KPMG Taseer Hadi & Co. Chartered Accountants

Budget Brief 2016 Khyber Pakhtunkhwa

Finance Bill 2016

This Budget Brief 2016 contains amendments of Khyber Pakhtunkhwa Finance Bill 2016 as it relates to Khyber Pakhtunkhwa Finance Act, 2013; Stamp Act, 1899; West Pakistan Urban Immovable Property Tax Act, 1958; West Pakistan Motor Vehicles Taxation Act, 1958; West Pakistan Act, 1964; West Pakistan Motor Vehicles Ordinance, 1965; Khyber Pakhtunkhwa Finance Act, 1990; and Khyber Pakhtunkhwa Local Government Act, 2013.

The provisions of the Khyber Pakhtunkhwa Finance Bill 2016 are generally applicable from 01 July 2016, unless otherwise specified.

This Memorandum contains the comments, which represent our interpretation of the legislation, and we recommend that while considering their application to any particular case, reference be made to the specific wordings of the relevant statutes.

15 June 2016

Contents

Khyber Pakhtunkhwa Finance Act, 2013 1 Stamp Act, 1899 2 West Pakistan Urban Immovable Property Tax Act, 1958 3 West Pakistan Motor Vehicles Taxation Act, 1958 4 West Pakistan Finance Act, 1964 6 West Pakistan Motor Vehicles Ordinance, 1965 7 Khyber Pakhtunkhwa Finance Act, 1990 8 Khyber Pakhtunkhwa Local Government Act, 2013 9

Contents

1

Registration

Section 41

The Bill proposes an editorial change in section 41(3) of the Act according to which a resident person receiving taxable services from a non-resident person in terms of section 19(2) of the Act is to be treated as a registered person for the purposes of the tax period in which the resident person receives the services, or the invoice is sent by the non-resident person or consideration is paid, whichever is earlier. Appointment of Officers Section 56 The Bill proposes to substitute the requirement for the Authority to frame regulations to define powers, pecuniary and territorial jurisdiction of officers. It is proposed that the officers are to exercise powers and discharge duties in the manner conferred upon them under the Act and regulations made thereunder. The Authority is empowered to impose limitations, restrictions or conditions to discharge powers and duties by the officers through passing of a general or a special order. Delegation of Powers Section 56-A A new section is proposed to be inserted, which prescribes that powers of a senior officer could be exercised or performed by a junior officer, subject to specified conditions and limitations imposed by the Authority. This proposal seems to cater to shortage of officers available with the Authority. Presumably, even the powers of the Collector (Appeals) could be exercised by an Additional Collector. Appeal to the Appellant Tribunal Section 84 The Bill seeks to include order passed by the Collector or Authority under any of the provisions of the Act as an appealable order before the Appellant Tribunal. This

means that the taxpayer or the officer not below the rank of an Additional Collector may, in addition to the order of the Collector (Appeals) and order under section 79(4) of the Act, challenge in appeal the order of the Collector or the Authority directly before the Appellant Tribunal. Power to make regulations Section 114 The Bill seeks to restrict requirement for the Authority to seek approval from the Council to make regulations or specify procedures, not inconsistent with the rules to give effect to the purposes of the Act only to the extent where the relevant provisions of the Act specifically provides for such approval to be obtained. Classification of new services under the First Schedule The following new services are proposed to be inserted in the First Schedule to the Act: 9803.3000 Facilities for travel by road 9804.3000 Cargo services by road 9815.8000 Visa processing services including

advisory or consultancy services for foreign education or for migration

9876.0000 Valuation services including competency

and eligibility testing services

Khyber Pakhtunkhwa Finance Act, 2013

2

The Bill proposes to increase stamp duties under the Stamp Act, 1899 as follows:

• Article 4 - from Rs. 60 to Rs. 100 in case of

Affidavits.

• Article 6(A) - from Rs, 200 to Rs. 300 per Marla in case of allotment of residential open plots.

- from Rs. 400 to Rs. 600 per Marla in case of allotment of commercial open plots.

• Article 8(A) - from Rs. 150 to Rs. 300 for arms licenses of non-prohibited bore

- from Rs. 1,000 to Rs. 1,500 for arms licenses of prohibited bore

- from Rs. 2,500 to Rs. 5,000 for form X and form XII prescribed under the Arms Rules

• Article 48 - Increase from Rs.300 to Rs.600 and from Rs.900 to Rs.1,500 for various types of ‘Power of Attorney’

Stamp Duty

3

The Bill proposes to amend the West Pakistan Urban Immoveable Property Act, 1958 which imposes tax on immoveable properties in urban areas. The proposal is to insert a new clause (c-i) after clause (c) at S.No.3 of Schedule-II to the Property Act to categorize a commercial area as ‘C locality’ and give it a weightage of ‘Five’. Presently, however ‘C locality’ is also categorized in ‘Clause (d)’ of the said Schedule.

West Pakistan Urban Immovable Property Tax Act, 1958

4

The Bill proposes to amend the West Pakistan Motor Vehicles Taxation Act, 1958 by substituting Schedule-II to the Motor Vehicles Act tax as follows:

Schedule – II

(see section 3) S #

Description of Motor Vehicles Annual Rate of Tax

1 Motor cycle/ Scooter Rs.1500 for life time

2 Truck/Trailers/Delivery Vans used for the transport or haulage of goods or materials:-For life time (a) Vehicles not exceeding 1250 K.G. in unladed weight; (b) Vehicles with maximum laden capacity upto 2030 KG: (c) Vehicles with maximum laden

capacity exceeding 2030 KG but not exceeding 4060 KG;

(d) Vehicle with maximum laden

capacity 4060 KG but not exceeding 6090 KG;

(e) Vehicles with maximum laden

capacity exceeding 6090 KG but not exceeding 8120 KG;

(f) Vehicles with maximum laden

capacity exceeding 8120 KG but not exceeding 12000 KG;

(g) Vehicles with long Trailers or

other vehicles with maximum laden capacity exceeding 12000 KG but not exceeding 16000 KG; and

(h) Vehicles with long trailers or

other vehicles with maximum laden capacity exceeding 16000 KG.

Rs. 625 Rs. 1,000 Rs. 1,025 Rs. 2,200 Rs. 2,500 Rs. 5,000 Rs. 7,500 Rs. 10,000

3 Vehicles plying for hire and ordinarily used for transport of passengers: (a) mechanically propelled

tricycle/rickshaw with seating capacity of not more than three persons;

(b) other vehicles with seating capacity of - (i) not more than 4 persons; (ii) more than 4, but not more

than 6 persons; and (iii) More than 6 persons,

plying on a routes. ( c) motor vehicles with seating

capacity of more than 6 but not more than 20 persons, plying, exclusively within the limits of Corporation/Municipality or Cantonment.

( d) motor vehicles with seating

capacity of more than 6 but not more than 20 persons plying exclusively within the limits of Corporation, Municipality or Cantonment or partly within and partly outside such limits with sixty percent of the total length of the route failing within the limits of a Corporation, Municipality or Cantonment.

Rs.500 Rs. 750 Rs. 800 Rs. 225 per seat Rs. 200 per seat Rs. 150 per seat

4 Motor vehicles (Private Motor Cars/Jeeps, etc.) other than those mentioned above and having- (a) seating capacity of not more than 3 persons; (b) Seating capacity of more than 3

but not more than 6 persons.

(i) with engine power not

exceeding 1000cc a lump sum tax of rupees ten thousand shall be charged for motorcars and jeeps up

Rs. 625

West Pakistan Motor Vehicles Taxation Act, 1958

5

to 1000 cc at the time of registration:

Provided that in case of a

motor vehicle registered before 1" day of July 2015, the amount of tax already paid shall be deducted from the payable tax of rupees ten thousand and the remaining amount shall be paid lump sum at the time of payment of the tax due; and

(ii) with engine power

exceeding 1000 cc but not exceeding 1300 cc;

(iii) with engine power

exceeding 1300cc but not exceeding 1500 cc;

(iv) (a) with engine power

exceeding 1500 cc but not exceeding 2500 cc; and

(b) Luxury Vehicles; and (v) with engine power

exceeding 2500 cc; and (c) seating capacity of more than 6 persons.

Rs. 1,500 Rs. 2,250 Rs. 3,500 Rs. 6,500 Rs. 1000 per seat

5 All tractors with or without trailers. Rs. 800

6

The Bill proposes to amend the West Pakistan Finance Act, 1964 so as to impose electricity duty on energy supplied by a licensee to consumers, by substituting the Fifth Schedule to the Finance Act as follows:

Appendix-II

Fifth Schedule (see section 13)

In case of energy supplied by a licensee to consumer of any of the following categories:

Electricity duty on the amount of the variable charges or the supply charges worked out according to electricity tariff:

(a) Domestic; 1.5 percent (b) Commercial; 1.5 percent (c) Industrial undertakings; 1.0 percent (d) Tube wells for irrigation

and agricultural machinery; and

1.0 percent

(e) Premises where the supply of energy by a licensee is un-metered.

1.5 percent

EXPLANATION-I: Electricity tariff' means the schedule of tariff as made and notified by the Federal Government under sub-section (4) of section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997. EXPLANATION-II: Supply charges and variable charges are sale rate per kilowatt hour as a single rate or part of a two part tariff applicable to actual unit consumed by the consumer. EXPLANATION-III: Premises which are used wholly or principally for manufacturing process within the meaning of clause (k) of section 2 of the Khyber Pakhtunkhwa Factories Act, 2013 (Khyber Pakhtunkhwa Act No. XVI of 2013) shall be deemed to be used for an industrial undertaking.

West Pakistan Finance Act, 1964

7

The Bill proposes to make certain amendments in the West Pakistan Motor Vehicles Ordinance, 1965 in relation to vehicles registration marks, number plates, and other registration documents as to be notified in the official Gazette by the Provincial Government.

West Pakistan Motor Vehicles Ordinance, 1965

8

The Bill proposes to levy tax on ‘Association of Persons’ and ‘Individual Firms’ engaged in profession, trade, calling or employment in the Province on the basis of their capital and reserves. By doing so the intention is to tax ‘Association of Persons’ and ‘Individual Firms’ on similar basis as in case of limited liability companies.

Paid Capital or Paid Capital and reserves

Rate of tax

(a) When not exceeding Rs. 10 million

Rs. 10,000

(b) When exceeding Rs. 10 million but not exceeding Rs. 25 million

Rs. 15,000

(c) When exceeding Rs. 25 million but not exceeding Rs. 50 million

Rs. 20,000

(d) When exceeding Rs. 50 million but not exceeding Rs. 100 million

Rs. 50,000

(e) When exceeding Rs. 100 million but not exceeding Rs.200 million

Rs. 75,000

(f) When exceeding Rs. 200 million.

Explanation: the paid up capital in case of foreign banks shall be minimum paid up capital as determined by the State Bank of Pakistan.

Rs. 100,000

Khyber Pakhtunkhwa Finance Act, 1990

9

Consequent to establishment of local Councils, the Bill seeks to omit the words ‘in lieu of Octroi and Zilla Tax’ for the purpose of recommendations to be made by the Finance Commission to the Provincial Government on the amount of grants for local government as mentioned under clause (a) of section 53 (1) of the Khyber Pakhtunkhwa Local Government Act, 2013.

Khyber Pakhtunkhwa Local Government Act, 2013

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