Nadeem Butt (FCA) - nbandco.comnbandco.com/Updated Amendments till February 11, 2014.pdfNadeem Butt (FCA) Chartered Accountant ... Revised rates for withholding tax ... Rates for collection

Prepared By

Nadeem Butt (FCA) Chartered Accountant

Principal

Taj Arcade, 3rd Floor, Office # 06, Opposite Services Hospital, 73-Main Jail Road, Lahore – Pakistan Ph: +92-42-37569644-46, 37535014 & 37554209 Fax: +92-42-37569649 Cell: +92-333-4245240, +92-301-4245240

URL: www.nbandco.com E-mail: nbco2007@yahoo/gmail/hotmail.com & nadeembuttfca1998@yahoo/gmail/hotmail.com

Nadeem Butt (FCA) - Principal Chartered Accountant Nadeem & Co. Chartered Accountants

Taj Arcade, 3rd Floor, Office # 06, Opposite Services Hospital, 73-Main Jail Road, Lahore. Ph: +92-42-37569644-46, 37535014 & 37554209 Fax: +92-42-37569649 Cell: +92-333-4245240, +92-301-4245240


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AMENDMENTS THROUGH FINANCE ACT, 2013 AND AFTER THAT TILL FEBRUARY 11, 2014

The amendments through these laws are effective as the same have already formed part of law and would therefore be effective from July 01, 2013 (Tax Year 2014) unless otherwise stated within this document.

This tax related document is intended to provide general guidance to our clients, staff, students and other persons related to taxation in any way and the same should not be deemed as an expert advice relating to any particular case, issue or matter as the case may be. Further for effective and better understanding of amendments, reference should be made to the appropriate wording to the relevant law, circulars, notifications, sales tax general orders issued there under and judgments given by the various appellate bodies within Pakistan.

This document has been prepared only for the aforesaid persons based on the information available with us till February 11, 2014. No responsibility whatsoever related to any mistake or material contained in this document shall be undertaken. The document should not be published or issued in any manner without taking written permission from the Firm.

Nadeem & Co. Chartered Accountants




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CONTENTS TABLE

1. ABOUT THE AUTHOR 3

2. COMPLETE AMENDMENTS RELATED TO INCOME TAX ORDINANCE, 2001 FOR THE TAX YEAR 2014 IN COMPARISON WITH TAX YEAR 2013 4-29

3. COMPLETE AMENDMENTS & EXPLANATIONS RELATED TO INCOME TAX ISSUED THROUGH STATUTORY REGULATORY ORDERS (SROs) AND CIRCULARS WITH OUR TECHNICAL COMMENTS ISSUED FROM JULY 1ST, 2013 TO FEBRUARY 11, 2014

30-38

4. INCOME SUPPORT LEVY ACT, 2013 39-40

5. AMENDMENTS RELATED TO SALES TAX ACT, 1990 FOR THE TAX YEAR 2014 IN COMPARISON WITH TAX YEAR 2013 41-49

6. AMENDMENTS & EXPLANATIONS ISSUED THROUGH STATUTORY REGULATORY ORDERS (SROs), CIRCULARS & GENERAL ORDERS WITH OUR TECHNICAL COMMENTS RELATED TO SALES TAX ISSUED FROM JUNE 16, 2013 TO FEBRUARY 11, 2014

50-57




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ABOUT THE AUTHOR

1. Sixteen (16) years post qualification practical / teaching / notes / book writing experience of Taxation after qualifying as a Chartered Accountant in 1998 and practicing as Fellow Member of ICAP under the name and style of Nadeem & Co. Chartered Accountants mainly in audit, income tax & sales tax.

2. Handling more than two hundred and fifty (250) various corporate and non corporate clients related to accounting, financial matters, audit (internal and external) and income tax / sales tax laws in Pakistan.

3. Member, (special invitees) Taxation Committee of Lahore Chamber of Commerce & Industry (LCCI).

4. Tax & audit advisor of all Pakistan Cottage Industry & Small Traders Association.

5. Life Member of Lahore Tax Bar Association.

6. Provided professional training on Financial and Taxes to various businessmen at Pakistan Readymade Garments & Technical Training Institute (PRGTTI).

7. Appointed on behalf of the income tax department by the Central Board of Revenue (now FBR) for Special Audit Under section 4A of the repealed Income Tax Ordinance, 1979 of various concerns.

8. Visiting faculty member of the Professional Academy of Commerce (PAC), Punjab Group of Colleges and ICMAP in providing facilities for the preparation of exams of Business Taxation.

9. Professional author of following two books on taxes in Pakistan:

a. Conceptual Approach to Taxes

b. Principles of taxes in Pakistan 10. The Book on Conceptual Approach to Taxes has the following status:

Recommended book all over Pakistan by:

The Institute of Chartered Accountants of Pakistan Punjab Group of Colleges Institute of Cost & Management Accountants of Pakistan (recommendation under process)

11. His two students of ICMAP got 1st and 2ND positions all over Pakistan by scoring 98% and 97% marks in

the subject of Business Taxation

12. His one student of ICAP got gold medal from ICAP in Module – C in the subject of Financial Accounting.




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AMENDMENTS RELATED TO INCOME TAX ORDINANCE, 2001 FOR THE TAX YEAR 2014 IN COMPARISON WITH TAX YEAR 2013

SR. PARTICULARS PAGE

1. Rate of tax for company other than a banking company [1st Schedule, Division II, clause (i)]

5

2. Taxability of dividend for company [Section 8 & 169] 5 3. Taxability of income from property [Section 15 & 15A] 6 4. Adjustment of losses [Section 56] 6 5. Initial allowance for plant & machinery [Section 23 & Third Schedule] 6 6. Definition of company [Section 80] 7 7. Acceptance of agricultural income [Section 111] 7 8. Rate of minimum tax [Section 113] 7 9. Minimum tax [Section 113A & 113B] 7 10. Persons that are required to file Income Tax Return [Section 114] 8 11. Pre-conditions to revise Income Tax Return [Section 114] 9 12. Persons not required to furnish a return of income [Section 115] 9 13. Requirement of Wealth Statement [Section 116] 9 14. Method of furnishing of return and other documents [Section 118] 10 15. Investment tax on income [Section 120A] 10 16. Time for provisional assessment [Section 122C] 11 17. Appointment of Appellate Tribunal [Section 130] 11 18. Applicability of advance tax on property income [Section 147] 11 19. Tax on import of foreign produced film [Section 148] [1st Schedule, Part II] 12 20. Tax deduction on salary [Section 149] 12 21. Definition of prescribed person [Section 152] 13 22. Definition of prescribed person [Section 153] 13 23. Revised rates for withholding tax [Section 153] [1st Schedule, Division III, Part III] 13 24. Payment to traders & distributors [Section 153A] 13 25. Persons required to deduct tax on property income [Section 155] 14 26. Rate of tax deduction in case of individual, AOP and company [Section 155] [1st

Schedule, Division V, Part III] 14

27. Tax rates for Prizes and Winnings [Section 156] [1st Schedule, Division VI, Part IV, clause 1]

15

28. Certificate of collection / deduction of tax is no more a sufficient evidence [Section 164]

15

29. Annual withholding tax statement [Section 165] 15 30. Furnishing of information by banks [Section 165A] 16 31. Additional payment for delayed refunds [Section 171] 16 32. Representatives [Section 172] 17 33. Audit by Commissioner Inland Revenue [Section 177] 17 34. Assistance to Commissioner Inland Revenue [Section 178] 17 35. Taxpayer’s registration [Section 181] 17 36. Displaying of National Tax Number [Section 181C] 18 37. Offences and penalties [Section 182] 18 38. Prosecution for unauthorized disclosure of information by a public servant [Section

198] 19




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39. Selection Audit by Board [Section 214C] 19 40. Reward to officers and officials of Inland Revenue [Section 227A] 19 41. Rate of advance tax on cash withdrawals from bank [Section 231A] [1st Schedule,

Division VI, Part IV] 20

42. Rates for collection of Tax by a Stock Exchange Registered in Pakistan [Section 233A] [1st Schedule, Division IIA, Part IV]

20

43. Rates for collection of Tax NCCPL [Section 233A] [1st Schedule, Division IIB, Part IV] 20 44. Rate of advance tax on purchase of Motor Cars and Jeeps [Section 231B] [1st

Schedule, Division VII, Part IV] 20

45. Advance tax on Goods Transport Vehicle [Section 234] 21 46. Rates of collection of tax [Section 234] [1st Schedule, Division III, Part IV] 21 47. Rate of advance tax mobile phone & prepaid telephone card [Section 236] [1st

Schedule, Division V, Part IV] 21

48. Advance tax at the time of sale by auction [Section 236A] [1st Schedule, Division VI, Part IV]

22

49. Deduction or collection of tax [Section 236D to 236J] 22 50. Tax rates for non-salaried individuals and AOPs [1st Schedule, Division I, Part I, clause

1] 23

51. Tax rates for salaried individuals [1st Schedule, Division I, Part I, clause 1A] 24 52. Amendments in Second Schedule 25 53. Amendments in Seventh Schedule 29 54. Income tax Statutory Regulatory Orders (SROs) issued from July 17, 2013 to

February 11, 2014 30

55. Status of Income Tax Circulars issued by Federal Board of Revenue (FBR) from July 01, 2013 to February 11, 2014

36

1. Rate of tax for company other than a banking company [1st Schedule, Division II, clause (i)]

SR. CATEGORY STATUS IN TAX

YEAR 2013 STATUS IN TAX

YEAR 2014 TECHNICAL COMMENTS

1. Small Company / Modaraba

25% Same To encourage the corporate sector (other than at Sr. 1 & 2), the rate of tax has been reduced by 1% for tax year 2014.

2. Banking Company 35% Same

3. Other than above 35% 34% 2. Taxability of dividend for company [Section 8 & 169] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

8 & 169 Dividend income for company was taxable under Normal Tax Regime @ 10%.

Dividend income for companies is taxable under fixed and final Tax @ 10%.

Previously dividend income for Companies was chargeable to tax under normal tax regime @ 10% after allowing deductions and adjustment of losses against dividend income.

Now dividend income for Companies is chargeable to tax at flat rate of 10% (7.5% in case of reduced tax rate under Part II




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of 2nd Schedule) as Final Tax. Hence now deductions and losses cannot be adjusted against dividend income received by companies.

3. Taxability of income from property [Section 15 & 15A] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

15 Fixed tax on property income

Income from property was taxable under Separate Block of Income and property income below Rs. 150,000 was not taxable for individuals & AOP’s.

Normal tax regime for property income

Income from property is chargeable to tax under normal tax regime (NTR) and normal slab rates shall be applicable.

Although this amendment was not a part of Finance Bill, 2013 however the property income is now chargeable to tax as part of total income under normal tax regime instead of fixed tax as final tax.

15A

Not applicable

Deductions allowable against property income

In computing income from property, deduction shall be allowed for expenditures or allowances specified in section 15A such as 1/5th of rent chargeable to tax (RCT) as repair allowance, interest on loan, allowance for unpaid rent etc.

Although this amendment was not a part of Finance Bill, 2013 however a new section 15A has been inserted which specifies the deductions allowed against Property Income.

4. Adjustment of losses [Section 56] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

56 Losses were adjustable against income from salary.

Losses are not adjustable against income from salary.

Previously losses under any head of income except capital losses and speculation losses were adjustable against Income from salary. Now losses cannot be adjusted against income from salary.

56 Income from property was chargeable to tax under separate block of income; hence losses were not adjustable against property income.

Income from property is chargeable to tax under normal tax regime however still losses are not adjustable against income from property.

Similarly, although income from property is now chargeable to tax under normal tax regime but still no loss under any head of income shall be adjusted against the same.

5. Initial allowance for plant & machinery [Section 23 & Third Schedule] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

23 Initial allowance on plant & machinery was 50%.

Initial allowance on plant & machinery is 25% that is equal to rate applicable on building.

The initial allowance rate on plant & machinery has been brought down equal to the rate




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applicable on building. However this amendment has no effect on 90% rate of depreciation allowance available under sections 23A & 23B.

6. Definition of company [Section 80] SECTION STATUS IN TAX YEAR

2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

80 Not applicable on the said persons.

Now Non-profit organization, all co-operative Societies (including Finance & other Societies), a trust, an entity or a body of persons established or constituted by or under any law for the time being in force have been included in the definition of company.

The definition of “Company” has been enlarged by including the said persons that has resulted into application of all the provisions of Income Tax Ordinance, 2001 on the said persons as applicable on a Company e.g. turnover tax & withholding tax provisions etc.

7. Acceptance of agricultural income [Section 111] SECTION STATUS IN TAX

YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

111

Not applicable

Where a person explains any unexplained income as agricultural income; such explanation shall be accepted to the extent of agricultural income worked back on the basis of agricultural income tax paid under the relevant provincial law.

It is clearly evident from the said amendment that a person has to pay provincial income tax otherwise his explanation of unexplained income as agricultural income shall not be accepted for the purposes of section 111. Further even a person pays tax under section 111 of the Income Tax Ordinance, 2001 then still the provincial income tax has to be paid.

8. Rate of minimum tax [Section 113] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

113 Rate of minimum tax was 0.5% and facility of carry forward to unadjusted turnover tax was available to Companies only.

Now rate of minimum tax has been increased to 1% & in addition to corporate taxpayers, individuals & AOPs are also entitled to adjust unadjusted minimum tax paid for the year against the tax liability (other than minimum tax) for the subsequent five tax years.

Although the rate of minimum tax has been increased by 0.5% on the said persons however the facility of carry forward of unadjusted turnover tax has also been extended to individuals and AOPs in addition to corporate sector.

9. Minimum tax [Section 113A & 113B] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

113A

Tax on income of certain persons:

Minimum tax on Builders:

Any person deriving income

It is clearly evident from the said amendment that the




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A retailer other than a company and having annual turnover up to Rs. 5,000,000 may opt to pay 1% turnover tax as final tax.

from construction and sale of residential, commercial, industrial or other buildings shall pay minimum tax at rates, mode and manner as the Federal Government may specify.

Fixed Tax Regime / Final Tax under section 113A & 113B is no more in tax year 2014 as the retailers are now to be taxed under normal tax regime read with sections 236G and 236H of the Income Tax Ordinance, 2001.

Further, Builders and developers have been brought under minimum tax regime (subject to this ordinance) however the rate of minimum tax on builders and developers has not so far been notified by the Federal Government.

113B

Tax on income of certain retailers:

A retailer other than a company having annual turnover more than Rs. 5,000,000 and subject to Sales Tax Special Procedure Rules shall pay final tax at rates specified in section 113B.

Minimum tax on land Developers:

Any person deriving income from development and sale of residential, commercial or other plots shall pay minimum tax at rates, mode and manner as the Federal Government may specify.

10. Persons that are required to file Income Tax Return [Section 114]

STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014

(a) every company, Same

(b) every person (other than a company) whose taxable income for the year exceeds the maximum amount not chargeable to tax,

Same

(c) any non-profit organization, & Same

(d) any welfare institution approved, Same

(e) any person not covered in the above clauses who,

(i) has been charged to tax in respect of any of the two preceding tax years;

(ii) claims a loss carried forward for a tax year;

(iii) owns immovable property with a land area of 250 square yards or more or owns any flat located in areas falling within the municipal existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment or the Islamabad Capital Territory;

(iv) owns immoveable property with a land area of 500 square yards or more located in a rating area;

(v) owns a flat having covered area of 2,000 square feet or more located in a rating area;

(vi) owns a motor vehicle having engine capacity above 1000CC; &

(vii) has obtained National Tax Number.

(viii) is the holder of commercial or industrial connection of electricity where the amount of annual bill exceeds Rs.1,000,000.

Same (except the following)

Same with limitation of Rs. 500,000 in place of Rs. 1,000,000.

Person registered with any chamber of




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Not applicable commerce, trade or business association, any market committee or any professional body including (ICAP, ICMAP, PEC, PBC & PMDC).

Not applicable Where Business income of an individual is between Rs. 300,000 & 400,000.

Technical comments: Another step by the Federal Government to earn more revenue by extending the scope of persons that are required to file the Income Tax Return.

11. Pre-conditions to revise Income Tax Return [Section 114]

Any person, who having furnished a return, discovers any omission or wrong statement therein, may file revised return subject to the following conditions namely:


(a) It is accompanied by the revised accounts or revised audited accounts, as the case may be; Same

(b) The reasons for revision of return, in writing, duly signed, by the taxpayers are filed with the return. Same

(c) Taxable income declared is not less than and loss declared is not more than income or loss, as the case may be, determined by an order issued under sections 121, 122, 122A, 122C, 129, 132, 133 or 221;

Same

(d)

Not Applicable

it is accompanied by approval of the Commissioner Inland Revenue in writing for revision of return;

Provided that if any of the above conditions, is not fulfilled the return furnished shall be treated as an invalid return as if it had not been furnished.

Same

Technical Comments: One more limitation imposed on persons for revision of return after having approval from the concerned commissioner. Further, this amendment is to bring the income tax provisions for revision of income tax return in consonance with Sales Tax Law.

12. Persons not required to furnish a return of income [Section 115] Section STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR

2014 TECHNICAL COMMENTS

115 A taxpayer whose entire income in a tax year consists of income chargeable under the head ‘Salary’ is not required to file his return of income, if the employer has filed related annual statement of deduction of income tax from salary, provided his salary income for the tax year is more than Rs.400,000 but less than Rs 500,000.

Relief withdrawn

Due to withdrawal of said relief in tax year 2014 (read with section 114) such taxpayers are now required to file return of income. The requirement of electronic filing of return by the salaried individual having salary income of Rs 500,000 or more is still intact.

13. Requirement of Wealth Statement [Section 116]




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SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

116

Every resident taxpayer being an individual filing a return of income for any tax year shall furnish a wealth statement and wealth reconciliation statement for that year along with such return if his taxable income of tax year 2013 or tax year 2012 exceeds Rs. 1,000,000 or his tax liability under final tax regime exceeds Rs. 35,000.

Every resident taxpayer being an individual filing a return of income for any tax year shall furnish a wealth statement and wealth reconciliation statement for that year along with such return;

Provided that every member of an association of persons shall also furnish wealth statement and wealth reconciliation statement for the year along with return of the association.

It is clearly evident from the said amendment that the filing of wealth statement for individuals filing income tax return (without any threshold of income or tax paid) is now must.

116 Where a person furnished a wealth statement and intends to file a revised wealth statement that was being filed without filing revised wealth reconciliation and reason of revision of wealth statement.

Where a person furnished a wealth statement and intends to file a revised wealth statement, then the person must file revised wealth reconciliation along-with reasons to revise wealth statement.

Now from tax year 2014 no wealth statement shall be revised without filing revised wealth reconciliation and reason of revision of wealth statement. Further the E-Portal from tax year 2013 to onwards shall not allow to any individual to file income tax return before filing of wealth statement.

14. Method of furnishing of return and other documents [Section 118] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

118 A taxpayer whose entire income in a tax year consists of income chargeable under the head ‘Salary’ is not required to file his return of income, if the employer has filed related annual statement of deduction of income tax from salary, provided his salary income for the tax year does not exceed Rs 500,000.

Relief withdrawn and now where individuals deriving salary income exceeding Rs.400,000 are required to file the income tax return along-with wealth statement & wealth reconciliation statement.

Due to withdrawal of said relief (read with section 114) such taxpayers are now required to file return of income along with proof of payment in the form of challans or any other equivalent document.

118 There was requirement of electronic filing of return along-with wealth statement and wealth reconciliation by the salaried individual having salary income of Rs 500,000 or more.

The filing requirement is same however now proof of tax paid shall also be attached with the return of income.

15. Investment tax on income [Section 120A] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX


120A Where any person declares undisclosed income under section 120A, the tax on such income

Section deleted.

Previously a person was entitled to incorporate undisclosed income in his books of account by paying nominal tax rate such




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called investment tax shall be charged at prescribed rates and such person shall be entitled to incorporate in his books of account such undisclosed income in tangible form and shall not be liable to pay any tax, charge, levy, penalty or prosecution under ITO, 2001.

as 2% or other rate on undisclosed income and after this the person was not required to pay any other tax, charge, levy, penalty or prosecution under Income Tax Ordinance, 2001.

Now this section has been omitted that has resulted into non-availability of whitening of undisclosed income that will now be taxed under section 111 along with levy of default surcharge and penalty on such income.

16. Time for provisional assessment [Section 122C] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

122C Provisional assessment was treated as final assessment order after the expiry of 60 days from the date of service of such orders.

Now provisional assessment shall be treated as final assessment order after the expiry of 45 days from the date of service of such orders.

In order to make the provisions of section 122C stricter for non-compliant taxpayers the period to treat the provisional assessment as final assessment has been reduced by 15 days (from 60 days to 45 days).

17. Appointment of Appellate Tribunal [Section 130] SECTION PARTICULARS STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014

130 A person may be appointed as Judicial Member if the person:

a. has exercised the powers of a District Judge and is qualified to be a Judge of a High Court

Same

b. is or has been an advocate of High Court and is qualified to be a Judge of the High Court

Same

c. Not applicable Is an officer of Inland Revenue Service in BS-20 or above and is a law graduate

130 A person may be appointed as Accountant Member if the person:

a. He is an officer of Inland Revenue Service equivalent in rank of Regional Commissioner

Same

b. A CIR or CIR (Appeals) having at least three year experience as Commissioner or Collector

Same

c. Not applicable Chartered Accountant who has practiced for 10 years

130 Chairperson of the Tribunal Not applicable

Except in special circumstances, the person appointed should be judicial member.

Technical Comments: To enlarge the scope for the appointment of Judicial Member, Accountant




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Member & Chairperson, more persons have been given opportunity to work in the said capacity.

18. Applicability of advance tax on property income [Section 147] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

147 Advance tax was not required to be paid on property income as the same was taxable as fixed and final tax.

Now advance tax is also required to be paid on property income due to taxability of the same under normal tax regime.

Now a person deriving income from property is required to pay advance tax quarterly subject to conditions specified in section 147.

19. Tax on import of foreign produced film [Section 148] [1st Schedule, Part II] SECTION PARTICULARS STATUS IN TAX

YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL

COMMENTS

148

Rate of tax

5% of the value of goods

(a) 5% of the value of goods in the case of industrial undertakings

(b) 5% in all other cases of companies

(c) 5.5% in case of all taxpayers other than above; and

(d) Notwithstanding the provision of clause (c) above, 12% of the value of the film in the case of a foreign produced film imported for the purposes of screening and viewing.

Another benefit to corporate sector as compared to non-corporate sector due to reduction in the rate of withholding tax for corporate sector.

148 Status of tax deducted on import of foreign produced film for the purpose of screening and viewing:

Final tax Adjustable

Previously income from business of import of foreign produced film for the purposes of screening & viewing was taxable under final tax regime. Now it is taxable under normal tax regime.

20. Tax deduction on salary [Section 149] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

149 Every employer paying salary to employee was required to deduct tax on salary.

Now every “person responsible for paying salary” to employee is required to deduct tax on

The scope of persons required to deduct tax on salary has been broadened. However, still tax shall be




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salary. deducted after adjustment of taxes deducted under other heads and tax credits admissible under sections 61 to 64.

21. Definition of prescribed person [Section 152] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

152 Previously it was not defined that who is prescribed person for the purposes of section 152.

Now, it has been defined that the “prescribed person” in section 152 means prescribed person as defined in section 153(7).

Definition of prescribed person under section 153(7) now added in section 152 for withholding tax purposes.

22. Definition of prescribed person [Section 153] STATUS IN TAX YEAR 2013 STATUS IN TAX


(a) Federal Government Same This amendment has enlarged the definition of Prescribed Person with addition of persons registered under Sales Tax Act, 1990. Now persons registered under Sales Tax Act are not only to deduct tax under section 153 but also required to file monthly statements under section 165.

(b) Company Same

(c) Association of persons constituted by, or under, law

Same

(d) Non-profit organization Same

(e) Foreign contractor or consultant Same

(f) Consortium or joint venture Same

(g) Exporter or an export house Same

(h) AOP, having turnover of fifty million rupees or above in tax year 2007 or in any subsequent tax year

Same

(i) Individual, having turnover of fifty million rupees or above in tax year 2009 or in any subsequent tax year

Same

(j) Not applicable

Person registered under the Sales Tax Act, 1990

23. Revised rates for withholding tax [Section 153] [1st Schedule, Division III, Part III]

Type of payment STATUS IN TAX YEAR 2013

STATUS IN TAX YEAR 2014

Rate for all persons Rate for Companies

Rate for Persons other than company

Sale of goods 3.5% 3.5% 4%

Rendering of services 6% 6% 7%

Contracts 6% 6% 6.5%

Technical comments: Another benefit given to corporate sector as compared to non corporate sector.




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24. Payment to traders & distributors [Section 153A] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR


153A Every manufacturer, at the time of sale to distributors, dealers and wholesales, shall collect tax at 0.5% of the gross amount of sales from the aforesaid persons

Section omitted

Although this section has been omitted however a new section 236G has been inserted with limited scope that is covering the similar provisions.

25. Persons required to deduct tax on property income [Section 155] STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 (a) Federal Government, Provincial Government,

Local Government Same

(b) Company Same (c) Non-profit organization Same (d) Diplomatic mission of a foreign state Same (e) Not applicable Charitable institution

(f) Not applicable a private educational institution

(g) Not applicable a boutique

(h) Not applicable a beauty parlor

(i) Not applicable a hospital, a clinic or a maternity home; (j) Not applicable Individuals or association of persons paying gross

rent of Rs.1,500,000 & above in a year. Technical comments: The scope of prescribed person for the purposes of section 155 has been extended by including categories as defined above from point (e) to (j).

26. Rate of tax deduction in case of individual, AOP and company [Section 155] [1st Schedule, Division V, Part III]


In case of individual, AOP & company S. No.

Gross amount of rent

Rate of tax

1. Where the gross amount rent does not exceed Rs. 150,000.

Nil

2. Where the gross amount of rent exceeds Rs. 150,000 but does not exceed Rs. 400,000.

5% of the gross amount exceeding Rs. 150,000.

(A) In case of individual & AOP

S. No.

Gross amount of rent

Rate of tax

1. Where the gross amount rent does not exceed Rs. 150,000.

Nil

2. Where the gross amount of rent exceeds Rs. 150,000 but does not exceed Rs. 1,000,000.

10% of the gross amount exceeding Rs. 150,000.




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3. Where the gross amount of rent exceeds Rs. 400,000 but does not exceed Rs. 1,000,000.

Rs. 12,500 plus 7.5% of the gross amount exceeding Rs. 400,000

4. Where the gross amount of rent exceeds Rs. 1,000,000.

Rs. 57,500 plus 10% of the gross amount exceeding Rs. 1,000,000.

3. Where the gross amount of rent exceeds Rs. 1,000,000.

Rs. 85,000 plus 15% of the gross amount exceeding Rs. 1,000,000.

(B) In case of company

The rate of tax to be deducted under section 155, in the case of company shall be 15% of the gross amount of rent.

Technical comments: 1. It is to be noted that from Tax year 2014 the rates of tax deduction on property income are different from

rates of computation of tax liability for recipient on property income.

2. Further, rates of tax deduction are applicable on gross amount of rent while rates of computation of tax liability on income from property are now applicable on net amount of property income after allowing deductions under section 15A.

27. Tax rates for Prizes and Winnings [Section 156] [1st Schedule, Division VI, Part IV, clause 1]


156

and

1st Schedule

The rate of tax to be deducted under section 156 on a prize on prize bond or cross-word puzzle was 10% of the gross amount paid.

The rate of tax to be deducted under section 156 on a prize on prize bond or cross-word puzzle is 15% of the gross amount paid.

Rate of tax has been increased by 5% to earn more revenue by the Federal Government.

28. Certificate of collection / deduction of tax is no more a sufficient evidence [Section 164]

SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR


164 Certificate of collection or deduction of tax is a sufficient evidence of collection or deduction of tax.

Omitted Due to this amendment now only tax paid challan or any other equivalent document shall be accepted as a valid evidence for collection or deduction of tax.

29. Annual withholding tax statement [Section 165] SECTION STATUS IN TAX YEAR


165(1) Not applicable

Following explanation added after sub-section (1)

Explanation:- For the removal of doubt, it is clarified that this sub-section overrides all conflicting provisions contained in the Protection of Economic Reforms Act, 1992, the

Through this amendment the provisions of section 165(1) override all conflicting provisions contained in other laws that prohibit to provide such information.




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Banking Companies Ordinance, 1962, the Foreign Exchange Regulation Act, 1947 and regulations made under the State Bank of Pakistan Act, 1956, if any, on the subject, in so far as divulgence of information under section 165.

Proviso after section 165(6)

Person deducting tax u/s 149 was required to file annual statement of deduction tax in case where income is between 300,000 and 350,000.

This proviso after sub-section (6) has been omitted.

Previously a person was required to file annual statement of deduction of tax under section 149 even where no tax has been deducted during the period if annual salary of any of the employees is between Rs. 300,000 and Rs. 350,000.

Now because of omission of this proviso, filing of particulars of said employees is no more required to be stated in the annual statement required under section 165.

30. Furnishing of information by banks [Section 165A] STATUS IN TAX

YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL

COMMENTS

Not applicable

New section added by Finance Act, 2013. Summary is given below: Every banking company shall make arrangements to provide to the Board in the prescribed form and manner: a. Online access to its central database containing details of its

account holders and all transactions made in their accounts;

b. A list containing particulars of deposits aggregating Rs. 1(M) or more during the preceding calendar month;

c. A list of payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to Rs. 100,000 or more during the preceding calendar month;

d. A consolidated list of loans written off exceeding Rs. 1(M) during the calendar year; and

e. A copy of each currency transactions report and suspicious transactions report.

Banking company shall also nominate a senior officer at the head office to coordinate with the Board.

Bank company & its officers shall not be liable to any civil, criminal or disciplinary proceedings against them for furnishing information.

The requirement under this section so far is not applicable due to stay granted against application of the said section by virtue of judgment of the Sindh High Court.

31. Additional payment for delayed refunds [Section 171] SECTION STATUS IN TAX YEAR STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS




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17

2013

171

Not applicable

Following explanation added after sub-section (2)

Explanation:- For the removal of doubts, it is clarified where a refund order is made on an application under sub-section (1) of section 170, for the purpose of compensation, the refund becomes due from the date refund order is made and not from the date the assessment of income treated to have been made by the Commissioner under section 120.

Previously there was doubt about the date from which refund becomes due on an application for refund under section 170. This doubt has been removed by above explanation.

32. Representatives [Section 172] SECTION STATUS IN TAX


172 Not applicable

An explanation has been inserted whereby the expression “business connection” includes transfer of asset or business in Pakistan by a non-resident.

Any person in Pakistan can be regarded a representative of a non-resident, where such person has any business connection with the non-resident person. The commissioner is now empowered to recover tax liabilities of the non-resident from a person who has purchased assets or business from the non-resident in Pakistan.

33. Audit by Commissioner Inland Revenue [Section 177] SECTION STATUS IN TAX


177

Not applicable

Explanation: The Commissioner’s power to select and conduct audit of a person is independent of powers conferred on the FBR under section 214C for selection of a person for tax audit.

The amendment is aimed to nullify the effect of a decision of Lahore High Court holding that powers to select taxpayers’ cases for audit only vested with FBR.

34. Assistance to Commissioner Inland Revenue [Section 178] Following persons are empowered and required to assist the Commissioner in the discharge of the Commissioner’s functions under this Ordinance.

Every officer of:

STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 (a) Customs Same (b) Federal Excise, Sales Tax Omitted (c) Provincial Excise and Taxation Same (d) District Coordination Officer Same (e) District Officers including District Officer –

Revenue Same

(f) Police and the Civil Armed Forces Same




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18

Technical comments: A Technical change has been made by excluding the officers of Sales Tax and Federal Excise since the relevant powers are now with officers of Inland Revenue Service.

35. Taxpayer’s registration [Section 181] SECTION STATUS IN TAX


181 Not applicable

Following proviso added after sub-section (3):

Provided that the Board may in case of individuals allow, in place of National Tax Number, use of Computerized National Identity Card issued by the National Database and Registration Authority.

The said proviso has been inserted and now Board may allow in case of individuals the use of CNIC in place of NTN.

36. Displaying of National Tax Number [Section 181C] SECTION STATUS IN TAX


181C

Not applicable

New section added by Finance Act, 2013

Every person deriving income from business chargeable to tax and who has been issued NTN shall display his NTN at a conspicuous place at every place of his business.

Now every person deriving income from business and who has been issued NTN shall display his NTN at every place of his business and in case of failure the person shall be liable to pay fine of Rs. 5,000.

37. Offences and penalties [Section 182]

Sr. Offences Penalties in tax year 2013 Penalties in tax year 2014

Technical comments

1. Where any person fails to furnish a return of income as required under section 114 within due date

Lower of the following:

(a) 0.1% of the tax payable for each day of default subject to a minimum penalty of Rs. 5,000

(b) 25% of the tax payable in respect of that tax year

Higher of the following:

(a) 0.1% of the tax payable in respect of that tax year for each day of default subject to a maximum penalty of 50% of the tax payable

(b) Rs. 20,000

Penalties have not only been increased but also rationalized so that taxpayers may avoid from various non-compliances under the provisions of Income Tax Ordinance, 2001.

2. Where any person fails to furnish wealth statement or wealth reconciliation statement.

Same as above

Rs.100 for each day of default.

3. Where any person fails to furnish a statement as required under section 115, 165 or

Same as above

Higher of the following:

(a) Rs. 2,500 for each day of default

(b) Rs. 10,000




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165A within the due date

4. Where a taxpayer who, without any reasonable cause, in non compliance with the provisions of section 177 fails to produce the record or documents on receipt of:

First notice: Rs. 5,000

Second Notice: Rs. 10,000

Third Notice: Rs. 50,000

First notice: Rs. 25,000

Second Notice: Rs. 50,000

Third Notice: Rs. 100,000

5. Any person who fails to furnish the information required or to comply with any other term of the notice served under section 176

First default: Rs. 5,000

Subsequent default: Rs. 10,000

First default: Rs. 25,000

Subsequent default: Rs. 50,000

6. Any person who fails to display his NTN at the place of business as required under this Ordinance or the rules made there under.

Not applicable

Rs. 5,000

38. Prosecution for unauthorized disclosure of information by a public servant [Section 198]


198 A person who discloses any particulars in contravention of section 216 shall commit an offence punishable on conviction with:

Fine = not specified

Imprisonment = not exceeding 6 months

or both

A person who discloses any particulars in contravention of section 216 shall commit an offence punishable on conviction with:

Fine = not less than Rs. 500,000

Imprisonment = not exceeding 1 Year

or both

Previously the amount of fine under section 198 was not specified. Now it has been specified that fine shall not exceed Rs. 500,000. Limit on period of imprisonment has been increased to 1 year.

39. Selection Audit by Board [Section 214C] SECTION STATUS IN TAX


214C Not applicable

Explanation: The Commissioner’s power to select and conduct audit of a person is independent of powers conferred on the FBR under section 177 for selection of a person for tax audit.

Through the aforesaid amendments FBR intends to keep independent of the powers under section 177 and confidentiality of audit parameters.




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The Board shall keep the parameters confidential.

40. Reward to officers and officials of Inland Revenue [Section 227A] SECTION STATUS IN TAX YEAR


227A Not applicable

New section added by Finance Act, 2013 Cash reward will be allowed to Officers / Officials of Inland Revenue and informer for their meritorious conduct of discovery and realization of concealment or evasion of taxes.

This section has been inserted to encourage the officers of Inland revenue for detection of concealment or evasion of income tax after recovery of such tax. Reward shall also be allowed to informer for providing credible information leading to such detection.

41. Rate of advance tax on cash withdrawals from bank [Section 231A] [1st Schedule,

Division VI, Part IV] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

231A 0.2% of the cash amount withdrawn.

0.3% of the cash amount withdrawn.

Rate of advance tax has been increased to earn more revenue by the Federal Government.

42. Rates for collection of Tax by a Stock Exchange Registered in Pakistan [Section

233A] [1st Schedule, Division IIA, Part IV] STATUS IN TAX YEAR


(i) In case of purchase of shares as per clause (a) of section 233A(1).

0.01% of purchase value

Same The last clause has been omitted however the same has been transferred under section 233AA with responsibility of withholding tax by NCCPL instead of stock exchange.

(ii) In case of sale of shares as per clause (b) of section 233A(1).

0.01% of sale value Same

(iii) In case of trading of shares as mentioned in clause (c) of section 233A(1)

0.01% of traded value Same

(iv) In case of financing of carry over trades (Badla) as per clause (d) of section 233A(1).

10% of the carry over Omitted

43. Rates for collection of Tax NCCPL [Section 233A] [1st Schedule, Division IIB, Part IV] SECTION STATUS IN TAX YEAR


233A

& Not applicable

New division inserted by Finance Act, 2013

This section has been inserted after omission of section 233A with




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21

1st Schedule

The rate of deduction under section 233AA shall be 10% of profit or mark-up or interest earned by the member, margin financier or securities lender.

responsibility of withholding tax by NCCPL instead of stock exchange.

44. Rate of advance tax on purchase of Motor Cars and Jeeps [Section 231B] [1st Schedule, Division VII, Part IV]

SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL

COMMENTS

231B

The rate of payment of tax was as follows:

Engine Capacity Amount of Tax Upto 850cc Rs.7,500 851cc to 1000cc Rs.10,500 1001cc to 1300cc Rs.16,875 1301cc to 1600cc Rs.25,000 1601cc to 1800cc Rs. 22,500 1801cc to 2000cc Rs. 16,875 Above 2000cc Rs.50,000

The rate of payment of tax now as follows:

Engine Capacity Amount of Tax Upto 850cc Rs.10,000 851cc to 1000cc Rs.20,000 1001cc to 1300cc Rs.30,000 1301cc to 1600cc Rs.50,000 1601cc to 1800cc Rs.75,000 1801cc to 2000cc Rs.100,000 Above 2000cc Rs.150,000


45. Advance tax on Goods Transport Vehicle [Section 234] SECTION STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

234

Previously advance tax on Goods transport vehicle of person deriving income from plying or hiring out of vehicle was final tax

Now this advance tax is adjustable.

The Goods Transport Vehicle sector has been shifted from final tax regime to normal tax regime.

46. Rates of collection of tax [Section 234] [1st Schedule, Division III, Part IV] SECTION STATUS IN TAX


234

&

1st Schedule

Not applicable

New clause inserted

Where the motor vehicle tax is collected in lump sum,-

(a) upto 1000cc Rs.7,500 (b) 1001cc to 1199cc Rs.12,500 (c) 1200cc to 1299cc Rs.17,500 (d) 1300cc to 1599cc Rs.30,000 (e) 1600cc to 1999cc Rs.40,000 (f) 2000cc and above Rs.80,000

This clause specifies the amount of advance income tax in case where motor vehicle tax is collected in lump sum.




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47. Rate of advance tax mobile phone & prepaid telephone card [Section 236] [1st Schedule, Division V, Part IV]


236 &

1st Schedule

10% of the amount of bill or sales price of pre-paid telephone card or sale of units through any electronic medium or whatever form.

15% of the amount of bill or sales price of pre-paid telephone card or sale of units through any electronic medium or whatever form.


48. Advance tax at the time of sale by auction [Section 236A] [1st Schedule, Division VI, Part IV]


236A

&

1st Schedule

5% of the gross sale price of any property or goods sold by auction.

10% of the gross sale price of any property or goods sold by auction.

Another revenue measure by the Federal Government.

49. Deduction or collection of tax [Section 236D to 236J] Following new sections have been inserted by Finance Act 2013 for the tax year 2014:

Section Who is required to deduct or collect tax Rate Exemption

limit Adjustable or

final

From whom tax is required to be deducted or collected

Time of deduction or collection

236D Prescribed person 10% of the total amount of bill Nil Adjustable

Person arranging or holding a function in a marriage hall, marquee, hotel, restaurant, commercial lawn, club etc.

Collection of bill

236E

Any licensing authority certifying any foreign TV drama serial or a play dubbed in Urdu or any other regional language, for screening and viewing on any landing rights channel, shall collect advance tax

Rs. 100,000 per episode. Nil Adjustable Distributors Certification




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23

236F PEMRA

Rates specified in Division XIII of Part IV of the First Schedule.

Nil Adjustable Licensee Licensing

236G

Every manufacturer or commercial importer of electronics, sugar, cement, iron, and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass textile, beverages, paint or foam sector,

0.1% of gross value of sales Nil Adjustable

Distributors, dealers and wholesales to whom such sales have been made

at the time of sale to distributors, dealers and wholesalers

236H

Every manufacturer, distributor, dealer, wholesaler or commercial importer of electronics, sugar, cement, iron, and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass textile, beverages, paint or foam sector,

0.5% of gross value of sales Nil Adjustable Retailers

at the time of sale to retailers

236I Educational Institution 5% of fee Rs.200,000 Adjustable Person

paying the fee.

At the time of fee

collection

236J

Every market committee In this section "market committee" includes any committee or body formed under any provincial or local law made for the purposes of establishing, regulating or organizing agricultural, livestock and other commodity markets.

Group or

Class

Tax (per

annum) Rs.

A 10,000 B 7,500

C or any

other class

5,000

Nil Adjustable

Dealers, Commission Agents and

Arhatis

At the time of issuance or renewal of license

Comments: In order to earn more revenue, the Federal Government has inserted new sections (236D to 236J) to enlarge the scope of persons required to deduct tax at source under Income Tax Ordinance, 2001.

50. Tax rates for non-salaried individuals and AOPs [1st Schedule, Division I, Part I,

clause 1]




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24


S. No. Taxable income Rate of Tax

(1) (2) (3) 1. Where taxable income

does not exceed Rs. 400,000

0%

2. Where the taxable income exceeds Rs. 400,000 but does not exceed Rs.750,000

10% of the amount

exceeding Rs. 400,000

3. Where the taxable income exceeds Rs. 750,000 but does not exceed Rs.1,500,000

Rs. 35,000 + 15% of the

amount exceeding Rs.

750,000 4. Where the taxable

income exceeds Rs. 1,500,000 but does not exceed Rs.2,500,000

Rs. 147,500 + 20% of the amount

exceeding Rs. 1,500,000

5. Where the taxable income exceeds Rs. 2,500,000

Rs. 347,500 + 25% of the amount

exceeding Rs. 2,500,000

S.

No. Taxable income Rate of Tax

(1) (2) (3)

1. Same Same

2. Same Same

3.

Same Same

4.

Same Same

5. Where the taxable income exceeds Rs. 2,500,000 but does not exceed Rs.4,000,000

Rs. 347,500 + 25% of the amount exceeding Rs. 2,500,000

6. Where the taxable income exceeds Rs. 4,000,000 but does not exceed Rs.6,000,000



Rs. 1,322,500 + 35% of the amount exceeding Rs. 6,000,000

Technical comments: Three more slabs have been added from 5 to 7 above whereas 5th slab restricted to taxable income up to Rs. 4 million and further the maximum rate is 35% on taxable income above Rs. 6 million.

51. Tax rates for salaried individuals [1st Schedule, Division I, Part I, clause 1A]


S. No. Taxable income Rate of Tax

(1) (2) (3) 1. Where taxable income

does not exceed Rs. 400,000

0%

S.

No. Taxable income Rate of Tax

(1) (2) (3) 1.

Same Same




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25

2. Where the taxable income exceeds Rs. 400,000 but does not exceed Rs. 750,000

5% of the amount exceeding Rs.

400,000

3. Where the taxable income exceeds Rs. 750,000 but does not exceed Rs. 1,500,000

Rs. 17,500 + 10% of the amount exceeding Rs.

750,000 4. Where the taxable

income exceeds Rs. 1,500,000 but does not exceed Rs. 2,000,000


1,500,000 5. Where the taxable

income exceeds Rs. 2,000,000 but does not exceed Rs. 2,500,000

Rs. 175,000 + 17.5% of the

amount exceeding Rs. 2,000,000



2,500,000

2.

Same Same

3. Where the taxable income exceeds Rs. 750,000 but does not exceed Rs. 1,400,000

Rs. 17,500 + 10% of the amount exceeding Rs. 750,000

4. Where the taxable income exceeds Rs. 1,400,000 but does not exceed Rs. 1,500,000

Rs. 82,500 + 12.5% of the amount exceeding Rs.1,400,000




Rs. 140,000 + 17.5% of the amount exceeding Rs. 1,800,000









11. Where the taxable income exceeds Rs.7,000,000

Rs. 1,425,000 + 30% of the amount exceeding Rs. 7,000,000

Technical comments: Income slabs and rate of tax to be changed from slab 3 to 6 and further five slabs from 7 to 11 added for higher tax on higher taxable income. Further the maximum rate is 30% on taxable income exceeding Rs. 7 million.

52. Amendments in Second Schedule




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26

PART CLAUSE STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

I 53A(i) Free or concessional passage provided by transporters including airlines to its employees (including the members of their household and dependants) was exempt.

Omitted

Due to omission of the said sub-clause this facility provided to employee by employer is now taxable.

I 58A

Not applicable

Following new clause inserted:

Income of a university or educational institution being run by a non-profit organization existing solely for educational purposes and not for purposes of profit.

The effect of insertion of clause 58A and omission of clause 92 is that the income of a university or educational institution shall be exempt if it is being run by a non-profit organization existing solely for educational purposes and not for purposes of profit.

I 92 Any income of any university or other educational institution established solely for educational purposes and not for purposes of profit.

Omitted

I 98A Any income derived by International Cricket Council Development (International) Limited (IDI), International Cricket Council (ICC), employees, officials, agents and representatives of IDI and ICC, officials from ICC members, players, coaches, medical doctors and officials of member countries, IDI partners and media representatives, other than persons who are resident of Pakistan, from ICC Champions Trophy, 2008 hosted in Pakistan.

Omitted

Clause omitted due to no further application of the said exemption.

I 103B Any dividend in specie derived in the form of shares in a company, as defined in the Companies Ordinance, 1984;

Provided that when such shares are disposed off by the recipient, the amount representing the dividend in specie shall be taxed in accordance with provisions of section

Omitted

Due to omission of the said clause now dividend in specie in the form of shares shall be chargeable to tax under section 5 of the Income Tax Ordinance, 2001.




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27

5 of this Ordinance and the amount, representing the difference between the consideration received and the amount hereinabove, shall be treated in accordance with provisions of section 37 or section 37A, as the case may be.

I 126E Corporate income tax holiday for a period of five years for projects from the date of start of commercial operations, and for developers of the Zone for a period of ten years from the date of start of developmental activity in the Special Economic Zones as announced by the Federal Government.

This clause has been substituted by following clause:

Income derived by a zone enterprise as defined in the Special Economic Zones Act, 2012 for a period of ten years starting from the date the developer certifies that the zone enterprise has commenced commercial operation and for a period of ten years to a developer of zone starting from the date of signing of the development agreement in the special economic zone as announced by the Federal Government.

More detailed & beneficial clause has been substituted.

II 28A

This clause was not available.

New clause inserted

The rate of tax under section 148 on import of hybrid cars (dual energy usage) shall be reduced as below:

Engine capacity Rate of reduction

Up to 1200 cc 100%

1201 to 1800 cc 50%

1801 to 2500 cc 25%

The added new clause is to reduce the tax rate on import of hybrid cars.

III 1

Not applicable

Previously, flying allowance by pilots, flight engineers, navigators of Pakistan Armed Forces, Pakistani Airlines or Civil Aviation Authority, Junior Commissioned Officers or other ranks of Pakistan Armed Forces and submarine allowance by the officers of the Pakistan Navy was taxable fully taxable @ 2.5% as a separate block of income;

Now, flying allowance or submarine allowance equal to Basic Salary is taxable as separate block of income @ 2.5% and excess amount shall be charged to tax under Normal Tax Regime.




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III 2 Tax payable by a full time teacher or researcher was reduced by an amount equal to 75% of tax payable on his salary income.

Tax payable by a full time teacher or researcher shall be reduced by an amount equal to 40% of tax payable on his salary income.

Benefit of reduction in tax liability has been reduced by 35%.

III 7 In tax year 2013, reduction of 80% in minimum tax under section 113 was available to a company engaged in the business of distribution of cigarettes manufactured in Pakistan.

Now the word “company” has been substituted by word “taxpayer”.

After amendment now all the taxpayers engaged in the said business are entitled to claim exemption under this clause.

IV 56A

Not applicable

New clause inserted

“The provisions of sub-section (7) of section 148 and clause (a) of sub-section 1 of section 169 shall not apply to a person who is liable to withholding tax under section 236E.”

Effect of the said clause is that the tax deducted on import of foreign produced TV plays and serials is adjustable.

IV 59(iv)(a) Tax under section 151 was not required to be deducted on Defence Savings Certificates, Special Savings Certificates, Saving Accounts or Post Office Savings Accounts, or Term Finance Certificates (TFCs), where such deposit does not exceed Rs. 150,000.

Omitted

Due to omission of the said clause now the National Saving Center shall also deduct tax on such specified profit on debt that was previously not so.

IV 72A

Not applicable

New clause inserted

The provisions of clause (1) of section 21, section 113 and 152 shall not apply in case of a Hajj Group Operator in respect of Hajj operations provided that the tax has been paid the rate of Rs. 3,500 per Hajji for the tax year 2013 and Rs. 5,000 per Hajji for the tax year 2014 in respect of income from Hajj operations.

Under new clause the provisions of sections 21(1), 113 and 152 shall not applicable in case of a Hajj Group Operator on fulfillment of certain conditions.

IV 72B

New clause inserted

The provisions of section 148 shall not apply to an industrial undertaking if the tax liability

Exemptions from provisions of section 148 to industrial undertaking on payment of advance tax liability as




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Not applicable

for the current tax year, on the basis of determined tax liability for any of the preceding two tax years, whichever is the higher, has been paid and a certificate to this effect is issued by the concerned Commissioner.

required under the said clause.

53. Amendments in Seventh Schedule RULE STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR


6 Previously dividend received from Money Market Funds and income funds was taxable at the rate of 25% for tax year 2013 and at the rate of 35% for tax year 2014 and onwards.

The words and figures “and at the rate of 35% for tax year 2014” have been omitted.

Now the dividend received from Money Market Funds and income funds is taxable at the rate of 25% instead of 35% for tax year 2013 and onwards.




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30

54. Income tax Statutory Regulatory Orders (SROs) issued from July 17, 2013 to February 11, 2014

SR. SRO STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

1. SRO 669(I)/2013

Dated:

17-07-2013

Not applicable

Following amendments made in clause 45A(a) in Part IV in the Second Schedule to the Income Tax Ordinance, 2001.

1. After the words, “the”, occurring for the second time, the words, “taxpayers falling in the” shall be inserted; and

2. The words “of sales tax zero-rated taxpayers” shall be omitted.

Previously, reduced rate of 1% u/s 153(1)(a) & 153(1)(b) was applicable on supplies and services provided to sales tax zero-rated taxpayers of following categories:

1. Textile and articles thereof; 2. Carpets; 3. Leather and artificial leather

items; 4. Surgical goods; and 5. Sports goods;

Now, reduced rate is applicable on supplies and services to above stated categories even where they are not in sales tax zero-rated regime due to amendments made in the Sales tax Law related to conditional taxation of above stated sectors.

2. SRO 739(I)/2013

Dated:

26-08-2013

Draft Form of “RETURN OF TOTAL INCOME / STATEMENT OF FINAL TAXATION (FOR INDIVIDUAL / AOP)” for tax year 2013.

Not applicable

This FBR has issued SRO BY exercising powers u/s 237 and specified the draft form of Income Tax Return / statement of Final Taxation for individuals / AOP for tax year 2013 for consideration of any objection or suggestion from any person within fifteen days from the date of its publication in the official Gazettee.

3. SRO 772(I)/2013

Dated:

06-09-2013

Draft Form of “RETURN OF TOTAL INCOME / STATEMENT OF FINAL TAXATION (FOR COMPANY)” for tax year 2013.

Not applicable

This FBR has issued SRO BY exercising powers u/s 237 and specified the draft form of Income Tax Return for companies for tax year 2013 for consideration of any objection or suggestion from any person within seven days from the date of its publication in the official Gazettee.

4. SRO 799(I)/2013

Dated:

17-09-2013

Form of “RETURN OF TOTAL INCOME / STATEMENT OF FINAL TAXATION (FOR INDIVIDUAL / AOP)” for tax year 2013 added after Part-I C in the Second Schedule to the Income Tax Rules 2002.

Not applicable

This SRO has finalized the draft return and specified the form of Income Tax Return for individuals / AOP for tax year 2013.




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31

5. SRO 828(I)/2013

Dated:

26-09-2013

Form of “RETURN OF TOTAL INCOME / STATEMENT OF FINAL TAXATION (FOR COMPANY)” for tax year 2013 added after Part-I C in the Second Schedule to the Income Tax Rules, 2002.

Not applicable

This FBR has issued SRO by exercising powers u/s 237 and issued amendment in relevant Rule by issuing the form of Income Tax Return / statement of Final Taxation for companies for tax year 2013.

6. SRO 900(I)/2013

Dated:

04-10-2013

(Read with serial No. 8 & 9 as under)

Not applicable

Clause 81 added after clause 80 of the Part IV of the 2nd Schedule to the Income Tax Ordinance, 2001.

(Read with SRO’s at serial no. 8 and 9 stated as under).

Manufacturer, distributor, dealer and wholesaler required to collect tax from retailers on sales u/s 236H are exempt from the requirement of furnishing the name, CNIC, NTN & address of such retailers.

7. SRO 904(I)2013

Dated:

08-10-2013

Through this SRO, Federal Government notified Income Support Levy Rules, 2013 for the purpose of collection and recovery of Income Support Levy effective from tax year 2013.

The Income Support Levy is also applicable.

The Income Support Levy Rules, 2013 are applicable on the net moveable assets of an individual effective from tax year 2013 and onwards.

8. SRO 900(I)/2013

Dated:

04-10-2013

(Read with serial No. 6 above)

Rate of collection of tax under section 234 (Tax on motor vehicles)

1. In case of goods transport vehicles other than oil tankers, tax of Rs. 5 per kilogram of laden weight was charged.

However [SRO 1064(I)/2013 dt 20-12-2013 has reduced this rate to Rs. 2 per kilogram of laden weight (Please see this SRO given below at serial no 14)].

2. In case oil tankers, tax of Rs. 2 per kilogram of laden weight was charged.

3. In case of Passenger transport vehicles with seating capacity of 20 persons or more, tax of Rs. 500 per seat per annum.

Through SRO 900(I)/2013 & 980(I)/2013 amendments have been made in clause 14 & 14A of Part II of the Second Schedule to the Income Tax Ordinance, 2001:

Rate of collection of tax under section 234 (Tax on motor vehicles)

1. In case of goods transport vehicles, tax of Rs. 2 per kilogram of laden weight was charged.

2. In case of Passenger transport vehicles with seating capacity of 20 persons or more, tax of Rs. 250 per seat per annum.

1. Rate for Oil tankers have been merged in Goods Transport Vehicles and rate has been reduced to Rs. 2 per kilogram of laden weight.

2. Rate for passenger transport vehicles with seating capacity of 20 or more persons, have been reduced from Rs. 500 to Rs. 250 per seat per annum.

9. SRO 980(I)/2013

Dated:

18-11-2013

(Read with serial No. 11 as under)

10. SRO New clause 16 added in In case of failure to file a




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32

978(I)/2013

Dated:

13-11-2013

Not applicable

Part III of 2nd Schedule to Income Tax Ordinance, 2001

statement u/s 115, 165 or 165 within due date, the minimum penalty was Rs. 50,000 that has been reduced to Rs.10,000.

New clauses 82 and 83 added in Part IV of the 2nd Schedule to the Income Tax Ordinance, 2001

(Applicable for tax year 2013 only).

Not applicable

Following persons are not required to file Wealth Statement in tax year 2013:

1. Individual whose income of tax year 2012 or 2013 is less than Rs.1,000,000.

2. Individual who is not a member of AOP and falling under FTR and has paid tax less than Rs. 35,000.

11. SRO 980(I)/2013

Dated:

18-11-2013

(Read with serial No. 9 above)

Not applicable

New clause 43E added in Part IV of the 2nd Schedule to the Income Tax Ordinance, 2001.

Read with material contained at serial no. 8 above.

The Federal Govt. by using powers u/s 53 has added a new clause:

Goods transport contractors on payment of tax @ 2.5% on payments for rendering or providing of carriage services shall be exempt from deduction of tax under section 153(1)(b).

12. SRO 1035(I)/2013

Dated:

05-12-2013

Non applicable

Chapter VIIIA (Banking Companies Reporting Requirements)

added after chapter VIII in Part III of Income Tax Rules, 2002.

This new chapter added contains the draft rules and forms for furnishing information by banks under section 165A of the Income Tax Ordinance, 2001.

13. SRO 1040(I)/2013

Dated:

05-12-2013

Clause 84 added in Part IV of the 2nd Schedule to the Income Tax Ordinance, 2001.

Not applicable

For tax year 2013, the provisions of section 177 and 214C shall not apply to a taxpayer if tax paid in tax year 2013 is at least 25% more than the higher of tax assessed or paid, for the tax year 2012 and has also filed a the Performa in the prescribed manner.

14. SRO 1064(I)/2013

Dated:

20-12-2013

Clause 14B added in Part II of the 2nd Schedule to the Income Tax Ordinance, 2001

Applicable up to 17th November, 2013.

Rate of collection of tax under section 234 (Tax on motor vehicles) in case of goods transport vehicle shall be reduced to Rs. 2 per kilogram for the period commencing on the 1st July, 2012 to 17th November, 2013 (both days inclusive).

After the aforesaid date (from 18 November to onwards) the exemption has been covered through SRO’s stated at serial




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33

no 8 and 9 above.

15. SRO 1065(I)/2013

Dated: 20-12-2013

This SRO made amendments in Second Schedule to Income Tax Ordinance, 2001

Amendments are applicable for tax year 2008 to 2013

Summary of amendments is given below:

1. For a person filing return under clause (87) or (88) of Part IV of 2nd Schedule [for seeking exemption from provisions of section 182, 205, 177 & 214] & taxable income is between Rs. 400,000 and 750,000 for tax year 2012 then tax shall be calculated at rate given below: 5% of amount exceeding Rs. 400,000

2. A person who revises his returns for tax year 2008 to 2012 before the due date of filing of return for tax year 2013 for availing benefit provided in clause (84) of Part IV of 2nd Schedule, is not required to obtain approval of such revision from Commissioner.

3. Clause (86) has been added which specifies investment on which provisions of section 111 shall not be applicable. It also specifies investments or proceeds on which immunity under this clause is not available.

4. For NTN holder persons, provisions of section 182, 205, 177, and 214 shall not apply for tax year 2008 to 2012 for which returns

Not applicable

This SRO provides the following facilities through clauses mentioned therein:

A. Facility to file the income tax return / returns up till specified date on fulfillment of certain conditions to the following persons:

1. NTN holders who have not filed income tax returns for the tax years from 2008 to 2013.

2. Persons who are not NTN holders and have not filed income tax returns for the tax years from 2008 to 2013.

B. Immunity from sources of investment under section 111

Persons who have made investments in specified industrial undertakings in specified sectors on fulfillment of certain conditions.




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34

have not been filed subject to fulfillment of conditions specified in clause (87) of Part IV of 2nd Schedule.

5. For persons who are not NTN holders on 28-11-2013, provisions of section 182, 205, 177, and 214 shall not apply for tax year 2008 to 2012 subject to conditions specified in clause 88 of Part IV of 2nd Schedule.

16. SRO 17(I)/2014

Dated: 07-01-2014

Not applicable

Following two clauses added in Part IV of the Second Schedule to the Income Tax Ordinance, 2001:

(89) The provisions of section 236I shall not apply to-

(a) the Federal Government or Provincial Government;

(b) an individual entitled to privileges under the United Nations (Privileges and Immunities) Act, 1948.

(c) A foreign diplomat mission in Pakistan; or

(d) A person who is a non-resident and-

(i) Furnishes copy of passport as an evidence to the educational institution that during previous tax year, his stay in Pakistan was less than 183 days;

(ii) Furnishes a certificate that he has no Pakistan-source income; and

The said two new clauses added has specified the persons on which the provisions of section 236I (5% tax on fee paid to educational institutions in Pakistan) and 236D (10% Advance tax on functions in hotels / gatherings) shall not be applicable.




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35

(iii) Fee is remitted directly from abroad through normal banking channel to the bank account of education institution.

(90) The provisions of section 236D shall not apply to –

(a) the Federal Government or Provincial Government;

(b) an individual entitled to privileges under the United Nations (Privileges and Immunities) Act, 1948.

(c) A foreign diplomat mission in Pakistan; or




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36

55. Status of Income Tax Circulars issued by Federal Board of Revenue (FBR) from July 01, 2013 to February 11, 2014

SR. CIRCULAR

NO. / DATED STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR


1. 6 of 2013

Dated:

19-07-2013

Not applicable

This circular provides explanation regarding important amendments made in the Income Tax Ordinance, 2001 through Finance Act, 2013.

Status of Circulars under section 206

It is the practice of Federal Board of Revenue that such explanatory circulars are being issued from time to time to achieve consistency and for the guidance to taxpayers and Officers of the Board.

It is worthwhile to mention here that although such circulars are binding on all the Income Tax Authorities other than Commissioner Income Tax (Appeals) however at the same time the circular is not binding on a taxpayer.

2. C.No.4 (234) ITP/2013

Dated:

23-07-2013

Not applicable

This circular contains clarification regarding lumpsum collection of tax on motor vehicles under section 234.

A few of the clarifications are given below:

Where motor vehicle tax is collected in lumpsum, advance tax shall also be collected in lumpsum in like manner.

Where some installments have been paid and remaining amount is to be paid at one time then advance tax shall be deducted in equal proportion to the remaining amount paid.

3. 7 of 2013

Dated:

13-08-2013

Through this circular, FBR extended the date of filing of Income Tax Returns/Statements for tax year 2013 upto 30-09-2013.

Not applicable

The Federal Board of Revenue u/s 214A has extended the date of filing of income tax returns due on 31-08-2013 uptill 30-09-2013.

4. 08 of 2013

Dated:

03-09-2013

Not applicable

This circular contains rules, procedure and application form for obtaining certificate of exemption from collection of tax u/s 148.

Quarterly exemption certificates shall be issued by the Commissioner Inland Revenue on fulfillment of following conditions namely:-

1. The raw material is being imported for own use.

2. The tax liability for the current year, on the basis of determined tax liability for any of the preceding two




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37

years, whichever is higher, has been paid.

3. Other procedural and specified conditions.

5. 09 of 2013

Dated:

17-09-2013

Through this circular, FBR extended the date of filing of Income Tax Returns / Statements for tax year 2013 upto 31-10-2013.

Not applicable

The Federal Board of Revenue u/s 214A is empowered to condone the time limit for any act or thing to be done by the taxpayer or by the income tax authorities specified u/s 207 of the Ordinance.

6. 10 of 2013

Dated:

17-09-2013

Not applicable

This circular contains clarifications in respect of section 236D of the Income Tax Ordinance, 2001 – Advance Tax on Functions and Gathering.

For this newly been added section and in response to various queries FBR has clarified 10 different queries related in this respect, a few of out of said clarifications are given below:

1. Tax is to be collected on every bill irrespective of its amount i.e. there is not minimum threshold.

2. Tax is to be withheld at the time of issuance of bill on the day function is held.

3. Tax withheld needs to be reported in monthly statement under section 165.

4. Advance tax u/s 236D is on total amount of bill including Sales Tax and required to be shown separately.

7. 11 of 2013

Dated:

22-10-2013

Through this circular, FBR has further extended the date of filing of Income Tax Returns/Statements for tax year 2013 upto 30-11-2013.

Not applicable

Due to practical difficulties faced by the taxpayers the Federal Board of Revenue u/s 214A has further extended the date of filing of income tax returns / statements for the tax year 2013.

8. 12 of 2013

Dated:

11-11-2013

Not applicable

Circular 8 of 2013 was issued on 03-09-2013 whereby directions were issued that exemption certificate u/s 148 of the Income Tax Ordinance, 2001 may be issued for a period of 3 months on fulfillment of specified conditions therein.

Through this circular, it has been decided that henceforth Exemption

Due to practical difficulties faced by various taxpayers and various representations in this connection received by the Board the FBR has increased the period of exemption certificate u/s 148 from 3 months to 6 months.




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38

Certificate shall be issued for a period of 6 months on fulfillment of said conditions.

9. 13 of 2013

Dated:

27-11-2013

This circular provides clarification regarding business capital for payment Income Support Levy from the Tax year 2013.

Clarification is also applicable.

Through this clarification, the amount of business capital is equal to by deducting business liabilities from business assets for the purposes of Income Support Levy.

10. 14 of 2013

Dated:

29-11-2013

Through this circular, FBR has further extended the date of filing of Income Tax Returns / Statements for tax year 2013 upto 15-12-2013.

Not applicable

Due to practical difficulties faced by the taxpayers the Federal Board of Revenue u/s 214A has further extended the date of filing of income tax returns / statements for the tax year 2013.

11. 15 of 2013

Dated:

12-12-2013

This circular contains rules and Proforma for Immunity from Audit for Tax year 2013.

Not applicable

A person after fulfilling specified conditions and to pay tax in tax year 2013 more than 25% of the tax paid / assessed in tax year 2012 has to file Performa specified in this circular to seek immunity from total audit under section 177 & 214C for tax year 2013.

12. 16 of 2013

Dated:

12-12-2013

This circular specifies the corrigendum and revised proforma of “REQUEST FOR SEEKING IMMUNITY FROM AUDIT FOR Tax year 2013”.

Not applicable

13. 17 of 2013

Dated:

17-12-2013

Through this circular, FBR has further extended the date of filing of Income Tax Returns / Statements for tax year 2013 upto 18-12-2013.

Not applicable

Due to practical difficulties faced by the taxpayers the Federal Board of Revenue u/s 214A has further extended the date of filing of income tax returns / statements for the tax year 2013 only for two days for those taxpayers who have paid their taxes by 16-12-2013 but could not file their income tax returns.




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INCOME SUPPORT LEVY ACT 2013

There is hereby imposed an Income Support Levy for the purposes herein after appearing;

AN ACT

to provide for charge and collection of Income Support Levy WHEREAS it is desirable to provide financial assistance and other social protection and safety net measures to economically distressed persons and families; AND WHEREAS under the principles of policy as given in the Constitution of the Islamic Republic of Pakistan, the State is obliged to promote social and economic well being of the people and to provide basic necessities of life; AND WHEREAS it is expedient to provide for financial resources for running an income support fund for the economically distressed persons and their families through a Levy to be called Income Support Levy; It is hereby enacted as follows:- 1. Short title, extent and commencement.- (1) This Act may be called the Income Support Levy Act, 2013.

(2) It extends to the whole of Pakistan.

(3) It shall come into force at once.

2. Definitions.- (1) In this Act, unless the context otherwise requires –

(a) “Levy” means the Income Support Levy leviable or payable under this Act;

(b) “net moveable wealth” means the amount by which the aggregate value of the moveable assets belonging to a person as declared in the wealth statement for the relevant tax year, is in excess of the aggregate value of all the liabilities owed by that person on the closing date of the tax year.

Explanation. - For the purpose of this clause,- (i) Where liability claimed relates wholly and exclusively to an immovable asset, it shall not be

claimed and allowed while computing the net moveable wealth. However, where the liability claimed relates wholly and exclusively to a moveable asset, it shall be claimed and allowed as a straight deduction while computing net moveable wealth; and

(ii) where the gross wealth of a person, declared in the wealth statement includes both moveable and

immoveable assets and the nature of assets to which the liability relates is not determinable, the liability to be allowed while determining the net moveable wealth shall be calculated by the following formula:- (A / B) x C

Where –




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A is the gross value of moveable assets; B is the gross value of both moveable and immoveable assts; and C is the gross value of debts owed;

(c) “Officer of Inland Revenue” means the Officer of Inland Revenue as defined under clause

(38A) of section 2 of the Ordinance; (d) “Ordinance” means the Income Tax Ordinance, 2001 (XLIX of 2001);

(e) “person” means an individual;

(f) “prescribed” means prescribed by the rules made under this Act;

(g) “tax year” means the tax year as defined in clause (68) of section 2 of the Ordinance; and

(h) “wealth statement” means a wealth statement required to be filed under section 116 of the income Tax Ordinance, 2001.

(2) All other words and impressions used, but not defined herein, shall have the same meaning as is assigned to them under the Ordinance.

3. Charge of Levy.- Subject to the provisions contained in this Act, there shall be charged for every tax year commencing on and from tax year 2013 a Levy, in respect of value of net moveable assets held by a person on the last date of the tax year at the rate specified in section 9 and in the manner specified hereunder. 4. Time and manner of payment of Levy. - A person who is liable to pay the Levy under this Act shall pay the Levy along with wealth statement. 5. Assessment of Levy. - The Officer of Inland Revenue shall, by an order in writing, determine the Levy payable, and shall serve upon the person a notice of demand specifying the sum payable and the time within which it shall be paid and thereupon such sum shall be paid to such account and in such manner as may be prescribed, within the time specified in the notice. 6. Default surcharge.- Without prejudice to any liability under any other law for the time being in force, where a person fails to pay Levy as provided under section 4 or the levy so paid is less than the amount payable, he shall be liable to pay default surcharge at the rate of 16% per annum on the amount not paid or the amount by which the Levy paid falls short of the amount payable, calculated from the date it was payable to the date it is paid or the date of an order under section 5, whichever is earlier. 7. Recovery of Levy. - The provisions of the Ordinance shall, so far as may be practicable, apply to the collection of Levy under this Act as they apply to the collection of tax under the Ordinance. 8. Appeals, revisions and rectifications.- The provisions of the Ordinance shall, so far as may be practicable, apply to an appeal against, or revision or rectification of, an order under this Act as they apply to an appeal, revision or rectification under the Ordinance. 9. Rate of Levy. - The rate of levy payable under this Act shall be 0.5% of the net moveable wealth exceeding one million rupees. 10. Power to make rules. - The Federal Board of Revenue may, by notification in the official Gazette, make rules for carrying out the purposes of this Act.




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AMENDMENTS RELATED TO SALES TAX ACT, 1990 FOR THE TAX YEAR 2014 IN

COMPARISON WITH TAX YEAR 2013

SR. PARTICULARS PAGE

1. Amendments in definitions [Section 2] 41 2. Rate of sales tax [Section 3] 42 3. 5% rate for standalone caterers [PRA Notification dated 25-11-2013] 42 4. Time of supply [Section 2(44)] 42 5. Rate of sales tax and extra sales tax [Section 3(1A)] 43 6. Sales tax on production capacity basis or fixed basis [Section 3(1B)] 43 7. Power of Federal Government to collect extra sales tax [Section 3(5)] 44 8. CNG [Section 3(8)] 44 9. Non-admissibility of input tax [Section 8(1)(caa)] 45 10. Rejection of input tax credit claimed against flying invoices or fraud etc [Section 21(3)

& 21(4)] 45

11. Further Accounting Record to be maintained for Tax Purposes [Section 22(1)(ea)] 45 12. Explanation regarding powers of Board, Commissioner or Officer of Inland Revenue

[Section 25] 46

13. Posting of Inland Revenue Officer [Section 40B] 46 14. Monitoring or tracking by electronic or other means [Section 40C] 47 15. Power of Commissioner (Appeals) to stay the recovery [Section 45B(1A)] 47 16. Rectification of mistake [Section 57] 47 17. Reward to Inland Revenue officers and officials [Section 72C] 48 18. Declaration of bank account [Section 73] 48 19. New items in 3rd Schedule 49 20. Amendments in 6th Schedule 49 21. Sales tax Statutory Regulatory Orders (SROs) issued from June 12, 2013 to February

06, 2014 50

22. Status of Sales tax Circulars issued by Federal Board of Revenue (FBR) from June 16, 2013 to February 11, 2014

56

23. Status of Sales Tax General Orders (STGO) issued by Federal Board of Revenue (FBR) from June 16, 2013 to February 11, 2014

56

1. Amendments in definitions [Section 2]

CLAUSE STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENT

5AC Not applicable New clause (5AC) added in section 2

“CREST” means the computerized program for analyzing and cross matching of sales tax returns, also referred to as Computerized Risk-Based Evaluation of Sales Tax;”

A new computerized system has been implemented which shall cross-match the input claimed by one person with output tax paid by the other person and ensure that a person cannot claim input if he has not paid sales tax on purchases.




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22A (22A) Provincial sales tax means tax levied under

(a) The Baluchistan Sales Tax Ordinance, 2000

(b) Islamabad Capital Territory (Tax on Services) Ordinance, 2001

(c) The Punjab Sales Tax Ordinance, 2000

(d) The North West Frontier Province Sales Tax Ordinance, 2000

(e) The Sindh Sales Tax Ordinance, 2000

Clause (22A) has been substituted by:

(22A) “Provincial Sales Tax” means tax levied under provincial laws or laws relating to Islamabad Capital Territory, which are declared by the Federal Government, through notification in the official Gazette, to be provincial sales tax for the purpose of input tax.

Definition of provincial sales tax has been simplified on separation of levy of sales tax on services to respective provinces.

33A Not applicable New clause (33A) has been inserted

“supply chain” means the series of transactions between buyers and sellers from the stage of first purchase or import to the stage of final supply;

Definition of supply chain has been inserted.

2. Rate of sales tax [Section 3]


3 16% on the supplies listed in Third Schedule

17% on supplies listed in Third Schedule

Another revenue measure by the Federal Government.

3. 5% rate for standalone caterers [PRA Notification dated 25-11-2013]


TECHNICAL COMMENTS

16% rate is applicable for caterers. 5% flat rate Benefit of 5% flat rate given to caterers instead of 16% on fulfillment of certain pre-conditions specified in the aforesaid notification by Punjab Revenue Authority.

4. Time of supply [Section 2(44)] STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014

"Time of supply," in relation to: (a) a supply of goods, means time at which goods are

delivered or made available to the recipient of the supply

(b) a supply of goods under hire purchase agreement, means the time at which the agreement is entered into; and

(c) Services, means the time at which the services are rendered or provided:

"Time of supply," in relation to: (a) a supply of goods, means time at which goods

are delivered or made available to the recipient of the supply or the time when any payment is received by the supplier in respect of that supply, whichever is earlier;

(b) Same (c) Same




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Not Applicable

The following proviso added after clause (c) above:

Provided that in respect of sub-clause (a), (b) or (c), where any part payment is received,–

(i) for the supply in a tax period, it shall be accounted for in the return for that tax period; and

(ii) in respect of exempt supply, it shall be accounted for in the return for the tax period during which the exemption is withdrawn from such supply;

Technical comments: 1. Now sales tax is chargeable if the amount is received in advance. Furthermore, to cater the part payment

made on account of such supply (including services or supply under the hire purchase agreement), it is clarified that the partial input shall be claimed in the same tax period and not the entire amount.

2. Further in case of exempt supply, part payment shall be accounted for in the return for the tax period during which exemption is withdrawn from such supply.

5. Rate of sales tax and extra sales tax [Section 3(1A)]


Not applicable

General rate of sales tax is 17%. Where taxable supplies are made to a person who has not obtained registration number, there shall be charged, levied and paid a further tax at the rate of 1% of the value in addition to the rate specified in this section:

Provided that the Federal Government specified vide SRO 648(I)/2013 dated July 09, 2013 and SRO 788(I)/2013 dated September 11, 2013 the following taxable supplies on which the further tax at the rate of 1% shall not be charged:

Sr. No.

Description of goods

1. Electrical energy supplied to domestic and agricultural consumers

2. Natural gas supplied to domestic consumers and CNG stations

3. Motor spirit, diesel oil, jet fuel, kerosene oil and fuel oil

4. Goods sold by retailers to the end consumers

5. Supply of goods directly to the end consumers including food and beverages, fertilizers and vehicles

6. Items falling in the 3rd schedule to the Sales Tax Act, 1990.

Technical comments: 1% extra tax has been charged to discourage the non registered persons. Federal Government has specified vide SRO 648(I)/2013 dated July 09, 2013 and SRO 788(I)/2013 dated September 11, 2013 the taxable supplies on which the further tax at the rate of 1% shall not be charged. 6. Sales tax on production capacity basis or fixed basis [Section 3(1B)]

SECTION STATUS IN TAX YEAR 2013

STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS




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3(1B)

Not applicable

The Board may, by notification in the official Gazette, in lieu of levying and collecting tax on taxable supplies, levy and collect tax–

(a) on the production capacity of plants, machinery, undertaking, establishments or installations producing or manufacturing such goods; or

(b) on fixed basis, as it may deem fit, from any person who is in a position to collect such tax due to the nature of the business.

Through this amendment, Board is empowered to levy and collect sales tax on production capacity basis or on fixed basis, as it may deem fit. Although negotiations of various representatives are under process to revive the old provisions of law in place of levy of tax on production capacity or fixed basis.

7. Power of Federal Government to collect extra sales tax [Section 3(5)]

SECTION

STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

3(5)

Federal Government was empowered to collect such extra amount of tax not exceeding 16% of the value of goods as it may by rules, prescribed.

Amendment has been made in section 3(5)

For the words “such extra amount of tax” the words “tax at such extra rate or amount” shall be substituted.

Now Federal Government may collect extra tax at prescribed rate or prescribed amount.

8. CNG [Section 3(8)]

SECTION STATUS IN TAX YEAR

2013


3(8)

Not applicable

The Federal and Provincial Government departments, autonomous bodies, public sector organizations, companies as defined in the Income tax Ordinance, 2001 which is registered for sales tax, Federal Excise Duty or income tax and recipients of services of advertisement, registered in sales tax and persons registered as exporters.

Notwithstanding the rate of sales as contained in sub-section (1) and notwithstanding anything contained in any law or notification made there under, in case of supply of natural gas to CNG stations, the Gas Transmission and Distribution Company shall charge sales tax from the CNG stations at the rate of 9% in addition to the sales tax chargeable under sub-section (1) on the value of supply, where the value for the purpose of levy of sales tax shall include price of natural gas, charges, rents, commissions and all local provincial and Federal duties and taxes, but excluding the amount of sales tax, as provided in clause (46) of section 2. This rate shall include the rate of tax chargeable under sub-section (1) and 9% in lieu of value addition made by the CNG stations. The rate of sales tax under this sub-section shall have effect and shall be deemed to have taken effect on and from the 1st day of July, 2007.

The said amendment has copied material from Sales Tax Special Procedure Rules, 2007 that are already available under the said rules.




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Explanation.- The rate of 9% in lieu of value addition is less than the standard rate of tax chargeable under sub-section (1), as all input tax adjustments have been catered for while determining the figure of 9%.

9. Non-admissibility of input tax [Section 8(1)(caa)]

SECTION STATUS IN

TAX YEAR 2013


8(1)(caa) Not

applicable

Tax credit shall not be allowed on purchases in respect of which a discrepancy is indicated by CREST or input tax of which is not verifiable in the supply chain.

Input tax credit shall not be allowed if discrepancy is indicated by CREST or input is not verifiable in supply chain.

10. Rejection of input tax credit claimed against flying invoices or fraud etc [Section 21(3) & 21(4)]


21(3) Previously input tax credit was allowed to buyer against invoices issued by a blacklisted person on fulfillment of responsibilities under section 73.

Now tax credit shall not be allowed against such invoices issued by a black listed person.

Through the said amendment no input tax credit shall be allowed to a person against invoices issued by a black listed person.

21(4)

Not applicable

Following new sub-section inserted

Notwithstanding anything contained in this Act, where the Board, the concerned Commissioner or any officer authorized by the Board in this behalf has reasons to believe that a registered person is engaged in issuing fake or flying invoices, claiming fraudulent input tax or refund, does not physically exist or conduct actual business, or is committing any other fraudulent activity, the Board, concerned Commissioner or such officer may after recording reasons in writing, block the refund or input tax adjustments of such person and direct the concerned Commissioner having jurisdiction for further investigation and appropriate legal actions.

Through the said amendment no input tax credit shall be allowed to a person engaged in issuing fake or flying invoices, claiming fraudulent input tax or refund, does not physically exist or conduct actual business, or is committing any other fraudulent activity

11. Further Accounting Record to be maintained for Tax Purposes [Section 22(1)(ea)]

STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS (a) records of supplies made shall indicate the

description, quantity & value of goods, name & address of the person to whom supplies were made & the amount of the tax charged;

Same




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(b) records of goods purchased shall show the description, quantity & value of goods, name, address & registration number of the supplier & the amount of the tax on purchases;

Same Further requirement imposed on registered persons to maintain record relating to gate passes, inward or outward and transport receipts.

(c) records of goods imported shall show the description, quantity & value of goods & the amount of tax paid on imports;

Same

(d) records of zero-rated & exempt supplies. Same (e) double entry sales tax accounts; Same (f) invoices, credit notes, debit notes, bank

statements, banking instruments inventory records, utility bills, salary & labour bills, rental agreements, sale purchase agreements & lease agreements;

Same

(g) such other records as may be specified by the Board

Same

(h) Not applicable A registered person is further required to maintain record relating to gate passes, inward or outward, and transport receipts;

12. Explanation regarding powers of Board, Commissioner or Officer of Inland

Revenue [Section 25]


2013


25 Not applicable

Following explanation added after section 25(5)

“Explanation.- For the purpose of section 25, 38, 38A, 38B and 45A and for removal of doubt, it is declared that the powers of Board, Commissioner or officer of Inland Revenue under these sections are independent of the powers of the Board under section 72B and nothing contained in section 72B restricts the powers of the Board, Commissioner or officer of Inland Revenue to have access to premises, stocks, accounts, records, etc. Under these sections or to conduct audit under these sections.”

This explanation clarified that powers of Board, Commissioner or Officer of Inland Revenue are independent of the powers of the Board under section 72B (Selection for audit by the Board) and section 72B does not restrict the powers of Board, Commissioner or officer of Inland Revenue to have access to premises, stocks, accounts, records, etc.

13. Posting of Inland Revenue Officer [Section 40B]


2013


40B Not

applicable

Following amendment has been made in section 40B

After the word “Board” the words “or Chief Commissioner” shall be

Previously only Board was empowered to post Officer of Inland Revenue to the premises of registered person or class of such persons to monitor production, sale of taxable goods and the stock position. Now Chief Commissioner is




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inserted. also empowered to post such officer under this section.

14. Monitoring or tracking by electronic or other means [Section 40C]


2013


40C

Not applicable

After section 40B the new section inserted in order to control / monitor the production, sales, clearance, stocks or any other related activity of the registered person at factory / mill premises.

Board may also specify a date from which no taxable goods shall be removed or sold without affixing tax stamp, banderole, stickers, labels etc.

To have check and balance on registered persons, this new section has been inserted which empowers Board that no goods shall be removed or sold from such date without fulfilling certain conditions.

15. Power of Commissioner (Appeals) to stay the recovery [Section 45B(1A)]


2013


45B(1A)

Not applicable

New clause 1A inserted after clause 1

This new clause empowers the Commissioner (Appeals) to stay the recovery of tax for period not exceeding 30 days in aggregate where in a particular case Commissioner (Appeals) is of the opinion that the recovery of tax shall cause undue hardship to the taxpayer.

Commissioner (Appeals) now has the power to stay the recovery of tax up to 30 days in aggregate like similar provisions given in Income Tax Ordinance, 2001.

16. Rectification of mistake [Section 57]



57 Correction of clerical errors, etc

Clerical or arithmetical errors in any assessment, adjudication, order or decision may, at any time, be corrected by the officer of Inland Revenue who made the assessment or adjudication or passed such order or decision or by his successor in office.

Section has been substituted by following: Rectification of mistakes

(1) The officer of Inland Revenue, Commissioner, the Commissioner (Appeals) or the Appellate Tribunal may, by an order in writing, amend any order passed by him to rectify any mistake apparent from the record on his or its own motion or any mistake brought to his or its notice by a taxpayer or, in the case of the Commissioner (Appeals) or the Appellate Tribunal, the Commissioner.

(2) No order under sub-section (1) which has the effect of increasing an assessment, reducing a refund or otherwise applying adversely to the taxpayer shall be made unless the taxpayer has been given a reasonable opportunity of

Provisions of substituted section 57 are same as the provisions of section 221 of the Income Tax Ordinance, 2001.




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being heard.

(3) Where a mistake apparent on the record is brought to the notice of the officer of Inland Revenue, Commissioner or Commissioner (Appeals), as the case may be, and no order has been made under sub-section (1), before the expiration of the financial year next following the date on which the mistake was brought to their notice, the mistake shall be treated as rectified and all the provisions of this Act shall have effect accordingly.

(4) No order under sub-section (1) shall be made after five years from the date of the order sought to be rectified.

17. Reward to Inland Revenue officers and officials [Section 72C]



72C Not applicable.

New section inserted

(1) In cases involving concealment or evasion of sales tax and other taxes, cash reward shall be sanctioned to the officers and officials of Inland Revenue for their meritorious conduct in such cases and to the informer providing credible information leading to such detection, as may be prescribed by the Board, only after realization of part or whole of the taxes involved in such cases.

(2) The Board may, by notification in the official Gazette, prescribe the procedure in this behalf and specify the apportionment of reward sanctioned under this section for individual performance or to collective welfare of the officers and officials of Inland Revenue.

This section has been inserted to encourage the officers of Inland revenue for detection of concealment or evasion of income tax after recovery of such tax. Reward shall also be allowed to informer for providing credible information leading to such detection.

18. Declaration of bank account [Section 73]


2013


73 Not applicable.

Following amendment has been made in explanation

After the word “is registered” the words, letters and figure “through Form STR 1 or change of particulars in registration database” shall be

Now a registered person is required to declare the bank account utilized for business transaction through Form STR 1 or change of particulars otherwise the input tax on payments against




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inserted; such bank account shall not be allowed.

19. New items in 3rd Schedule

STATUS IN TAX YEAR

2013

STATUS IN TAX YEAR 2014 STATUS IN COMMENTS

Not applicable.

Following new 15 items have been added in the 3rd Schedule:

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

23. Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electronic bulbs, tube-lights, fans, electric irons, washing machines and telephone sets.

24. Household gas appliances, including cooking range, ovens, geysers and gas heaters.

25. Foam or spring mattresses and other foam products for household use.

26. Auto parts and accessories sold in retail packing.

27. Lubricating oils, brake fluid, transmission fluid, and other vehicular fluids and maintenance products in retail packing.

28. Tyres and tubes

29. Storage batteries

30. Arms and ammunition

31. Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing

32. Fertilizers

33. Cement sold in retail packing

34. Tiles sold in retail packing

35. Biscuits, confectionary, chocolates, toffees and candies

36. Other goods and products sold in retail packing

New items added in 3rd Schedule although the same were taxed at the rate of 2%.

20. Amendments in 6th Schedule

STATUS IN TAX YEAR

2013


Not applicable.

In Table-1, serial number 25 in column (1) and the entries relating thereto in columns (2) and (3) shall be omitted

In Table-2, serial number 12 in column (1) and the

Sales tax exemptions on following items have been withdrawn:

1. Milk preparations obtained by replacing one or more of the




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50

entries relating thereto in columns (2) and (3) shall be omitted

constituents of milk by another substance, whether or not packed for retail sale

2. Supplies against International Trade. 21. Sales tax Statutory Regulatory Orders (SROs) issued from June 12, 2013 to February

11, 2014 SR. SRO STATUS IN TAX


1. 500(I)/2013

Dated:

12-06-2013

Applicable from 12-06-

2013

SRO 646(I)/2005 rescinded Zero-rating facility allowed to specified registered persons.

SRO 172(I)/2006 rescinded Exempted goods on fulfillment of certain conditions

SRO 863(I)/2007 rescinded Zero-rating facility allowed on specified goods subject to fulfillment of specified conditions.

SRO 160(I)/2010 rescinded Exemption from surcharge, penalties and outstanding sales tax to certain registered persons

SRO 117(I)/2011 rescinded Exemptions and other reliefs for registered persons at specified places.

SRO 180(I)/2011 rescinded 50% exemption of sales tax to certain sectors.

SRO 164(I)/2010 rescinded Exemption from sales tax on supply of electricity to certain persons at specified places.

2. 649(I)/2013

Dated:

09-07-2013 Not applicable

Through this SRO, FBR made “The Federal Excise Duty and Sales Tax on Production Capacity (Aerated Waters) Rules, 2013

Although Rules finalized for collection of sales tax and FED on production capacity basis however still efforts are being made for the revival of old method of taxation.

3. 648(I)/2013

Dated:

09-07-2013

Effective from 13-06-2013

This SRO specifies the goods on which further tax @ 1% shall not be charged under section 3(1A).

Under section 3(1A) extra sales tax @ 1% is required to be charged on sales to non-registered persons except the goods specified in SRO 648(I)/2013 and 788(I)/2013.

4. 657(I)/2013

Dated:

11-07-2013

Not applicable

Through this SRO Federal Government direct that sales tax at the rate of 5% shall be charged on import & local supply of second-hand and

Through the said SRO relief of reduced tax rate has been given to a specific sector.




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worn clothing falling under PCT heading No. 6309.0000.

5. 670(I)/2013

Dated:

18-07-2013

Not applicable

Federal Government specifies through this SRO 19 more goods, on import or supply of which sales tax at the rate of 0% shall be charged.

Further, raw material, packing material, sub-components, components, sub-assemblies and assemblies imported or purchased locally for the manufacture of the said goods shall be charged to sales tax @ 0%.

Further items specified through this SRO for zero rating subject to fulfillment of specified conditions.

6. 681(I)/2013

Dated:

26-07-2013

Not applicable

In the third schedule, serial No. 22 and 36 in column 1 and the entries relating thereto in column 2 and 3 has been omitted.

Following items have been omitted from 3rd Schedule:

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

2. Other goods and products sold in retail packing

These items were inserted in 3rd Schedule by Finance Act, 2013 effective from June 13, 2013.

7. 682(I)/2013

Dated:

26-07-2013

Not applicable

This SRO made amendments in SRO 1125(I)/2011 dated 31-12-2011

Previously SRO 1125(I)/2011 dated 31-12-2011 specified the goods in Table on which sales tax was charged at the rate of 0%, 2% or 5% subject to the conditions specified in SRO.

SRO 682 made following amendments in SRO 1125.

1. Name of the “Table” has been changed to “Table-I” and after Table-I, Table-II has been inserted.

2. Sales tax @ 2% shall be charged on goods specified in Table-I.

3. Sales tax @ 5% shall be charged on goods specified in Table-II.

4. Further amendments have been made in conditions, increasing




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the rate of tax on certain goods.

8. 740(I)/2013

Dated:

26-08-2013

Not applicable

This SRO made amendments in Notification No. SRO 460(I)/2013 dated 30-05-2013

Previously in SRO 460(I)/2013, rate of sales tax to be charged on import or supply of mobile / satellite phones was specified. The screen size of mobile / satellite phone specified in this SRO was between 2.6 inches to 4.2 inches.

Now SRO 740(I)/2013 has made amendment that sales tax shall be charged on mobile / satellite phones with screen size between 2.6 inches to 5 inches.

9. 788(I)/2013

Dated:

11-09-2013

Not applicable

This SRO made amendment in SRO 648(I)/2013 dated 09-07-2013 (given below).

SRO 648(I)/2013 specified the list of goods on which further tax @ 1% shall not be charged under section 3(1A).

SRO 788(I)/2013 added “Natural Gas supplied to CNG stations” in this list. Hence extra sales tax @ 1% shall not be charged on Natural Gas supplies to CNG stations.”

10. 787(I)/2013

Dated:

11-09-2013

Not applicable

This SRO made amendment in SRO 509(I)/2013 dated 12-06-2013.

SRO 509(I)/2013 specified that the sales tax @ 5% shall be charged on electric bills and gas bills exceeding Rs.15,000 per month on industrial or commercial connections if person is non-registered person or not in Active Tax Payer List maintained by FBR.

SRO 787(I)/2013 added that “Provided that the levy of extra tax at the rate of 5% shall not be applicable in case of supply of natural gas to CNG stations”.

11. 898(I)/2013

Dated: Not applicable

This SRO made following amendments in SRO 1125(I)/2011 dated 31-12-




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04-10-2013 2011:

1. New condition (viia) added after condition (vii).

(viia) Notwithstanding anything contained in any condition of SRO 1125(I)/2011, import and supplies of fabric shall be charged to sales tax at the rate of 3% and value addition tax @ 2% shall be chargeable on commercial imports of fabrics.

2. Following two provisos added after condition (x)

Refund against local supplies shall be admissible only subject to pre refund audit and in case of value addition of less than 10% subject to condition that the registered persons furnishes a revolving bank guarantee valid for at least 90 days issued by bank to the satisfaction of CIR of an amount not less than average monthly refund claim during last 12 months.

Further that the post refund audit shall be conducted and finalized within 90 days and certificate to genuineness of the refund claim shall be issued for each & every claim by CIR having jurisdiction.

The rate of sales tax on import and supply of fabric has been reduced from 5% to 3%. Further, value addition tax has been reduced from 3% to 2% on import of fabric.

Provisos added related to refund of input tax on fulfillment of specified conditions.

12. 896(I)/2013

Dated:


This SRO made amendments in Chapter-XIII of Sales Tax Special Procedure Rules.

Previously extra amount of sales tax @ 0.75% of value of supplies of electric home appliances (specified goods) was charged.

Through this amendment rate of extra tax has been increased to 2% and further goods have been included in the list of specified goods on which such extra tax shall be charged.

13. 897(I)/2013

Dated:

04-10-2013

Not applicable

This SRO made amendments in Chapter-XIII of Sales Tax Special Procedure (Withholding) Rules (2007). With few amendments the following new sub rules have been added:

1. A withholding agent shall deduct 10% of the total sales tax shown on the sales tax invoices issued by a wholesaler, dealer (including petroleum dealers) or distributor.

2. On purchase of taxable goods from persons liable to be registered but not actually registered, withholding tax shall be deducted as given

The said amendments has shown the following results:

1. 10% withholding tax for

categories specified at Sr. 1.

2. In order to discourage

the persons liable to be registered but not actually registered the rate of withholding tax on




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below:

Withholding agent Rate Government departments, autonomous bodies or public sector organizations having FTN

Applicable rate

Other than above 1%

Rate as mentioned above shall be applied on value of taxable supplies made and unless otherwise specified in the contract between the buyer and the supplier, the amount of sales tax for the purpose of this rule shall be worked out on the basis of gross value of taxable supply.

taxable supplies has been specified at 17% or other applicable rate and 1% for withholding agents specified in Sr. 2 unless otherwise specified in the contract between the buyer and supplier.

14. 895(I)/2013

Dated:


In the third schedule, serial No. 23, 24, 25, 26, 27, 28, 29, 30, 31, 34 and 35 in column 1 and the entries relating thereto in column 2 and 3 has been omitted.

Items have been omitted from 3rd Schedule and included in Sales Tax Special Procedure Rules in the list of goods “specified goods” on which extra sales tax @ 2% shall also be charged:

15. 946(I)/2013

Dated:

24-10-2013

Sales tax applicable for the period from 21-06-2013 to 29-06-2013 Not applicable

Goods on which sales tax is to be charged @ 17% shall be charged @ 16% during the period from 21-06-2013 to 29-06-2013 subject to the condition that this reduction shall not be applicable if sales tax @ 17% has already been charged during the said period.

16. 945(I)/2013

Dated:


Through this SRO, FBR made amendment in rule 5 of the Sales Tax Rules, 2006.

A person filing application for registration has to specify in his application the Collectorate in whose jurisdiction the registration is sought.

This SRO made amendment in rules regarding criteria for selection of Collectorate on the basis of legal status of the entity and nature of business.

This SRO is effective from 01-07-2013

17. 79(I)/2014 Dated: 31-01-2014

Not applicable

Through this SRO, FBR made following amendments in Rule 2 to 10 related to sales tax registration in Sales Tax Rules, 2006.

(1) In Rule 2

Definition of “REGSYS” added:

Through this SRO, FBR made following amendments in Rule 2 to 10 related to sales tax registration in Sales Tax Rules, 2006.




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(xlva) “REGSYS” means the Board’s computerized system for registration of taxpayers

(2) In Rule 5

Previously application for registration was required to be filed to CRO. Now registration shall be applied through REGSYS.

(3) New sub-rule (1A) inserted:

The applicant shall electronically attach the scanned copies of eight (8) various documents, where applicable as mentioned in the said rule.

(4) New sub-rule (1B) inserted:

The applicant shall also submit GPS-tagged photographs of premises, machinery installed (if any), the electricity meter, and gas meter, as the case may be.

(5) Sub-rule (2A) omitted:

Previously, CRO may cause further inquiry from the applicant through LRO including the issuance of Objection Slip (Now this sub-rule has been omitted)

(6) Sub-rule 3 substituted:

Previously, CRO was authorized to register the applicant after verification or reject the application within fifteen (15) days of complete application.

Now, the application shall be processed electronically by REGSYS.

If application is complete, then a risk score shall be assigned to application. In case the application is assigned a low risk score, registration certificate shall be issued.

If application is incomplete, Objection Memo shall be issued electronically to applicant to remove objections within ten (10) days.

Remaining applications shall be sent to concerned LRO for further

Definition of “REGSYS” introduced:

Now application for registration shall be filed with the REGSYS instead of CRO.

Electronically filing of sales tax registration procedure prescribed.

Pre-conditions for sales tax registration through insertion of new sub rule.

CRO power no more there due to omission of sub-rule.

Now, the application shall be processed electronically by REGSYS.

Where application is complete.

Where application is not complete.

Procedure for remaining




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inquiry, which may include physical verification. The officer conducting verification shall take GPS-tagged photographs and load into REGSYS.

(7) Sub-rule 4 substituted:

Previously, a manufacturer was registered after verification of manufacturing facility by LRO.

Now, a manufacturer, who is not assigned low risk score by REGSYS, shall be registered only after physical verification of manufacturing facility by LRO.

(8) In Rule 6:

In sub-rule (3), the LRO shall transmit the particulars of person to the REGSYS instead of CRO.

In sub-rule (4), Now the Commissioner Inland Revenue in place of Collector of Sales Tax may issue notice under section 25 of the Act and take other action as required under law against such person.

In sub-rule (4), in proviso, Now the Commissioner Inland Revenue in place of CRO shall send recommendation to REGSYS.

(9) In Rule 7:

In sub-rule (1), Now, in case of change in particulars of registration a registered person shall notify the change to the REGSYS in place of CRO.

In sub-rule (2), Now, in case of change of business category as manufacturer, the change shall be allowed after LRO has taken GPS-tagged photographs and entered then on REGSYS in the manner prescribed.

In sub-rule (3), Now, revised registration certificate shall be issued by REGSYS in place of CRO.

(10) In Rule 8:

In sub-rule (1), Previously, registration was transferrable from one collectorate to another

applications.

A manufacturer with low risk score by REGSYS, shall be registered only after physical verification of manufacturing facility by LRO.

REGSYS replaced with the words CRO.

Now the CIR in place of Collector of Sales Tax may issue notice u/s 25 of the Act & take other action as required under law against such person.

Now the CIR in place of CRO shall send recommendation to REGSYS.

Change in particulars of registration shall notify to the REGSYS in place of CRO.

Pre-conditions for change of business category as manufacturer

Now, revised registration certificate shall be issued by REGSYS in place of CRO.

Now, registration is transferrable between LTU and RTO only.




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or one LTU or RTO to another. Now, registration is transferrable between LTU and RTO only.

In sub-rule (2), (3) and (4), As now a person shall not be registered under Collectorate, therefore, registration shall not be transferred to collectorate. Hence, in these rules the word collectorate has been omitted.

(11) Rule 9 substituted:

Now, in case where a person files application of registration to LRO, the LRO shall submit the application to REGSYS in place of CRO.

(12) In Rule 10:

Now, the Board may allow or allocate a person separate registration for manufacturing units located in different LTUs or RTOs in place of Collectorates.

Now, the CIR in place of Collector (having jurisdiction over cancelled registration) shall ensure that tax arrear files are transferred to CIR in place of Collector (having jurisdiction over the registration so retained)

Form STR-1 substituted by TRF-01 (V-2):

The word collectorate has been omitted.

Procedural change in filing of registration application.

Now Board is power to allocate a person separate registration for manufacturing units located in different LTUs or RTOs in place of Collectorates.

Now CIR in place of Collector empowered over the jurisdiction for tax arrear

Change in name of registration Form

22. Status of Sales tax Circulars issued by Federal Board of Revenue (FBR) from June 16, 2013 to February 11, 2014

SR. CIRCULAR NO. /

DATED STATUS IN TAX YEAR 2013 STATUS IN TAX YEAR 2014 TECHNICAL COMMENTS

1. No.3(9) ST-L & P / 2010

Dated:

12-07-2013

Through this circular, FBR extended the date of payment & filing of Sales Tax / FED Returns for all the registered persons up to 25th July, 2013 for the tax period June, 2013.

Not applicable

By using powers u/s 74 of Sales Tax Act and u/s 43 of the Federal Excise Act

2. No. 3(9) ST-L & P / 2010

Dated:

15-08-2013

Not applicable

Through this circular, FBR extended the date of payment & filing of Sales Tax / FED Returns for all the registered persons up to 20th August, 2013 for the tax period July, 2013.

3. No.3(9) ST-L & Through this circular, FBR




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P / 2010 -111314

Dated:

23-08-2013

Not applicable

extended the date of payment & filing of Sales Tax / FED Returns for all the registered persons up to 27th August, 2013 for the tax period July, 2013

the FBR has extended the date of payment and filing of returns.

4. No.3(9) ST-L & P / 2010 – 140007-R

Dated:

14-10-2013

Not applicable

Through this circular, FBR extended the date of payment & filing of Sales Tax / FED Returns for all the registered persons up to 23th October, 2013 for the tax period September, 2013

5. STGO 50 of 2013

Dated:

21-11-2013

Not applicable

FBR made amendments in STGO No. 09 of 2007 dated 13th September, 2007.

Through this amendment, FBR omitted 65 registered persons by names from the list of persons who shall be charged sales tax on electricity @ of 0%.

23. Status of Sales Tax General Orders (STGO) issued by Federal Board of Revenue

(FBR) from June 16, 2013 to February 11, 2014 SR. STGO

NO. / DATED

STATUS IN TAX YEAR

2013


1. All STGOs (except stated after Sr. 1.)

Not applicable

Through all the Sales Tax General Orders (except the under mentioned) issued from June 16, 2013 to January 15, 2014, FBR allowed or withdrawn zero rating facility due to reasons mentioned therein on supply of electricity and / or gas for various industrial units by names.

Allowing / withdrawal of facility of zero-rating on supply of electricity / gas.

2. 28 of 2013

Dated:

05-07-2013

Not applicable

Through the Finance Act, 2013 the applicable rate of sales tax has been increase from 16% to 17% with effect from 13-06-2013. However the printed retail price stock lying at 12-06-2013 shall be charged at the rate of 16% subject to fulfillment of certain conditions.

The one percent increase in sales tax rate with effect from 13-06-2013 shall not be applicable on the printed retail price stock lying on 12-06-2013 on fulfillment of certain conditions.

3. 30 of 2013

Dated:

12-07-2013

Not applicable

Amendment in STGO 28 of 2013 dated 05-07-2013

In General Order 28 of 2013, in the subject, the word “July” shall be read as “June”.

Correction of typing error in General Order.

4. 34 of 2013

Dated:

16-08-

Not applicable

This general order provides the uniform procedure for actions against registered persons claiming fraudulent input tax or refunds etc under section 21(4) of the Sales Tax Act, 1990.

The procedure has been defined for action to be taken against registered persons claiming fraudulent input tax or refunds.




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2013

5. 31 of 2013

Dated:

27-09-2013

Not applicable

Amendment in STGO 36/2010 dated 24-09-2010

In the Table, at S. No. 17, the figures “BH 001064” replaced with “BH 001065”.

Correction of typing error in General Order.

6. 46 of 2013

Dated:

13-11-2013

Not applicable

Following amendment made in STGO 34/2010 dated 16-09-2010

In para 2, in clause (b), in sub-clause (ii) and (v), after the words “by the end of the calendar month in which the due date falls” the words “by the end of calendar month following the month in which the due date falls” shall be substituted.

Where a registered person fails to file sales tax returns for two (2) consecutive periods then the person shall not remain as an active taxpayer.

Documents

Nadeem Butt (FCA) - nbandco.comnbandco.com/Updated Amendments till February 11, 2014.pdfNadeem Butt (FCA) Chartered Accountant ... Revised rates for withholding tax ... Rates for collection