ZIC Tax Handbook FB 2015

8/16/2019 ZIC Tax Handbook FB 2015

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Finance Bill 2015

Zahid Jamil & Co.

Chartered Accountants www.zahidjamilco.com An Independent Member Firm of Prime Global

www.primeglobal.net

Tax Hand Book

http://www.zahidjamilco.com/http://www.zahidjamilco.com/http://www.primeglobal.net/http://www.primeglobal.net/http://www.primeglobal.net/http://www.zahidjamilco.com/


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TAX HAND BOOK FINANCE Bill 2015

Zahid Jamil & Co Chartered Accountants | An Independent Member Firm of Prime Global 2

Strictly for circulation to

Clients & Staff of Zahid Jamil & Co.

This handbook elaborates the important changes brought down through Finance Bill, 2015

relating to Income Tax, Sales Tax and Federal Excise Duty. For considering the precise effect of

a particular change, reference should be made to the specific wordings in the relevant statute,

therefore, not generally be acted upon without obtaining appropriate advice.

The handbook can also be accessed on our web site www.zahidjamilco.com

Dated: June 07, 2015

http://www.zahidjamilco.com/http://www.zahidjamilco.com/http://www.zahidjamilco.com/


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TAX HAND BOOK

TABLE OF CONTENTS

Sr. # Description Page #

1. EXECUTIVE SUMMARY………………….………………………………………………………………………………………. 4-7

2. AMENDMENTS IN INCOME TAX ORDINANCE, 2001 ………………………………………………………………. 8-33

3. AMENDMENTS IN SALES TAX ACT, 1990 ……………………………………………………………………………….. 34-39

4. AMENDMENTS IN FEDERAL EXCISE ACT, 2005 ……………………………………………………………………… 40-45

5. AMENDMENTS IN CUSTOMS ACT, 1969………… ……………………………………………………………………… 46-48


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EXECUTIVE SUMMARY

INCOME TAX

A public company deriving profit for the year and having reserves in excess of hundred percent of its paid up

capital is now further taxable on such excess reserves at the rate of ten percent. However, a scheduled bank, a

modaraba and a government owned public company are not chargeable to such tax.

A one-time super tax @ 4% of income of banking companies and 3% of income of Rs.500 million or more has been

proposed to be levied on all persons for the tax year 2015 invariably on all types of income whether taxable under

the normal law or under the Final Tax Regime (FTR).

Capital gain on securities that are held for a period less than 4 years are proposed to be taxed based on the

following holding period of securities and rates-

Holding Period

Tax Period

2015 2016

Less than 12 months 12.5% 15%

12 months or more but lessthan 24 months 10% 12.5%

24 months or more but less

than 48 months

0% 7.5%

Profit on debt derived by all taxpayers is now taxable as a separate block of income at progressive slab rates of

ten, twelve and half and fifteen percent applicable on gross amount of profit on debt.

Tax credit available to a company on its enlistment on a registered stock exchange is proposed to be enhanced

from 15% to 20% of the tax payable.

Like banking companies, other companies and AOPs are proposed to estimate the advance tax before the secondinstallment is due in cases where higher income and tax payable is anticipated. 50% of the estimated advance tax

is required to be paid in the second quarter and balance in remaining quarters.

A tax credit of 1% of tax payable, for every 50 employees employed by a newly established industrial undertaking

shall be allowed for 10 years. The maximum credit is allowed upto 10% of tax payable.

The eligible threshold of admissible investment in shares and premium on life insurance for claim of tax credit is

proposed to be enhanced from Rs.1 million to Rs.1.5 million.

Instead of tax credit on profit on debt paid on a housing loan, the Bill proposes to allow deductible allowance with

reference to profit on debt paid on a housing loan for the purpose of construction of a new house or acquisition ofa house.

Exporters are to be given an option to opt out of the final tax regime and pay tax on normal basis but the tax

deducted will be treated as minimum tax.

CNIC issued by NADRA to be treated as NTN effective from the tax year 2015.

Non-filers are proposed to subject to collection of tax @ 0.6% on all banking transactions where the value of

transactions in a day exceeds Rs.50, 000.

The Bill proposes to enact provisions enabling automatic exchange of information by the Government with other

countries. Rate of tax on dividend increased from 10% to 12.5%


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The due date of payment of tax demand is proposed to be enhanced from 15 days to 30 days. Moreover, the

Commissioner (Appeals) has been empowered to grant stay from recovery of tax demand for a period of 60 days

instead of 30 days at present.

Remittance of education and related expenses abroad is proposed to be subject to collection of tax @ 5%.

Concept of Special Audit Panels comprising officers of Inland Revenue and professionals introduced.

Automatic selection for audit of such retailers proposed who do not file their returns or pay tax as per the

conditions prescribed.

Whistleblower who reports concealment to be rewarded. Amendments made on the following tax laws for this

purpose:

Income Tax Ordinance, 2001

Sales Tax Act, 1990

Federal Excise Act, 2005

Single rate of tax for banking companies on dividend income and capital gain of 35% is proposed

Application of minimum tax on builders has been deferred until 30 June 2018.

Minimum tax on land developers has been levied at the rate of two percent of the value of land notified by any

authority for the purpose of stamp duty.

Payments to resident persons for use of machinery and equipment is proposed to be subject to withholding tax @

10%

Board no longer empowered to exempt goods or person from collection of tax at import stage.

Manufacturers of cooking oil and vegetable ghee subject to final tax at the rate of two percent on purchase of

locally produced edible oil.

Commissioner empowered to issue reduced/nil withholding tax certificate to a permanent establishment of a non-

resident person.

Scope of collection of advance tax on private motor vehicles has been expanded. The term “motor vehicle” has also

been defined.

Collection of advance tax also required in respect of internet bills and prepaid card for internet.

Wholesalers of specified goods now exposed to collection of advance tax by manufacturers, wholesaler, dealers

and distributors.

Exemption from collection of tax under Chapter-XII (transitional advance tax provisions) as available to various

persons has been consolidated under a single section for ease of reference.

The rate of default surcharge in respect of various non-compliances has been reduced from eighteen percent to

twelve percent.


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Penalties for non-filing of statement in respect of income governed by the final tax regime, withholding

statements, furnishing of information by banks and wealth statements have been amended.

Rate of compensation for delayed refund reduced from fifteen percent per annum to KIBOR plus zero point five

percent per annum.

SALES TAX

Certain amendments made in the definitions of Active taxpayer, Cottage Industry, Retailer and Supply.

Rate of further tax enhanced from 1% to 2%.

Custom Authorities empowered to recover short payments or non-payments of sales tax at import stage.

Manner of claiming input tax adjustment on import rationalized.

Disallowance of input tax scope enhanced.

Joint or several liabilities for unpaid sales tax amount in the supply chain.

Withdrawal of board’s power to grant exemption except for emergency situation Now such exemptions wouldstands rescinded at the close of the financial year.

Extended requirement of registration under the Act.

Special audit panel to conduct audit

Certain amendments made in offences and penalties

Monitoring or tracking of production, sales, clearance, stocks etc. through electronic or other means.

Agreements for the exchange of information with provincial or foreign governments.

Prize scheme to promote tax culture.

Certain amendments in the following Schedules: -Fifth Schedule -Sixth Schedule -Eighth Schedule -Ninth Schedul

FEDERAL EXCISE

Powers of the Board granting exemption from the levy of FED are proposed to be withdrawn.

Federal Government is now only empowered to exempt good or services from the levy of FED subject to theapproval of Economic Coordination Committee.

Commissioner to pass orders under section 35 of the FE Act, upon receipt of an application from the aggrievedperson in addition to taking suo-moto action.

Board to appoint special audit panels for conducting audit.

Federal Government to enter into bilateral or multilateral agreements with provincial governments or withgovernments of foreign countries for exchange of information.


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INCOME TAX

AMENDMENTS IN INCOME TAX ORDINANCE, 2001

Sr.

#Section Before Amendment After Amendment

1. Sec. 5(A)

Sec 4(B)

Excess Reserves of Public

Company to Suffer tax

Section 5 was not previously

existed.

Super tax for rehabilitation

of temporary displaced

persons

Clause (B) in Section 4was

not previously existed

Tax has been proposed to be charged at the rate of ten percent

of so much of the reserves as exceed hundred percent of the

company’s paid-up capital after the distribution of cash

dividend within six months of the end of tax year . This section

shall not apply to a public company being a scheduled bank,

modaraba or a public company in which fifty percent or more

shares are held by the Government.

A one-time super tax has been proposed to be levied on all

persons for the tax year 2015 invariably on all types of income

whether taxable under the normal law or under the Final Tax

Regime (FTR). To remove any sort of ambiguity, it has been

stated that the super-tax will apply to income from all sources

and on all persons including income of insurance companies,

oil and gas and mineral companies, banking companies and on

capital gains of listed securities.

The super tax is proposed to be charged as

follows –

Banking company

4% of

income

Person other than a banking companyhaving income equal to or exceeding

Rs.500 million

3% of

income

The super tax is required to be paid at the time of filing thereturn of income and in case it is not paid, the Commissioner is

empowered to collect the same by passing an order in writing.

2. Sec. 37(A) Capital Gain on Disposal of

Securities

Gain on disposal of securities

was taxable if the security

was held for a period less

than 2 years.

It has been proposed that tax capital gain on securities

that are held for a period less than 4 years. Rates of tax

are–

Holding period 2015 2016

Less than 12 months 12.5% 15%


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12 months or more but lessthan 24 months 10% 12.5%

24 months or more but less

than 4 years 0% 7.5%

It is proposed to be required form mutual fund or a collective

investment scheme or a REIT scheme to deduct capital gain tax

on redemption of securities in the following way-

Category Filer Non-filer

Individuals and

AOP10% 17.5%

Company10% for stock

funds

25% for others

25%

3. Sec. (53&159) Exemptions and tax

concessions

The Federal Government was

empowered to amend the

Second Schedule to the

Ordinance to provide or carry

away exemptions and tax

concessions or to offer

conditions in respect thereof.

Such powers were exercised

by the Board under delegated

authority of the Federal

Government which at times

was criticized by certain

quarters on the touchstone of

discretion exercised by the

Federal Government.

Now, the discretion that was available to the Federal

Government has been proposed to be taken away, relocated the

authority of granting exemptions or concessions to the

Parliament.

Federal Government, with the approval of the ECC of theCabinet, can still amend the Second Schedule if the following

circumstances-

national security issues

natural disaster

national food security in emergency situations

protection of national economic interests in situationsowing to abnormal fluctuation in international

commodity prices

removal of anomalies in taxes

development of backward areas

implementation of bilateral/ multilateral agreements

Powers of the Board available under section 159 to amend the

rates of withholding tax, exempt persons, classes of persons,

goods or classes of goods form withholding tax under the

Ordinance have been proposed to be withdrawn.

4. Sec. 151 & 7B Profit on Debt

Section 151, regarding

profit/yield on certain

categories of debt is subject

to withholding tax at the

gross amount, after deduction

of zakat. The tax deducted

under this section is generally

construed as a final discharge

An introduction of a separate scheme of taxation in respect of

profit on debt derived by all categories of taxpayers, including

corporate taxpayers has been launched which would be taxed

via newly proposed Section 7B at following rates.

Sr.No. Profit on Debt Rate of Tax

1 Where profit on debt

does not exceed

Rs.25,000,000

10%


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of tax liability for all

categories of taxpayers, other

than companies.

2 Where profit on debtexceeds

Rs.25,000,000 but

does not exceed

Rs.50,000,000

2,500,000 + 12.5% ofthe amount exceeding

Rs.25,000,000

3Where profit on debt

exceeds

Rs.50,000,000

Rs.5,625,000 + 15% of

the amount

exceeding

Rs.50,000,000

Under the proposed amendments, companies would no longer

be able to allocate expenses against its interest income.

Profit or debt u/s 151 would be adjustable against the tax

determined pursuant to the proposed Section 7B.

5. Sec. 152(4A) Commissioner Empowered

to Issue Reduced/Nil

Withholding tax Certificate

to a Permanent

Establishment of a Non-

resident

Sub-section (4A) in Section

152 was not previously

existed.

The purposed new sub section (4A) in Section 152 confers

powers to the Commissioner to provide nil or reduced

withholding tax certificates in appropriate circumstances to

PEs of non-resident persons.

6. Sec. 65 (6)

Sec. 65(C)

Tax credit on Industrial

Investments

Sub-section (6) in Section 65

was not previously existed.

Tax Credit for Enlistment

Company was allowed tax

credit up to 15% of the tax

payable for the tax period in

which company has been

enlisted on registered stock

exchange in Pakistan.

A new sub- section has been proposed to be inserted in section

65, to provide general guidance relating to claim of tax credits,

to take away the ambiguity.

The Bill proposes to enhance the tax credit from 15% to 20% of

the tax payable.


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Sec. 65(E)

Tax credit for Industrial

Undertaking

Tax credit was admissible for

the period of 4 years after

installation of plant or

machinery.

The tax credit for a period of 5 years has been proposed to be

allowed, beginning from the date of setting up oncommencement of commercial production from the new plant

or expansion project whichever is later.

7. Sec. 147 Advance Payment of Tax

Previously, a company or an

AOP was required to pay

advance tax in 4 equal

installments on a quarterly

basis. Where they estimate

that the tax payable for the

relevant tax year is likely to

be more than the amount

based on latest assessed

income and tax liability they

can make an estimate at any

time before the last

installment is due and pay the

advance tax accordingly.

Now taxpayers are required to estimate the tax payable for the

relevant tax year at any time before the second installment is

due i.e. even before completion of half year after such

estimation. The proposed amendment requires payment of

50% of the estimated advance tax by the due date of the second

quarter of the relevant tax year. The remaining 50% is required

to be paid in the 3rd and 4th installments.

8. Sec 64B

Sec. 64(A)

Tax Credit for Employment

Generation by

Manufacturers

Section 64B was not

previously existed

Deductible Allowance for

Profit on Debt

Presently a person was

entitled to a tax credit in

respect of any profit or share

in rent/ share in appreciation

for value of house which is

paid on a loan given by a bank

A tax credit has been introduced for companies to encourage

employment generation. Under this provision, any company

engaged in manufacturing formed between, July 1, 2015 to June

30, 2018 shall be allowed a tax credit of 1% of tax payable for

every 50 employees registered with EOBI and social security

schemes. The maximum tax credit shall, however, not exceed

10% of the tax payable.

It has been proposed to insert a new section 64A in the same

Part X of Chapter III which deals with tax credits. Although this

section caters to almost the same benefit on the amount paid

for the purpose of construction a new house or acquisition of a

house, however, instead of allowing a tax credit, the proposed

section allow a deductible allowance to the individual. All

other aspects and threshold for eligibility remain the same as

discussed above except that the ceiling of Rs.750,000 is


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or NBFI or by government or

local government or a public

company listed on the stock

exchange. The tax

credit is available if the loan

is utilized for construction ofa new house or acquisition of

house. The tax credit is

presently available at the

average rate of tax of the

person on the lesser of the

total amount paid or 50% of

the person’s taxable income

for the year or

Rs.750,000.

proposed to be enhanced to Rs.1 million.

9. Sect. 62 Tax Credit for Investment

in Shares and Life

Insurance Premium Paid

Tax credit was allowed up to

lower of the cost of acquiringthe shares/ premium paid or20% of the person’s taxable

income for the year or Rs.1

million.

Limit regarding granting tax credit has been proposed to be

enhanced from Rs.1 million to Rs.1.5 million

10. Sec 154 Exports

Previously, tax deductible in

proceeds of export was

considered as FTR.

An irrevocable option has been proposed to be offered to

exporters to opt out of final taxation at the time of filing the

return. As per the option the tax deducted under this section

shall be treated as minimum tax instead of a final tax of the

person opting out of FTR.

11. Sec.181 Taxpayers Registration

Previously it was on the

direction of the board to

allow CNIC of individual as

his/her NTN.

It has been proposed that the Board may in the case of

individuals allow use of NIC, issued by the NADRA, in place of

NTN .Every CNIC holder would become NTN holder regardless

of the fact whether he has taxable income or not. Hence, such

an individual will be required to file a tax return since under

section 114 of the Ordinance, the requirement of filing a return

of income is also on a person who has obtained NTN.

12. Sec. 236P Advance Tax on Banking

Transaction Otherwise

Than Through Cash

A unique regime for collection of tax on banking transactions

has been proposed to be introduced for non-filer persons for

tax purposes. Under this regime almost all banking


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transactions including sale of instrument like demand draft,

pay order, etc. and transfer of any sum through cheque and

other similar manners or clearing interbank transfer through

cheques shall be subject to collection of tax at the rate of 0.6%

of the transaction amount. This provision will only be

applicable where the sum total of paymentsFor all transactions exceed Rs 50,000 in a day.

13. Sec.165 B Collection and Exchange of

Information

Sec.165B was not previously

existed As per proposed section 165B every financial institution would

be required to provide information to the Board in respect of

non-resident persons.

14. Sec.94 Dividend

Rate of Dividend was 10%

and reduced rate of tax was

7.5% applicable to dividends

paid by certain specified

companies.

The rate of tax on dividends for all tax payers has been

proposed to be increased from 10% to 12.5%, with no change

in reduced rate applicable to dividends paid by certain

specified companies.

15. Sec. 114 Revision of Return

The persons who were

obliged to file a return of for a

tax year. The revision of said

return was subject to certain

circumstances and one such

option was permission of

commissioner.

It has been proposed that where a return of income is revised

within 60 days of its filing, the condition of obtaining prior

approval from the Commissioner will not be applicable.

16. Sec.128 Grant of Stay by

Commissioner

(Appeal)

Previously, the Commissioner

(Appeals) was empowered to

grant stay from recovery of

tax demand to a taxpayer for

an aggregate period not

exceeding 30 days.

Powers have granted to the Commissioner (Appeals) to grant

stay from recovery of tax demand for a further period of 30

days subject to the condition that the appeal shall be decided

within the extended period of 30 days.

17. Sec. 137 Due Date for Payment of

Tax Demand

Previously, due date for

payment of tax was

Within 15 days from the date

of service notices

30 days would be available for payment of tax demand arising

from an order passed by the tax authorities.


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18. Sec. 236Q Payment to Residents for

Use of Machinery and

Equipment

Sec.263Q was not previously

existed

As per proposed Sec 236Q withholding of tax @ 10% from

payments to a resident person for use of or right to useindustrial, commercial and scientific equipment as well as on

account of rent of machinery is proposed. Tax under this

section would be considered as Final tax. The obligation to

withhold tax under this section has been proposed on a

“prescribed person” as per the definition given in section

153(7) of the Ordinance.

19. Sec. 236R Collection of Tax on

Remittance of Education

Expenses Abroad

Sec. 236 (R) was not

previously existed As Per Sec. 236R collection of advance tax @ 5% proposed to

be levied on the amount of education expenses remitted

abroad. Education expenses include tuition fee, boarding and

lodging expenses, any payment for distant learning to any

institution or university in a foreign country and any other

expense related or attributable to foreign education.The obligation to collect tax from education related expenses is

on banks, financial institutions, foreign exchange companies or

any other person responsible for remitting foreign currency

from the payer of education related expenses. It would be

adjustable against the tax liability of the payer of education

related expenses.

20. Sec. 227B Concept of Whistleblower

Sec. 227B was not previously

existed

Under Proposed new Sec. 227B new concept regarding

whistle-blower has been introduced in following tax laws:

Income Tax Ordinance, 2001

Sales Tax Act, 1990

Federal Excise Act, 2005

Whistle-blower is a person who reports concealment or

evasion of tax/duty leading to detection or collection of

tax/duty, corruption or misconduct, to the competent authority

having power to take action against the person or a income tax,

sales tax or federal excise authority committing fraud,

corruption, misconduct, or involved in concealment or evasionof tax/duty.

Board may sanction reward to whistleblowers in cases of


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concealment or evasion of tax/duty, corruption or misconduct

providing credible information leading to such detection of

evasion of tax/duty.

The procedure for sanction of award and its apportionment is

to be notified in the official Gazette by the Board.

The claim of reward by the whistleblower shall be rejected inthe following circumstances-

the information provided is of no value;

the Board already had the information;

the information was available in public records; or

no collection of duties is made from the informationprovided from which the Board can pay the reward

21. Sec.236T Collection of Tax by

Pakistan Mercantile

Exchange Limited

Sec. 236T was not previously

existed

The proposed Section 236T obliges PMEX to collect tax @ 0.1%

from its members

(i) on purchase and sale of futures commodity contracts, and

(ii) on purchase and sale of futures commodity contracts in

lieu of tax on the commission earned by such members.

It is proposed that the tax so collected shall be a minimum tax.

PMEX has been defined in the proposed Clause (42A) of Section

2 of the Ordinance.

22. Sec. 177(11) Audit

Sub-section 11 in Sec. 177

was not previously existed

A Panel comprising of two or more persons will be empowered

to conduct an audit including a forensic audit of income tax

affairs of a taxpayer. The Panel shall consist of an Officer of

Inland Revenue or a Firm of Chartered Accountant or Cost and

Management Accountant or any other person as directed by

the FBR.

23. Sec. 214 D Automatic Selection for

Audit of Retailers

Sec. 214D was not previously

existed.

It has been proposed that retailers who are registered under

Rules (4) and (6) of Sales Tax Special Procedures Rules, 2007

i.e. large retailers either operating as unit of a national or

international chain of stores, operating an air-condition mall,

retailer who has a credit and debit card machine, retailer

whose annual preceding electricity bill exceeds Rs.600,000 and

a wholesaler-cum-retailer engaged in bulk import and other

retailers who pay sales tax on electricity bills. The aforesaid

retailers are proposed to be automatically selected for audit if

they do not fulfill the following conditions –

enlistment on the active taxpayer list in case of large


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retailer registered under Rule (4)

Complete return of income furnished within time

The tax payable along with the return has been dulypaid

2% tax is paid under section 113 i.e. on turnover basisin case of small retailer registered under Rule (6) who

files the return below taxable limit and in the

preceding tax year has either declared income belowtaxable limit or not filed the return

In case of small retailer who has declared taxableincome in previous year he must pay 25% higher tax

than the previous tax year.

24. Sec. 15A Deductions Against Income

from Property

A deduction not exceeding

6% of the rent chargeable to

tax in respect of property was

allowed

on account of expenditure

incurred for the purpose of

collecting rent.

Deduction allowed has been proposed to be enhanced to cover

expenses incurred including administration expenses subject

to the threshold of 6% of rent chargeable to tax in respect of

such property.

25.

Sec.113 B Minimum Tax on Land

Developers

Minimum tax at the rate ofRs.50 per square yard as per

the layout or site plan had

been proposed.

It has been proposed that imposition of minimum tax at the

rate of two percent of the value of land notified by anyauthority for the purpose of stamp duty.

26. Sec. 148 Power of the Board to

Exempt Goods from

Collection of Income Tax at

Import stage

The Board has the power to

exempt certain goods or

persons from collection of

income tax at the time of

import.

Such power has been proposed to be withdrawn.

27. Sec. 148A Tax on Local Purchase of

Cooking Oil or Vegetable

Ghee


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Sec. 148A was not previously

existed

It has been purposed as per Sec. 148A the manufacturers of

cooking oil or vegetable ghee shall be chargeable to tax at the

rate of two percent on purchase of locally produced edible oil.

Such tax shall be final tax in respect of income accruing from

locally produced edible oil.

28. Sec.171 Additional Payment forDelayed Refunds

Previously compensation rate

for delay was 15% of the

amount of refund.

Compensation rate for delay has been proposed to be changed

i.e KIBOR Plus 0.5% per annum.

29. Sec.205 Default Surcharge

Previously, rate of surcharge

was 18% per annum

Rate of surcharge has been proposed to be reduced to 12% per

annum.

30. Sec.

207

INCOME TAX AUTHORITIES

(PREVIOUSLY NOT EXISTED)

Consequent t o the proposal of Section 177 whereby “special

audit panel” shall be appointed, the Bill also seeks to insert a

new clause in section 207 whereby “special audit panel” shall

also be treated as a Tax Authority.

31. Sec.231B Advance Tax on Private

Motor Vehicles

Every manufacturer of motor

car or jeep is required to

collect advance tax at the

time of sale.

The purposed Scope of this section has been broaden by

replacing word “motor car or jeep” with vehicle.

The motor vehicle includes car, jeep, van, sports utility vehicle,

pickup trucks, caravan automobile, limousine, wagon or any

other automobile used for private use. It has also been

proposed to insert the definition of the expression “date of first

registration” for different modes of acquisition of

Vehicles.

32. Sec. 236 Advance Tax on Telephone

and Internet user

Advance tax was previously

collected on telephone bill,

prepaid card and sales of

units through electronic

medium.

Internet bills and prepaid card for internet has been proposed

to be within the ambit of this section. It would be taxed at rate

of 14% of amount of bill.

33. Sec. 236H Advance Tax on Sale to

Retailers and Wholesalers

Every manufacturer,

distributor, dealer, Bill has excluded sales of fertilizer from collection of advance


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wholesaler or commercial

importer of various items

listed in this section including

fertilizer are required to

collect advance tax on sale to

a retailer

tax under Sec.236H.

34. Sec.231A,

231AA,236B,

236C,236,D236I,

236k

New Sec.236 O

Exemption Was Available

to Various Persons

Regarding Advance Tax

Bill has been proposed to delete these section and has

introduced new section in their respect Sec.236O where by

following person shall be exempted from collection of advance

tax under the entire chapter XII:

the Federal Government or a Provincial Government

a foreign diplomat or a diplomatic mission in Pakistan

a person who produces a certificate from theCommissioner that his income during the tax year is

exempt.

35. Sec.

236S

DIVIDEND IN SPICIE

(PREVIOUSLY NOT

EXISTED)

The Bill proposes to insert a new section viz. section 236S

which provides for collection of tax from the gross amount of

dividend in specie @ 12.5%. The tax so collected shall be final

tax in terms of section 5 of the Ordinance.

FIRST SCHEDULE

TAX RATES FOR INDIVIDUALS AND ASSOCIATION OF PERSONS

The rates of tax chargeable for the tax year 2016 (corresponding to the income year ending at any time between

01 July 2015 to 30 June 2016) have been revised as under. The basic threshold has remained unchanged:

Salaried taxpayers

No. SALARIED TAXPAYER RATE

1 Upto Rs.400,000 Nil

2 Rs.400,001 – 500,000 2% of excess over Rs.400,000

3 Rs.500,001 – 750,000 Rs.2,000 + 5% of excess over Rs.500,000

4 Rs.750,001 – 1,400,000 Rs.14,500 + 10% of excess over Rs.750,000

5 Rs.1,400,001 – 1,500,000 Rs.79,500 + 12.5% of excess over Rs.1,400,000

6 Rs.1,500,001 – 1,800,000 Rs.92,000 + 15% of excess over Rs.1,500,000






12 Over Rs.7,000,000 Rs.1,422,000 + 30% of excess over Rs.7,000,000


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Non-salaried taxpayers

NO. Non-Salaried taxpayers RATE

1 Upto Rs.400,000 Nil

2 Rs.400,001 – 500,000 7% of excess over Rs.400,0003 Rs.500,001– 750,000 Rs.7,000 + 10% of excess over Rs.500,000

4 Rs.750,001– 1,500,000 Rs.32,000 + 15% of excess over Rs.750,000




8 Over Rs.6,000,000 Rs.1,319,500 + 35% of excess over Rs.6,000,000

Reduction in tax liability

A senior citizen of Pakistan, being a taxpayer, aged sixty years or more on the first day of the relevant tax year, isallowed a rebate of 50% of the tax payable if his/her taxable income in that tax year is Rs.1,000,000/- or less. The

said rebate continues and the rule, that in determining the threshold as above, income under final tax regime shall

be excluded, also remains unchanged.

In addition, the relief as above shall also be available to an individual who, irrespective of his age, is registered as a

disabled person according to his/her Computerized National Identity Card.

RATES OF TAX FOR COMPANIES

[Clause (i), Division II, Part I of First Schedule]

NO.Companies Tax Year 2015 2016

1 Public and Private 33 32

2 Cooperative and Finance Society 33 32

3 Banking 35 35

4 Small 25 25

The threshold on capital for small Companies is proposed to be enhanced for a maximum Rs.25 million to Rs.50

million

Rate of Super tax for rehabilitation of temporarily displaced persons

The rate of super tax for rehabilitation of temporarily displaced persons have been proposed as under:

Taxpayer RATE %

Banking Company 4

Person, other than a banking company, having income of Rs.500

million or more 3


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RATE OF DIVIDEND TAX

[Division III, Part I of First Schedule]

Dividend from Tax Year 2015 2016

Companies owning power project privatized by WAPDA,

companies set-up for power generation and companies

supplying coal, exclusively to power generation projects

7.5 7.5

Others 10 12.5

Stock fund, if dividend receipts are less than capital gains 12.5 15

Dividend received by a company from a collective investment scheme, REIT Scheme or a mutual fund, other than a

stock fund, shall be taxed at the rate of 25%.

However, if a Developmental REIT Scheme with the object of development and construction of residential

buildings is set up by 30th June, 2018, dividend received by a person from such Developmental REIT Scheme shall

be reduced by fifty percent for three years from 30th June, 2018.

Rate of tax on profit on debt

The existing rate of tax on profit on debt is 10%. The proposed rates of tax are as under:

AMOUNT Rate %

Upto Rs.25,000,000 10%

Rs.25,000,001 –50,000,000

Rs.2,500,000+ 12.5% of the

amount exceeding

Rs.25,000,000

Over Rs.50.000,000

Rs 5,625,000 + 15% of the

amount exceedingRs.50,000,000

CAPITAL GAINS ON DISPOSAL OF SECURITIES U/S 37A

[Division VII , Part I of First Schedule]

The rate card for levying tax on capital gains arising on sale of securities (other than Companies), as referred to in

Section 37A have been proposed as under:

Holding period Tax Year 2015 2016TAX YEAR

2015 2016

Less than 12 months 12.5 15

More than 12 months but less than 24 months 10 12.5

More than 24 months but less than 48 months - 7.5

The rate for companies in respect of debt securities shall be as specified in Division II of Part I of First Schedulewhich is proposed to be 32%

However, mutual fund or a collective investment scheme or a REIT scheme shall deduct, on redemption of

securities, capital gains tax at the revised rates as specified below:


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TaxpayerRATE (%)

FILER NON FILER

Individual and AOP10% for stock funds

17.510% for others

Company10% for stock funds

2525% for others

In case of a stock fund if dividend receipts of the fund are less than capital gains, the rate of tax deduction shall be

12.5%

CAPITAL GAINS ON DISPOSAL OF IMMOVABLE PROPERTY

[Division VIII , Part I of First Schedule]

The rate of tax on capital gain on immovable property remained unchanged and are as under:

Holding period of immovable property Rate % RATE %

Upto 1 year 10

More than 1 year but not more than two years 5

More than 2 years -

MINIMUM TAX UNDER SECTION 113

[Division IX , Part I of First Schedule]

The rates of minimum tax as a percentage of the taxpayers’ turnover have remained unchanged and are as under

S.

No.Person(s)

Minimum tax

as percentage

of person’s

turnover for

the year

(1) (2) (3)1. (a) Oil marketing companies, Oil refineries, Sui Southern Gas Company Limited and

Sui Northern Gas Pipelines Limited ( for the cases where annual turnover exceeds

rupees one billion.);

(b) Pakistani Airlines; and

(c) Poultry industry including poultry breeding, broiler production, egg production

and poultry feed production.

0.5%

2. (a) Distributors of pharmaceutical products, fertilizers and cigarettes;

(b) Petroleum agents and distributors who are registered under the Sales Tax Act,

1990;

(c) Rice mills and dealers; and

0.2%


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(d) Flour mills.

3. Motorcycle dealers registered under the Sales Tax Act, 1990. 0.25%

4. In all other cases. 1%

Advance tax on imports

The Bill proposes to enhance the scope of the table and has specified separate tax rates for filer and non-filer and

now the table reads as under:

Taxpayer Rate

Rate % (of import

value as increased

by customs duty,sales tax and

federal excise

duty)

FilerNon-filer

Industrial undertaking importing remeltable steel (PCT Heading 72.04) and

directly reduced iron for its own use

1 1.5

Persons importing plastic fertilizers in pursuance of Economic Coordination

Committee of the cabinet's decision No. ECC-155/12/2004 dated 9

December 2004

Persons importing urea

Manufacturers covered under Notification No. S.R.O. 1125(I)/2011 dated 31

December 2011

Proposes to insert Persons importing Gold; andProposes to insert Persons importing Cotton

Persons importing pulses 2 3

Commercial importers covered under Notification No. S.R.O. 1125(I)/2011

dated 31 December 20113 4.5

Ship breakers on import of ships 4.5 6.5

Industrial undertakings not covered above5.5 8

Companies not covered above

Persons not covered above 6 9

Advance tax on dividends

The Bill proposes to enhance the rate of withholding tax on dividend for non-filer to 17.5% from existing 15%.

However, a collective investment scheme, REIT Scheme and mutual fund would deduct tax on payment to a non-

filer as per the following table:

Stock FundMoney market fund, Income Fund or any

other fund

Individuals 10 10

Company 10 25AOP 10 10


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Further, the Bill proposes to reduce the withholding rates of taxes to 50% on the dividend paid by the

Developmental REIT scheme set up to 30th June 2018 for development and construction of residential buildings

for three years from 30 June 2018.

However, in the case of stock fund, if dividend receipts are less than the capital gains, the rate of tax to be

deducted shall be 15% instead of the existing 12.5%.

Advance tax on profit on debt

The advance tax rate for recipients who are non filers is proposed to be 17.5% from 15% if the yield or profit paid

exceeds Rs. 500,000.

Advance income tax on payment to non-residents

The Bill proposes to segregate the rates of withholding taxes between corporate and others on account of making

payment to a permanent establishment (PE) and brings the rate of withholding in line with the rates applicable to

a resident person which are as under:

Rate of tax

Corporate Non-Corporate

Filer Non-Filer Filer Non-Filer

For supply of goods 4 6 4.5 6.5

For services other than transport services 8 12 10 15

For execution of contract 7 10 7.5 10

The Bill also seeks to include the payment to a sportsperson under the ambit of execution of contract by PE on

which the rate of withholding tax at 10% of the gross amount payable.

Advance income tax on payment to resident on payments for goods and services

The Bill seeks to introduced the rate of withholding tax for non-filer when making payments on account of goods

and services, which are as under

Rate of tax

Corporate Non-Corporate

Filer Non-Filer Filer Non-Filer

For supply of goods 4 6 4.5 6.5

For services other than transport services 8 12 10 15

For execution of contract 7 10 7.5 10

The Bill seeks to treat the payment of sportsperson under the ambit of execution of contract at 10% as final tax

effective from the tax year 2013.

Collection of advance income tax on petroleum products

The Bill seeks to introduce the rate of collection of tax for non-filer which at 15% of gross amount for every

person selling petroleum products to a petrol pump operator. However, the withholding rates for a filer remain

unchanged at 12% of the gross amount.

Collection of advance income tax on Brokerage and Commission

The Bill seeks to enhance the rate of collection of tax from advertising agents along with introduction of rate of

collection of taxes from a non-filer which are as under:


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Rate of tax

Filer Non-Filer

For advertising agents 10% 15%

Other than advertising agents 12% 15%

Collection of advance income tax on goods transport vehicles

Vide Finance Act, 2012 a tax was introduced on goods transport vehicles at the rate of Rs.5 per KG of the laden

weight. Now the Bills seeks to reduce the rates of collection of tax on goods transport vehicles which are as under:

Rate of tax

Filer Non-Filer

Amount of tax on per KG of laden weight Rs. 2.5 Rs. 4

Collection of advance income tax on passenger transport vehicles

The Bill seeks to revise the rate of collection of tax on passenger transport vehicles plying for hire for on the basis

of seating capacity which are as under:

CapacityRs. Per seat per annum

Filer Non-Filer

Four or more persons but less than ten Rs. 50 Rs.100

Ten or more persons but less than twenty Rs.100 Rs.200

Twenty persons or more Rs.300 Rs.500

Collection of advance income tax on private motor vehicles

The Bill also seeks to revise the rate of collection of advance income tax payable for tax year 2016 at the time of

paying annual motor vehicle tax, in the case of private motor vehicles as under:

Engine Capacity Amount of tax

Filer Non-Filer

Up to 1000 cc Rs.800 Rs.1,200

1001 cc – 1199 cc Rs.1,500 Rs.4,000

1200 cc – 1299 cc Rs.1,750 Rs.5,000

1300 cc – 1499 cc Rs.2,500 Rs.7,500

1500 cc – 1599 cc Rs.3,750 Rs.12,000

1600 cc – 1999 cc Rs.4,500 Rs.15,000

2000 cc & above Rs.10,000 Rs.30,000

Advance tax on purchase, registration and transfer of Motor Vehicles

[Clause IV, Division III, Part IV of First Schedule]

Where the motor vehicle tax is deducted in lump sum, the previous table has been replaced by this one:-

Amount of Tax


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Engine Capacity Filers Non-filers

Upto 850cc - 5,000

851cc - 1000cc 5,000 15,000

1001cc – 1300cc 75,00 25,000

1301cc – 1600cc 12,500 65,000

1601cc – 1800cc 18,750 100,000

1801cc – 2000cc 25,000 135,000

2001cc - 2500cc 37,500 200,000

2501cc – 3000cc 50,000 270,000

Above 3000cc 62,500 300,000

RATES OF COLLECTION OF TAX UNDER SECTION 236 [TELEPHONE USERS]

[Clause (b), Division V, Part IV of First Schedule]

The Bill seeks to levy the tax on internet bill of a subscriber and pre-paid cards for internet at the rate of 14%.

CASH WITHDRAWL FROM BANK

[Division VI, Part IV of First Schedule]

The Bill proposes to enhance the rate of collection of advance tax on cash withdrawal by non-filer from 0.5% to

0.6% for transactions exceeding Rs. 50,000 per day.

ADVANCE TAX ON TRANSACTION IN BANK

[Division VIA, Part IV of First Schedule]

The Bill proposes to introduce the rate of collection of advance tax on banking transactions other than cash

transactions by a non-filer to 0.6% if the amount exceeds Rs. 25,000 in a day.

ADVANCE TAX ON SALE TO DISTRIBUTORS, DEALERS AND WHOLESALERS

[Division XIV, Part IV of First Schedule]

The rate of collection of tax under section 236G shall be as follows:-

Category of Sale Rate of Tax

Filer Non-Filer

Fertilizers 0.7% 1.4%

ADVANCE TAX ON DOMESTIC ELECTRICITY CONSUMPTION

[Division XIX, Part IV of First Schedule]

The rate of tax to be collected under section 235A shall be-

7.5% if the amount of monthly bill is Rs.75,000 or more; and


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ADVANCE TAX ON INTERNATIONAL AIR TICKET U/S 236L

[Division XX, Part IV of First Schedule]

The rate of tax to be collected under section 236L shall be-

Sr.# Type of ticket Rs. Per Person

1 First/ Executive Class 16,000

2 Other than economy 12,000

3 Economy 0

Advance tax on Banking transactions otherwise than through cash for non-filer

The rate of collection of advance tax for tax year 2016 banking transaction for non-filer are proposed to be

leviable at the rate of 0.6% of the transaction for non-filer if the total transactions in a day exceeds Rs. 50,000.

Rate of collection of tax by Pakistan Mercantile Exchange Limited

The rate of collection of tax by Pakistan Mercantile Exchange Limited is proposed as under:

1. Sale or purchase of future commodity contract from its member @ 0.1%

2. Commission on sale or purchase of future commodity contract from its members on commission

earned by them @ 0.1%

Advance tax on the payment to residents for use of machinery and equipment

The rate of deduction of tax is proposes at 10% of the gross amount of payment for the use or the right to use

industrial, commercial and scientific machinery and equipment.

Collection of advance tax on remittances of education expenses

The bill proposes to collect tax at the rate of 5% from the amount remitted abroad on account of education related

expenses.

SECOND SCHEDULE

EXEMPTIONS FROM TOTAL INCOME

[Clause (35), (113) & (126F) Part I of Second Schedule]

Clause (20) (113) (126F) has been omitted.

[Clause (61), Part I of Second Schedule]

Tax credit in respect of donations to The Indus Hospital, Karachi

The above Clause contains a list of names of approved donees, to whom donation made is exempt from tax. The

name of “The Indus Hospital, Karachi” has been proposed to be added to the said list .


27/48




Exemption to The Indus Hospital, Karachi

The Bill proposes to grant exemption to the income of “The Indus Hospital, Karachi” by inserting its name in the

list of institutions and entities whose income is exempt from tax.

[Clause (99A), Part I of Second Schedule]

Sale of immoveable property to a REIT Scheme

The above Clause grants exemption to profits and gains accruing to a person on sale of immoveable property to

REIT Scheme upto 30 June 2015. The Bill proposes to enhance the period of sale to 30 June 2020 in case of sale of

immoveable property to a Developmental REIT Scheme with the objective of development and construction of

residential buildings.

[Clause (126A), Part I of Second Schedule]

Exemption to the income derived by China Overseas Port Holding Company Limited

The income derived by China Overseas Port Holding Company Limited from Gwadar port operations presently

enjoys exemption from tax for a period of twenty years beginning 06 February 2007. The Bill proposes to extend

the exemption period from 20 years to 23 years.

[Clause (126I), Part I of Second Schedule]

Income of Manufacturer of certain Plant, Machinery & Equipment

A new Clause is being proposed to be inserted as a consequence of which profits and gains derived by a taxpayer

from an industrial undertaking set-up by 31 December 2016, which is engaged in the manufacturing of plant,

machinery, equipment and items with dedicated use (no multiple uses) for generation of renewable energy from

sources like solar and wind for a period of five years beginning from 01 July 2015.

[Clause (126J), Part I of Second Schedule]

Income of Warehousing or Cold Chain facilities


from an industrial undertaking set-up between 01 July 2015 and 30 June 2016 which is engaged in operating,

warehousing or cold chain facilities for storage of agriculture produce for a period of three years beginning with

the month in which the industrial undertaking is set-up or commercial operations are commenced whichever is

later.

[Clause (126K), Part I of Second Schedule]

Income from operating Halal Meat production


from an industrial undertaking set-up between 01 July 2015 and 31 December 2016 which is engaged in


28/48



operating halal meat production and has obtained halal certification for a period of four years beginning with the

month in which the industrial undertaking is set-up or commercial production is commenced whichever is later.

[Clause (126L), Part I of Second Schedule]

Income from industrial undertaking set-up in KPK


from a manufacturing unit set-up in KPK Province between 01 July 2015 and 30 June 2018 for a period of five

years beginning with the month in which the industrial undertaking is set-up or commercial production is

commenced whichever is later. However, the exemption is subject to the following conditions:

- The manufacturing unit is set-up between 01 July 2015 and 30 June 2018 both days inclusive.

- The manufacturing unit is not established by splitting up or reconstruction or reconstitution of an undertaking

already in existence or by transfer of machinery of plant from an undertaking established in Pakistan at any time

before 01 July 2015.

[Clause (126M), Part I of Second Schedule]

Income from Transmission Line Project


from transmission line project set-up in Pakistan between 01 July 2015 and 30 June 2018. The exemption is

applied to projects:

- Owned and managed by a company formed for operating the said project and registered under the Companies

Ordinance, 1984 and having its registered office in Pakistan;

- Not formed by the splitting up, or the reconstruction or reconstitution, of a business already in existence or by

transfer to a new business of any machinery or plant used in a business which was being carried on in Pakistan at

any time before the commencement of the new business; and

Owned by a company fifty percent of whose shares are not held by the Federal Government or Provincial

Government or a Local Government or which is not controlled by the Federal Government or a Provincial

Government or a Local Government.


Exemption to LNG Terminal Operators and Terminal Owners

A new clause is being proposed to be inserted by virtue of which profits and gains derived by LNG Terminal

Operators and Terminal Owners will be exempt from tax for a period of five years from the date of

commencement of commercial operations.


Exemption to income from social security contribution


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A new clause is being proposed to be inserted as a consequence of which income from social security

contributions derived by Employees’ Social Security Institutions of Balochistan, Khyber Pakhtunkhwa, Punjab and

Sindh shall be exempt from tax. However, income other than income from social security contributions would

remain taxable.

[Clause (13C), (14), (14A), (14B), (21), (56B), (56H), (59)(sub clause(iii)), (72A) & (83) Part II of Second

Schedule]

These clauses have been omitted.

[Clause (11A), Sub-clause (iv) Part II of Second Schedule]

Exemption from minimum tax to KAPCO

Exemption provided to income arising to the purchaser of Kot Addu Power Station from owning and operating the

power station under Clause (138), Part I of the Second Schedule to the Ordinance, was withdrawn through the

Finance Act, 2008.

The Bill now proposes to omit sub-clause (iv) of Clause (11A), which provided exemption from levy of minimum

tax to KAPCO under section 113 of the Ordinance, being redundant provision.

[Clause (11A), Sub-clause (xviii), Part II of Second Schedule]

Coal Mining Project in Sindh – Exemption from minimum tax

Profits and gains derived by a taxpayer from coal mining project in Sindh, supplying coal exclusively to power

generation projects is exempt from tax under Clause (132B) of Part-I of the Second Schedule to the Ordinance

which was introduced vide Finance Act, 2014. The Finance Act, 2014 also inserted reference of Clause (132B) in

Sub-clause (v) of Clause (11A) of the Part-IV of the Second Schedule to the Ordinance exempting from levy of

minimum tax, under Section 113 of the Ordinance receipts from sale of electricity, which was not appropriate

since Clause (132B) exempts profits and gains from coal mining projects. The Bill has now rectified the situation

and proposes to delete the reference of Clause (132B) from Sub-clause (v) of Clause (11A). The Bill proposes to

exempt coal mining projects from levy of minimum tax under Section 113 of the Ordinance.

[Clause (11A), Sub-clause (xix) & Clause (11D) Part II of Second Schedule]

Exemption from minimum tax and alternate corporate tax to LNG Terminal Operators and Terminal Owners

With the proposed exemption from tax to profits and gains derived by LNG Terminal Operators and Terminal

Owners under Clause (141), Part I of the Second Schedule to the Ordinance, the Bill also proposes to exempt such

LNG Terminal Operators and Terminal Owners from the levy of minimum tax under section 113 of the Ordinance.

In line with the above proposed exemptions to LNG Terminal Operators and Terminal Owners, the Bill also seeks

to provide exemption from the levy of Alternative Corporate Tax under section 113C of the Ordinance.

[Clause (11A), Sub-clause (xx) Part II of Second Schedule]

Exemption from minimum tax for businesses in KPT, FATA & PATA


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Clause 126F, Part I of the Second Schedule to the Ordinance provided exemption to profits and gains derived by a

taxpayer, excluding manufacturers and suppliers of cement, sugar, beverages and cigarettes, located in the most

affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and PATA for the tax years 2010, 2011 and

2012.

Consequent amendment has now been proposed to be brought in Clause (11A) by way of inserting a new sub-

clause (xx) wherein exemption from the levy of minimum tax under section 113 of the Ordinance is beingproposed.

The proposed amendment would have a retrospective impact being related to tax years 2010, 2011 and 2012.

However, the Bill does not provide for any mechanism as to how such amendment would be applied in cases

where minimum tax has already been charged and paid for the above tax years. The viable medium to avail the

benefit of such exemption would either be revision of return already filed or, in cases where assessments have

been amended, rectification of the amended assessment orders passed for the relevant tax years.

[Clause (11A), Sub-clause (xxi) Part II of Second Schedule]

Rice Mills – Exemption from minimum tax for the tax year 2015

SRO 57(1)/2012 dated 24 January 2012 inserted Clause (13) in Part-III of the Second Schedule to the Ordinance

whereby rice mills were subject to a reduced rate of minimum tax, under Section 113 of the Ordinance at 0.2% of

the turnover. The Bill now proposes to exempt the levy of minimum tax in case of rice mills for the tax year 2015.

[Clause (11A), Sub-clause (xxii), (xxiii), (xxiv) & (xxv) Part II of Second Schedule]

Exemption from minimum tax

With the proposed exemption from tax on profits and gains derived by a taxpayer from the following industrial

undertakings, under respective Clauses of Part-I of the Second Schedule to the Ordinance, the Bill also proposes to

exempt such projects from the levy of minimum tax under Section 113 of the Ordinance.

Industrial Undertaking

Relevant Clauses of

Part-I of the Second

Schedule

Income of Manufacturer of equipment with dedicated used for

generation of renewable energy

126I

Income of Warehousing or Cold Chain Facilities126J

Income from Operating Halal Meat Production126K

Income from Industrial Undertaking set-up in KPK126L

[Clause (11A), Sub-clause (xix) & Clause (11D) Part II of Second Schedule]

Exemption from minimum tax and alternate corporate tax to LNG Terminal Operators and Terminal Owners

Clause (11A), Sub-clause (xix) & Clause (11D)With the proposed exemption from tax to profits and gains derived by LNG Terminal Operators and Terminal

Owners under Clause (141), Part I of the Second Schedule to the Ordinance, the Bill also proposes to exempt such

LNG Terminal Operators and Terminal Owners from the levy of minimum tax under section 113 of the Ordinance.


31/48



In line with the above proposed exemptions to LNG Terminal Operators and Terminal Owners, the Bill also seeks

to provide exemption from the levy of Alternative Corporate Tax under section 113C of the Ordinance

[Clause (16A), Part II of Second Schedule]

Exemption from withholding of tax for advertisement services

Under the aforesaid Clause, exemption was provided from withholding of tax under section 153(1)(b) of the

Ordinance in respect of payments to electronic and print media for advertisement services. The exemption thereinhas been proposed to be withdrawn in the Bill.

[Clause (46), Part II of Second Schedule]

Exemption from withholding of tax while making payment to PE of a non-resident E&P companies

Earlier, payments in respect of supply of goods, rendering of services and execution of contracts to a permanent

establishment (PE) of a non-resident person were subject to withholding of tax under section 153(1) of the

Ordinance. Clause (46), Part IV of the Second Schedule to the Ordinance provided for exemption from withholding

of tax under section 153(1) in respect of payment received by an oil distribution company or an oil refinery or a

PE of non-resident Petroleum Exploration and Production (E&P) Companies.

Through the Finance Act, 2012, payment to a PE of non-resident was excluded from the purview of section 153(1)

and a new sub section (2A) was inserted in section 152 of the Ordinance, providing for withholding of tax inrespect of above payments to a PE of non-residents.

However, corresponding change was not brought into Clause (46), Part IV of the Second Schedule to the

Ordinance resulting in withdrawal of exemption from withholding of tax on account of payment received by a PE

of non-resident Petroleum Exploration and Production (E&P) Companies.

The Bill now proposes to introduce amendment in the aforesaid clause by inserting reference to section 152(2A)to account for the above anomaly and restore exemption from withholding of tax to the above companies.


Exemption from payment of tax at import stage under Section 148

The goods classified under Pakistan Custom Tariff falling under Chapter 27 is presently exempted from payment

of tax at import stage. The Bill seeks to withdraw the said exemption.

Likewise all goods classified under Chapter 99 of Pakistan Custom Tariff are also presently exempted from

payment of tax at import stage. The Bill seeks to withdraw said exemption from goods falling under PCT heading

9918.The Bill also proposes to exempt from payment of tax at import stage in case of certain petroleum products

imported by oil marketing companies and oil refineries as under:

- Petroleum oils and oils obtained from bituminous minerals crude- Furnace Oil

- High Speed Diesel Oil

- Motor split- JP-1

- Base Oil for lubricating oil


Large Trading Houses

Large Trading Houses, subject to certain conditions, are exempt from payment of minimum tax under Section 113

of the Ordinance and are not subject to withholding of tax under Section 153 of the Ordinance. The Bill seeks to

propose to insert a further explanation to Clause (57) to clarify that in-house preparation and processing of food

and allied items for sale to customers shall not disqualify a company from being treated as a Trading House,provided all other conditions as mentioned therein are fulfilled and sale of such items does not exceed 2% of total

sales.


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[Clause (61A) & (28B) Part II of Second Schedule]

Deduction of tax from cash withdrawal by exchange companies

The Bill proposes to omit Clause (61A) which grants exemption from withholding of tax under Section 231A in

respect of cash withdrawal by exchange companies duly licensed and authorized by the SBP on bank accounts

exclusively dedicated for authorized business related transactions, subject to certain conditions.

However, Clause (28B) has been proposed to be inserted in Part II of the Second Schedule to the Ordinance

wherein a reduced rate of 0.15% has been proposed on cash withdrawals by such exchange companies.

[Clause (86) Part II of Second Schedule]

Exemption from invocation of Section 111

The above Clause was inserted in the Ordinance through SRO 1065(I)/2013 dated 20 December 2013, whereby

the investment made by an individual, AOP or company in a Greenfield industrial undertaking was granted

exemption, subject to certain conditions as specified therein, from probe of source of investment under Section

111 of the Ordinance. One of the conditions is that the investment has to be made on or after 01 January 2014 and

commercial production of the said industrial undertaking has to be commenced on or before 30 June 2016. The

Bill proposes to extend the period of commencement of commercial production from 30 June 2016 to 30 June

2017.

[Clause (90) Part II of Second Schedule]

Collection of advance tax on functions and gathering

The aforesaid clause provided exemption from collection of advance tax on functions and gatherings under

section 236D of the Ordinance to Federal Government, Provincial Government, an individual entitled to privileges

under the United Nations (Privilege and Immunities) Act, 1948 and a foreign diplomat or a diplomatic mission.The Bill now proposes to withdraw the above exemptions by omitting the above clause.

[Clause (91) & (92)Part II of Second Schedule]

Exemption from payment of tax at import stage under Section 148

The Bill proposes to exempt payment of tax at import stage at the time of import of certain equipment as under

[Clause (91)]:

- Tillage and seed bed preparation equipments.

- Seeding or planting equipments.- Irrigation, drainage and agro – chemical application equipments.

- Harvesting, threshing and storage equipments.

- Post-harvest handling and processing equipments.

The Bill further proposes to exempt payment of tax at import stage while importing [Clause (92)]:

- Aircraft whether imported or acquired on wet or dry lease.

- Maintenance kit for use in trainer aircrafts.

- Spare parts for use in aircrafts, trainer aircrafts or simulators.

- Machinery, equipment and tools for setting up maintenance, repair and overhaul workshops.

- Operational tools, machinery, equipment and furniture and fixtures on one time basis for setting up

Greenfield airports.

- Aviation simulators.


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SALES TAX

AMENDMENT IN SALES TAX ACT, 1990

Sr. Sec. Before Amendment After Amendment

1. Sec. 2(1)

Sec.

2(5)(ab)

Section

2(28)

Section

2(33)

DEFINITION

No such provision was available.

Cottage industry is already defined as

a manufacturer whose annual

turnover from taxable supplies

made in any tax period during

the last twelve months does not

exceed five million rupees.

Whose annual utility

(electricity, gas and telephone)bills during the last twelve

months do not exceed seven

hundred thousand rupees.

The def inition of “retailer” inter alia

states that “the total turnover per

annum shall be taken into account for

the purposes of registration of the

retailer under section 14”

Previously activities of the toll

manufacturer were considered as

“Service” and sales tax was charged at

the same rate.

ACTIVE TAXPAYERS The concept of ‘Active Taxpayers’ is aregistered person who does not fall in any of the following:

Black listed, blocked or suspended;

Fails to file return for 2 consecutive months;

Fails to file income tax return by due date;

Fails to file two consecutive monthly or annual

statements under section 165 of the Income Tax

Ordinance, 2001.

The Bill proposes to increase the limit of seven hundred

thousand to eight hundred thousand rupees. The

amendment is aimed to give effect to the increase in the

prices of the utilities in the recent years.

The scheme of registration and charging of sales tax by the

retailers is no more linked or based on turnover.

It is proposed that the transfer or delivery of goods

manufactured by the toll manufacturers (who manufacture

goods from the raw material not belonging to them, on

charges basis) to the owners or their nominated persons

would be considered as supply.

Proposed change is just to provide legal coverage to the


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the supplier in his return at the time of filing of

return by the buyer.

6. Sec.

14

Registration

Previous requirement for getting

register has been amended:

As per the proposed amendment every person who is

engaged in making taxable supplies in Pakistan, including

zero-rated supplies and falling in any of the following

categories is required to be registered under the Sales Tax

Act, 1990:-

a manufacturer who is not running a cottage

industry;

a retailer who is liable to pay sales tax under the Act

or rules made thereunder, excluding such retailer

required to pay sales tax through his electricity bill

under sub-section (9) of section 3;

an importer;

an exporter who intends to obtain sales tax refund

against his zero-rated supplies;

a wholesaler, dealer or distributor; and

a person who is required, under any other Federal

law or Provincial law, to be registered for the

purpose of any duty or tax collected or paid as if it

were a levy of sales tax collected under the Act

7 Sec. 33 Offences and Penalties

The penalty for late filing of the sales tax

return or for late deposit of tax is at a

concessional rate of Rupees 100 per day

provided the delay does not exceed

fifteen days.

The Bill now proposes to restrict the availability of the

concessional rate of Rs. 100 per day to a delay of upto ten

days only

8 Amendment in Fifth Schedule

Supply of locally manufactured plant and

machinery earlier zero rated under SRO

397(I)/2001.

Export of exempted goods by

manufacturer was zero rated.

Now continue to be treated as zero rated under fifth

schedule.

Now respective input tax adjustment would be available to

such manufacturer/exporter.

9 Sixth Schedule Exemptions

Not previously exempted Import or supply of following goods is proposed to be

exempted:

Aircraft, whether imported or acquired on wet or

dry lease


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Maintenance kits for use in trainer aircrafts of PCT

headings 8802.2000 and 8802.3000

Spare parts for use in aircrafts, trainer aircrafts or

simulators

Machinery, equipment and tools for setting up

maintenance, repair and overhaul (MRO) workshop

by MRO company recognized by Aviation Division

Operational tools, machinery, equipment and

furniture and fixtures on one-time basis for setting

up Greenfield airports by a company authorized by

Aviation Division.

Aviation simulators imported by airline company

recognized by Aviation Division.

Local supply of the following goods is proposed to be

exempted:

Raw and pickled hides and skins, wet blue hides and

skins

Bricks (upto June 30, 2018)

Crushed stone (upto June 30, 2018)

Items exempted under SRO 880(I)/2007, SRO 408(I)/2012

and SRO 760(I)/2012 are proposed to continue to be

exempted under Sixth Schedule.

Supplies of marble and granite by manufacturers exempted

under SRO 76(I)/2008 are proposed to continue to be

exempted under Sixth Schedule subject to conditions of

annual turnover of less than Rs 5 million and annual utility

bills not more than Rs 800,000.

Items covered under Fifth Schedule to the Customs Act, 1969now proposed to be exempted under Sixth Schedule.

Import and supply of equipment under PCT codes

3006.9100, 3926,9050 and 8539.3930 are proposed to be

exempted under Sixth Schedule.


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10 Eighth Schedule

Not previously existed

These goods were Previously subject to

reduce rate of 5%

Following items are proposed to be subject to reduced rate

of 7%:

Tillage and seed bed preparation equipment

Seeding or planting equipment

Irrigation, drainage and agro- chemical application

equipment

Harvesting, threshing and storage equipment

Post-harvest handling and processing &

miscellaneous machinery

Following items are proposed to be subject to reduced rate

of 10%

Machinery and equipment for development of grain

handling and storage facilities

Complete plants for relocated industries

Machinery, equipment and other capital goods

meant for initial installation, balancing,

modernization, replacement or expansion of oil

refining (mineral oil, hydro- cracking and other

value added petroleum products), petrochemical

and petrochemical down-stream products including

fibers and heavy chemical industry, cryogenic

facility for ethylene storage and handling.

11 Prescribed items were subject to

reduce rate of 5%

Following items are proposed to be omitted from eighth

schedule:

Following items imported by Call Centers, Business

Processing Outsourcing facilities duly approved by Pakistan

Telecommunication Authority.

(1) Telephone sets/head sets.

(2) Cat 5/Cat 6/Power cables

(3) PABX Switch

(4) Plasma TV

(5) Dedicated telephone exchange system for call centers.

(6) Other digital cell recorders

Proprietary Formwork System for building/structures of a

height of 100 ft and above and its various items/

components consisting of the following, namely:-

(1) Plastic tube.


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(2) Plastic tie slot filters/plugs, plastic cone.

(3) Standard steel ply panels, Special sized steel ply panels,

wedges, tube clamps (B-Type & G Type), push/pull props,

brackets (structure), steel soldiers (structure), drop head,

standard, prop tic, buard rail post (structure), coupler brace,

cantilever frame, decking beam/Infill beam and doorwayangles.

(4) Lifting Unit (Structure)

(5) Bolts, tie bolts, anchor bolt assembly (fastener), anchor

screw (fastener).

(6) Nuts

(7) Steel pins, tie wing nut (fastener).

(8) Steel washers, water plate (fastener).

(9) Adjustable base jack (thread rod with nut and steelplate), adjustable fork head (threaded rod with nut and steel

channel).

Import and supply of ingredients of poultry and cattle feed

exempt under SRO 1007(I)/2005 are proposed to be taxed at

5% under Eighth Schedule.

Reduced rate notified vide the following notifications areproposed to be subject to same reduced rate and conditions

under the Eighth Schedule: - SRO 69(I)/2006 @ 16% - SRO

313(I)/2006 @ 6% - SRO 657(I)/2013 @ 5% - SRO

572(I)/2014 @ 10%

12 Ninth Schedule

Prescribed rates were used Sales tax rates under the Ninth Schedule on import and/or

registration of IMEI by Cellular Mobile Operators have been

doubled.


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FEDERAL EXISE DUTY

AMMENDMENTS IN FEDERAL EXISE ACT , 2015

Sr. Section Before Amendment After Amendment

1. Sec.

16(2)(3)

Exemptions

The Federal Government may, bynotification in the official Gazette, exempt

any goods or class of goods or any

services or class of services from the

whole or any part of the duty leviable

under this Act.

Further The Board may by special order,

exempt from the payment of the whole or

any part of the duty leviable under this

Act, any goods or services on which such

duty is leviable.

The powers of the Board to grant exemption from thelevy of the FED have been withdrawn. In view of the

proposed withdrawal of powers of the Board, the Federal

Government is only vested with the powers to grant

exemption for levy of FED on any goods or class of goods

or any services or class of services as the case may be,

subject to the approval of the Economic Coordination

Committee of Cabinet. This approval is sought for

whenever circumstances exist to take immediate action

for the purposes of national security, natural disaster,

national food security in emergency situations arising out

of abnormal fluctuation in international commodity

prices, removal of anomalies in duties, development of

backward areas and implementation of bilateral and

multilateral agreements.

All notifications by the Federal Government for

providing exemption shall be placed before the National

Assembly in a financial year. Further, any notification

issued after 1st July 2015 shall, if not earlier rescinded,

stand rescinded on the expiry of the financial year in

which the said notifications was issued.

2. Sec.

35 (1)

Power of Board or Commissioner to

Pass Certain Orders

The Board or the Commissioner was

authorized to take suo moto action to

call for and examine the records of any

proceedings under this Act, or for

verifying the legality or propriety of any

decision or order passed by a subordinate

Officer and may pass such order as he

may think fit.

It has been proposed that the Board or the

Commissioner, as the case may be may take action on the

application by the aggrieved person in addition to their

suo moto action.


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3.

4.

Sec.

45 (A)

Sec.

46

Monitoring or Tracking by Electronic

or Other Means

Section 45A was inserted by the Finance

Act, 2013, whereby the Board may, by

notification in the official Gazette, specify

any registered person or class ofregistered persons or any goods or class

of goods in respect of which monitoring

or tracking of production, sales,

clearances, stocks or any other related

activity may be implemented through

electronic or other means as may be

prescribed. In such cases, no excisable

goods shall be removed or sold by the

manufacturer or any other person

without affixing tax stamp, banderole,

stickers, labels, etc. in any such form, style

and manners as may be prescribed by the

Board.

Departmental Audit

The heading of Section 46 was read as

“Departmental Audit”.

Previously, sub-section 4 of section 46

authorizes the Board to appoint a

Chartered Accountant or a Cost and

Management Accountant or a firm of such

accountants to conduct audit of a person

liable to pay duties under this Act in such

manner and subject to such conditions itmay specify.

The prop

ZIC Tax Handbook FB 2015

Documents

Transcript of ZIC Tax Handbook FB 2015