentrated and added sugar or other sweetening matter 0402.1000

Following entries relating to supplies made to Export Processing Zones also

proposed to be deleted.

A. Supplies of locally manufactured plant and machinery of the following specifications, to

manufacturers in the Export Processing Zone, subject to the conditions, restrictions and

procedure given below, namely

(i) Plant and machinery, operated by power of any description, as is used for the manufacture or

production of goods by that manufacturer;

(ii) Apparatus, appliances and equipments specifically meant or adapted for use in conjunction

with the machinery specified in clause (i);

(iii) Mechanical and electrical control and transmission gear, meant or adapted for use in

conjunction with machinery specified in clause (i); and

(iv) Parts of machinery as specified in clauses (i), (ii) and (iii) identifiable for use in or with such

machinery.

All the above entries were proposed to be added in fifth Schedule subject to conditions mentioned

below:

Conditions, restrictions and procedures:-

(a) the supplier of the machinery is registered under the Act;

(b) proper bill of export is filed showing registration number;

(c) the purchaser of the machinery is an established manufacturer located in the Export

Processing Zone and holds a certificate from the Export Processing Zone Authority to that

effect;

SALES TAX


(d) the purchaser submits an indemnity bond in proper form to the satisfaction of the concerned

Commissioner Inland Revenue that the machinery shall, without prior permission from the

said Commissioner, not be sold, transferred or otherwise moved out of the Export Processing

Zone before a period of five years from the date of entry into the Zone;

(e) if the machinery is brought to tariff area of Pakistan, sales tax shall be charged on the value

assessed on the bill of entry; and

(f) breach of any of the conditions specified herein shall attract legal action under the relevant

provisions of the Act, besides recovery of the amount of sales tax along with default surcharge

and penalties involved.”;

The Bill proposed withdrawal of Sales Tax exemptions from following items:-

1

Poultry feed and Cattle feed including their all ingredients except soyabean meal of PCT heading 2304.0000 and oil-cake of cottonseed falling under PCT heading 2306.1000.

2301.2090, 2305.0000, 2306.2000, 2306.3000, 2306.4100, 2306.5000, 2309.9010, 2309.9020, 2309.9090, 2936.2100, 2936.2200, 2936.2300, 2936.2400, 2936.2500, 2936.2600, 2936.2700 and 2936.2800

2 Incinerators of disposal of waste management, motorized sweepers and snow ploughs.

8417.8000, 8430.2000 and 8479.8990

3 Re-importation of foreign origin goods which were temporarily exported out of Pakistan subject to similar conditions as are envisaged for the purposes of applying zero-rate of customs duty under the Customs Act, 1969.

99.18

4 Reclaimed lead, if supplied to recognized manufacturers of lead batteries.

Respective Heading

5 Waste Paper. Respective Heading

Exemption given to following items were restricted with subject to condition if sold without

brand name and retail packing :-

EXEMPTIONS SIXTH SCHEDULE TABLE 1

SALES TAX


1 Milk 4.01

2 Milk and cream, concentrated or containing added sugar or

other sweetening matter, excluding that sold in retail packing

under a brand name

04.01, 04.02

3. Flavored milk, excluding that sold in retail packing under a

brand name

402.99

4 Yogurt, excluding that sold in retail packing under a brand name 0403.1000

5 Whey, excluding that sold in retail packing under a brand name 04.04

6 Butter, excluding that sold in retail packing under a brand name 0405.1000

7 Desi ghee, excluding that sold in retail packing under a brand

name

0405.9000

8 Cheese, excluding that sold in retail packing under a brand

name

0406.1010

9 Processed cheese not grated or powdered, excluding that sold

in retail packing under a brand name

0406.3000

Exemption of Sales Tax were granted to following Items in sixth schedule of the

S.T.A. 1990:-

1 Appliances for colostomy 3006.9100

2 Colostomy and urostomy bags 3926.9050

3 Tubular day lighting devices (TDDs) 8539.3930

4 Diagnostic kits or equipment, namely:-

HIV Kits,4C EsTrionyx, 5C Cell control Lnormal, Bovine precision

multi sera, Pregnancy test, DNA SSP DRB Generic IC, Reticulocyte

count (control) retic, C Control, Kit for vitamin B12 estimation,

Ferritin kit, HEV (Hepatitis E virus), ID-DA Cell, Urine Analysis

Strips, Albumin beg, Cratininsysi, Ring, Detektiion cups, ISE

Standard, Alkaline phosphatase (Alb), Bilirubin kit, HDL

Cholesterol, Ckcreatinin kinase (mb), Cknac, Glulcose kit,

Ammonia Modular, Lac, Ldh kit (lactate dehydrogenase, kit), Urea

uv kit, Ua plus, Tina quant, Crp control,Aslo tin, Proteins, Lipids,

HDL/LDL cholesterol, Protein kit, U, Control Sera, Pac, Control,

HCV, UIBC (Unsaturated iron binding, capacity), U/CSF, Inorganic

Phosphorus kit, Kit amplicon kit (for PCR), Ige, Lchsv, Oligo,

NA/K/CL, Hcy, Standard [or calibrated], Hla B27, Liss Coombs,

Typhoid kit, HCV amp, Urine test strips, Strips for sugar test,

Blood glucose test strips, Kits for automatic cell separator, for

collection of platelets, Elisa or Eclia kit, PCR kits, Immunoblast

(western blot test), I.C.T. (Immunochromatographic kit), CBC

Reagent (For hematologyanalyzer) Complete blood count reagent

3822.0000

SALES TAX


5 Blood Bag CPDA-1 with blood transfusion set pack in aluminum

foil with set.

Respective headings

6 Urine drainage bags Respective headings

7 Aircraft, whether imported or acquired on wet or dry lease 8802.2000, 8802.3000, 8802.4000

8 Maintenance kits for use in trainer aircrafts of PCT headings

8802.2000 and 8802.3000

Respective headings

9 Spare parts for use in aircrafts, trainer aircrafts or simulators Respective headings

10 Machinery, equipment and tools for setting up maintenance,

repair and overhaul (MRO) workshop by MRO company

recognized by Aviation Division

Respective headings

11 Operational tools, machinery, equipment and furniture and

fixtures on one-time basis for setting up Greenfield airports by a

company authorized by Aviation Division

Respective headings

12 Aviation simulators imported by airline company recognized by

Aviation Division

Respective headings

13 Raw Cotton and Pickled hides and skins, wet blue hides and skins 41.01, 41.02, 41.03, 4104.1000,

4105.1000, 4106.2100,4106.3000

and 4106.9000

14. Supplies made by manufacturers of marble and granite having

annual turnover less than five million rupees even if their annual

utility bill is more than eight hundred thousand rupees

Respective headings

15 Bricks (up to 30th June, 2018) 6901.1000

16 Crushed stone (up to 30th June, 2018) 2517.1000

(3) in Table-3, serial numbers 10 and 16 in column (1) and entries relating

thereto in columns (2), (3) and (4) shall be omitted;

(

(1) in Table-1,–

SIXTH SCHEDULE TABLE 3

EIGHT SCHEDULE TABLE 1

SALES TAX


(i) serial number 3, in column (1) and entries relating thereto in

columns (2), (3), (4) and (5) shall be omitted;

(ii) in serial numbers 1, 4 and 6, in column (1), the figure “5%” in

column (4), the figure “10%” shall be substituted;

Sales Tax at reduced rates were proposed to be introduced on following item:-

1. Soyabean Meal 0402.9900 10% Sold in retail packing

under a brand name

2. Oilseeds meant for sowing Respective Headings 10% Import thereof subject to

the condition that the

concerned department of

the Division dealing with

the subject-matter of oil

seed certifies that the

imported seeds are

fungicide and insecticides

treated and are meant for

sowing.

3. Plant and machinery not manufactured locally

and having no compatible local substitutes

Respective Headings 10%

4. Flavoured milk 0402.9900 10% Sold in retail packing

under a brand name

5. Yogurt 0403.1000 10% Sold in retail packing

under a brand name

6. Cheese 0406.1010 10% Sold in retail packing

under a brand name

7. Butter 0405.1000 10% Sold in retail packing

under a brand name

8. Cream 04.01 and 04.02 10% Sold in retail packing

under a brand name

9. Desi ghee 0405.9000 10% Sold in retail packing

under a brand name

10. Whey 04.04 10% Sold in retail packing

under a brand name

11. Milk and cream, concentrated and added sugar

or other sweetening matter

0402.1000 10% Sold in retail packing

under a brand name

SALES TAX


12. Poultry feed, cattle feed, and their ingredients

except soya bean meal of PCT heading 2304.0000

and oilcake of cottonseed falling under PCT

heading 2306.1000

2301.2090,2305.0000, 2306.2000,

2306.3000,2306.4100, 2306.5000,

2309.9010,2309.9020, 2309.9090,

2936.2100,2936.2200, 2936.2300,

2936.2400,2936.2500, 2936.2600,

2936.2700,2936.2800,and

2306.4900 (Rape Seed Meal),

2308.9000 (Guar Meal),

2303.1000 (Corn Gluton Feed/Meal),

2303.1000 (Residues of starch

manufacture and similar residues),

3507.9000 (Enzymesother),

2302.1000 (Maize Bran),

2302.2000 (Rice Bran),

2302.3000 (Wheat Bran),

2302.4000 (Other Cereals),

2302.5000 (Bran of Leguminous

Plants),

2306.7000 (Oil- cake and other solid

residues of Maize (corn) germ),

2306.4900 (Sesame Cake),

2306.9000 (Sesame Meal/other

Meal),

2842.1000 (Double or complex

silicates, including aluminosilicates

whether or not chemically defined),

2301.2010 (Fish Meal),

0505.9000 (Poultry by product

Meal),

and the following items only of Feed

Grade:

2827.6000 (Potassium Lodide),

2833.2990 (Manganese Sulphate),

2833.2600 (Zinc Sulphate),

2817.4000 (Zinc Oxide),

2833.2500 (Copper Sulphate),

2833.2910 (Ferrous Sulphate),

2915.5000 (Propionic acid, its salts

and esters),

2930.4000 (DL Methionine),

2930.4000 (Methionine Hydroxy

Analogue (liquid)),

2922.4100 (Lysine Monohydro

Chloride /sulphate),

2923.2000 (Lecithins),

2923.9000 (Betafin),

2922.4290 (Arganine),

2934.9910 (Furazolidone),

2922.5000 (Threonine),

2835.2600 (Mono Calcium

Phosphate),

2835.2500 (Di Calcium Phosphate) ,

and 2835.2600 (Mono Di Calcium

Phosphate)

5%

SALES TAX


13. Incinerators of disposal of waste management,

motorized sweepers and snow ploughs

8417.8000, 8430.2000 and

8479.8990

5%

14. Re-importation of foreign origin goods which

were temporarily exported out of Pakistan

99.18 5% Subject to

similarconditions as are

envisaged for the

purposes of customs duty

under the Customs

Act,1969, and taxable

value shall be the value

determined under PCT

heading 99.18 of the said

Act increased by customs

duty payable

15. Reclaimed lead Respective headings 5% If supplied to recognized

manufacturers of lead

and lead batteries

16. Waste paper 47.07 5%

17. Plant, machinery, equipment and specific items

used in production of bio-diesel

Respective headings 5% Alternative Energy

Development Board

(AEDB), Islamabad shall

certify in the prescribed

manner and format as

per Annex-B, as given in

the Sixth Schedule, that

the imported goods are

bonafide project

requirement. The goods

shall not be sold or

otherwise disposed of

within a period of five

years of their import

except with the prior

approval of the FBR and

payment of customs

duties and taxes leviable

at the time of import

18. Rapeseed, sunflower seed and canola seed 1205.0000, 1206.0000 16% On import by solvent

extraction industries

19. Soya bean seed 1201.1000 6% On import by solvent

extraction industries,

subject to the condition

that no refund of input

tax shall be admissible”;

20. Secondhand and worn clothing or footwear 6309.0000 5%

21. Agricultural tractors 8701.9020 10%

22. Tillage and seed bed preparation equipment: 7%

(i) Rotavator 8432.8010

(ii) Cultivator 8432.2910

SALES TAX


(iii) Ridger 8432.8090

(iv) Sub soiler 8432.3090

(v) Rotary slasher 8432.8090

(vi) Chisel plow 8432.1010

(vii) Ditcher 8432.1090

(viii) Border disc 8432.2990

(ix) Disc harrow 8432.2100

(x) Bar harrow 8432.2990

(xi) Mould board plow 8432.1090

(xii) Tractor rear or front blade 8430.6900

(xiii) Land leveller or land planer 8430.6900

(xiv) Rotary tiller 8432.8090

(xv) Disc plow 8432.1090

(xvi) Soil-scrapper 8432.8090

(xvii) K.R.Karundi 8432.8090

(xviii) Tractor mounted trancher 8701.9020

(xix) Land leveler 8430.6900

23. Seeding or planting equipment: 7%

(i) Seed-cumfertilizer drill (wheat, rice barley,

etc.)

8432.3010

(ii) Cotton or maize planter with fertilizer

attachment

8432.3090

(iii) Potato planter 8432.3090

(iv) Fertilizer or manure spreader or broadcaster 8432.4000

(v) Rice transplanter 8432.3090

(vi) Canola or sunflower drill 8432.3010

(vii) Sugarcane planter 8432.3090

24. Irrigation, drainage and agro-chemical

application equipment:

8421.2100, 8421.9990 8424.2010 7%

(i) Tubewells filters or strainers 8424.2010, 8424.2010, 8424.2010

(ii) Knapsack sprayers 8424.2010

(iii) Granular applicator

(iv) Boom or field sprayers

(v) Self propelled sprayers

(vi) Orchard sprayer

25. (i) Harvesting, threshing and storage equipment: 8433.5200, 8433.5200, 8433.5900 7%

(ii) Wheat thresher 8433.5300,8433.5200

(iii) Maize or groundnut thresher or sheller 8433.5900, 8433.4000, 8433.5900,

8433.5900

(iv) Groundnut digger 8433.5900, 8433.5900

SALES TAX


(v) Potato digger or harvester 8433.5200, 8433.5200

(vi) Sunflower thresher 8716.8090 8433.5900

(vii) Post hole digger 8433.5100, 8433.5900

(viii) Straw balers

(ix) Fodder rake

(x) Wheat or rice reaper

(xi) Chaff or fodder cutter

(xii) Cotton picker

(xiii) Onion or garlic harvester

(xiv) Sugar harvester

(xv) Tractor trolley or forage wagon

(xvi) Reaping machines

(xvii) Combined harvesters

(xviii) Pruner/shears

26. Post-harvest handling and processing &

miscellaneous machinery:

7%

(i) Vegetables and fruits cleaning and sorting or

grading equipment

8437.1000

(ii) Fodder and feed cube maker equipment 8433.4000

In the Table 2 of the EightShedule which was previously for the charging of sales tax @ of five percent

was now charge to 10 % on supplies of goods mentioned At SrNo1,5&6 of Soyabeen meal ,Raw &

Ginned Cotton & plant and machinery not manufactured locally.

Sales Tax rates on Cellular Mobile Phones are proposed to be enhance to hundred percent from

existing rates of Rs.150, Rs250 &Rs 500 on imports and supplies.

In line with sales tax on services prevailed at provinces. It is proposed to imposed sales tax on

services falling within Islamabad Capital territory. The services includes:-

EIGHT SCHEDULE TABLE 2

NINHT SCHEDULE

SALES TAX ON SERVICES ON FEDERAL CAPTIAL

ISLAMBAD TERITORRY

I.C.T ORDINANCE

SALES TAX


“THE SCHEDULE”

S.No Description PCT Heading, if applicable Rate of Tax

(1) (2) (3) (4)

1 Services provided or rendered by

hotels, motels, guest houses,

marriage halls and lawns (by

whatever name called) including

“pandal” and “shamiana” services,

clubs including race clubs, and

caterers.

9801.1000, 9801.3000,

9801.4000, 9801.5000,

9801.6000

Sixteen per

cent

2 Advertisement on television and

radio, excluding advertisements–

9802.1000,9802.2000 Sixteen per

and cent

(a) sponsored by an agency of the

Federal or Provincial Government

for health education;

(b) sponsored by the Population

Welfare Division relating to

educational promotion campaign;

(c) financed out of funds provided

by a Government under grant-in-aid

agreement; and

(d) conveying public service

messages, if telecast on television

by the World Wide Fund for Nature

(WWF) or United Nations Children’s

Fund (UNICEF)

3 Services provided by persons

authorized to transact business on

behalf of others–

9805.200, 9805.4000,

9805.8000

Sixteen per

(a) stevedore;

SALES TAX


(b) customs agents; and

(c) ship chandlers.

4 Courier services and cargo services

by road provided by courier

companies;

9808.0000, 9804.9000 Sixteen per

cent

5 Construction services, excluding: 9824.0000 and 9814.2000 Sixteen per

cent

(i) construction projects (industrial

and commercial) of the value

(excluding actual and documented

cost of land) not exceeding Rs. 50

million per annum.

(ii) the cases where sales tax is

otherwise paid as property

developers or promoters.

(iii) Government civil works

including Cantonment Boards.

(iv) construction of industrial zones,

consular buildings and other

organizations exempt from income

tax.

(v) construction work under

international tenders against

foreign 9824.0000 and 9814.2000

Sixteen per cent 44 grants-in-aid.

(vi) Residential construction projects

where the covered area does not

exceed 10,000 square feet for

houses and 20,000 square feet for

apartments

SALES TAX


6 Services provided by property

developers and promoters

(including allied services) excluding

the actual purchase value or

documented cost of land.

9807.0000 and respective

subheadings of heading 98.14

Rs.100 per

square yard

for land

development

, and Rs.50

per square

feet for

building

construction

7 Services provided by persons

engaged in contractual execution of

work, excluding:

9809.0000 Sixteen per

cent

(i) annual total value of the

contractual works or supplies does

not exceed Rs.50 million;

(ii) the contract involving printing or

supplies of books.

8 Services provided for personal care

by beauty parlours, clinics and

slimming clinics, body massage

centres, pedicure centres; including

cosmetic and plastic surgery by such

parlours/clinics, but excluding:

9810.0000 9821.4000 and

9821.5000

Sixteen per

cent

(i) annual turnover does not exceed

Rs.3.6 million; or

(ii) the facility of air-conditioning is

not installed or available in the

premises.

9 Management consultancy services 9815.4000, 9819.9300 Sixteen per

cent

SALES TAX


10 Services provided by freight

forwarding agents, and packers and

movers.

9805.3000, 9819.1400 Sixteen per

cent or Rs.

400 per bill

of lading,

whichever is

higher

11 Services provided by software or IT-

based system development

consultants.


cent

12 Services provided by technical,

scientific and engineering

consultants


cent

13 Services provided by other

consultants including but not

limited to human resource and

personnel development services;

market research services and credit

rating services.

9815.9000 9818.3000

9818.2000

Sixteen per

cent

14 Services provided by tour operators

and travel agents including all their

allied services or facilities (other

than Hajj and Umrah)

9805.5100 9805.5000

9803.9000

Sixteen per

cent

15 Manpower recruitment agents

including labour and manpower

supplies.


cent

16 Services provided by security

agencies.


cent

17 Services provided by advertising

agents


cent

SALES TAX


18 Share transfer or depository agents

including services provided through

manual or electronic book-entry

system used to record and maintain

securities and to register the

transfer of shares, securities and

derivatives.


cent

19 Business support services. 9805.9200 Sixteen per

cent

20 Services provided by fashion

designers, whether relating to

textile, leather, jewellery or other

product regimes, including allied

services, marketing, packing,

delivery and display, etc.


cent

21 Services provided by architects,

town planners and interior

decorators

9814.1000, 9814.9000 Sixteen per

cent

22 Services provided in respect of rent-

a-car.


cent

23 Services provided by specialized

workshops or undertakings

(autoworkshops; workshops for

industrial machinery, construction

and earth- moving machinery or

other special purpose machinery

etc; workshops for electric or

electronic equipments or appliances

etc. including computer hardware;

car washing or similar service

98.20 Sixteen per

cent

SALES TAX


stations and other workshops).

24 Services provided for specified

purposes including fumigation

services, maintenance and repair

(including building and equipment

maintenance and repair including

after sale services) or cleaning

services, janitorial services, dredging

or desilting services and other

similar services etc

98.22 Sixteen per

cent

25 Services provided by underwriters,

indenters, commission agents

including brokers (other than stock)

and auctioneers

9819.1100, 9819.1200,

9819.1300, and,9819.9100

Sixteen per

cent

26 Services provided by laboratories

other than services relating to

pathological or diagnostic tests for

patients.

98.17 Sixteen per

cent

27 Services provided by health clubs,

gyms, physical fitness centres,

indoor sports and games centres

and body or sauna massage centres

9821.1000 and 9821.2000

9821.4000

Sixteen per

cent

28 Services provided by laundries and

dry cleaners.


cent

29 Services provided by cable TV

operators.Technical analysis and

testing services

9819.9000,9819.9400 Sixteen per

cent

SALES TAX


30 Services provided by TV or radio

program producers or production

houses.

-- Sixteen per

cent

31 Transportation through pipeline and

conduit services.

-- Sixteen per

cent

32 fund and asset (including

investment) management services.

-- Sixteen per

cent

33 Services provided by inland port

operators (including airports and

dry ports) and allied services

provided at ports and services

provided by terminal operators

including services in respect of

public bonded warehouses,

excluding the amounts received by

way of fee under any law or bylaw.

-- Sixteen per

cent

34 Technical inspection and

certification services and quality

control (standards’ certification)

services

-- Sixteen per

cent

35 Erection, commissioning and

installation services.

-- Sixteen per

cent

36 Event management services -- Sixteen per

cent

37 Valuation services (including

competency and eligibility testing

services),

-- Sixteen per

cent

38 Exhibition or convention services -- Sixteen per

cent

SALES TAX


39 Services provided in respect of

mining of minerals, oil & gas

including related surveys and allied

activities

-- Sixteen per

cent

40 Services provided by property

dealers and realtors.

-- Sixteen per

cent

41 Call centres -- Eighteen and

a half per

cent

42 Services provided by

car/automobile dealers.

-- Sixteen per

cent”;.

FEDERAL EXCISE DUTY


Federal Excise Duty

Following provisions are inserted /modified in accordance with Sales Tax Act and same comment may be

refer on these provisions includes:-

Whistle Blower Sec. 2(24-A)

Exemption Sec. 16

Powers of Board or Commissioner for recalling an order Sec. 35

Reward to whistleblowers Sec. 42-D

Affixing Stamps, Stickers, Banderole Sec. 45-A

Special /Panel Audit Section 46(4)

Agreements for the Exchange of information Sec. 47-A

Disclosure of information by a public servant Sec. 47-B

Bill proposed to increase / levy duty on following items:-

(I) Rates of FED is increased from existing 9% to 12% on Aerated water,

(II) Rates for Federal Excise duty on cigarettes have been enhanced.

(III) Adjustable Federal excise duty on Filter Rods of cigarettes has been levied @ Rs.0.75

per filter rod.

The bill proposed exemption from Federal Excise Duty on following items:-

(I) White Cement;

(II) Motor cars and other Motor vehicles for transport of persons of engine capacity of

850cc and above

(III) Services of air travelling on Socio economic routs located in Makran coastal region,

FATA, AzadJammu Kashmir, Gilgit- Baltistan or Chitral

(IV) Services of air travel by Haj passengers, Diplomats &supernumerary crew.

DUTIABLE ITEM FIRST SCHEDULE

EXEMPTION FROM F.E.D.

THIRD SCHEDULE

FEDERAL EXCISE DUTY


Advertisement in newspaper and periodicals

(V) Services in relation to Hajand Ummrah, cheque book, insurance, Musharika and

Modaraba financing and utility bill collection .

It is to be noted that entries mentioned at Sr. (III) to (VI) were previously also exempted

from the levy of FED under respective F.E.D Rules.

Documents

Budget Commentry 2015-16