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FOR THE USE OF CLIENTS & STAFF ONLY

HLB IJAZ TABUSSUM & CO.

Chartered Accountants

Islamabad.

May 27, 2017

The information presented in this Memorandum has been sifted from the Federal

Budget and Finance Bill, 2017, as presented in the National Assembly. It contains

proposed amendments, which will become operative only after adoption by the

legislative. Views expressed herein should not be acted upon without first obtaining

professional advice, as the interpretation may differ in different circumstances.

Soon after the passing of the Finance

Act, 2017, the amended soft copy of this

Memorandum will be available on our

Website http://www.hlbitc.com

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CONTENTS

FROM SENIOR PARTNER’S DESK 03

BUDGET 2017-2018 AT A GLANCE 05

SALIENT FEATURES OF FEDERAL BUDGET 2017-18 06

INCOME TAX ORDINANCE, 2001 23

SALES TAX ACT, 1990 47

FEDERAL EXCISE ACT, 2005 59

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FROM SENIOR PARTNER'S DESK

This is the 5th budget presented by the current administration and has naturally

been prepared with an eye on the coming election year. Towards this end the

government has decided to continue agri-subsidies, offer new loans to farmers

and a 40% increase in development expenditure.

Although the ambitious targets set in the previous budget like tax collection,

investments, reduction in current deficit and GDP fell short, still the achieved

GDP of 5.3% is highest in the past 10 years. The FY17 Economic Survey attributes

this achievement to accommodative monetary policies, increase in

development spending, growth in private credit and better energy supplies.

The GDP again resides on 6.0% growth in the service sector which has a 60%

share, while the industrial sector showed a growth of 5.0% (21%weightage)

though it was below the target of 7.7%. Agriculture (19.5% GDP contribution)

recovered during the year (up 3.5%) compared to the negative growth last

year. The government aspires to further build on the growth momentum as it

aims for GDP growth of 6% in FY 18. This growth is based on 6.4% growth in

services followed by 7.3% in industrial and 3.5% in agriculture.

As per the Economic Survey 2016-17, the CPI based inflation stood at average

4.09% while the per capita income rose to $ 1,629 from $ 1,531 last year.

However, the pundits have predicted this figure to go down when the data of

the new census is taken into account.

The government has targeted its tax revenue collection at Rs. 4,330.5 billion, an

increase of 38.34% over last year. To meet this target the government has

proposed enhanced rates of withholding tax on non-filers, revised capital gains

tax on securities, imposition of regulatory duties on 565 luxury items, extension in

super tax for another year, withdrawal of fixed tax regime on

builders/developers, revised zero rating regime for five export oriented sectors

and increase in excise duty on cement/cigarettes and 6% sales tax on

commercial imports of fabrics.

The total expenditure is estimated at Rs. 4,752.9 billion, an increase of 6.11%

with major spending, as usual, in debt servicing (28.68%), defense (19.36%) and

public sector development fund (21.06%).

The Tax Memorandum provides in depth analysis of the changes brought

about in tax laws of the country by the budget. We hope our clients and other

users will find this document useful. This document is simultaneously being

made available at our website www.hlbitc.com. The clients are encouraged

to access this and other useful material made available by the firm.

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The Partners of HLB Ijaz Tabussum & Co. Chartered Accountants acknowledge

the tireless efforts of its Islamabad office in producing this document.

IJAZ AKBER - FCA

Senior Partner and International Contact Person

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BUDGET 2017-18 AT A GLANCE

RECEIPTS: Budget Estimates

S. No. SOURCES OF FUNDS (ESTIMATED) (Rs. In billion)

1. Tax Revenue 4,330.5

- FBR Taxes 4,013.0

- Other Taxes 317.5

2. Non-Tax Revenue 979.9

a)Gross Revenue Receipts (1+2) 5,310.3

b)Less: Provincial Share 2,384.2

I. Net Revenue Receipts (a-b) 2,926.1

II. Net Capital Receipts (Non-Bank) 528.0

III. External Receipts (net) 511.4

IV. Estimated Provincial Surplus 347.3

V. Bank Borrowing 390.1

VI. Privatization Proceeds 50.0

TOTAL RESOURCES (I To VI) 4,752.9

EXPENDITURES: Budget Estimates

S. No. APPLICATION OF FUNDS (ESTIMATED) (Rs. In billion)

(A) Current: (1 To 7) 3,477.1

1. Interest payment 1,363.0

2. Pension 248.0

3. Defense Affairs & Services 920.2

4. Grants and Transfers 430.2

5. Subsidies 138.8

6. Running of Civil Government 376.8

(B) Development: (I to III) 1,275.8

I. Federal PSDP 1,001.0

II. Net Lending 122.6

III. Other development expenditure 152.2

TOTAL APPLICATION (A+B) 4,752.9

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SALIENT FEATURES FOR BUDGET 2017-18

INCOME TAX

Relief Measures

• Reduction in Tax Rate for Companies: Continuing with the policy of

reducing corporate tax rates, the rate has been reduced further from

31% to 30% for the Tax Year 2018.

• Reduction of withholding tax rates for mobile phone subscribers: The

number of mobile phone subscribers in Pakistan has shown a gradual

and sustained increase and presently there are about 140 Million mobile

telephone subscribers in Pakistan belonging to various strata of society.

In order to promote mobile phone density, the rate of withholding

income tax for mobile phone subscribers is being reduced from 14% to

12.5%.

• Introducing concept of start-ups: In order to promote innovation and

entrepreneurship in Information Technology the concept of start-up has

been introduced. A start-up has been defined as a business set-up by an

individual, AOP or a company having turnover upto Rs.100 Million,

registered and certified by the Pakistan Software Export Board (PSEB) as

an information technology entity engaged in offering technology driven

products or services to any sector of the economy. In order to incentivize

the start-ups, tax exemption is being accorded to profits earned by such

start-ups for a period of three years. Moreover, exemption from levy of

minimum tax as well as withholding tax (as recipient) is also being

accorded to such start-ups.

• Exemption on cash withdrawal by branchless banking agents: At

present, tax @ 0.3% and 0.6% is deducted upon aggregate cash

withdrawals exceeding Rs.50,000 per day from filers and non-filers

respectively. In order to promote digital payments in the country and to

assist in the realization of the long term vision of Universal Financial

Inclusion in Pakistan, exemption is being accorded to branchless banking

agents operating under the Asaan Mobile Account Scheme from

withholding tax on cash withdrawals made for the purpose of making

payments to their respective customers.

• Exemption from collection of advance tax on vehicles leased under the

Prime Minister’s Youth Loan Scheme: At present, advance tax @ 3% is

collected at the time of leasing motor vehicles to a non-filer. In order to

facilitate the generation of employment opportunities among the

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unemployed youth and to mitigate their hardship, exemption from

collection of advance tax is being accorded to vehicles leased under

the Prime Minister‘s Youth Loan Scheme.

• Enhancement in limit for importing raw material by manufacturers without

collection of income tax at the import stage: Presently, the quantitative

limit for import of raw materials by an industrial undertaking for its own

use, without collection of tax at the import stage, is 110% of the raw

materials imported and consumed in the previous tax year. In order to

promote industrialization and manufacturing the quantitative limit for

import of raw materials by industrial undertaking, without collection of

income tax at the import stage , on the basis of exemption certificate

issued by the Commissioner, is being enhanced from 110% to 125% of the

quantity imported and consumed in the previous tax year.

• Reduction in threshold for paying advance tax in the case of an

individual: At present an individual is obliged to pay advance tax if his

latest assessed taxable income is Rs.500,000 or more. In order to provide

relief and to facilitate small taxpayers, the threshold for payment of

advance tax on the basis of latest assessed taxable income is being

enhanced from Rs.500,000/- to Rs.1,000,000/-

• Further relief on tax credit for education expenses: At present, individuals

having taxable income of less than one million rupees are entitled to a

deductible allowance in respect of education expenses incurred by

them. In order to provide respite upto middle income groups paying

tuition fees, the threshold of taxable income for individuals entitled to a

deductible allowance in respect of education expenses incurred is

being increased from Rs.1,000,000/- taxable income to Rs.1,500,000/-.

• Relief from Withholding tax on Life Insurance Premium: Presently,

advance tax is collected by insurance companies from non-filers if life

insurance premium paid by such non-filers exceeds Rs.200,000/- per

annum. In order to provide respite to taxpayers having life insurance

policies the threshold for collection of advance tax from such non-filers is

being enhanced from Rs.200,000/- to aggregate amount of Rs.300,000/-

per annum.

• Relief for individuals and AOP’s paying health insurance premium

/contribution: At present a resident person other than a company,

deriving income from salary or business and being a filer is entitled to a

tax credit in respect of any health insurance premium or contribution

paid to an insurance company. In order to provide respite to individuals

and AOP‘s availing health insurance the lower limit of tax credit

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available to such persons, on a proportionate basis, is being increased

from Rs.100,000/- to Rs. 150,000/-.

• Reduction of withholding tax rates on Registration of Motor Vehicles:

In order to encourage and incentivize compliant taxpayers, being filers

of income tax returns, withholding tax on registration and transfer of

motor vehicles having engine capacity upto 850cc, 851cc to 1000cc

and 1001cc to 1300 cc is being reduced from existing Rs.10,000/-,

Rs.20,000/- and Rs.30,000/- to Rs.7,500/-, Rs.15,000/- and Rs.25,000/-

respectively.

• Loan to employee by employer: A present interest free loan exceeding

Rs. 0.5 Million provided by an employer to an employee is treated as a

perquisite and is subjected to tax in the hands of the employee. In order

to provide relief to such employees it is proposed to enhance this limit of

interest free loans from the existing 0.5 Million to 1 Million.

• Extending period for which tax credit on enlistment is available: At

present, upon enlistment of a company in the stock exchange, 20% tax

credit for a period of two tax years is available on the tax payable by

such company. In order to further incentivize the enlistment of

companies on the stock exchange such tax credit is being extended for

another two tax years, however, such tax credit shall be allowed @10%

of the tax payable for each of these subsequent two tax years.

• Reduced rate of minimum tax on services rendered by the Pakistan

Stock Exchange: Presently, services rendered by Pakistan Stock

Exchange Limited are subjected to 8% minimum tax which results in an

effective tax rate which is much higher than the prevalent corporate

rate of tax. To further improve the performance of the Stock Exchange it

is being subjected to reduced rate of minimum tax @ 2% on its services.

• Limit for sales promotion by pharmaceutical companies to be enhanced:

A provision was introduced in the Finance Act, 2016 whereby

expenditure incurred by pharmaceutical companies on sales promotion,

advertisement and publicity, in excess of 5% of turnover was to be

treated as an inadmissible expense. In view of the difficulty being

experienced by pharmaceutical companies in carrying out their normal

business activities the limit for expenditure incurred by such companies

on sales promotion, advertisement and publicity is being enhanced from

5% to 10% of turnover.

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• Tax neutrality in Islamic Banking viz-a-viz conventional banking: In order

to promote and incentivize Islamic Banking, special provisions have been

introduced whereby tax neutrality has been accorded in the case of

Musharika financing by extending the benefit of depreciation on assets

coowned in the case of a Musharika arrangement.

• Fixed tax by Hajj Group Operators: At present Hajj Group operators are

paying Rs.5000/- per Haji in respect of income from Hajj operations. In

order to facilitate Hajj Group operators the fixed tax of Rs.5000/- per Haji

is being extended for the Tax Year 2017.

• Exemption to income of political parties: At present there is no specific

exemption in the law in respect of income of political parties. As a relief

measure, exemption is now being proposed on income of all political

parties registered with the Election Commission of Pakistan under the

Political Parties Order, 2002.

• Exemption for Non-Profit /Charitable Institutions: In order to encourage

non-profit/charitable institutions ,income of the following charitable

organization/non- profit organizations is proposed to be exempted:-

o Gulab Devi Chest Hospital

o Pakistan Poverty Alleviation Fund

o National Academy of Performing Arts

• Incentivizing distribution of dividend: At present, there is exemption from

tax on the undistributed reserves of a public company, other than a

banking company or a modaraba if the lesser of at least 40% of after tax

profit or 50% of the paid up capital is distributed as dividend. In order to

protect the interest of small investors and to promote payment of

dividends the condition regarding distribution of 50% of paid up capital is

being omitted.

• Concept of provisional assessment to be abolished: At present, there is

no right of appeal against a provisional assessment order which attains

finality after the expiry of 45 days from the date of service of such order if

the taxpayer fails to furnish a complete return of income. In order to

alleviate the hardship being faced by various taxpayers who are unable

to file return of income within 45 days on account of genuine reasons

and have no remedy against such order, the concept of provisional

assessment is being done away with.

• Revision of withholding tax statements: Presently taxpayers are unable to

revise withholding tax statements in case of any error /omission. In order

to facilitate taxpayers, a new provision is being introduced enabling

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taxpayers to revise withholding tax statements suo-moto within 60 days

of the filing of withholding tax statements.

• Empowering Chief Commissioner to revise order refusing extension in

filing of tax return and statements: At present there is no remedy

available to a taxpayer if the concerned Commissioner refuses to grant

extension in filing of an income tax return, or a wealth tax statement. In

order to facilitate such taxpayers, the Chief Commissioners are being

empowered to revise an order by a Commissioner refusing to grant such

extension.

• Reduction of withholding tax rates on fast moving consumer goods:

The present the rate of withholding tax on sale /supply of Fast Moving

Consumer Goods is 3% and 3.5% respectively for companies and non-

companies. Distributors of Fast Moving Consumer Goods typically have

high volumes but low profit margins, therefore, the incidence of

withholding tax at the present rates causes undue hardship for such

distributors. In order to mitigate their hardship, the rates of withholding tax

are being reduced to 2% and 2.5% respectively for companies and non-

companies.

Revenue Measures

• Taxation of Dividend: The present rate of tax of 12.5 % on dividend

income is on the lower side as compared to most other countries in the

region. It is proposed that the rate be increase to 15%. Furthermore, rate

of tax on dividend received from mutual funds is being rationalized and

enhanced from existing 10% to 12.5%.

• Rationalization of rates on interest income: At present there are three

slabs for taxation of interest income for persons earning interest income

upto Rs.25 Million, from 25 Million to 50 Million and in excess of Rs.50

Million. In order to rationalize taxation of interest income and to reduce

the incidence of tax upon persons earning lesser interest income the

following new slabs are being introduced:-

Where mark-up does not exceed Rs. 5 M 10%

Where mark-up exceeds Rs.5 M but does not exceed

Rs.25 M

12.5%

Where mark-up exceeds Rs.25 M 15%

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• Simplification of rate structure on Capital Gains Tax: At present there is a

three tier rate structure for capital gains tax on securities based upon the

holding period of securities i.e. less than 12 months, more than 12 months

but less than 24 months and more than 24 months but less than 5 years.

For the purposes of simplification and promotion of stock market

transactions, a flat /single rate of tax of 15% for filers and 20% for nonfilers

is being introduced.

• Withdrawal of tax credit to manufacturers making 90% sale to registered

persons: A tax credit of 3% of tax liability was made available to all

manufacturers who make 90% of their sales to sales tax registered

persons in order to encourage documentation and for facilitating entry

into the formal sector, however, this incentive has failed to achieve its

desired objective and has failed to contribute, in any meaningful

manner, towards documentation. In this backdrop this tax credit is being

withdrawn.

• Rationalizing minimum tax: At present the standard rate for minimum tax

is 1% of turnover. In order to facilitate and encourage the organized and

compliant sector to making correct declarations of their taxable income

and tax liability thereon, the rate of minimum tax is being enhanced from

1 % to 1.25%.

• Tax on Builders and Developers: Vide the Finance Act, 2016 a fixed tax

on builders and developers on the basis of developed or built up area

was introduced at different rates for various cities across the country. The

departure from normal tax regime to fixed tax regime did not yield the

expected results, therefore, it is proposed that the normal tax regime be

reintroduced for land developers and builders.

• Rationalizing tax on import of DAP fertilizers: Presently tax collected at

import stage on DAP fertilizer constitutes final discharge of tax liability for

commercial importers whereas the same is adjustable for urea

manufacturers who also commercially import DAP fertilizer. In order to

rationalize this disparity and for the sake of uniformity, commercial import

of DAP fertilizer both by commercial importers as well as urea

manufacturers is proposed to be brought into the final tax regime.

• Extension in Super Tax: At present, Super Tax is levied at the rate of 4% on

the income of Banking Companies and at the rate of 3% for other

persons. The circumstances which necessitated introduction of Super Tax

are still continuing, therefore, it is proposed to extend the levy of Super

Tax by one more year, i.e. for the tax year 2017.

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• Advance Tax on Stock Exchange Brokers: Currently the rate of advance

withholding tax collected from stock exchange brokers is 0.02% and is

adjustable. This withholding tax is now being made final tax in respect of

such persons.

• Documentation of Purchase of Tobacco: Illicit and non-duty paid

cigarette manufacturing has created distortions. In order to document

purchase of tobacco, Pakistan Tobacco Board is being entrusted with

collection of withholding tax on purchase of tobacco by manufacturers

of cigarettes at the rate of 5% of the purchase value of tobacco, at the

time of collecting cess.

• Rationalization of withholding tax on sale to retailers in respect of

electronics goods: At present, the rate of withholding tax on sales made

by manufacturers, wholesaler, dealers and distributors of electronics

goods to retailers is liable to adjustable withholding tax at the rate of

0.5%. It is proposed to enhance the tax rate to 1 %.

• Manufacturers/wholesaler to collect withholding tax from

distributors/dealers of batteries: Presently, manufacturers/commercial

importers are required to collect withholding tax on sale to dealers,

distributors and wholesalers on sale of various items such as electronic

goods, cigarettes, etc. at the rate of 0.1% of such sales. The scope of this

withholding tax is being extended to batteries.

Similarly, every distributor, dealer, wholesaler while making sales to

retailers in respect of the above referred commodities are required to

collect withholding tax at the rate of 0.5% of the amount of sales. The

scope of this withholding tax is being extended to batteries.

• Increasing cost of non-compliance with tax laws: The government, since

the preceding three years, has consistently adopted the policy of

creating a distinction between compliant and non-compliant taxpayers

by prescribing higher withholding tax rates for non-filers and resultantly

increasing the cost of doing business for such non-filers. Continuing with

this policy the differential of withholding tax rates for filers viz-a-viz non-

filers, is being enhanced in scope and rates for various transactions

including, payments made to residents and non-resident persons for

sales/services/contracts, payments for prize bond/lottery, sale by

auction, commission/discount to petrol pump operators etc.

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SALES TAX & FEDERAL EXCISE

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

aimed at:

Reduction of sales tax on fertilizers to replace subsidy. Due to

complications in payment of subsidy to fertilizers manufacturers and

importers, the subsidy is proposed to be substituted with reduction in

sales tax rates on various fertilizers. Instead of ad valorem rates, specific

rates have been proposed. However, the rate on urea fertilizer shall

remain unchanged at 5% ad valorem.

Enforced through Finance Bill, 2017, effective from 01.07.2017.

Reduction in rate of sales tax on poultry machinery. Sales tax on import

of seven types of poultry machinery is proposed to be reduced to 7%.


Exemption from sales tax on combined harvesters. Presently, combined

harvesters are subject to sales tax at 7% ad valorem under Eighth

Schedule. It is proposed to provide exemption from whole of sales tax on

combined harvesters upto five years old by inserting an entry in the Sixth

Schedule.


Exemption from sales tax on agriculture diesel engine. Sales tax on

agricultural diesel engines (from 3 to 36 HP) is proposed to be exempted.


Exemption from sales tax on imported seeds for sowing. Presently,

imported oil seeds are subject to sales tax @ 5% under Eighth Schedule.

Exemption from payment of sales tax is being provided on import of

sunflower and canola hybrid seeds meant for sowing.


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Exemption from sales tax on multimedia projectors. Exemption from sales

tax is being provided on import of multimedia projectors by educational

institutions.


Exemption from sales tax on gifts and donations. Exemption from sales

tax is being provided to gifts and donations received from foreign

governments and organizations to the Federal and Provincial

Governments and public sector organizations.


Exemption from extra tax to lubricating oil. In order to enable industrial

consumers to avail input tax adjustment on lubricating oils purchased

from the traders, the entry relating to lubricating is being omitted from

Chapter XIII of the Sales Tax Special Procedures Rules, 2007, thus

withdrawing the levy of 2% sales tax on lubricating oils.

Enforced through amendment of the Sales Tax Special Procedures Rules, 2007 with effect from 01.07.2017.

Reduction in sales tax on import and supply of hybrid electric vehicles.

Reduction in sales tax at the rate of 50% is available on import of Hybrid

Electric Vehicles upto 1800cc and at the rate of 25% on Hybrid Electric

Vehicles exceeding 1800cc. It is proposed to maintain reduction in sales

tax at the rate of 50% on Hybrid Electric Vehicles having engine capacity

upto 1800cc and restrict reduction at the rate of 25% on engine

capacity from 1801cc to 2500cc only. Similar reduction is proposed to be

provided on local supply of the said two categories of Hybrid Electric

Vehicles.

Enforced through amendment SRO ____ (I)/2017, dated 01.07.2017, effective from 01.07.2017.

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Automatic stay against recovery. It is proposed to provide for automatic

stay against recovery against recovery of Sales Tax and Federal Excise

Duty demand till decision by the Commissioner Inland Revenue

(Appeals) subject to 25% of the amount of sales tax and FED demand.


Exemption from sales tax on premixes to fight growth stunting. It is

proposed to provide for exemption from sales tax on premixes to fight

growth stunting.


Exemption to vehicles for development of Gwadar Port. It is proposed to

provide exemption from sales tax to vehicles for construction and

development of Gwadar Port and Gwadar Free Zone on the line of

exemption available to vehicles under the Customs Act, 1969. Scope of

exemption already provided to materials and equipment, is being

clarified by extending exemption to plant, machinery, equipment,

appliances and accessories.


Exemption from sales tax to items for renewable sources of energy.

Existing exemption available to items for renewable sources of energy is

proposed to be aligned with exemption available to these items under

the Customs Act, 1969.


Exemption from sales tax to items for conservation of energy. Exemption

from sales tax is proposed to be provided to items for conservation of

energy on the pattern of exemption available under the Customs Act,

1969.


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Exemption to parts and components for manufacturing LED lights.

Exemption is proposed to be provided to parts and components for

manufacturing LED lights on the pattern of exemption available under

the Customs Act, 1969.


Withdrawal of sales tax withholding. Sales tax withholding is proposed to

be withdrawn on supplies from registered persons to other registered

persons with the exception of advertisement services. Enforced through Finance Bill, 2017, effective from 01.07.2017.

Reduction in Federal Excise Duty on Telecommunication Services.

Federal Excise Duty on telecommunication services is proposed to be

reduced from 18.5% to 17%.


Services under Islamabad Capital Territory (Tax on Services) Ordinance,

2001. Services which are subject to sales tax on the basis of turnover

without input tax adjustment under Provincial Sales Tax Laws are

proposed to be taxed in the similar manner. Exemption from sales tax is

also proposed to be provided on export of IT services.

Enforced through amendment SRO ____ (I)/2017, dated 01.07.2017, effective from 01.07.2017.

Rationalization of sales tax on mobile phones. Mobile phones are

chargeable to sales tax at the rates of Rs. 300, Rs. 1,000 and Rs. 1,500 per

mobile phone set depending upon categories of mobile phones. It is

proposed to merge sales tax rates of Rs. 300 and Rs. 1,000 per set into Rs.

650 per set. The proposal will promote use of information technology and

will also reduce disputes on categorization of mobile phones.


Increase in Federal Excise Duty on cement. Federal Excise Duty on

cement is proposed to be enhanced from Rs. 1 per kg to Rs. 1.25 per kg.


Enhancement of rates of Federal Excise Duty on cigarettes. Since 2014,

FED is being charged on cigarettes on the basis of specific rates for two

tiers. In order to arrest the declining revenue trends and to curb the

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menace of illicit low priced cigarettes of inferior quality, a new tier is

being introduced and the proposed duty structure for the three tiers.

Enforced through amendment SRO ____ (I)/2017, dated 27.05.2017, effective

from 27.05.2017.

Rate of sales tax for steel sector. Steel sector is currently paying sales tax

on the basis of consumption of electricity at the rate of Rs. 9 per unit of

electricity. The existing rate of Rs 9/unit of electricity is proposed to be

enhanced to Rs.10.5 and corresponding increase shall be made in ship

breaking and other allied industry. And to promote the ease of doing

business the issues pertaining to steel industry shall be resolved in

consultation with the industry.

Enforced through amendment of the Sales Tax Special Procedures Rules, 2007 with effect from 01.07.2017.

Regularization of retailers‘ regime. Tier-1 retailers are under obligation to

pay sales tax under normal regime. Alternatively, they have the option to

pay sales tax @ 2% of turnover without any input tax adjustment. The said

regime had been introduced under an SRO which has been struck down

by the Lahore High Court. It is proposed to provide for payment of sales

tax by tier-1 retailers through Sales Tax Act, 1990.


Payment of sales tax on retail sales of five export oriented sectors. Retail

sales of five export oriented sectors are chargeable to sales tax @ 5%. It is

proposed to increase the said rate to 6%.

Enforced through amendment SRO (I)/2017, dated 01.07.2017, effective

from 01.07.2017.

Sales tax on commercial import of fabrics. Commercial import of fabrics

is zero-rated under SRO 1125(I)/2011 dated 31.12.2011. It is proposed to

levy sales tax @ 6% on commercial import of fabrics.

Enforced through amendment SRO (I)/2017, dated 01.07.2017, effective

from 01.07.2017.

Clarificatory amendment regarding application of sales tax on imports.

Goods imported into Pakistan are subject to sales tax. However, in order

to clarify the matter in view of some court judgments Clarificatory

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amendment is being made to section 3 regarding application of sales

tax on imports destined for non-tariff areas.


Removing ambiguity regarding application of further tax in respect to

persons making zero-rated supplies. Clarificatory amendment is

proposed to be made regarding application of further tax under section

3(1A) on zero-rated supplies covered under section 4 of the Sales Tax

Act, 1990. However, zero-rated supplies made to diplomats, privileged

persons, duty free shops and similar categories shall be excluded from

the purview of further tax.


Inclusion of Inland Revenue Authorities. District Taxation Officer,

Deputy/Assistant Director Audit are proposed to be included in the list of

Inland Revenue authorities.


Assigning of jurisdiction of sales tax to Chief Commissioners Inland

Revenue. Presently, Federal Board of Revenue assigns jurisdiction of Sales

Tax and Federal Excise directly to Commissioners Inland Revenue. It is

proposed that the Federal Board of Revenue may assign jurisdiction to

Chief Commissioners Inland Revenue who may further assign jurisdiction

to Commissioners Inland Revenue under his administrative control.


Service of electronically sent notices to companies be construed as

proper service. Notices sent to companies through electronic medium is

proposed to be treated as proper service along with other prescribed

modes.


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Fixation of minimum sales tax on supply of locally produced coal.

Minimum sales tax @ Rs. 425 per metric tonne is proposed to be provided

for locally produced coal.


Penalties are proposed to be imposed on persons manufacturing,

possessing, transporting, distributing, storing, selling non-duty paid/

counterfeit cigarettes.


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CUSTOMS

Relief Measures

Reduction of duty from 11% to 3% and removal of 5% RD on grandparent

and parent stock of chicken

Reduction of duty on import of hatching eggs from 11 % to 3%

Reduction of RD on aluminium waste or scrap from 10% to 5%

Exemption of 3% CD on raw skins & hides

Exemption of 16% CD on stamping foils

Reduction of CD on sheets for veneering rom 16% to 11 %

Reduction of CD on pre-fabricated modular clean rooms panels

from 20% to 3%

Exemption of 3% CD on import of ostriches

Reduction of CD on fabric (non-woven) for pharmaceutical industry from

16% to 5%

Protection To Local Industry

5% RD levied on import of synthetic filament yarn (of polyesters)

Increase of CD on aluminium beverage cans from 11 % to 20

CD reduced on uncoated polyester film and aluminum wire from 20% to

11 % for manufacturers of metalized yarn

CD reduced from 20% to 16% and from 16% to 11%, on raw materials for

manufacturers of Baby Diapers

Tariff Rationalization

CD rate on Bituminous coal and other coal equalized @ 5%. However, for

the Power Projects in IPPs Mode, CD on import of both types of coal

reduced to 3%

Separate PCT code for compressors of vehicle @ 35% CD created

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Separate PCT code for classification of electric cigarettes created at

20% CD

RD @ 10% levied on animal protein meals Revenue Measures

RD levied/increased on 565 non-essential items by various rates ranging

from 5% to 15%

CD @ Rs. 250 per set converted into RD @ Rs. 250 per set on mobile

phones

CD @ 11% and 16% exempted and instead RD at uniform rate of 9%

levied on the telecom equipment

RD on betel nuts increased from 10% to 25% while RD @ Rs.200/kg levied

on betel leaves

Concession in duty/taxes on Hybrid Electric Vehicles above 2500 cc

withdrawn

Miscellaneous

ADOPTION OF WCO HS VERSION 2017,- Pakistan being a signatory to the

HS Convention is obliged to adopt the HS 2017, incorporated its

nomenclature/New HS Codes in Pakistan Customs Tariff with addition,

creation and deletion of local PCT codes and also made relevant

changes in the Fifth Schedule and SROs/Notifications where HS Codes

have changed.

Exemption from CD extended on import of combined harvesters-

threshers up to 5 years old while 10% and 20% RD levied on five to ten

years and more than ten years old respectively.

Additional duty on cylinder head for motorcycles levied

Extension of concession on 11 more components of trailers

Concessionary rate of 11% available on Set top boxes, TV broadcast

transmitter and Reception apparatus etc. extended till 30.6.2018.

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Surcharge in excess of 0.25% for cargo in-bonded at Karachi for

upcountry Bonds exempted

Expansion of scope of exemption on import/donation by allowing

imports and donation of Federal, Provincial, AJ&K, Gilgit-Baltistan

Governments, NDMA, PDMA and Govt. emergency/ rescue services

Import of solar panels and related components were exempted from the

condition of ‗local manufacturing‘ till 30th June 2017 which is extended

till 30th June, 2018.

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INCOME TAX ORDINANCE 2001 AMENDMENTS PROPOSED BY THE FINANCE BILL, 2017

Through Finance Bill 2017, following further amendments are proposed to be incorporated in the Income Tax Ordinance, 2001 (XLIX of 2001):

DEFINITIONS SECTION 2

In the Income Tax Ordinance, 2001, Section 2, clause (22A) ―durable goods‖

have been excluded from the definition of ―fast moving consumer goods‖.

In sub clause (38A) ―District Taxation Officer‖ and ―Assistant Director Audit‖

have been added to the definition of ―Officer of Inland Revenue‖

After clause (62) a new clause (62A) has been added which defines ―start-

up‖ as follows;

―startup‖ means a business of resident individual, AOP or a company

incorporated or registered in Pakistan on or after first day of July, 2012

and the person is engaged in or intends to offer technology driven

products or services to any sector of the economy provided that the

person is registered with and duly certified by the Pakistan Software

Export Board (PSEB) and having turnover of less than one hundred

million in each of the last five tax years.‖

SUPER TAX SECTION 4B

Through Finance Act, 2015, section 4B was inserted, whereby super tax was levied on the taxable income of the banking companies and on the taxable income of the taxpayer‘s whose income exceeds from Rs. 500 Million. Earlier, the super tax was levied for the tax year 2015 and through Finance Act 2016 the scope of this tax was extended till tax year 2016, whereas through this proposed amendment the scope of this tax is extended till tax year 2017.

TAX ON UNDISTRIBUTED PROFITS SECTION 5A

As per the prevalent provisions, all public companies except for modaraba and schedule bank, which generates profits for a tax year and do not distribute cash dividend within 6 months at the end of tax year or distributes dividends but its reserves are in excess of 100% of its paid up capital, the excess will be treated as income of a company and levied a 10% tax rate.

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The finance act 2017 now states tax shall be imposed at the rate of 10 % on every public company except for modaraba and schedule banks that generate profit for a tax year but does not distribute at least 40 % of its after tax profits within six months of the end of the tax year through cash or bonus shares.

The substituted provision is reproduced for the benefit of the reader;

“5A. Tax on undistributed profits.- (1) Subject to this Ordinance, for tax year 2017 and onwards, a tax shall be imposed at the rate of ten percent, on every public company other than a scheduled bank or a modaraba, that derives profit for a tax year but does not distribute at least forty percent of its after tax profits within six months of the end of the tax year through cash or bonus shares:

Provided that for tax year 2017, bonus shares or cash dividends may be distributed before the due date mentioned in sub-section (2) of section 118, for filing of a return.

(2) The provisions of sub-section (1) shall not apply to-

(a) a company qualifying for exemption under clause (132) of Part

I of the Second Schedule; and

(b) a company in which not less than fifty percent shares are held by the Government.‖

TAX ON BUILDERS AND DEVELOPERS SECTION 7C AND 7D

Through Finance Act, 2016 the tax liability for the builders and developers shall be determined on the basis of area, instead of the value of property or actual transaction. Builders and developers to whom these provisions are to apply are the persons engaged in construction and sale of residential, commercial or other buildings and plots under the projects initiated and approved by the relevant land and building authorities after July 1, 2016.

Whereas, through this proposed amendment these provisions shall apply to projects undertaken for development and sale of residential, commercial or other plots initiated and approved during tax year 2017 only for which payment under rule 13S of the Income Tax Rules, 2002 has been made by the developer during tax year 2017 and the Chief Commissioner has issued online schedule of advance tax installments to be paid by the developer in accordance with rule 13ZB of the Income Tax Rules, 2002.

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CHARGE OF TAX SECTION 8

By virtue of proposed amendment section 7C and 7D have been excluded from this section and tax on builders and developers shall not be treated as final tax.

VALUE OF PERQUISITES SECTION 13

Interest free or a loan given at a rate lower than the bench mark rate, the difference between actual rate and the bench mark rate shall be included in taxable salary.

Through this finance bill it is proposed to enhance the limit of loan from employer to the employee from the existing Rs. 500,000 to Rs. 1,000,000.

DEDUCTIONS NOT ALLOWED SECTION 21

This section specifies deductions which are not admissible for tax purpose. Through this proposed amendment, any expenditure in respect of sales promotion, advertisement and publicity in excess of 10 % ( previously 5 % ) of turnover incurred by pharmaceuticals manufacturers will be not admissible for tax purposes.

DEPRECIATION SECTION 22

Through this proposed amendment a new sub section is proposed to be added, defining the ownership of depreciable asset owned by a taxpayer pursuant to arrangement of Musharika financing, which is as follows;

In section 22, in sub-section (15), for the full stop at the end, a colon shall be substituted and thereafter the following proviso shall be added, namely:—

―Provided that where a depreciable asset is jointly owned by a taxpayer and an Islamic financial institution licensed by the State Bank of Pakistan or Securities and Exchange Commission of Pakistan, as the case may be, pursuant to an arrangement of Musharika financing or diminishing Musharika financing, the depreciable asset shall be treated to be wholly owned by the taxpayer.‖;

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EXEMPTIONS AND TAX CONCESSIONS IN THE SECOND SCHEDULE

SECTION 53

The proposed amendment seeks to explain the approval required in sub section 2 of the aforementioned section for exemptions and tax concessions, which is now read as ―The Board with the approval of Minister In charge of the Federal Government.‖ Furthermore, in sub-section (4), for the full stop, a colon shall be substituted and thereafter the following provisos shall be added, namely:-

"Provided that all such notifications, except those earlier rescinded, shall be deemed to have been in force with effect from the first day of July, 2016 and shall continue to be in force till the thirtieth day of June, 2018, if not earlier rescinded:

Provided further that all notifications issued on the first day of July, 2016 shall continue to be in force till the thirtieth day of June, 2018, if not earlier rescinded."

DEDUCTIBLE ALLOWANCE FOR PROFIT ON DEBT

SECTION 64A

Sections 64A shall be re-numbered as 60C;

DEDUCTIBLE ALLOWANCE FOR EDUCATION EXPENSES

SECTION 64AB

Sections 64AB shall be re-numbered as 60D and it is proposed

The taxable income, on which entitlement to claim deductible allowance in respect of tuition fee paid, has been increased from ―less than one million rupees‖ to ―less than one and half million rupees‖.

TAX CREDIT FOR INVESTMENT IN HEALTH INSURANCE

SECTION 62A

The lower limit of tax credit available in sub-section (2), in component C of the formula in clause (c) on a proportionate basis, is proposed to be increased from one hundred thousand rupees to one hundred fifty thousand rupees.

Tax credit to a person registered under the Sales Tax Act, 1990.

SECTION 65A

By virtue of proposed amendment it is now omitted.

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Tax credit for enlistment SECTION 65C

It is proposed that tax credit for enlistment in any registered stock exchange in Pakistan will be available for three tax years provided that the tax credit for the last two years shall be ten per cent of the tax payable.

PRINCIPLES OF TAXATION OF COMPANIES

SECTION 94 (3)

By virtue of amendment it is proposed to be omitted.

SPECIAL PROVISIONS RELATING TO THE PRODUCTION OF OIL AND NATURAL GAS, AND EXPLORATION AND EXTRACTION OF OTHER MINERAL DEPOSITS

SECTION 100 (2)

From tax year 2017 and onwards profits and gains derived from sui gas field shall be taxable in accordance with the rules in Part 1 of Fifth Schedule.

TAX CREDIT FOR CERTAIN PERSONS SECTION 100 C

It is proposed to add another provision to be eligible for tax credit which is as follows;

―the administrative and management expenditure does not exceed 15% of the total receipts.‖

The following new sections are proposed to be inserted in section 100 (C);

―(1A) Notwithstanding anything contained in sub-section (1), surplus funds of non-profit organization shall be taxed at a rate of ten percent.

(1B) For the purpose of sub-section (1A), surplus funds mean funds or monies:

(i) not spent on charitable and welfare activities during the tax year; (ii) received during the tax year as donations, voluntary contributions, subscriptions and other incomes; (iii) or more than twenty five percent of the total receipts of the non-profit organization received during the tax year;

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(iv) are not part of restricted funds:

Explanation: For the purpose of this subsection, ―restricted funds‖ mean any fund received by the organization but could not be spent and treated as revenue during the year due to any obligation placed by the donor.‖

MINIMUM TAX ON THE INCOME OF CERTAIN PERSONS

SECTION 113 (1) (e)

As per the proposed amendment, the business individuals/AOPs having turnover of ten million rupees or above are required to pay minimum tax as per the percentage specified in column (3) of the table in Division IX of Part-I of the First Schedule.

RETURN OF INCOME SECTION 114 (6) (c)

Since it is proposed to omit the section ―122C‖, therefore, the expression in sub –section 6, clause (c) of section 114 shall be omitted.

PERSONS NOT REQUIRED TO FURNISH A RETURN OF INCOME

SECTION 115 (3)

Through this proposed amendment, a widow, an orphan below the age of

twenty-five years, a disabled person or in the case of ownership of

immovable property, a non-resident person are not required to furnish a

return of income solely by the reasons of;

1) owns immovable property with a land area of two hundred and fifty square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory

2) owns immoveable property with a land area of five hundred square yards or more located in a rating area

3) owns a flat having covered area of two thousand square feet or more

located in a rating area

4) owns a motor vehicle having engine capacity above 1000 CC

WEALTH STATEMENT SECTION 116

Since it is proposed to omit section 122C, therefore sub-section 2A of section 116 is omitted being redundant.

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In sub-section (3), for the expression

―an assessment, for the tax year to which it relates, is made under sub-section (1) or subsection (4) of section 122‖ the expression ―the receipt of notice under sub-section (9) of section 122, for the tax year to which it relates‖ shall be substituted;

With the changes suggested in sub-section (3) of section 116, the person who discovers any omission or wrong statement in wealth statement was allowed to file revised statement at any time before an assessment, which now has been restricted to revise the wealth statement before the receipt of notice under sub-section (9) of section 122 for the tax year to which it relates.

After the proposed amendment the sub-section (3) of section 116 shall read as follows;

―Where a person, who has furnished a wealth statement, discovers any omission or wrong statement therein, he may, without prejudice to any liability incurred by him under any provision of this Ordinance, furnish a revised wealth statement 11[along with the revised wealth reconciliation and the reasons for filing revised wealth statement,] at any time before the receipt of notice under sub-section (9) of section 122, for the tax year to which it relates.‖

EXTENSION OF TIME FOR FURNISHING RETURNS AND OTHER DOCUMENTS

SECTION 119

On denial from Commissioner to grant extension of time for furnishing the return, or statement, as the case may be the Chief Commissioner is proposed to be authorized to grant extension or further extension.

The following proviso is proposed to be added to section 119 (4);

―Provided that where the Commissioner has not granted extension for furnishing return under sub-section (3) or sub-section (4), the Chief Commissioner may on an application made by the taxpayer for extension or further extension, as the case may be, grant extension or further extension for a period not exceeding fifteen days unless there are exceptional circumstances justifying a longer extension of time.‖;

BEST JUDGEMENT ASSESSMENT SECTION 121

Under this section the commissioner is empowered to make an assessment of income and tax based on any available information in case of failure by the

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person to furnish a return. Through this amendment scope is enlarged and following provision ―(ab)‖ in sub-section (1) after clause (aa) is proposed to be added

―furnish return of income in response to notice under subsection (3) or sub-section (4) of section 114; or‖

AMENDMENT OF ASSESSMENTS SECTION 122

As the power of Commissioner to make provisional assessment based on his best judgment is proposed to be withdrawn by omitting section 122C. Therefore, the expression ―are issued under section 122C‖ shall be omitted.

PROVISINAL ASSESSMENT SECTION 122 C

The Commissioner‘s power to make a provisional assessment, on failure to furnish a return by a person in response to notice under sub-section (3) or sub-section (4) of section 114 , based on available information is proposed to be withdrawn, accordingly section 122C shall stand omitted.

APPEAL TO THE COMMISSIONER (APPEALS)

SECTION 127

As section 122 C is proposed to be omitted. Therefore, in section 127, in sub-section (1), the expression ‖or issued under section 122C‖ shall be omitted.

APPOINTMENT OF THE APPELLATE TRIBUNAL

SECTION 130

Through this amendment a person may be appointed as a judicial member of

the Appellate Tribunal if the person –

(a) has exercised the powers of a District Judge and is qualified to be a

Judge of the High Court or;

(b) is or has been an advocate of a High Court and is qualified to be a

Judge of the High Court.

The provision regarding appointment as a judicial member of appellate

tribunal if the person is an officer of Inland Revenue Service in BS-20 or above

and is a law graduate is now omitted.

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DUE DATE FOR PAYMENT OF TAX SECTION 137

Both the Provisos of sub-section (2) of section 137 shall be omitted as section 122C is proposed to be omitted

RECOVERY OF TAX FROM PERSONS ASSESSED IN AZAD JAMMU AND KASHMIR

SECTION 146

The geographical scope of section 146 is now proposed to include Gilgit – Baltistan as well which was previously limited to Azad Jammu and Kashmir, accordingly Gilgit-Baltistan is inserted in the marginal note after the word ―Kashmir‖ and in sub-section (1), after the word ―Kashmir‖.

ADVANCE TAX PAID BY THE TAXPAYER

SECTION 147

At present an individual is obliged to pay advance tax if his taxable income exceeds Rs. 500,000. It is now proposed to provide relief to the small tax payer who‘s income is less than one million rupees.

IMPORTS SECTION 148

The tax collected in case of import of fertilizer by manufacture or fertilizer shall now be a final tax of the income of the importer arising from imports.

PAYMENTS TO NON-RESIDENTS SECTION 152 (1AAA), (1B), (2A), (4A)

Every person making a payment for advertisement services to a non-resident media person relaying from outside Pakistan shall deduct tax as per Division II of Part III of the First Schedule from the gross amount paid.

Every person making a payment in full or part (including a payment by way of advance) to a non-resident person on the execution of contract under a construction, assembly or installation project in Pakistan, including a contract for the supply of supervisory activities in relation to such project; or for construction or services rendered relating thereto; or advertisement services rendered by T.V. Satellite Channels shall deduct tax from the gross amount payable under the contract which shall be a final tax provided that the provisions of this sub-section shall not apply in respect of a non-resident person unless he opts for the final tax regime.

In sub-section (2A), clauses (i), (ii) and (iii) shall be re-numbered as (a), (b) and (c) respectively.

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The scope of subsection (4A) has been enlarged to include the recipient of payment as referred to in subsection (1A). Now it is proposed to substitute the present sub-section 4A with the below one;

"(4A) The Commissioner may, on application made by the recipient of payment referred to in sub-section (1A) having permanent establishment in Pakistan, or by a recipient of payment referred to in sub-section (2A), as the case may be, and after making such inquiry as the Commissioner thinks fit, allow by order in writing, in cases where the tax deductible under sub-section (1) or sub-section (2A) is adjustable, any person to make the payment without deduction of tax or deduction of tax at a reduced rate.";.

PAYMENTS FOR GOODS , SERVICES AND CONTRACTS SECTION 153

By adding the following proviso the collection of tax along with the payment has been elaborated;

―Provided that where the recipient of the payment under clause (b) receives the payment through an agent or any other third person and the agent or, as the case may be, the third person retains service charges or fee, by whatever name called, from the payment remitted to the recipient, the agent or the third person shall be treated to have been paid the service charges or fee by the recipient and the recipient shall collect tax along with the payment received.‖

STATEMENTS SECTION 165

A new sub section ―(2A)‖ is proposed to be added after sub section (2) whereby a person on discovering any omission or wrong statement of tax withholding may file a revised statement within sixty days of filing of statement.

FURNISHING OF INFORMATION BY FINANCIAL INSTITUTIONS INCLUDING BANKS

SECTION 165 B

A new sub section ―(3)‖ is proposed to be added after sub section (2) which is read as follows;

"(3) for the purpose of this section, the terms "reportable person" and "financial institution" shall have the meaning as provided in Chapter XIIA of the Income Tax Rules, 2002‖

Under this section, every financial intuition shall make arrangements to provide information regarding non-resident or any other reportable persons to the Board in the prescribed form and manner for the purpose of automatic

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exchange of information under bilateral agreement or multilateral convention which was previously just limited to non-resident persons.

NOTICE TO OBTAIN INFORMATION OR EVIDENCE

SECTION 176

Under the proposed amendment Cost and Management Accountants may also be appointed, previously limited to Chartered Accountants, by the Board or the Commissioner to conduct audit under section 177 for any tax year.

OFFENCES AND PENALTIES SECTION 182

Through this proposed amendment the scope of this section is extended as under;

1) any person who fails to maintain records of transactions between

associates required under this Ordinance or the rules made thereunder, such person shall pay a penalty of ten thousand rupees or five per cent of the amount of tax on income whichever is higher;

2) any person who fails to furnish the information required of

transactions between associates shall pay a penalty of twenty-five thousand rupees for the first default and fifty thousand rupees for each subsequent default;

Through this amendment two more categories of offenses as serial number 17 and 18 have been added after serial number 16 to include as folows;

Any reporting financial institution or reporting entity who fails to furnish information or country-by-country report to the Board as required under section 107, 108 or 165B within the due Date shall pay a penalty of two thousand rupees for each day of default subject to a minimum penalty of twenty five thousand rupees

Any person who fails to keep and maintain document and information

required under section 108 or Income Tax Rules, 2002 shall pay a penalty of 1% of the value of Transactions.

PROSECUTION FOR NON-COMPLIANCE WITH CERTAIN STATUTORY OBLIGATIONS

SECTION 191 (1) (a) (c)

Through this amendment the scope of sub section (1) of section 191 has been extended whereby any person who without any reasonable cause fails to comply with the notice from Commissioner to file a return of income for that year with 30 days from the date of such notice or as specified by the

34

prosecutions and transitional advance tax provisions shall commit an offence punishable on conviction with a fine or imprisonment for a term not exceeding one year, or both.

DEFAULT SURCHARGE SECTION 205 (1B)

The scope of this subsection is extended whereby in the case of person having a special tax year, the default surcharge shall be calculated on and from the first day of the fourth quarter of the special tax year till the date on which assessment is made or the last day of special tax year, whichever is earlier.

ADVANCE RULING SECTION 206A

Through this proposed amendment, this section shall apply to a non-resident tax payer having permanent establishment in Pakistan.

INCOME TAX AUTHORITIES SECTION 207

Through this proposed amendment, two new Income Tax Authorities for the purposes of this Ordinance and rules made thereunder, namely District Taxation Officer and Assistant Director Audit have been added.

APPOINTMENT OF INCOME TAX AUTHORITIES

SECTION 208

Through this proposed amendment, the Board may appoint as many District Taxation Officer and Assistant Director Audit as may be necessary.

DISCLOSURE OF INFORMATION BY A PUBLIC SERVANT

SECTION 216

Through this proposed amendment, a new clause is added to include provision of information to Employees Old Age Benefit Institution regarding salaries in statements furnished under section 165.

Furthermore, nothing contained in sub-section(1) shall prevent the Board from publishing, with the prior approval of Minister In charge of the Federal Government, any such particulars as are referred to in that sub-section.

REWARD TO OFFICERS AND OFFICIALS OF INLAND REVENUE

SECTION 227A (1)

Previously, the cash reward was sanctioned to officers and officials of Inland Revenue only after realization of part or whole of the taxes involved in cases involving concealment or evasion of income tax and other taxes.

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Through this proposed amendment, in cases involving concealment or evasion of income tax and other taxes, cash reward shall also be sanctioned for other meritorious services 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.

REWARD TO WHISTLEBLOWERS SECTION 227B

Through this proposed amendment, a clause has been added whereby the claim for reward by the whistleblower shall also be rejected if the information is not supported by any evidence.

DIRECTORATE-GENERAL OF BROADENING OF TAX BASE

SECTION 230D

Through this proposed amendment, a new section 230(D) have been added introducing provisions regarding Directorate-General of Broadening of Tax Base. The proposed section is reproduced for the benefit of the reader;

―230D. Directorate-General of Broadening of Tax Base.— (1) The Directorate-General of Broadening of Tax Base shall consist of a Director-General and as many Directors, Additional Directors, Deputy Directors, Assistant Directors and such other officers as the Board may, by notification in the official Gazette, appoint.

(2) The Board may, by notification in the official Gazette, specify the functions, jurisdiction and powers of the Directorate- General of Broadening of Tax Base.

DIRECTORATE-GENERAL OF TRANSFER PRICING

SECTION 230E

Through this proposed amendment, a new section 230(E) have been added introducing provisions regarding Directorate-General of Transfer Pricing. The proposed section is reproduced for the benefit of the reader;

230E. Directorate-General of Transfer Pricing.— (1) The Directorate-General of Transfer Pricing shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors, Assistant Directors and such other officers as the Board may, by notification in the official Gazette, appoint. (2) The function of the Directorate General of Transfer Pricing shall be to conduct transfer pricing audit:

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Explanation: For the removal of doubt, it is clarified that transfer pricing audit refers to the audit for determination of transfer price at arm's length in transactions between associates and is independent of audit under section 177, 214C or 214D which is audit of the income tax affairs of the taxpayer. (3) The Board may, by notification in the official Gazette, specify the criteria for selection of the taxpayer for transfer pricing audit and may further specify functions, jurisdiction and powers of the Directorate-General of Transfer Pricing.‖;

ADVANCE TAX ON PRIVATE MOTOR VEHICLES

SECTION 231B

Through this proposed amendment the scope of this subsection has been broadened whereby every leasing company or a scheduled bank or a nonbanking financial institution or an investment bank or a modaraba or a development finance institution now also include both shariah compliant or under conventional mode.

Furthermore, the leasing of a motor vehicle could be either through ijara or otherwise.

As before, at the time of leasing of a motor vehicle to a non-filer, advance tax shall be collected at the rate of three per cent of the value of the motor vehicle.

A STOCK EXCHANGE REGISTERED IN PAKISTAN

SECTION 233A

Through this proposed amendment advance tax collected by a stock exchange registered in Pakistan from its members on purchase and sale of shares in lieu of tax on the commission earned by such members shall no longer be adjustable and shall be final tax.

CNG STATIONS SECTION 234A

Through this proposed amendment tax liability of CNG stations shall be the aggregate amount of tax collected on electricity and gas bills. Any other tax collection or deduction on account of CNG station shall be now refundable to them.

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Proposal includes separate rate of advance tax for non-filers at the rate of 6% of gas consumption charges against the present rate of 4% for both filers and non-filers

ELECTRICITY CONSUMPTION SECTION 235 & 235A

Proposed to clarify that threshold of monthly bills is inclusive of sales tax and all incidental charges. Further proposed to define the threshold from rupees 30,000 per month to rupees 360,000 per annum in order for tax withholding of commercial and industrial consumers.

ADVANCE TAX ON SALE OR TRANSFER OF IMMOVABLE PROPERTY

SECTION 236C

Advance Tax on sale or transfer of immovable Property shall also be collected at the time of recording transfer of any immovable property from the seller or transferor.

The extracts from the proposed section is reproduced for the benefit of the reader;

―(1) Any person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect from the seller or transferor advance tax at the rate specified in Division X of Part IV of the First Schedule‖.

An explanation after sub section (1) of section 236(C) has been added which is as follows;

―For the removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society and registrar of properties.‖

Furthermore a new proviso has been added in sub-section (2), whereby it has been clarified that advance tax collected on sale or transfer of immovable property shall be minimum tax if acquired and disposed of within the same tax year.

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ADVANCE TAX ON SALES TO DISTRIBUTORS, DEALERS AND WHOLESALERS.

SECTION 236G

Through the amendment it has been proposed that advance tax shall also be collected from manufacturer and commercial importer of batteries at the rate of 0.1% from filers and 0.2% from non-fliers at the time of sale to distributors, dealers and wholesalers.

ADVANCE TAX ON SALES TO RETAILERS

SECTION 236H

Through the amendment it has been proposed that advance tax shall also be collected from manufacturer, distributor, dealer, wholesaler or commercial importer of batteries at the rate of 0.5% of the gross amount of sales at the time of sale to retailers and every distributor or dealer to another wholesaler.

ADVANCE TAX ON PURCHASE OR TRANSFER OF IMMOVABLE PROPERTY

SECTION 236K

Advance Tax on sale or transfer of immovable Property shall also be collected at the time of recording transfer of any immovable property from the purchaser or transferee.

The extracts from the proposed section is reproduced for the benefit of the reader;

―(1)Any person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect from the purchaser or transferee advance tax at the rate specified in Division XVIII of Part IV of the First Schedule.‖

An explanation after sub section (1) of section 236(K) has been added which is as follows;

―For the removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society and registrar of properties‖

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TAX ON PURCHASE OR TRANSFER OF IMMOVABLE PROPERTY

SECTION 236W

Advance Tax on sale or transfer of immovable Property shall also be collected at the time of recording transfer of any immovable property from the purchaser or transferee. The extracts from the proposed section is reproduced for the benefit of the reader;

―(1) Every person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect from the purchaser or transferee advance tax at the rate of three per cent of the amount computed under clause (c) of sub-section (4) of section 111.‖

An explanation after sub section (1) of section 236(W) has been added which is as follows;

―For the removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society and registrar of properties‖

ADVANCE TAX ON TOBACCO SECTION 236X

Through this proposed amendment a new Section has been added which is as follows;

― (1) Pakistan Tobacco Board, at the time of collecting cess on tobacco, directly or indirectly, shall collect advance tax at the rate of five percent of the purchase value of tobacco from every person purchasing tobacco including manufacturers of cigarettes.

(2) Tax collected under this section shall be adjustable.‖

VALIDTION SECTION 241

Through this proposed amendment a new Section has been added which is as follows;

―All notifications and orders issued and notified, in exercise of the powers conferred upon the Federal Government, before the first day of July, 2017 shall be deemed to have been validly issued and notified in

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exercise of those powers, notwithstanding anything contained in any judgment of a High Court or the Supreme Court.‖

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AMENDMENTS PROPOSED TO THE FIRST SCHEDULE TO THE INCOME TAX ORDINANCE, 2001.

The following amendments are proposed to be made to the First Schedule to the Income Tax Ordinance, 2001.

PART I – RATES OF TAX:

Division III-Rate of Dividend Tax: Through the Finance Act 2017, the following increase in tax rates has been proposed.

o 12.5% (previously 10%) in case of dividend received by a person from a mutual fund.

o 15% (previously12.5%) in all other cases except for dividends received from a mutual fund and in the case of dividends declared or distributed by purchaser of a power project privatized by WAPDA or on shares of a company setup for power generation.

Division IIIA-Rate of Profit on Debt: Through Finance Act it has been proposed to increase tax rates for profit on debt. The tax slabs have been lowered as it now starts from Rs. 1 – 5000,000 as compared to Rs. 1 – 2500000 previously. The tax rates for each slab are now fixed which are as follows;

S.NO Profit on Debt Rate of tax

(1) (2) (3)

1. Where profit on debt does not

exceed Rs.5,000,000

10%

2. Where profit on debt exceeds

Rs.5,000,000 but does not exceed

Rs.25,000,000

12.5%

3. Where profit on debt exceeds

Rs.25,000,000

15%

Division VII-Capital Gain on Disposal of Securities: Division VII has been substituted namely capital gain on disposal of securities whereby tax rates have been increased comparatively to previous years. Also higher tax rates have been imposed for non-filer individuals.

42

PART III – DEDUCTION OF TAX AT SOURCE:

In Division I of Part III, rate of advance tax on dividend to be collected for filers has been increased from 12.5% to 15%.

In the first provision to the Division I of Part III, the tax required to be deducted by a Collective Investment Scheme, [REIT Scheme] or a mutual fund has been amended by this bill whereby the rates of taxes have been increased as compared to the previous year

In Division II of Part III, the rate of tax to be deducted from a payment made to a non-resident who is also a non-filer on the execution of contracts have now been increased to 12% to 13%.

In Division II of Part III, in case of transport services and payments made to sportsperson, tax rates have increased for non-filers as compared to previous years.

In case of payment being made to a non-filer company against purchases of goods in Division III of Part III, rendering of services or execution of contracts the rate has increased from 6% to 7%.

An explanation has now been added in Division III which is as follows; “For the removal of doubt, it is clarified that “cotton seed and edible oils means cotton seed oil and edible oils.”

In Division III, payments for goods, tax rates for non-filers have been

increased by 1%. In case of payments for services, tax rates for non-filers

have been increased by 2.5%.

In Division V of Part III, the tax rate of deduction on income from property

under in case of a company which is a filer was 15%, now it has been

proposed that a non-filer company will be charged 17.5%.

In Division VI of Part III, in case of prizes won on prize bonds or cross word

puzzle, rate of tax for non-filer has been proposed to be increased from

20% to 25%.

In Division VIA, petroleum Products, for sale of petroleum products rate of

tax for non-filers has been increased by 2.5% to 17.5%.

In Division VIB of Part III, the tax rates for filers and non-filers to be

collected on the amount of gas bill of a compressed natural gas station

have been separately proposed to be 4% and 6% respectively. PART IV - DEDUCTION OR COLLECTION OF ADVANCE TAX

ELECTRICITY CONSUMPTION: It is further clarified that the rate of collection of tax of electricity consumption is calculated on the ―gross‖ amount of electricity bill.

43

TELEPHONE USERS: In case of tax collected from subscribers of internet, mobile telephone, pre-paid internet or telephone cards has been reduced from 14% to 12.5%.

ADVANCE TAX ON PURCHASE, REGISTRATION AND TRANSFER OF MOTOR VEHICLES: The rate of tax on purchase, registration and transfer of motor vehicles has been decreased for filers for engine capacity between 1CC to 1300CC.

ADVANCE TAX AT THE TIME OF SALE BY AUCTION: In case of advance tax collected at the time of sale by auction rates of tax filer and non-filer have been separately proposed to be 10% and 15% respectively of the gross sale price of any property or goods.

ADVANCE TAX ON SALES TO RETAILERS: A detailed table as follows has been proposed to be added, showing rate to be charged on sale to retailers.

Category of sale Rate of Tax

Filer Non-Filer

(1) (2) (3)

Electronics 1% 1%

Others 0.5%

ADVANCE TAX ON BANKING TRANSACTION OTHERWISE THAN THROUGH CASH: It is now further clarified that Board with the approval of Minister in charge of Federal Government may amend the rate specified for advance tax on banking transaction otherwise than through cash.

ADVANCE TAX ON INSURANCE PREMIUM: Respite has been provided to non-filers who pay life insurance premium, as 1% will be charged if the payment exceeds Rs. 300,000/- which was previously Rs. 200,000/-

44

AMENDMENTS PROPOSED TO THE SECOND SCHEDULE TO THE INCOME TAX ORDINANCE, 2001.

The following amendments are proposed to be made to the second schedule of the Income Tax Ordinance, 2001.

PART-I – EXEMPTIONS FROM TOTAL INCOME: 1. Exemptions have been granted to the Asian Infrastructure Investment

Bank, Gulab Devi Chest Hospital, Pakistan Poverty Alleviation Fund and National Academy of Performing Arts on any income derived by them.

2. Any profit on debt received by Japan International Cooperation Agency (JICA) from Islamabad Burhan Transmission Reinforcement Project Phase-I will be exempt from tax.

3. Any income derived by a Political Party which is registered under Political Parties Order, 2002 will be exempt from tax.

4. Profit and gains of start-up companies certified by Pakistan Software Export Board will be exempt for the tax year in which start-up is created and for the following two years as well. Furthermore, no withholding tax will be deducted at the time of receiving payments for sale of goods, rendering services and executing contracts.

PART IV – EXEMPTIONS FROM SPECIFIC PROVISIONS 1. In line with exemption provided as per Part I of the Second Schedule

immunity against payment of minimum tax has also been granted to start-up companies certified by Pakistan Software Export Board.

2. Clause (41) – Through this proposed amendment payment to non-resident persons shall be subject to Final Tax on the income of non-resident person arising from a contract without the need to opt for presumptive tax regime.

3. Z&M Oils (Pvt) Ltd, Exceed Petroleum (Pvt) Ltd, Petrowell (Pvt.) Ltd, Quality-1, Petroleum (Pvt) Ltd, Horizon Oil Company (Pvt) Ltd, Outreach (Pvt) Ltd, Kepler Petroleum (Pvt) Ltd are now added to the list of importers who are exempt from paying advance tax to collectors of custom.

45

4. Through Finance Act 2013, advance tax collected on import of dramas in any language was adjustable. This was omitted in 2016 whereby making it Final Tax.

5. At present Hajj operators are paying Rs. 5,000/- per Haji in respect of income from hajj operations. In order to facilitate the fixed tax of Rs. 5,000/- per haji will remain the same for the tax year 2017.

6. The current limit for import of raw material by an industrial undertaking for its own use, without collection of tax at import stage is 110% of raw material imported and consumed in the previous year. Through this Finance Act, the limit has been enhanced from 110% to 125% of the quantity imported and consumed in the previous year.

7. Immunity has been granted for the tax year 2017 also, to exporters of the IT enabled services in terms of Clause (94) provided to company shall ensure their status as filer. This immunity is now also extended to services rendered by Pakistan Stock Exchange Limited.

8. Two new clauses have been added to this Schedule which are as follows:

a. Clause (101) - The provisions of section 231A shall not apply in respect of cash withdrawal made from a ―Branchless Banking (BB) Agent Account‖ utilized to render branchless banking services to customers.

b. Clause (102) - The provisions of section 231B(1A) shall not apply to light commercial vehicles leased under the Prime Minister‘s Youth Business Loan Scheme.

46

AMENDMENTS PROPOSED TO THE EIGHTH SCHEDULE TO THE INCOME TAX ORDINANCE, 2001.

NCCPL shall now furnish to the Board within 45 days (30 days previously)

of the end of each quarter, a statement of capital gains and tax computed thereon, in that quarter in the prescribed manner and format.

The amount collected by NCCPL on behalf of the Board as computed in the manner laid down under this Schedule shall be deposited in a separate bank account with National Bank of Pakistan and the said amount shall be paid to the Board along with interest accrued thereon on yearly basis by August 15th (previously July 31st) next following the financial year in which the amount was collected.

47

THE SALES TAX ACT, 1990

AMENDMENTS PROPOSED BY THE FINANCE BILL, 2017

All amendments shall be effective from July 01, 2017 unless otherwise provided

The summary of the amendments proposed in various sections and schedules

of Sales Tax Act, 1990 is as under:-

1. Definitions SECTION 2

The following amendments to section 2 of the Sales Tax Act, 1990, have

been proposed through the Finance Bill, 2017.

Tier-1 Retailers Clause 43A

This newly inserted clause classifies Tier-1 Retailers as:-

National or international chain of stores;

Retailer operating in an air-conditioned shopping mall, plaza or centre,

excluding kiosks;

Retailer whose cumulative electricity bill during the immediately

preceding twelve consecutive months exceeds rupees six hundred

thousand; and

Wholesaler-cum-retailer, engaged in bulk import and supply of

consumer goods on wholesale basis to the retailers as well as on retail

basis to the general body of the consumers.

2. Scope of tax SECTION 3

Few amendments have been proposed which provide as under:-

The proposed amendment in section 3(1)(b) intends to clarify that sales

tax shall be chargeable on all imports including imports meant for non-

tariff areas of Pakistan. The proposed amendment is made subject to

court decision requiring clarity in this section.

The proposed amendment in section 3(1A) provides that further tax @

2% shall also be chargeable on zero rated supplies made to persons

who have not obtained sales tax registration. Consequent to this

proposed amendment, further tax @ 2% shall be chargeable on zero

48

rated supplies to a person who is liable to get sales tax registration but

who has not done so.

The newly proposed section 3(9A) provides that the Tier-1 Retailers shall

pay sales tax @ 17% on supply of taxable goods after adjustment of

input tax. The Tier-1 Retailers dealing in five exports oriented sectors (i.e.

textile, leather, carpets, sports and surgical) shall pay sales tax at

reduced rate as specified in SRO 1125(I)/2011.

However, a Tier-1 Retailer may opt to pay turnover tax @ 2% on total

turnover (including exempt supplies turnover) without any input tax

adjustment. Tier-1 Retailer intending to pay turnover tax shall have to

file this option before concerned Chief Commissioner by 15th day of

July and once opted, the retailer have to pay turnover tax for the

whole financial year.

3. Zero rating SECTION 4

The proposed amendment intends to harmonize this section with

corresponding amendment proposed in section 3(1A) regarding

imposition of further tax on zero rated supplies to unregistered persons.

4. Exemption SECTION 13

It has been proposed that FBR shall place before the National Assembly all

the exemption notification issued during a financial year. Prior to this

amendment, Federal Government was required to place exemption

notifications before the National Assembly.

It has also been proposed that all the exemption notifications, which had

not been rescinded up till now, shall remain in force till June 30, 2018, if not

rescinded earlier. It has further been proposed that all exemption

notifications issued on or after 1st July, 2016 shall continue to be in force till

30 June, 2018, if not rescinded earlier.

Prior to above proposed amendment, all the exemption notifications

issued during a financial year shall, if not rescinded earlier, stand rescinded

on expiry of the respective financial year.

The above amendments proposed in section 13 shall be effective on the

next day of assent given to this Act by the President of Pakistan.

49

5. Appointment of authorities SECTION 30

It has been proposed to incorporate District Taxation Officer and Assistant

Director Audit in the existing list of Inland Revenue Authorities. The two

newly proposed authorities shall act as subordinate to Commissioner

Inland Revenue and Additional Commissioner Inland Revenue.

It has further been proposed that now onwards, the Board may assign

jurisdiction to Chief Commissioners and a Chief Commissioner may further

assign jurisdiction to Commissioners under his administrative control. Prior to

this proposed amendment, Board assigns jurisdiction to both Chief

Commissioners and Commissioners.

6. Offences and penalties SECTION 33

The proposed amendment seeks to provide penalty on manufacturing,

possession, transportation, distribution, storage and selling of non-duty

paid cigarettes. Following penalties have been proposed on person

committing such offence:

Such cigarette stock shall be liable to outright confiscation and

destruction;

Penalty of Rs. 25,000 or 100% of the tax involved, whichever is higher;

Imprisonment up to 5 years and / or additional fine to the extent of tax

loss;

Permanent seizure of vehicle used for transportation of cigarettes;

Sealing of premises, used for sale of cigarettes, for 15 days.

7. Recovery of arrears of tax SECTION 48

It has been proposed to provide automatic stay against recovery of tax

demand in cases where the appeal against such tax demand is pending

before Commissioner (Appeals) and taxpayer has deposited 25% of tax

demand.

8. Service of orders, decisions, etc. SECTION 56

The proposed insertion seeks to incorporate another mode in the existing

prescribed modes for service of notices to the companies. The proposed

50

insertion provides that notice sent to companies, through e-mail or sent on

their e-folder shall be treated as proper service of notice.

9. Validation SECTION 74A

This newly proposed section intends to provide legal cover to the

notifications already issued under the powers conferred upon Federal

Government.

10. Empowerment of FBR Various Sections

Amendments have been proposed in various sections of Sales Tax Act,

1990 whereby the various powers of Federal Government has been

transferred to FBR and FBR has been authorized to use such powers with

approval of Federal Minister. Summary of the proposed amendments is as

under:-

Sr # Section Description

1 3(2)(b) Issue notification to charge higher or lower rate of sales

tax on specified goods.

2 3(3A)

Issue notification to specify goods in respect of which

liability to pay tax shall be on the person receiving the

goods.

3 3(5) Issue notification to levy extra rate or amount of tax on

specified goods.

4 4(c) Issue notification to allow zero rating on specified goods.

5 7(3) Issue notification to allow adjustment of paid input tax

from output tax.

6 7(4) Issue notification to allow adjustment of specified

amount of input tax from output tax.

7 7A(1) Issue notification to levy sales tax on difference between

purchase value and sale value of specified goods.

8 7A(2) Issue notification specifying minimum value addition to

be declared by specified persons / goods.

9 8(1)(b) Issue notification specifying goods on which input tax

adjustment is inadmissible.

10 13(2)(a)

Issue notification providing exemption of sales tax on

specified goods. This amendment proposed in section 13

shall be effective on the next day of assent given to this

Act by the President of Pakistan.

11 60 Issue notification allowing exemption of sales tax on

specified goods imported for subsequent exportation.

12 65 Issue notification directing that tax not paid or short paid

as a result of inadvertent general practice shall not be

51

required to be paid.

13 71(1) Issue notification providing Special Sales Tax Procedures

in respect of specified persons / goods.

11. Third Schedule TAX AT RETAIL PRICE

It has been proposed to withdraw retail price sales tax on Fertilizers. A

corresponding amendment has been proposed in Schedule Eight,

whereby reduce rate of sales tax on different types of fertilizers has been

provided.

12. Fifth Schedule ZERO RATING

It has been proposed to provide conditional zero rating on following

goods including its raw materials, packing materials, components and sub

components:

Preparation suitable for infants and young children put up for retail sale.

Prior to this proposed amendment, conditional zero rating was available

on ‖Preparations for infant use put up for retail sale‖ including its raw

materials, packing materials, components and sub components.

13. Sixth Schedule EXEMPT GOODS

It has been proposed to allow exemption of sales tax on import and / or

supply of following goods:-

Preparations suitable for infants or young children put up for retail sale.

Prior to proposed amendment, exemption was available only on

Preparations for infant use put for retail sale.

Markers and porous tipped pens.

The scope of conditional exemption of sales tax on supply of materials

and equipment to China Overseas Ports Holding Company and its

operating companies including their contractors and sub-contractors

for construction of Gwadar Port and development of Free Zone for

Gwadar Port has been extended to supply of materials and equipment

(plant, machinery, equipment, appliances and accessories).

Vehicles imported by China Overseas Ports Holding Company Limited

(COPHCL) and its operating companies namely (i) China Overseas

52

Ports Holding Company Pakistan (Private) Limited (ii) Gwadar

International Terminal Limited, (iii) Gwadar Marine Services Limited and

(iv) Gwadar Free Zone Company Limited, for a period of twenty three

years for construction, development and operations of Gwadar Port

and Free Zone Area subject to 21 limitations, conditions prescribed

under PCT heading 9917(3).

Sodium Iron (Na Fe EDTA), and other premixes of Vitamins, Minerals and

Micro-nutrients (food grade) and subject to conditions imposed for

importation under the Customs Act, 1969. Prior to this proposed

amendment, exemption was available on Premixes for growth stunting.

Goods received as gift or donation from a foreign government or

organization by the Federal or Provincial Governments or any public

sector organization subject to recommendations of the Cabinet

Division and concurrence by the Federal Board of Revenue.

Sunflower and canola hybrid seeds meant for sowing. Prior to this

proposed amendment sales tax @ 5% was chargeable on seeds for

sowing under schedule eight.

Combined harvesters up to five years old. Prior to this proposed

amendment sales tax @ 7% was chargeable on combined harvesters

under schedule eight.

Single cylinder agriculture diesel engines (compression-ignition internal

combustion piston engines) of 3 to 36 HP, and CKD kits thereof.

It has been proposed to withdraw exemption of sales tax on import and

supply of following materials used in Pesticides industry:-

Ingredients for pesticides.

Cadusafos Technical Material.

Tiethanolamine and its salts.

It has further been proposed to extend the conditional exemption on

imports of equipment and items for promotion of renewable energy

technologies. The extended list of items on which conditional sales tax

exemption has been allowed is as under:-

53

Off–grid/On-grid solar power system (with or without provision for

USB/charging port) comprising of PV Module, Charge controller,

Batteries for specific utilization with the system (not exceeding 50 Ah in

case of portable system), Essential connecting wires (with or without

switches), Inverters (off-grid/ on-grid/ hybrid with provision for direct

connection/ input renewable energy source and with Maximum Power

Point Tracking (MPPT) and Bulb holder.

Water purification plants operating on solar energy.

Solar Parabolic Trough Power Plants and its parts namely Parabolic

Trough collectors modules, Absorbers/Receivers tubes, Steam turbine of

an output exceeding 40MW, Steam turbine of an output not exceeding

40MW, Sun tracking control system and Control panel with other

accessories.

Solar Dish Sterling Engine and its parts namely Solar concentrating dish,

Sterling engine, Sun tracking control system, Control panel with

accessories, Sterling Engine Generator.

Solar Air Conditioning Plant and its parts namely Absorption chillers,

Cooling towers, Pumps, Air handling units, Fan coils units, Charging &

testing equipment.

Solar Desalination System and its parts namely Solar photo voltaic

panels,. Solar water pumps, Deep Cycle Solar Storage batteries,.

Charge controllers, Inverters (off grid/on grid/ hybrid) with provision for

direct connection/input from renewable energy source and with

Maximum Power Point Tracking (MPPT).

Solar Thermal Power Plants with accessories.

Solar Water Heaters with accessories and parts namely Insulated tank,

Vacuum tubes (Glass), Mounting stand, Copper and Aluminum tubes,

Electronic controller, Assistant/ feeding tank, Circulation Pump, Electric

heater/ immersion rod (one piece with one solar water heater),

Solenoid valve (one piece with one solar water heater), Selective

coating for absorber plates.

PV Modules and its parts namely Solar cells, Tempered Glass, Aluminum

frames, O-Ring, Flux, Adhesive labels, Junction box & cover, Sheet

mixture of paper and plastic, Ribbon for PV Modules (made of silver

&Lead), Bypass diodes, EVA (Ethyl Vinyl Acetate) Sheet (Chemical).

54

Solar Cell Manufacturing Equipment namely Crystal (Grower) Puller (if

machine), Diffusion furnace, Oven, Wafering machine, Cutting and

shaping machines for silicon ingot, Solar grade polysilicon material,

Phosphene Gas, Aluminum and silver paste.

Pyranometers and accessories for solar data collection.

Solar chargers for charging electronic devices.

Remote control for solar charge controller.

Wind Turbines for grid connected solution above 200 KW (complete

system).

Wind Turbines upto 200 KW for off-grid solutions comprising of: (i) Turbine

with Generator/ Alternator (ii) Nacelle with rotor with or without tail (iii)

Blades (iv) Pole/ Tower (v) Inverter for use with Wind Turbine (vi) Deep

Cycle Cell/ Battery (for use with wind turbine).

Wind water pump.

Geothermal energy equipment namely Geothermal heat pumps,

Geothermal Reversible Chillers, Air handlers for indoor quality control

equipment, Hydronic heat pumps, Slim Jim heat exchangers, HDPE

fusion tools, Geothermal energy installation tools and equipment,

Dehumidification equipment, Thermostats and intellizone.

Any other item approved by the Alternative Energy Development

Board (AEDB) and concurred to by the FBR.

SMD/LED/LVD lights with or without ballast, fittings and fixtures.

SMD/LED/LVD street lights, with or without ballast, PV module, fitting

and fixtures.

Tubular day lighting device.

Wind turbines including alternators and mast.

Solar torches.

Lanterns and related instruments.

LVD induction lamps.

55

LED bulb/tube lights.

PV module, with or without, the related components including invertors

(offgrid/on grid/ hybrid) with provision for direct connection/input from

renewable energy source and with Maximum Power Point Tracking

(MPPT), charge controllers and solar batteries.

Light emitting diodes (light emitting in different colors).

Water pumps operating on solar energy along with solar pump

controllers.

Energy saver lamps of varying voltages.

Energy Saving Tube Lights.

Sun Tracking Control System

Invertors (off-grid/on grid/hybrid) with provision for direct

connection/input from renewable energy source and with Maximum

Power Point Tracking (MPPT).

Charge controller/ current controller.

Parts and components for manufacturing LED lights namely Aluminum

housing/ shell for LED (LED light fixture), Metal clad printed circuit

boards (MCPCB) for LED, Constant current power supply for of LED

lights (1 -300W), Lenses for LED lights.

14. Eighth Schedule REDUCED RATE OF TAX

It has also been proposed to charge reduce rate of sales tax on following

items:-

Description Rate of sales tax

DAP Fertilizer Rs. 100 per 50kg

Bag

NP (22-20) fertilizer manufactured from gas other tan

imported LNG.

Rs. 168 per 50kg

Bag

NP (18-18) fertilizer manufactured from gas other tan

imported LNG.

Rs. 165 per 50kg

Bag

NPK-I fertilizer manufactured from gas other tan

imported LNG.

Rs. 251 per 50kg

Bag

56

NPK-II fertilizer manufactured from gas other tan

imported LNG. Rs. 22 per 50kg Bag

NPK-III fertilizer manufactured from gas other tan

imported LNG.

Rs. 341 per 50kg

Bag

SSP fertilizer manufactured from gas other tan


CAN fertilizer manufactured from gas other tan


Natural gas supplied to fertilizer plant for

manufacturing of urea. 10%

Phosphoric acid imported by fertilizer company for

manufacturing of DAP. 5%

Machinery for poultry sector namely Machinery for

preparing feeding stuff, Poultry incubators and

brooders, Insulated sandwich panels, Poultry sheds,

Evaporative air cooling system and Evaporative

cooling pad.

7%

Multimedia projectors imported by educational

institution 10%

Locally produced coal Rs. 425/ton or 17%

ad valorem,

whichever is higher

15. Ninth Schedule FIXED TAX

It has been proposed to revise the fixed amount of sales tax chargeable

on Mobile phones. After proposed revision, fixed amount sales tax on

different types of mobile phones shall be chargeable as per following

rates:-

Sr.

# Description

Sales Tax on

Import or

Local Supply

Sales Tax at

the time of

Registration of

IMEI number

Sales Tax

payable at

time of

supply of

CMOs

1

Subscriber

Identification

Module (SIM) Cards

- - Rs. 250 (no

change)

2

Low Priced Cellular

Mobile Phones or

Satellite Phones with

following

specifications:-

Increased

from Rs.

300/- to Rs.

650/-

Increased from

Rs. 300/- to Rs.

650/-

-

57

All cameras: 2.0

mega-pixels or less

Screen size: 2.6 inches

or less

Key pad

3

Medium Priced Cellular

Mobile Phones or

Satellite Phones with

following

specifications:-

One or two cameras

between 2.1 to 10

mega-pixels

Screen size: between

2.6 inches and 4.2

inches

Micro-processor: less

than 2 GHZ

Reduced

from Rs.

1,000/- to Rs.

650/-

Reduced from

Rs. 1,000/- to

Rs. 650/-

-

4

Smart Cellular Mobile

Phones or Satellite

Phones with below

specifications:-

One or two cameras:

10 mega-pixels and

above

Touch Screen: size 4.2

inches and above

4GB or higher Basic

Memory

Operating system of

the type IOS, Android

V2.3,Android

Gingerbread or

higher, Windows 8 or

Blackberry RIM

Rs. 1,500/-

(No

change)

Rs. 1,500/- (No

change) -

58

Micro-processor:

2GHZ or higher, dual

core or quad core

16. Proposed Notifications VARIOUS PROVISIONS

It has also been proposed to issue notifications pertaining to following

matters:-

Sr # Subject Matter of Proposed Notification

1

Amendment in Chapter XIII of Sales Tax Special Procedure Rules,

2007. The proposed amendment seeks to withdraw levy of extra tax

@ 2% on Lubricating Oils. Consequent to this proposed

amendment, the industrial users of Lubricating Oils shall be able to

adjust input tax credit on purchase of Lubricating Oils.

2

Currently 50% reduction in sales tax is available on import of hybrid

vehicles up to 1800cc and 25% reduction in sales tax is available on

import of hybrid vehicles exceeding 1800cc. It has been proposed

to restrict the 25% reduction in sales tax on import of hybrid vehicles

having capacity from 1801cc to 2500cc. It has also been proposed

that 50% and 25% reduction in sales tax shall also be provided on

local sale of hybrid vehicles.

3

Amendment has been proposed in Sales Tax Special Procedure

(Withholding) Rules, 2007, whereby sales tax withholding shall be

withdrawn on taxable supplies made by one registered person to

another registered.

4

Amendment in Islamabad Capital Territory (Tax on Services)

Ordinance, 2001 has been proposed, whereby, the services which

are subject to sales tax on the basis of turnover without input tax

adjustment under Provincial Sales Tax Laws are proposed to be

taxed in the similar manner in Islamabad. Exemption from sales tax

is also proposed to be provided on export of IT services.

5

Amendment in Sales Tax Special Procedure Rules, 2007 has been

proposed whereby, the existing sales tax rate applicable on steel

sector will be enhanced from Rs. 9/unit of electricity consumed to

Rs. 10.5/unit of electricity consumed.

6 Reduced rate of sales tax applicable on retail sales of five export

oriented sectors is proposed to be enhanced from 5% to 6%.

7 Rate of sales tax on commercial imports of fabrics is proposed to be

enhanced from 0% to 6%.

59

FEDERAL EXCISE ACT, 2005

AMENDMENTS PROPOSED BY THE FINANCE BILL, 2017

All amendments shall be effective from July 01, 2017 unless otherwise provided

The detail of amendments proposed in various sections and notifications of

Federal Excise Act, 2005 are as under:-

1. Exemptions SECTION 16

It has been proposed that FBR, instead of Federal Government, shall place

before the National Assembly, all the exemption notifications issued during

a financial year.

It has also been proposed that all the exemption notifications, which have

not been rescinded up till now, shall remain in force till June 30, 2018, if not

rescinded earlier. It has further been proposed that all exemption

notifications issued on or after 1st July, 2016 shall continue to be in force till

30 June, 2018, if not rescinded earlier.

Prior to above proposed amendment, all the exemption notifications

issued during a financial year shall, if not rescinded earlier, stand rescinded

on expiry of the respective financial year.

The above amendments proposed in section 13 shall be effective on the

next day of assent given to this Act by the President of Pakistan.

2. Offences, penalties, fines and allied

matters

SECTION 19

The proposed amendment seeks to impose penalty on persons engaged

in the manufacture or production of cigarettes in the manner contrary to

this Act or the rules made thereunder or otherwise evades duty of excise

on cigarettes or is engaged in the manufacture or production of

counterfeited cigarettes or tax stamps, banderoles, stickers, labels or

barcodes, or is engaged in the manufacturing or production of cigarettes

packs without affixing, or affixing counterfeited, tax stamps, banderoles,

stickers, labels or barcodes. On such offence, following penalties have

been proposed:

The machinery, equipment, instruments or devices used in such

manufacture or production shall, after outright confiscation, be

destroyed in such manner as may be approved by the Commissioner;

60

No person shall be entitled to any claim on any ground whatsoever, or

be otherwise entitled to any compensation in respect of such

machinery or equipment, instruments or devices;

The confiscation or destruction shall be without prejudice to any other

penal action which may be taken under the law.

3. Appointment of Federal excise officers

and delegation of powers

SECTION 29

It has been proposed to incorporate District Taxation Officer and Assistant

Director Audit in the existing list of Federal Excise Officers. The two newly

proposed officers shall act as subordinate to Commissioner Inland

Revenue and Additional Commissioner Inland Revenue.

It has further been proposed that now onwards, the Board may assign

jurisdiction to Chief Commissioners and a Chief Commissioner may further

assign jurisdiction to Commissioners under his administrative control. Prior to

this proposed amendment, Board assigns jurisdiction to both Chief

Commissioners and Commissioners.

4. Deposit, pending appeal, of duty

demanded or penalty levied

SECTION 37

It has been proposed to provide automatic stay against recovery of tax

demand in cases where the appeal against said demand is pending

before Commissioner (Appeals) and taxpayer has deposited 25% of tax

demand.

5. Validation SECTION 43A

This newly proposed section intends to provide legal cover to the

notifications already issued under the powers conferred upon Federal

Government.

6. Service of notices and other documents SECTION 47

The proposed insertion seeks to incorporate another mode in the existing

prescribed modes for service of notices to the companies. The proposed

insertion provides that notice sent to companies, through e-mail or sent on

their e-folder shall be treated as proper service of notice.

61

7. Empowerment of FBR VARIOUS SECTIONS

Amendments have been proposed in various sections of Federal Excise

Act, 2005 whereby the various powers of Federal Government have been

transferred to FBR and FBR has been authorized to use such powers with

approval of Federal Minister. Summary of the proposed amendments is as

under:-

Sr # Section Description

1 2(8a)

Issue notification specifying different filing dates for

different parts and annexures of monthly federal excise

return.

2 3(1)(c) Issue notification to charge excise duty on specified

goods manufactured in non-tariff areas.

3 3(4) Issue notification to charge higher or lower date of duty

on specified goods and services.

3 16(2)

Issue exemption notification providing exemption on

specified goods and services. This amendment

proposed in section 16 shall be effective on the next day

of assent given to this Act by the President of Pakistan.

8. FIRST SCHEDULE RATE OF DUTY ON GOODS AND SERVICES

Following amendments have been proposed in First Schedule:-

INCREASE IN RATE OF FEDERAL EXCISE DUTY

Rate of federal excise duty has been increased on following goods:-

Rate of duty on locally produced cigarettes has proposed to be

changed with intent to increase the rate. The revised rate of federal

excise duty on locally produced cigarettes is as under:-

a) Duty @ of Rs. 3,740/- per thousand cigarettes, if printed retail price

exceeds Rs. 4,500/- per thousand cigarettes.

b) Duty @ of Rs. 1,670/- per thousand cigarettes, if printed retail price

ranges between Rs. 2,925/- to Rs. 4,500/- per thousand cigarettes.

c) Duty @ of Rs. 800/- per thousand cigarettes, if printed retail price is

less than Rs. 2,925/- per thousand cigarettes.

62

Rate of duty on Cement has been increased from Rs. 1/kg to Rs.

1.25/kg.

INCREASE IN RATE OF FEDERAL EXCISE DUTY

Rate of duty on telecommunication services has been reduced from

18.5% to 17%.

9. THIRD SCHEDULE CONDITIONAL EXEMPTION

It has been proposed to allow conditional exemption of duty on following

goods:-

The scope of conditional exemption of duty on supply of materials and

equipment to China Overseas Ports Holding Company and its

operating companies including their contractors and sub-contractors

for construction of Gwadar Port and development of Free Zone for

Gwadar Port has been extended to supply of materials and equipment

(plant, machinery, equipment, appliances and accessories).

Vehicles imported by China Overseas Ports Holding Company Limited

(COPHCL) and its operating companies namely (i) China Overseas

Ports Holding Company Pakistan (Private) Limited (ii) Gwadar

International Terminal Limited, (iii) Gwadar Marine Services Limited and

(iv) Gwadar Free Zone Company Limited, for a period of twenty three

years for construction, development and operations of Gwadar Port

and Free Zone Area subject to 21 limitations, conditions prescribed

under PCT heading 9917(3).

Particulars Rate

Rate Rate Depreciation, Initial Allowance and Amortisation as per Third Schedule

Up to Rs. 400,000 NIL Up to Rs. 400,000 Buildings (all types) 10%

Rs. 400,001 to Rs. 500,000 Rs. 400,001 to Rs. 500,000 Furniture including Fittings, Plant & machinery 15%

Motor Vehicle (all types) 15%

Rs. 500,001 to Rs. 750,000 Rs. 500,001 to Rs. 750,000 Ships, Technical and Professional Books 15%

Computer Hardware including Printer etc. 30%

Rs. 750,001 to Rs. 1,500,000 Rs. 750,001 to Rs. 1,400,000 Mineral Oil Concerns

- Below Ground Installations 100%

Rs. 1,500,001 to Rs. 2,500,000 Rs. 1,400,001 to Rs. 1,500,000 - Off Shore Platforms 20%

- Production Installations 20%

Rs. 2,500,001 to Rs. 4,000,000 Rs. 1,500,001 to Rs. 1,800,000 Ramp built for disabled persons not exceeding Rs. 250,000/- 100%

Initial Allowance for Plant and Machinery u/s 23 25%

Rs. 4,000,001 to Rs. 6,000,000 Rs. 1,800,001 to Rs. 2,500,000 Initial Allowance for Buildings u/s 23 15%

Amortisation of Pre-commencement expenditure u/s 25 20%

above Rs. 6,000,000 Rs. 2,500,001 to Rs. 3,000,000

Super Tax (Companies, Individuals & AOPs)

Rs. 3,000,001 to Rs. 3,500,000 Banking Companies 4%- Other persons (on income greater than or equal to Rs. 500 million) 3%

Rs. 3,500,001 to Rs. 4,000,000

- Interest on an account or deposits with banks / financial institutions 10%

- Rs. 4,000,000 to Rs. 7,000,000

above Rs. 7,000,000 Brokerage and Commission u/s 233 Filer Non-Filer

- - Advertising Agents 10% 15%

-

- CAPITAL GAIN ON SALE OF IMMOVABLE PROPERTY - Other Cases 12% 15%

Under Section 37(1A)

- Period Rate

1. 10%

RATES OF ADVANCE TAX ON DIVIDEND - On gas consumption charges of CNG Stations u/s 234A 4% 6%

(Under Section 5) 2. 0% - Prize on Prize Bond or a Cross-Word Puzzle u/s 156A 15% 25%

1. 7.5% - On sale by auction u/s 236A 10% 15%

RATES OF ADVANCE TAX ON SALE OF SECURITIES - Cash withdrawal from Bank u/s 231A 0.3% 0.6%

(Division VII, 37A) - Banking transactions u/s 231AA 0.3% 0.6%

Period - Petroleum products u/s 156A 12% 17.5%

2. Other cases filers 15% Filer Non-Filer Filer Non-Filer - On sales to distributors, dealers or wholesalers u/s 236G 0.1% 0.2%

3. Other cases non-filers 20% 1. 15% 18% 15% 20% - On sales to retailers - Others u/s 236H (on gross sales) 0.5% 1%

-

10% 17.5%

Payments for Goods, Services & Contracts (153) 2. 12.5% 16% 15% 20%

in case of goods

4% of gross amount payable in case of "filer" company Imports u/s 148 (on import value as increased by custom duty, sales tax and FED)

7% of gross amount payable in case of "non-filer" company Industrial Undertakings (remittable steel & pottasic fert., Urea & Manufac.) 1% 1.5%

4.5% of gross amount payable in case of "filer" other cases 3. 7.5% 11% 15% 20% Persons importing pulses 2% 3%

7.75% of gross amount payable in case of "non-filer" other cases Commercial Importers covered under Notification No. S.R.O.1125(I) 3% 4.5%

2% of gross amount in case of distributors if supplier is company Ship breakers 4.5% 6.5%

2.5% of gross amount in case of distributors if supplier is other than company Ind. Undertakings covered under S.No 1-4 of section 148 5.5% 8%

1.5% of gross amount of rice, cotton seed or edible oils Companies not covered under S.No. 1 to 5 of section 148 5.5% 8%

4. 0% 0% 0% 0% Persons not covered under S.No. 1 to 6 of section 148 6% 9%

In case of services

8% of gross amount payable in case of "filer" company

14.5% of gross amount payable in case of "non-filer" company 5. 5% 5% 5% 5% Payments to non-residents u/s 152

10% of gross amount payable in case of "filer" other cases -

17.5% of gross amount payable in case of "non-filer" other cases

- Under a hydel power project or a transmission line project 7% 13%

In case of contracts including contracts signed by sports persons ADVANCE TAX ON SALE OR TRANSFER OF IMMOVABLE PROPERTY - Under any other power project 7% 13%

7% of gross amount payable in case of "filer" company Rate of tax under section 236C shall be as follows: Rate - Any other contract: 7% 13%

12% of gross amount payable in case of "non-filer" company In case of filers 1% - Royalty or fee for technical services 15% 15%

7.5% of gross amount payable in case of "filer" other cases In case of non- filers 2% - Payment for supplies of goods in case of company 4% 7%

12.5% of gross amount payable in case of "non-filer" other cases - Payment for supplies of goods other than a company 4.5% 7.75%

10% of gross amount payable in case of "sports persons" - Payment for services in case of company 8% 14%

ADVANCE TAX ON PURCHASE OF IMMOVABLE PROPERTY - Payment for services other than a company 10% 17.5%

TAX RATES FOR INDIVIDUALS & AOP UNDER SECTION 155 Rate of tax under section 236K shall be as follows: Rate - Payment for advertisement services 10% 10%

- Value is upto Rs. 3,000,000/- 0% - Payment for insurance premium or re-insurance premium 5% 5%

Value greater than Rs. 3,000,000/- Filer 2%

- Non-Filer 4%

Rate

- - By educational institutions on amount of fee u/s 236I 5%

- Telephone bills exceeding monthly Rs. 1,000/- u/s 236 10%

- - Mobile, Internet subscriber or prepaid card user u/s 236 12.5%

- On Export of Raw Cotton and Cotton Yarn u/s 154 1%

- - On functions and gatherings u/s 236D 5%

- Purchase of Air Ticket u/s 236B 5%

- On Sale and purchase of shares u/s 233A 0.02%

TAX RATES FOR COMPANIES UNDER SECTION 155 - Purchaser of tobacco at purchase value u/s 236X 5%

The rate of tax in the case of "filer " company shall be 15% of gross amount of rent

The rate of tax in the case of "non-filer" company shall be 17.5% of gross amount of rent

ADVANCE TAX ON INSURANCE PREMIUM U/S 236U FROM NON-FILERS TAX AT TIME OF COLLECTION OF ADVANCE TAX ON MOTOR VEHICLE U/S 234 -

Types of Premium Rates Engine Capacity Filer Non-Filer -

General Insurance Premium 4% Upto 1000cc Rs. 800 Rs. 1,200

1% 1001cc to 1199cc Rs. 1,500 Rs. 4,000 Profit On Debt u/s 7B

Others 0% 1200cc to 1299cc Rs. 1,750 Rs. 5,000 Profit On Debt

1300cc to 1499cc Rs. 2,500 Rs. 7,500 Where profit on debt does not exceed Rs. 5,000,000 10%

1500cc to 1599cc Rs. 3,750 Rs. 12,000 Where profit on debt exceeds Rs. 5,000,000 but does not exceed Rs.25,000,000 12.5%

1600cc to 1999cc Rs. 4,500 Rs. 15,000 Where profit on debt exceeds Rs. 25,000,000 15%

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

ADVANCE TAX ON TRANSFER OF PRIVATE MOTOR VEHICLE U/S 231B(2)

Engine Capacity Filer Non-Filer

Engine Capacity Filer Non-Filer Upto 850cc 0 Rs. 5,000

Upto 850cc Rs. 7,500 Rs. 10,000 851cc to 1000cc Rs. 5,000 Rs. 15,000

851cc to 1000cc Rs. 15,000 Rs. 25,000 1001cc to 1300cc Rs. 7,500 Rs. 25,000 RATE OF TAX FOR COMPANIES TAX YEAR TAX YEAR

1001cc to 1300cc Rs. 25,000 Rs. 40,000 1301cc to 1600cc Rs. 12,500 Rs. 65,000 2017 2018

1301cc to 1600cc Rs. 50,000 Rs. 100,000 1601cc to 1800cc Rs. 18,750 Rs. 100,000 Rate of tax for small companies 25% 25%

1601cc to 1800cc Rs. 75,000 Rs. 150,000 1801cc to 2000cc Rs. 25,000 Rs. 135,000 Rate of tax for all kinds of companies 31% 30%

1801cc to 2000cc Rs. 100,000 Rs. 200,000 2001cc to 2500cc Rs. 37,500 Rs. 200,000 Rate of tax for banking companies 35% 35%

2001cc to 2500cc Rs. 150,000 Rs. 300,000 2501cc to 3000cc Rs. 50,000 Rs. 270,000

2501cc to 3000cc Rs. 200,000 Rs. 400,000 Above 3000cc Rs. 62,500 Rs. 300,000

Above 3000cc Rs. 250,000 Rs. 450,000

REDUCED RATES ON IMPORT OF HYBRID CARS U/S 148

Upto 1200cc 100% Rate of reduction

1201cc to 1800cc 50% Rate of reduction

1801cc to 2500cc 25% Rate of reduction

RATES OF APPEAL FEE Appeal against assessment Other cases

Commissioner (Appeals) /Addl. Commissioner Rs. 1,000/- Company Rs.1,000/- , Others Rs. 200/-

Income Tax Appellate Tribunal. Rs. 2,000/- Rs. 2,000/-

Income groupIncome group

On execution of Contract, Sub-Contract for the design, Construction or

supply of plant & equipment:

Yield on a National Saving Deposit Certificate, including a Defense Saving

Certificate, under the National Saving Scheme.

Where holding period of immovable property is upto

five years

Pakistan International Airlines Corporation, Poultry industry including breeding, broiler

production, egg and feed production (Tax Rate : 0.5%)

8% 16%

Future commodity contracts entered

in to by members of Pakistan

Mercantile Exchange.

Rs. 600,000 to Rs. 1,000,000/-

More than five years

NILUp to Rs. 200,000/-

100

ADVANCE TAX ON PURCHASE, REGISTRATION OF PRIVATE MOTOR

VEHICLE U/S 231B(1)&(3)

Provided that the rate of tax to be collected u/s 231B(2) shall be reduced by

10% each year from the date of first registration in Pakistan.

500

Rs. 719,500/- + 30% of amount

exceeding Rs. 4,000,000/-

Life Insurance Premium if exceeding 0.3 million p.a.

Rs. 60,000/- plus 15% of exceeding

amount Rs.1,000,000/-

Rs. 20,000/- plus 10% of amount


Rs. 210,000/- plus 20% of exceeding

amount Rs.2,000,000/-

Rs. 1,000,000 to Rs. 2,000,000/-

Distributor of pharmaceutical products, fertilizers and cigarettes, petroleum agents and

distributors (who are registered under Sales Tax Act, 1990) (Tax Rate: 0.2%)

Rice Mills, Dealers & Flour Mills (Tax Rate : 0.2%) , Motor Cycle dealers registered under

ST Act, 1990 (Tax Rate 0.25%)

In the case of air transport 3% of the gross amount received or receivable;

PROPOSED TAX CARD Tax Year 2017-18

TAX RATES FOR SALARIED CLASS RATES OF TAXTAX RATES FOR INDIVIDUALS & ASSOCIATION

OF PERSONS

NIL

2% of amount exceeding Rs.

400,000/-

50

In the case of shipping 8% of the gross amount received or receivable;

The rate of tax imposed under section 7 shall be:

Rs. 259,500/- + 20% of amount


Rs. 14,500 + 10% of the amount

exceeding Rs. 750,000/-

Rs. 79,500/- + 12.5% of amount


Rs. 92,000/- + 15% of amount


TY 2017

Life insurance agents where commission received is less than Rs. 0.5

million per annum

Dividends declared by purchaser of power project

privatized by WAPDA or on shares of a company setup

for Power Generation or supplying coal for PG

Where holding period of a security is

twenty four months or more but the

security was acquired on or after July

1st, 2013.

TY 2018

Rs. 2,000/- + 5% of amount


Rs. 359,500/- + 22.5% of amount


Rs. 7,000 + 10% of amount


Rs. 32,000 + 15% of amount


Rs. 144,500 + 20% of amount


Rs. 344,500/- + 25% of amount


100

200

Rs. 472,000/- + 25% of amount


Rs. 597,000/- + 27.5% of amount


Rs. 1,422,000/- + 30% of amount


5% of gross amount exceeding

200,000/-

In all other cases (Tax Rate : 1.25 %)

Rs. 200,000 to Rs. 600,000/-

Oil Marketing Companies, Oil Refineries, Sui Southern & Sui Northern Gas Co., (where

annual turnover exceeds 1 billion (Tax Rate : 0.5%)

1,319,500+ 35% of the amount


Where the security was acquired

before July 1st, 2013.

Seating Capacity

Twenty or more

Filer (Rs/ seat/ annum)

300

Ten or more and less than

twenty

Non- Filer (Rs/ seat/ annum)

Upto Rs. 2,000,000/- Four or more and less than

ten

TAX ON MOTOR VEHICLES U/S 234 PASSENGER TRANSPORT VEHICLE -

PLYING FOR HIRE

7% of amount exceeding Rs.

400,000/-


less than twelve months.


more than twelve months but less

than twenty four months.

Rs. 137,000/- + 17.5% of amount


Minimum Tax u/s 113 chargeable as per Division IX, Part-I, 1st Schedule is 1%

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