Sunteți pe pagina 1din 29

Finance Act 2013

Tax Hand Book

Finance Act 2013 Tax Hand Book Zahid Jamil & Co. Chartered Accountants www.zahidjamilco.com An Independent Member

Zahid Jamil & Co.

Chartered Accountants

An Independent Member Firm of Prime Global

Jamil & Co. Chartered Accountants www.zahidjamilco.com An Independent Member Firm of Prime Global www.primeglobal.net

Tax Hand Book

Finance Act 2013

Strictly for circulation to clients & staff of Zahid Jamil & Co.

This handbook elaborates the important changes brought down through Finance Act, 2013 relating to Income Tax, Sales Tax, Federal Excise Duty and other Taxation Laws. For considering the precise effect of a particular change, reference should be made to the specific wordings in the relevant statute, therefore, not generally be acted upon without obtaining appropriate advice.

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

Dated: July 26, 2013

Zahid Jamil & Co

Chartered Accountants

2

An Independent Member Firm of Prime Global

Tax Hand Book

INCOME TAX

AMENDMENTS IN INCOME TAX ORDINANCE, 2001

Finance Act 2013

Sr.

     

#

Section

Before Amendment

After Amendment

1

Sec. 8 (e) Proviso

GENERAL PROVISONS RELATING TO TAXES

 

&

IMPOSED UNDER SECTIONS 5, 6 AND 7 Previously, dividend received by a company was excluded from Final Tax Regime (FTR).

169 (3)

Now the dividend income received by a company shall be treated as a separate block income under FTR.

2

Sec.15(6)

INCOME FROM PROPERTY Prior to Finance Act 2013, Income from Property was taxed as separate block of income at prescribed rates.

 

& 15(7)

Now Income from Property is taxable as part of Total Income at normal rates provided in Division I of Part-I of First Schedule of Income Tax Ordinance 2001.

Previously Individual or Association of Persons driving taxable income exceeding Rs. 150,000 and does not drive taxable income under any other head, were exempt from tax under this head.

Now section 15(1) shall apply to all persons and no tax will be charged on gross rent income up to Rs. 150,000/-.

3

Sec.

DEDUCTIONS IN COMPUTING INCOME CHARGEABLE UNDER HEAD INCOME FROM PROPERTY

No such section was available.

New Section has been Inserted; i.e.

15(A)

(1) in computing the income of a person chargeable to tax under the head “Income from Property” for a tax year, a deduction shall be allowed for the following expenditures or allowances, namely:

 

(a)In respect of repairs to a building, an allowance equal to one- fifth of the rent chargeable to tax in respect of the building for the year, computed before any deduction allowed under this section;

(b)any premium paid or payable by the person in the year to insure the building against the risk of damage or destruction;

(c)any local rate, tax, charge, or cess in respect of the property or the rent from the property paid or payable by the person to any local authority or government in the year, not being any tax payable under this Ordinance;

(d)any ground rent paid or payable by the person in the year in respect of the property;

(e)any profit paid or payable by the person in the year on any money borrowed including by way of mortgage, to acquire, construct, renovate, extend, or reconstruct the property;

Zahid Jamil & Co

Chartered Accountants

3

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

   

(f)where the property has been acquired, constructed, renovated, extended, or reconstructed by the person with capital contributed by the House Building Finance Corporation or a scheduled bank under a scheme of investment in property on the basis of sharing the rent made by the Corporation or bank, the share in rent and share towards appreciation in the value of property (excluding the return of capital, if any) from the property paid or payable by the person to the said Corporation or the bank in the year under that scheme;

(g)where the property is subject to mortgage or other capital charge, the amount of profit or interest paid on such mortgage or charge;

(h)any expenditure (not exceeding six percent of the rent chargeable to tax in respect of the property for the year computed before any deduction allowed under this section) paid or payable by the person in the year for the purpose of collecting the rent due in respect of the property;

(i)any expenditure paid or payable by the person in the tax year for legal services acquired to defend the person’s title to the property or any suit connected with the property in a Court; and

(j)where there are reasonable grounds for believing that any unpaid rent in respect of the property is irrecoverable, an allowance equal to the unpaid rent where

(i)the tenancy was bona fide, the defaulting tenant has vacated the property or steps have been taken to compel the tenant to vacate the property, and the defaulting tenant is not in occupation of any other property of the person;

(ii)the person has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or has reasonable grounds to believe that legal proceedings would be useless; and

(iii)the unpaid rent has been included in the income of the person chargeable to tax under the head “Income from Property” for the tax year in which the rent was due and tax has been duly paid on such income.

(2) Where any unpaid rent allowed as a deduction under clause (j) of sub-section (1) is wholly or partly recovered, the amount recovered shall be chargeable to tax in the tax year in which it is recovered.

(3) Where a person has been allowed a deduction for any expenditure incurred in deriving rent chargeable to tax under the head “Income from Property” and the person has not paid the liability or a part of the liability to which the deduction relates within three years of the end of the tax year in which the deduction was allowed, the unpaid amount of the liability shall be chargeable to tax under the head “Income from Property” in the first tax year following the end of the three years.

 

4

Zahid Jamil & Co

An Independent Member Firm of Prime Global

Chartered Accountants

Tax Hand Book

 

Finance Act 2013

     

(4) Where an unpaid liability is chargeable to tax as a result of the application of sub-section (3) and the person subsequently pays the liability or a part of the liability, the person shall be allowed a deduction for the amount paid in the tax year in which the payment is made.

(5) Any expenditure allowed to a person under this section as a deduction shall not be allowed as a deduction in computing the income of the person chargeable to tax under any other head of income.

(6) The provisions of section 21 shall apply in determining the deductions allowed to a person under this section in the same manner as they apply in determining the deductions allowed in computing the income of a person chargeable to tax under the head “Income from Business”.

Sr.

     

#

Section

Before Amendment

 

After Amendment

4

Sec. 56

SET OFF OF LOSSES Previously, loss, for a tax year, sustained under any head of income under section 11 except for speculation business, could be set off against any other head of income for the year.

 

(1)

Now the said loss cannot be set off against income under the head salary or income from property.

5

Sec. 80

PERSON DEFINITION Previously only corporate and finance societies were considered as company.

Now non profit organization, entity or body of persons established under any law, trusts and all societies in addition to corporate and finance societies are treated as company.

6

Sec.

UNEXPLAINED

INCOME

OR

 

111(1)

ASSETS

Previously

provisions

of

Now a new provision has been inserted according to which where a taxpayer explains the nature and source of the amount credited or the investment made, money or valuable article owned or funds from which the expenditure was made, by way of agricultural income, such explanation shall be accepted to the extent of agricultural income worked back on the basis of agricultural income tax paid under the relevant provincial law.

Section

111

were

not

applicable

on

Agriculture

Income.

7

Sec. 113 (1) & (2)

MINIMUM TAX Previously minimum tax payable by resident company, individual or association of person was 0.5% of their turnover. Previously carrying forward of excess amount of tax paid than the actual tax payable was available to companies only.

Now the rate has been increased to 1 per cent of their turnover.

Now this facility has been extended to Individuals and Association of Persons and they can also carry forward the excess amount of tax paid as per provisions of section 113.

Zahid Jamil & Co

Chartered Accountants

5

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

Sr.

     

#

Section

Before Amendment

After Amendment

 

8 Sec. 113A

MINIMUM TAX ON BUILDERS /MINIMUM TAX ON LAND DEVELOPERS The old sections 113A and 113B dealt Taxation of Retailers.

 

/ 113B

Previous scheme of final tax for retailers has been withdrawn. Taxation of retailers is now inter alia dealt in section 236H. New sections have been substituted.

 

The substituted section 113A provides that a person derives income from business of construction and sale of residential, commercial or other building, such person shall pay minimum tax on income from sale of residential, commercial or other building at the rates to be notified later. The mode manner and time of payment of such amount shall be notified later.

The substituted section 113B provides that where a person derives income from business of development and sale of residential, commercial or other plots, such person shall pay a minimum tax on income from sale of residential, commercial, or other plots sold at the rates to be notified later. The mode manner and time of payment of such amount of tax shall also be notified.

 

9 Sec.114

RETURN OF INCOME Previously a person was

 

(1)(b)

The threshold for filling of return has been curtailed to Rs. 500,000/- from Rs. One million, in the case of a person who is holder of commercial or industrial connection of electricity.

(viii)

required to file a return of income having commercial or industrial connections of

electricity where the amount of annual bill exceeds Rs.

Now a person registered with Chamber of Commerce and Industry or any trade or business association or any market committee or any professional body including Pakistan Engineering Council, Pakistan Medical and Dental Council, Pakistan Bar Council, Institute of Chartered Accountants of Pakistan or Institute of Cost & Management Accountants of Pakistan has to file return of income.

Now every individual whose income under the head “Income from Business” exceeds rupees three hundred thousand but does not exceed rupees four hundred thousand in a tax year is also requird furnish return of total income.

1,000,000/-

Also every individual whose income under the head ‘Income from business’ exceeds rupees three hundred and fifty thousand but does not exceed rupees four hundred thousand in a tax year was also required to furnish return of income from the tax year.

Previously any person, furnishing revised return after discovering any omission or wrong statement therein, were not required to get approval of Commissioner.

Now a person after discovering any omission or wrong statement in return furnished may file revised return if it is accompanied by approval of commissioner in writing for revision of return.

Zahid Jamil & Co

Chartered Accountants

6

An Independent Member Firm of Prime Global

Tax Hand Book

 

Finance Act 2013

Sr.

     

#

Section

Before Amendment

 

After Amendment

10

Sec. 115

PERSONS NOT REQUIRED TO FURNISH A RETURN OF INCOME Previously a taxpayer whose entire income in a tax year consists of income chargeable under the head ‘Salary’ was not required to file his return of income, if the employer has filed related annual statement of deduction of income tax from salary, provided his salary income for the tax year does not exceed Rs 500,000.

 

& 118

Now it has been made compulsory for every taxpayer whose entire income is chargeable under the head “Salary”, to furnish return of income. Annual statement for deduction of income tax on salary shall not be treated as return on income in any case.

Now it has been made compulsory for salaried individuals deriving salary income along with wealth statement and wealth reconciliation statement.

Where salary income for the tax year is five hundred thousand or more, the taxpayer is required to file return of income electronically in the prescribed form accompanied by the proof of deduction or payment of tax and wealth as required under section 116 along with wealth reconciliation statement.

 

The date of electronic filling of returns by salaried persons, and a statement required under sub section (4) of section 115 by persons falling in PTR is 31 st August next following the end of the tax year to which the statement or returns related.

11

Sec. 116

WEALTH STATEMENT Previously every resident taxpayer being an individual filing a return of income for any tax year whose last declared or assessed income or the declared income for the year, was one million rupees or more, was required to furnish a wealth statement and wealth reconciliation statement for that year along with such return

It has been made compulsory for every resident Individual Tax Payer (along with person filling statement under section 115(4)) to furnish wealth statement and wealth reconciliation statement regardless of last declared or assessed income or declared income for the year.

Every person furnishing revised wealth statement and wealth reconciliation shall also furnish reasons for furnishing revised wealth statement.

12

Sec. 120

INVESTMENT

TAX

ON

 

INCOME

The FBR had power to make a scheme of payment of investment tax in respect of undisclosed income, representing any amount or investment made in movable or immovable assets.

Now power of Federal Board of Revenue (FBR) to make investment tax schemes has been withdrawn.

Zahid Jamil & Co

Chartered Accountants

7

An Independent Member Firm of Prime Global

Tax Hand Book

 

Finance Act 2013

Sr.

     

#

Section

Before Amendment

 

After Amendment

 

13 Sec.122C

PROVISIONAL ASSESSMENT

 

Previously, the provisional assessment could not be enforced, if a return of income was filed within 60 days from date of service of such provisional assessment order.

Time Limit of sixty days for provisional assessment to attain finality as the final assessment order from the date of service of order of provisional assessment and the limitation of sixty days in the subsequent provisions to sub-section (2) of section 122C has been reduced to forty five days.

 

14 Sec. 130

APPOINTMENT

OF

THE

 

APPELLATE TRIBUNAL

Previously, officers of Inland Revenue were not eligible for appointment as Judicial Member of Tribunal.

Now it has been allowed to induct the officers of Inland Revenue Service, being a law graduate, having at least 15 years of service in BS-17 and above, as Judicial members of the Tribunal.

 

15 Sec. 148

IMPORT

 

There was no advance tax on import of foreign produced films.

Collector of custom shall collect the advance tax on a foreign produced film imported for the purpose of screening and viewing.

 

16 Sec. 149

DEDUCTION OF TAX AT SOURCE FROM SALARY Previously, it was only the “employer” who was responsible for the deduction of withholding tax from salary.

The responsibility for withholding tax from salary has now been extended to any “person responsible for” paying salary.

 

17 Sec. 152

PAYMENTS

TO

NON-

 

RESIDENTS

The term “prescribed person” was not defined in this section.

Definition of “prescribed person” used in sub-section (7) of section 153 would apply for the purpose of sub-section (2A) of section 152 in respect of payments to a Permanent Establishment of a non-resident for sale of goods, rendering of or providing services and execution of contracts.

 

18 Sec. 153

PAYMENTS FOR GOODS, SERVICES AND CONTRACTS

 

Sales Tax registered person

A

person registered under the Sales Tax Act, 1990 (Act), is now

was not

included in the

included in the definition of a “prescribed person” responsible for

definition

of

prescribed

withholding tax on payments for sale of goods, services and execution

person.

of

contracts.

Zahid Jamil & Co

Chartered Accountants

8

An Independent Member Firm of Prime Global

Tax Hand Book

 

Finance Act 2013

Sr.

     

#

Section

Before Amendment

   

After Amendment

 

19 Sec. 153A

PAYMENTS

TO

TRADERS

 

AND DISTRIBUTORS

 

This section required manufacturers to collect tax from traders and distributors.

Now this section has been omitted.

 

20 Sec.155

INCOME FROM PROPERTY

 

Definition of “prescribed person” was limited.

The scope of prescribed person for the purposes of section 155 has been extended to include;

 

Charitable institutions.

Private educational institutions, boutiques, beauty parlors, hospitals, clinics or maternity homes.

Individual or AOPs paying gross rent of Rs 1,500,000 and above in a year.

 

21 Sec.164

CERTIFICATE OF COLLECTION OR DEDUCTION OF TAX

 

Presently, a certificate issued by a withholding agent for tax collected or deducted is treated sufficient evidence of tax suffered for claiming credit thereof under section 168.

Now this facility has been withdrawn

 

22 Sec.165

STATEMENTS

   

No

such

explanation

was

It has been clarified that the provisions of section 165 shall override

available.

 

all

conflicting

provisions in following laws restricting certain

 

divulgence of information:

- Protection of Economic Reforms Act, 1992

- Banking Companies Ordinance, 1962

- Foreign Exchange Regulations Act, 1947

- Regulations made under the State Bank of Pakistan Act, 1956.

 

23 Sec. 165A

FURNISHING OF INFORMATION BY BANKS

 

After section 165, the following new section shall be added. 1)Notwithstanding anything contained in any law for the time being in force including but not limited to the Banking Companies Ordinance, 1962 (LVII of 1962), the Protection of Economic Reforms Act, 1992 (XII of 1992), the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the State Bank of Pakistan Act,1956 (XXXIII of 1956), if any, on the subject, every banking company shall make arrangements to provide to the Board in the prescribed form and manner,-

No such section was present.

a)

Online access to its central database containing details of its

account holders and all transactions made in their accounts.

b)

a list containing particulars of deposits aggregating rupees one

million or more made during the preceding calendar month.

c)

a list of payments made by any person against bills raised in

Zahid Jamil & Co

Chartered Accountants

9

An Independent Member Firm of Prime Global

Tax Hand Book

 

Finance Act 2013

     

respect of a credit card issued to that person, aggregating to rupees one hundred thousand or more during the preceding calendar month.

d)

A consolidated list of loans written off exceeding rupees one

million during a calendar year.

e)

A copy of each Currency Transactions Report and Suspicious

Transactions Report generated and submitted by it to the Financial Monitoring Unit under the Anti-Money Laundering Act, 2010 (VII of

 

2010).

2)

Each banking company shall also make arrangements to nominate

senior officer at the head office to coordinate with the Board for provision of any information and documents in addition to those listed in sub-section (1), as may be required by the Board.

a

3) The banking companies and their officers shall not be liable to any civil, criminal or disciplinary proceedings against them for furnishing information required under this Ordinance.

4)

Subject to section 216, all information received under this section

shall be used only for tax purposes and kept confidential.

24

Sec.

CREDIT FOR TAX COLLECTED OR DEDUCTED Previously, tax credit was allowed under certain tax collections / deductions even if they fall under FTR.

 

168(3)

Now, no tax credit against tax collection / deduction under section 153 shall be allowed if it falls under FTR, and section 234(5) has been excluded from this provision.

25

Sec. 169

TAX COLLECTED OR DEDUCTED AS A FINAL TAX Previously, for section 153 only clauses (c) and (d) of 153(3), and for section 234 only subsection 5, were considered under final tax under the applicable provisions of this section.

Now, all provisions of section 153 have been vested under the provisions of this section whereas section 234(5) has been excluded.

25

Sec. 171

ADDITIONAL PAYMENT FOR DELAYED REFUND

has been clarified that for the purposes of compensation, refund

becomes due from the date of the refund order, made on an application under sub-section (1) of section 170,and not from the date of assessment of income treated to have been made by the Commissioner under section 120.

It

No

such

explanation

was

available.

 

26

Sec.172

REPRESENTATIVE

   

No

such

explanation

was

It

has been explained that “business connection” includes transfer of

available.

 

an asset or business in Pakistan by a non-resident to the representative of the person.

Zahid Jamil & Co

Chartered Accountants

10

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

Sr.

     

#

Section

 

Before Amendment

 

After Amendment

27

Sec. 177

AUDIT / SELECTION OF AUDIT BY THE BOARD

 

& 214C

For the removal of doubt, it has been made clear that the powers of the Commissioner under this section are independent of the powers of the Board under section 214C and nothing contained in section 214C restricts the powers of the Commissioner to call for the record or documents including books of accounts of a taxpayer for audit and to conduct audit under this section.

No

such

explanation

was

available.

 
 

Further notwithstanding anything contained in this Ordinance or any other law, for the time being in force, the Board shall keep the parameters confidential.

28

Sec. 178

ASSISTANCE TO

   

COMMISSIONER

Previously every officer of federal excise and sales tax was empowered and required

Now this power has been withdrawn from federal excise and sales tax officers.

to

assist the Commissioner in

the discharge of the Commissioner’s functions

under this Ordinance.

 

29

Sec. 181

TAXPAYERS REGISTRATION CNIC was not treated as Alternative of NTN.

FBR may allow the use of Computerized National Identity Card as an alternative to National Tax Number (NTN).

32

Sec 198

PROSECUTION FOR UNAUTHORISED DISCLOSURE OF INFORMATION BY A PUBLIC SERVANT

 

A

person who discloses any

Now the fine of not less than Rs. 500,000/- and imprisonment of one year has been defined.

particulars in contravention of section 216 shall commit an offence punishable on conviction with a fine or imprisonment for a term not

exceeding six months, or both.

 

32.

Sec. 227A

REWARD

TO

INLAND

In cases involving concealment or evasion of income tax and other taxes, cash reward shall be sanctioned to the officers and officials of Inland Revenue for their meritorious conduct in such cases and to the informer providing credible information leading to such detection, as may be prescribed by the Board, only after realization of part or whole of the taxes involved in such cases. The Board may, by a notification in the official Gazette, prescribe the procedure in this behalf and specify the apportionment of reward sanctioned under this section for individual performance or to collective welfare of the officers and officials of Inland Revenue.

REVENUE

OFFICERS AND

OFFICIALS

No

such

provision

was

available.

 

Zahid Jamil & Co

Chartered Accountants

11

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

Sr.

     

#

Section

Before Amendment

After Amendment

33

Sec. 230B

DIRECTORATE GENERALS OF LAW AND RESEARCH & DEVELOPMENT

 

& 230C

New directorate has been created within FBR relating to functions, jurisdiction and powers to be specified for “Directorate-General of Law” and “Directorate-General of Research and Development”.

No

such

provision

was

available

 

34

Sec.

COLLECTION OF TAX BY NATIONAL CLEARING COMPANY OF PAKISTAN LIMITED (NCCPL)

 

233AA

NCCPL shall now collect advance tax at the rate of 10 percent from margin financiers, trading financiers and lenders on providing of any margin financing, margin trading or securities lending under Securities (Leveraged Markets and Pledging) Rules, 2011 in share business. This provision does not apply to mutual fund specified in sec 57(2) part I of Second Schedule.

Division IIB of Part IV of the First Schedule

35

Sec. 234

TAX ON MOTOR VEHICLES

 

As per section 234 of Income Tax Ordinance, 2001 any person at the time of collecting motor vehicle tax shall also collect advance tax at the rates specified in first schedule. If Motor vehicle tax is collected in installments, the advance tax shall also be collected in installments in like manner.

Now, it has been provided that where the motor vehicle tax is collected in lump sum, this advance tax shall also be collected in lump sum in like manner. Moreover where this tax is collected from any person being the owner of goods transport vehicle, the tax so collected shall also be adjustable against total tax liability and not final tax on income of such person for plying , or hiring out , of such vehicle.

36

Sec. 236D

ADVANCE TAX ON FUNCTIONS & GATHERINGS

Transactions / Persons subject to advance tax collection Persons arranging functions and gathering related to wedding, seminar, workshop, session, exhibition, concert, show, party or any other gathering for such purpose. Collection / withholding agent Owner, lease-holder, operator / manager of marriage hall, marquee, hotel, restaurant, commercial lawn, club, and community place etc. Rate applicable 10% of total amount of bill from the person arranging the gathering. Status of tax WHT is adjustable.

No

such

provision

was

available.

 

36.

Sec. 236

ADVANCE TAX ON FOREIGN

Transactions / Persons subject to advance tax collection Distributor of foreign produced films, TV plays and serials Collection / withholding agent Person responsible for censoring or certifying a foreign-produced film, TV drama serial or play. Rate applicable Rs 1,000,000 on film; Rs 100,000 per TV play / episode of serial. Status of tax WHT is adjustable.

1

E

PRODUCED TV PLAYS & SERIALS No such provision was available.

Zahid Jamil & Co

Chartered Accountants

12

An Independent Member Firm of Prime Global

Tax Hand Book

 

Finance Act 2013

Sr.

     

#

Section

Before Amendment

After Amendment

36.

Sec 236F

ADVANCE TAX ON CABLE

 

2

OPERATORS AND ELECTRONIC MEDIA No such provision was available.

Transactions / Persons subject to advance tax collection Cable operators and other electronic media Collection / withholding agent PEMRA at the time of issuance/renewal of license Rate applicable Rs 7,500 to Rs 5,000,000.

36.

Sec 236G

ADVANCE TAX SALE TO

Transactions / Persons subject to advance tax collection Distributors, dealers and wholesaler Collection / withholding agent Manufacturers or commercial importers of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile and beverages paint or foam,. Rate applicable 0.1 per cent of the gross value of sales.

3

DISTRIBURTORS, DEALERS AND WHOLESALERS No such provision was available.

36.

Sec. 236

ADVANCE TAX ON SALE TO

Transactions / Persons subject to advance tax collection Retailers Collection / withholding agent Manufacturer, distributors, dealer and wholesaler or commercial importer of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, Beverages, paint or foam. Rate applicable 0.5 per cent of the gross value of sales

4

H

RETAILERS No such provision was available.

36.

Sec. 236 I

ADVANCE TAX ON PAYMENT

Transactions / Persons subject to advance tax collection Educational fee/charges where annual fee exceeds Rs 200,000. Collection / withholding agent Educational institutions Rate applicable 5 per cent of the fee

5

OF FEE TO EDUCATIONAL INSTITUTIONS No such provision was present

36.

Sec. 236 J

ADVANCE TAX ON DEALERS,

Transactions / Persons subject to advance tax collection Dealers, commission agents or arhatis, etc. Collection / withholding agent Market committee or body formed under any provincial or local law. Rate applicable Rs 5,000 to Rs 10,000

6

COMMISSION AGENTS AND ARTIS ETC. No such provision was present

FIRST SCHEDULE

TAX RATES FOR CORPORATE SECTOR

[Division II in clause I of First Schedule]

Following proviso shall be added, namely:-

Provided that the rate of tax imposed on the taxable income of a company other than a banking company, shall be

34% for the tax year 2014.

Zahid Jamil & Co

Chartered Accountants

13

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

TAX RATES FOR ASSOCIATION OF PERSONS AND NON-SALARIED INDIVIDUALS [Clause (1) of Division I of Part I of the First Schedule]

Previously, income of AOPs and non-salaried individuals were taxable at rates ranging from 10 per cent to 25 per cent of taxable income.

The Finance act, 2013 has substituted the previous TABLE with the following tax slab rate for taxable income

from business;

S No.

Taxable income

Rate of tax

1.

Where the taxable income does not exceed Rs.400,000

0%

2.

Where the taxable income exceed Rs.750,000

exceeds Rs.400,000 but does not

10% of the amount exceeding Rs.400,000

3.

 

exceeds Rs.750,000 but does not

Rs.35,000

+

15%

of

the

amount

Where the taxable income exceed Rs.1,500,000

exceeding Rs.750,000

 
 

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

Rs.147,500

+

20%

of

the

amount

4.

exceeding Rs.1,500,000

 
 

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

Rs.347,500

+

25%

of

the

amount

5.

exceeding Rs.2,500,000

 

6.

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

Rs 722,500 + 30% of the amount exceeding Rs 4,000,000

 

7.

Where the taxable income exceeds Rs 6,000,000

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

 

The significant changes, apart from variation in rates, are:

There would be seven slabs as against six slabs previously provided for.

The highest rate of 35 per cent would apply on income exceeding Rs 6,000,000 per annum, whereas this income is currently taxable at the rate of 25 per cent.

Now a retailer being an individual or an association of persons has turnover upto rupees five million for any tax year, such person will not make payment of tax as a final tax at the rates of 1%. (Division IA of First Schedule omitted)

Zahid Jamil & Co

Chartered Accountants

14

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

TAX RATES FOR SALARIED INDIVIDUALS [Clause (1A) of Division I of Part I of the First Schedule]

The Finance act, 2013 has substituted the previous TABLE with the following tax slab rate for taxable salary

income

S.No.

Taxable income

Rate of tax

(1)

(2)

(3)

1.

Where

the

taxable

income

does

not

exceed

0%

Rs.400,000

 

2.

Where the taxable income exceeds Rs.400,000 but

5% of the amount exceeding

does not exceed Rs.750,000

Rs.400,000

3.

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

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

4.

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

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

5.

Where the taxable income exceeds Rs.1,500,000 but does not exceed Rs.1,800,000

Rs.95,000 + 15% of the amount exceeding Rs.1,500,000

6.

Where the taxable income exceeds Rs.1,800,000 but does not exceed Rs.2,500,000

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

7.

Where the taxable income exceeds Rs.2,500,000 but does not exceed Rs.3,000,000

Rs.262,500 + 20% of the amount exceeding Rs.2,500,000

8.

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

Rs.362,500 + 22.5% of the amount exceeding Rs.3,000,000

9.

Where the taxable income exceeds Rs.3,500,000 but does not exceed Rs.4,000,000

Rs.475,000 + 25% of the amount exceeding Rs.3,500,000

10.

Where the taxable income exceeds Rs.4,000,000 but does not exceed Rs.7,000,000

Rs.600,000 + 27.5% of the amount exceeding Rs.4,000,000

11.

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

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

The significant changes, apart from variation in rates, are:

- There would be eleven slabs as against six slabs previously provided for.

- The highest rate of 30 per cent would apply on income exceeding Rs 7,000,000 per annum, whereas this income is previously taxable at the rate of 20 per cent.

ADVANCE TAX ON IMPORTS

[Part II of the First Schedule]

The rates of advance tax to be collected by the Collector of Customs under section 148 are enhanced from 5 to 5.5 per cent in case of all taxpayers excluding companies and industrial undertakings, for which the previous rate i.e 5 % remains applicable.

Further 12 % of the value of the film in case of a foreign produced film imported for the purpose of screening and viewing.

Zahid Jamil & Co

Chartered Accountants

15

An Independent Member Firm of Prime Global

Tax Hand Book

WITHHOLDING TAX ON GOODS AND SERVICES

[Division III of Part III of the First Schedule]

Finance Act 2013

The rates of tax to be deducted from payments for sale of goods, services and execution of contract made to all the taxpayers, except companies, are proposed to be enhanced as follows:

Sale of goods:

Rendering or providing of services:

Execution of contract:

TAX ON INCOME FROM PROPERTY

[Division V of Part III of the First Schedule]

from 3.5 to 4 per cent from 6 to 7 per cent from 6 to 6.5 per cent

The tax rates in case of AOP and individual, effective for tax year 2013, are as under:

Sr.

Gross amount of rent

Rate of tax

 

No

1

Where gross amount of rent does not exceed Rs.

Nil

150,000/-

2

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

10%

of

gross

amount

exceeding Rs. 150,000/-

 

3

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

Rs.

85,000

+

15%

of

gross

amount

exceeding

Rs.

1,000,000

 

The significant changes, apart from variation in rates, are:

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

The highest rate of 15 per cent would apply on gross amount of rent exceeding Rs 1,000,000 per annum, whereas this income is previously taxable at the rate of 10 per cent.

COLLECTION OF TAX BY A STOCK EXCHANGE REGISTERED IN PAKISTAN [Division IIA of Part IV of First Schedule]

Tax in case of financing of carry over trades @ of 10 % of carry over charges as per clause (d) of sub-section (1) of section 233A is not prevailed now.

RATES OF COLLECTION OF TAX BY NCCPL

[Division IIB of Part IV of First Schedule]

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

ADVANCE TAX ON MOTOR VEHICLES [Division III of Part IV of the First Schedule]

The amount of advance tax to be collected under section 234 where the motor vehicle tax is paid on a lump sum basis, has now been prescribed as follows:

Sr.

Engine Capacity

Amount of Advance Tax Rs

No

1

Upto 1000cc

7,500

Zahid Jamil & Co

Chartered Accountants

16

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

2 1001cc to 1199cc

12,500

3 1200cc to 1299cc

17,500

4 1300cc to 1599cc

30,000

5 1600cc to 1999cc

40,000

6 2000cc to above

80,000

PRIZES AND WINNINGS [Division VI of Part III of the First Schedule]

The rate of withholding tax to be deducted on a prize on prize bond or crossword puzzle is proposed to be enhanced from 10 to 15 per cent.

WITHHOLDING TAX ON CASH WITHDRAWALS FROM A BANK [Division VI of Part IV of the First Schedule]

The withholding tax rate on cash withdrawals from a bank is proposed to be enhanced from 0.2 to 0.3 per cent of the gross amount of withdrawal.

ADVANCE TAX ON PURCHASE OF MOTORCARS AND JEEPS [Section 231B and Division VII of Part IV of the First Schedule]

The amounts of advance tax to be collected by the Motor Vehicle registration authority on the registration of new motorcars / jeeps are proposed to be revised as under:

Engine Capacity

Existing Advance tax

Revised Advance tax Rs.

Rs.

Upto 850cc

7,500

10,000

851cc to 1000cc

10,500

20,000

1001cc to 1300cc

16,875

30,000

1301cc to 1600cc

16,875

50,000

1601cc to 1800cc

22,500

75,000

1801cc to 2000cc

25,000

100,000

Above 2000cc

50,000

150,000

ADVANCE TAX AT THE TIME OF SALE BY AUCTION [Section 236A and Division VIII of Part IV of the First Schedule]

The rate of advance tax to be collected by a person making sale of any property or goods by public auction has been enhanced to 10 per cent from the existing rate of 5 per cent of the gross sale price of such property or goods.

ADVANCE TAX ON FUNCTIONS AND GATHERINGS [Section 236D and Division XI of Part IV of the First Schedule]

The rate of tax to be collected on arranging functions and gathering related to wedding, seminar, workshop, session, exhibition, concert, show, party or any other gathering for such purpose is 10%.

ADVANCE TAX ON FORIGN PRODUCED FILM AND TV PLAYS [Section 236E and Division XII of Part IV of the First Schedule] Rate of collection of taxes under this section is as follow:

Zahid Jamil & Co

Chartered Accountants

17

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

Foreign produced TV Drama Serial

Rs. 100,000 per episode

Foreign produced TV Play (single episode)

Rs. 100,000

TAX ON CABLE TELEVISION OPERATOR [Section 236F and Division XIII of Part IV of the First Schedule]

The rate of tax to be collected under this section is as follows:

Licence Category as provided in PEMRA Rules

Tax on licence fee Rs.

Tax on renewal Rs.

H

7,500

10,000

H-I

10,000

15,000

H-II

25,000

30,000

R

5,000

30,000

B

5,000

40,000

B-1

30,000

50,000

B-2

40,000

60,000

B-3

50,000

75,000

B-4

75,000

100,000

B-5

87,500

150,000

B-6

175,000

200,000

B-7

262,500

300,000

B-8

437,500

500,000

B-9

700,000

800,000

B-10

875,500

900,000

The rate of tax to be collected by Pakistan Electronic Media Regularly Authority under section 236F in case of IPTV, FM Radio, MMDS, Mobile TV, Mobile Audio, Satellite TV Channel and Landing Right shall be 20% of permission fee or renewal fee, as the case may be.

ADVANCE TAX ON SALE TO DISTRIBUTOR, DEALERS OR WHOLESALERS [Section 236G and Division XIV of Part IV of the First Schedule]

Tax @ of 10% will be deducted of distributor, dealers or wholesales dealing with manufacturers or commercial importers of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile and beverages paint or foam.

ADVANCE TAX ON SALE TO RETAILER [Section 236H and Division XV of Part IV of the First Schedule]

Tax @ 0.5% will be deducted of retailer dealing with manufacturer, distributors, dealer and wholesaler or commercial importer of electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam.

COLLECTION OF ADVANCE TAX BY EDUCATIONAL INSTITUTIONS [Section 236I and Division XVI of Part IV of the First Schedule]

Tax @ of 5% will be deducted of educational fee/charges where annual fee exceeds Rs 200,000.

Zahid Jamil & Co

Chartered Accountants

18

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

ADVANCE TAX ON DEALERS, COMMISSION AGENTS AND ARHATIS ETC [Section 236J and Division XVII of Part IV of the First Schedule]

Tax on dealers, commission agents and arhatis dealing with market committee or body formed under any provincial or local law will be charge as follow;

Sr. #

Group

Amount of Tax (Per annum) Rs.

1

Group or Class A

10,000

2

Group or Class B

7,500

3

Group or Class C

5,000

4

Any other category

5,000

SECOND SCHEDULE

PART I - EXEMPTIONS FROM TOTAL INCOME

PERQUISITE OF FREE OR CONCESSIONAL PASSAGE [Clause (53A) of Part I of the Second Schedule]

The perquisite of free or concessional passage provided by transporters including airlines to its employees (including the members of their households and dependants) was exempted from the Salary income vides Finance Act, 2005. This exemption has now withdrawn.

INCOME OF UNIVERSITY OR OTHER EDUCATIONAL INSTITUTIONS [Clause (58A) of Part I of the Second Schedule]

A new clause is inserted that income of a university or other educational institutions being run by a non profit organization existing solely for educational purposes and not for purpose of profit.

INCOME OF UNIVERSITY OR OTHER EDUCATIONAL INSTITUTIONS [Clause (92) of Part I of the Second Schedule]

Any income of any university or other educational institution established solely for Educational purposes and not for purposes of profit, was exempt from tax under clause (86) of Part I of the Second Schedule to the repealed Income Tax Ordinance, 1979. The said exemption was continued under clause (92) of Part I of the Second Schedule to the Income Tax Ordinance, 2001 (Ordinance).

The effect of withdrawal of this exemption and consequently, such universities and educational institutions will now be required to compute their taxable income and pay tax at the applicable rates.

INCOME FROM ICC CHAMPIONS TROPHY 2008 [Clause (98A) of Part I of the Second Schedule]

A specific clause was inserted in 2008 to exempt any income derived by International Cricket Council Development (International) Limited (IDI), International Cricket Council (ICC), employees, officials, agents and representatives of IDI and ICC, officials from ICC members, players, coaches, medical doctors and officials of member countries, IDI partners and media representatives, other than persons who were resident of Pakistan, from ICC Champions Trophy, 2008 which was scheduled to be hosted in Pakistan. Now this clause has been withdrawn.

DIVIDEND IN SPECIE [Clause (103B) of Part I of the Second Schedule]

Tax on any dividend in specie derived in the form of shares in a Company, as defined in the Companies Ordinance, 1984 was effectively deferred in a certain manner with effect from July 1, 2010. Where such shares are disposed by the recipient,

Zahid Jamil & Co

Chartered Accountants

19

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

the amount representing the dividend in specie is taxed at the rate of 10 per cent in accordance with section 5, and the amount representing the difference between the consideration received and the amount taxed as dividend, is taxed under the head Capital Gains under section 37 or 37A, as the case may be. On withdraw of concession and consequently, dividend in specie will be taxed under section 5 at the rate of 10 per cent in the tax year in which the same is received by the shareholder.

SPECIAL ECONOMIC ZONES (SEZ) [Clause (126E) of Part I of the Second Schedule]

Previously corporate income tax has provided the tax holidays of 5 year for the project from the date of start of commercial operation and for a period of 10 year to developer zone from development in SEZ. Now It has substituted the existing clause 126E by exempting the following:

the income derived by a zone enterprise as defined in the SEZ Act, 2012 for a period of ten years starting from the date the developer certifies that the zone enterprise has commenced commercial production; and

for a period of ten years to a developer of a zone starting from the date of signing of the development agreement in the SEZ as announced by the Federal Government.

PART II REDUCTION IN TAX RATES

IMPORT OF HYBRID CARS [Clause (28) of Part II of the Second Schedule]

A new clause 28 has inserted in Part II of the Second Schedule providing for the reduction of tax under section 148 on

import of hybrid cars as follows:

Engine Capacity

Rate of reduction

Upto 1200cc

100%

1201cc to 1800cc

50%

1801cc to 2500cc

25%

PART III REDUCTION IN TAX LIABILITY

FLYING AND SUBMARINE ALLOWANCES [Clause (1) of Part III of the Second Schedule]

Any amount received as following allowances is presently taxed at 2.5 per cent as a separate block of income now the reduction under this clause shall be available to so much of flying allowance or the submarine allowances as does not exceed an amount equal to basic salary.

TAX PAYABLE BY A FULL TIME TEACHER OR A RESEARCHER [Clause (2) of Part III of the Second Schedule]

The tax payable by a full time teacher or a researcher, employed in a non profit education or research institution duly recognized by Higher Education Commission, a Board of Education or a University recognized by the Higher Education Commission, including government training and research institution is reduced by an amount from 75% to 40 % of tax payable on his income from salary.

DISTRIBUTORS OF CIGARETTES [Clause (7) of Part III of the Second Schedule]

Where any company engaged in the business of distribution of cigarettes manufactured in Pakistan is required to pay minimum tax on the amount representing its turnover under section 113, the amount of tax payable under the said section

is reduced by eighty per cent.

The above concession is extended to non-corporate taxpayers i.e. Individuals and AOPs, who are engaged in the business of

distribution of cigarettes manufactured in Pakistan.

Zahid Jamil & Co

Chartered Accountants

20

An Independent Member Firm of Prime Global

Tax Hand Book

PART IV EXEMPTION FROM SPECIFIC PROVISIONS

PROFIT ON DEBT [Clause (59)(iv)(a) of Part IV of the Second Schedule]

Finance Act 2013

In the case of any resident individual, no tax is required to be deducted under section 151 from income or profits paid on Defense Saving Certificates, Special Savings Certificates, Savings Accounts or Post Office Savings Accounts, or Term Finance Certificates (TFCs), where such deposit does not exceed Rs 150,000. Now the above provision has withdrawn.

INCOME FROM HAJJ OPERATIONS [Clause (72A) of Part IV of the Second Schedule]

The following provisions are proposed to be not applicable in case of a Hajj Group Operator in respect of Hajj operations, provided that the tax has been paid at the rate of Rs 3,500 per Hajji for the tax year 2013 and Rs 5,000 per Hajji for the tax year 2014 in respect of income from Hajj operations:-

(a) Section 21(l)

Any expenditure for a transaction paid or payable under a single account head which, in aggregate, exceeds Rs 50,000 made other than by a crossed cheque drawn on a bank or by crossed bank draft or crossed pay order or any other crossed banking instrument showing transfer of amount from the business bank account of the taxpayer.

(b) Section 113

Minimum tax payable at the rate of 1 per cent (Previously it was 0.5 per cent) of the turnover from all sources of the tax year where either no tax is payable or the tax paid or payable is less than the rate of minimum tax.

(c) Section 152

Requirement for every person to withhold tax from any payment made to a non-resident person other than certain

exceptions laid down in the said section.

IMPORTS BY AN INDUSTRIAL UNDERTAKING [Clause (72B) of Part IV of the Second Schedule]

Under section 148, the Collector of Customs is required to collect advance tax from every importer of goods on the value of goods at the applicable rate, which is ordinarily treated as a final tax on the income of the importer arising from the imports except inter alia in the case of import of raw material, plant, machinery, equipment and parts by an industrial undertaking for its own use. Now it has inserted a new clause in Part IV of the Second Schedule whereby the provisions of section 148 will not apply to an industrial undertaking, if the tax liability for he current tax year, on the basis of determined tax liability for any of the preceding two tax years, whichever is higher, has been paid and a certificate to this effect is issued by the concerned Commissioner.

THIRD SCHEDULE

PART II INITIAL ALLOWANCE

INITIAL ALLOWANCE REGARDING PLANT AND MACHINERY AND BUILDING [Clause 1 of part II of Third Schedule] ‘Eligible depreciable assets’ are entitled to initial allowance at the rate of 50 per cent for plant and machinery and 25 per cent for buildings. Now it has been reduced the rate of initial allowance to 25 per cent in the case of plant and machinery.

SEVENTH SCHEDULE

[RULE 6 OF SEVENTH SCHEDULE] It has reduced the rate of tax from 35 per cent to 25 per cent on dividend received from Money Market Funds and Income Funds for tax year 2014 and onwards.

Zahid Jamil & Co

Chartered Accountants

21

An Independent Member Firm of Prime Global

Tax Hand Book

SALES TAX

AMENDMENT IN SALES TAX ACT, 1990

Finance Act 2013

Sr.

Sec.

Before Amendment

After Amendment

1.

Sec. 2

Definitions

 

Clause

Previously, no definitions of CREST, provincial sales tax and supply chain existed.

The aforementioned definitions have now been inserted through clauses 5AC, 22A and 33A respectively.

5AC, 22A

and 33A

 

2.

Sec. 2

Time of supply

Now, sales tax shall be levied at the time earlier of receipt of payment or actual delivery of goods. Also, in case where part payment is received::

Clause

Previously, sales tax was levied at the

44

time of actual delivery irrespective of time of payment i.e. sales tax was not

chargeable on advance payments against purchases of goods.

 

i. For taxable supplies, it shall be accounted for in the return for the tax period of receipt; and

ii. For exempt supplies, it shall be accounted for in the return for the tax period during which such exemption is withdrawn.

3.

Sec. 3

Scope of tax

Now the standard sales tax rate has been enhanced to 17%.

A

further tax of 1% shall be charged in addition to standard

Previously, the standard rate of sales tax was 16%.

Before the amendments, no further tax existed on taxable supplies made to unregistered persons.

Previously sales tax was levied on a generalized basis i.e. supply of goods.

applicable rate of sales tax on taxable supplies made to unregistered persons. However, the Federal Government may exclude any supplies from this list.

Now the board has the power to charge sales tax on the basis of the production capacity of the manufacturers or on a fixed basis instead of the previous generalized basis.

Now CNG stations will be charged with sales tax at the rate

of

9% in addition to the standard rate of sales tax, applicable

Previously, CGS stations were charged with sales tax at the standard rate.

from July 01, 2007, where the said 9% comprise sales tax in lieu of value addition made by the CNG station. The value for this purpose shall include price of natural gas, charges, rent, commissions and all local provincial and Federal taxes and

duties excluding sales tax.

4.

Sec.

8

Tax credit

 

(1) (caa)

Before the amendment, no provision was in the Sales Tax Act, 1990 regarding any discrepancy indicated by the CREST system or any unverifiable input tax in a supply chain.

Now such discrepancies or input tax which is not verifiable

in

a supply chain shall be inadmissible.

 

22

Zahid Jamil & Co

 

An Independent Member Firm of Prime Global

Chartered Accountants

Tax Hand Book

 

Finance Act 2013

Sr.

Sec.

Before Amendment

 

After Amendment

 

5.

Sec. 21

De-registration, blacklisting and suspension of registration.

 

(3)

Previously, the input tax in respect of purchases from a person who has either been blacklisted or whose registration has been suspended was disallowed with the exception of a claimant who demonstrates compliance with the requirements of sec. 73.

Now there is no such exception.

 

Now the FBR, Commissioner or any other authorized officer is empowered to block refunds or input adjustments if he has reasons to believe that the person is involved in fraudulent activities or in issuance of fake or flying invoices.

(4)

6.

Sec.

22

Records

 

Under the new law, it is mandatory for taxpayers to maintain records of goods movement to and from business premises / undertakings / warehouses i.e. inward and outward gate passes and transport receipts.

(1) (ea)

Previously inward and outward gate were not required to be maintained.

7.

Sec. 25

Access to record, documents, etc.-

 

Under the new amendments, an explanation is added to sub section (5) of section 25 to the effect that powers to conduct audit / enquires do not stand prejudiced by FBR’s authority under section 72B to select taxpayers for detailed audit and that such powers stand independently vested with Commissioners / other authorized Officers too.

Explanat

No

such

explanation

existed

in

the

ion

previous law.

 

8.

Sec. 40B

Posting of Inland Revenue Officer. Previously, the power to post officers to taxpayers’ business resided with the Board.

Now

this

power

has

also

been

vested

with

the

Chief

Commissioner.

 

9.

Sec. 40C

Monitoring or tracking by electronic or other means

Now the Board has been empowered with the following:

 

i.

To subject any class of registered persons or class of goods to electronic monitoring as to production, sales, clearances, stocks etc. in a prescribed manner.

Previously, no such provision existed.

 
 

ii.

To specify a particular date beyond which movement of taxable goods would be subject to affixing thereon of tax stamps, banderole, stickers, etc.

10

Sec. 45B

Appeals

   

.

Previously, it was ruled by the Courts that the Commissioner (Appeals) has the powers to grant stay on sales tax recoveries, if he is of the view that the recovery order has imposed hardships on the taxpayer. No such provision was specified in the Sales Tax laws and, also, no time limits regarding such stay were in existent.

Now, by the Finance Act 2013, the same powers have been incorporated in the Sales Tax laws and a limit of 30 days (in aggregate) has been imposed on the stay order under this section.

Zahid Jamil & Co

Chartered Accountants

23

An Independent Member Firm of Prime Global

Tax Hand Book

 

Finance Act 2013

Sr.

Sec.

Before Amendment

 

After Amendment

11

Sec. 57

Correction of clerical errors, etc.-

 

.

Under the previous law, any clerical or arithmetic mistakes could be rectified by the officer who made the assessment or by his successor.

Under the new act, it has been substituted that ‘mistakes apparent from record’ can now be rectified by any administrative or appellate authority i.e. Commissioner Inland Revenue, Commissioner Inland Revenue (Appeals) or the Appellate Tribunal Inland Revenue.

12

Sec. 72C

Reward

to

inland

revenue

officers

Now, cash rewards shall be sanctioned to the officers who will discover any tax fraud or concealment. Board shall prescribe the procedure in this regard.

.

and officials

 

Previously, no such provision exists.

13

Sec. 73

Certain transactions not admissible.

 

.

Previously, it is required by a registered person to intimate the Commissioner Inland Revenue in respect of its “business bank accounts”.

Now, the term “business bank account” includes the manner of information either through ‘Form STR I’ already notified or ‘by change of particulars’ in registration database.

14

Third

Taxable supplies

   

.

Schedule

Previously these goods were not included in third schedule.

With regard to goods specified in the Third Schedule, sales tax at retail price is collected from the manufacturer. The scope of Third Schedule is extended to following goods:

Finished or made-up articles of textile and leather, including garments, footwear,

and bed ware, sold in retail packing;

Household electrical goods, including air conditioners, refrigerators, deep

freezers, televisions, recorders and players, electric bulbs, tube-lights, fans,

electric irons, washing machines and telephone sets;

Household gas appliances, including cooking range, ovens, geysers and gas

heaters;

Foam or spring mattresses, and other foam products for household use;

Auto parts and accessories sold in retail packing;

Lubricating oils, brake fluid, transmission fluid, and other vehicular fluids and

maintenance products in retail packing;

Tyres and tubes;

Storage batteries;

Arms and ammunition;

Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes,

glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing;

Fertilizers;

Cement sold in retail packing;

Tiles sold in retail packing;

Zahid Jamil & Co

Chartered Accountants

24

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

Biscuits, confectionary, chocolates, toffees and candies; and

Other goods and products sold in retail packing.

15

.

Sixth

Schedule

The following entries have now been omitted:

Milk preparations obtained by replacing one or more of the constituents of milk by another substance, whether or not packed for retail sale

FEDERAL EXISE DUTY AMMENDMENTS IN FEDERAL EXISE ACT , 2005

Sr.

Section

Before Amendment

 

After Amendment

1.

Sec.

Special Excise Duty

 

Now, a ‘Further Duty’ of 2% in addition to normal rate, shall be charged when goods or services are supplied to unregistered persons.

3(3A)

Previously, no such provision existed.

 

2.

Sec. 17

Records

 

Before amendment, no such records were required to be maintained.

Now, every person registered under the FED Act is required to maintain a record of inward / outward gate passes and transport receipts.

3.

Sec. 33

Appeals to Collector (Appeals).

   

1A

Previously, Commissioner (Appeals) was not authorized to stay recovery of any tax levied under this Act.

Now, he can give stay on such orders if he thinks that such order has made hardships for the taxpayer, for a period not exceeding 30 days in aggregate.

4.

Sec. 35

Powers

of

Board

or

Collector

to

pass

An Explanation has now been inserted to clarify that the powers of FBR, Commissioner or Officer of Inland Revenue vested under sections 35, 45 and 46 are independent of the powers of the FBR under section 42B.

Explan

certain order

 

ation

Previously, no such explanation existed.

 
 

It

has further being clarified that nothing contained in

section 42B restricts the powers of FBR, Commissioner or officer of Inland Revenue under the aforesaid sections

or to conduct audit.

5.

Sec.

Observance of Board's orders, directions and instructions.

A new section has been inserted to reward officers and

42C

officials of Inland Revenue for their meritorious conduct

 

in

cases involving concealment or evasion of excise duty

No such section exists under the previous law.

and other taxes. Moreover, the informer providing credible information leading to such detection would also be rewarded after realization of part or whole of the taxes involved in such cases. It has also been enacted that

FBR may by notification prescribe the procedure to specify the apportionment of reward for individual performance or to collective welfare of the officers and officials of Inland Revenue.

Zahid Jamil & Co

Chartered Accountants

25

An Independent Member Firm of Prime Global

Tax Hand Book

 

Finance Act 2013

 

6. Sec. 45

Access to records and posting of excise staff, etc.

 

Previously, only the Board had powers to post officers in respect of monitoring the activities of a taxpayer.

Now, the same powers have been vested with the Chief Commissioner.

 

7. Sec.

Monitoring or tracking by electronic or other means

This new section has been inserted to enact that FBR may by notification prescribe the procedure to specify any registered person or class of registered persons or any goods or class of goods in respect of which monitoring or tracking of production, sales, clearances, stocks or any other related activity may be implemented through electronic or other means, as may be prescribed. Moreover, excisable goods shall not be removed or sold by the manufacturer or any other person without affixing tax stamp, banderole, stickers, labels, etc. in any such form, style and manner as may be prescribed by FBR.

45A

No such section exists under the previous law.

 

8. First

Table I

 

Sch.

Previously, the rate of duty was 6% on the goods mentioned in serial 4, 5 and 6.

Now, the rate has been enhanced to 9%.

 
 

9. First

Table I

sch.

The following have been substituted:

The now provisions are:

 

9. Locally produced cigarettes if their retail price exceeds [nineteen rupees and fifty paisa] per ten cigarettes.

Sixty-Four per

9.

If

printed

Rupees two thousand three hundred and twenty five per thousand cigarettes

cent

of

the

retail

 

price

retail price

exceeds rupees

 

two

thousand

 

two

hundred

 

and

eighty

six

per

thousand

cigarettes

10. Locally produced cigarettes if their retail price exceeds [Ten rupees] per ten cigarettes but does not exceed nineteen rupees and fifty paisa per ten cigarettes.

Four rupees and seventy Five paisas per ten

10.

if

printed

Rupees eight hundred and

retail

 

price

eighty

per thousand

does

cigarettes

cigarettes plus

5seventy per

per

cent

not

rupees

thousand

exceed

two

two

 

incremental rupee or part

hundred

and

Zahid Jamil & Co

Chartered Accountants

26

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

   

thereof.

eighty

six

per

 

thousand

cigarettes

10. First

Table I

sch.

Previously, there was another category than mentioned above under serial 11, which has now been omitted.

11. First

Table 1

sch.

Entry 54. The new act has provided for levy of duty at the rate of forty paisa per Kilo gram of Oil seed by inserting new entry to the First Schedule.

Entry 55. It has also been enacted for levy of duty at the rate of ten per cent ad valorem on motor vehicles classified under PCT Heading 87.03 having cylinder capacity of 1800 cc and above.

12. First

Table II

sch.

Entry 7 and 8

The act seeks to enlarge the scope of FED on services by deleting the existing Entry No. 7 and replacing Entry No. 8 to Table II of the First Schedule to the Act. The amended Entry NO. 8 provides for levy of FED on services of banks, insurance companies, cooperative finance societies, modarabas, musharikas, leasing companies, foreign exchange dealers, NBFI, Assets management Companies and other persons dealing in any such services.

13. Third

Table I

sch.

Exemptions on the following items has been removed:

 

Hydraulic cement imported or purchased locally by petroleum or

 

energy sector companies.

Lubricating Oil supplied to Pakistan Navy for consumption in vessels

 

Transformer Oil used in manufacture of transformers supplied against international tenders.

14. Third

Table II

sch.

It has now been enacted to make consequential amendment by withdrawing exemption of duty from the date of introduction of the Finance Bill, 2013 i.e. June 13, 2013 as available to services provided by the Asset Management Companies.

Zahid Jamil & Co

Chartered Accountants

27

An Independent Member Firm of Prime Global

Tax Hand Book

INCOME SUPPORT LEVY Income Support Levy Act 2013.

Finance Act 2013

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

(a)

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

(b)

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

Explanation.For the purpose of this clause,

(i)

where liability claimed relates wholly and exclusively to an immovable asset, it shall not be claimed and allowed while computing the net moveable wealth. However, where the liability claimed relates wholly and exclusively to a moveable asset, it shall be claimed and allowed as a straight deduction while computing net moveable wealth; and

(ii)

where the gross wealth of a person, declared in the wealth statement includes both moveable and immoveable assets and the nature of assets to which the liability relates is not determinable, the liability to be allowed while determining the net moveable wealth shall be calculated by the following formula:

 

(A / B) x C

Where

A

is the gross value of moveable assets;

B

is the gross value of both moveable and immoveable assts; and

C

is the gross value of debts owed;

(c)

“Officer of Inland Revenue” means the Officer of Inland Revenue as defined under clause (38A) of section 2 of the Ordinance;

(d)

“Ordinance” means the Income Tax Ordinance, 2001 (XLIX of 2001);

(e)

“person” means an individual;

(f)

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

(g)

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

(h)

“wealth statement” means a wealth statement required to be filed under section 116 of the Income Tax Ordinance,

2001.

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

under the Ordinance.

3. Charge of Levy.Subject to the provisions contained in this Act, there shall be charged for every tax year commencing on and from tax year 2013 a Levy, in respect of value of net moveable assets held by a person on the last date of the tax year at the rate specified in section 9 and in the manner specified hereunder.

4. Time and manner of payment of Levy.A person who is liable to pay the Levy under this Act shall pay the Levy

along with wealth statement.

5. Assessment of Levy.The Officer of Inland Revenue shall, by an order in writing, determine the Levy payable, and

shall serve upon the person a notice of demand specifying the sum payable and the time within which it shall be paid and thereupon such sum shall be paid to such account and in such manner as may be prescribed, within the time specified in the notice.

6. Default surcharge.Without prejudice to any liability under any other law for the time being in force, where a person fails to pay Levy as provided under section 4 or the levy so paid is less than the amount payable, he shall be liable to pay default surcharge at the rate of sixteen per cent per annum on the amount not paid or the amount by which the Levy paid falls short of the amount payable, calculated from the date it was payable to the date it is paid or the date of an order under section 5, whichever is earlier.

Zahid Jamil & Co

Chartered Accountants

28

An Independent Member Firm of Prime Global

Tax Hand Book

Finance Act 2013

7. Recovery of Levy.The provisions of the Ordinance shall, so far as may be practicable, apply to the collection of Levy under this Act as they apply to the collection of tax under the Ordinance.

8. Appeals, revisions and rectifications.The provisions of the Ordinance shall, so far as may be practicable, apply to an appeal against, or revision or rectification of, an order under this Act as they apply to an appeal, revision or rectification under the Ordinance.

9. Rate of Levy.The rate of levy payable under this Act shall be 0.5% of the net moveable wealth exceeding one million rupees.

10. Power to make rules.The Federal Board of Revenue may, by notification in the official Gazette, make rules for carrying out the purposes of this Act.

10. Validation.

(i)

The levy, collection and payment of sales tax under the proviso to clause (c) of sub-rule (2) of rule 20 of Sales Tax Special Procedure Rules, 2007, shall be deemed to have been lawfully and validly levied, collected and paid in accordance with sub-section (8) of section 3 of the Sales Tax Act, 1990 as stated above.

(ii)

The levy, collection and payment of duty of customs under sub-clause (10) of clause 2 of this Act shall deemed to have been lawfully and validly levied, collected and paid in accordance with sub-clause (11) of clause 2.

(iii)

The levy, collection and payment of sales tax under sub-clauses (2), (3), (7), (13) and (14) of clause 5 of this Act, renumbered as aforesaid, shall deemed to have been lawfully and validly levied, collected and paid in accordance with sub-clause (15) of clause 5.

(iv)

The levy, collection and payment of excise duty under sub-clause (6), subparagraph (ii), (iii) and (iv) of paragraph (a) and paragraph (b) of sub-clause(8) and sub-clause (9) of clause 8 of this Act, renumbered as aforesaid, shall deemed to have been lawfully and validly levied, collected and paid In accordance with sub-clause (10) of clause 8.”

KARACHI OFFICE Abid Chambers (Formely:Al-Yousaf Chambers)Shahrah-e-liaqat, New Challi Karachi, Pakistan. Tel: +92-21-2639066-2639511 Fax: +92-21-2621234 Email:infokhi@zahidjamilco.com

LAHORE OFFICE Office # 234-235,2nd Floor, Land Mark Plaza, Jail Road,Lahore-Pakistan. Tel: +92-42-5877817-8 Fax: +92-42-5877820 Email:infolhr@zahidjamilco.com

FAISALABAD OFFICE Al-Jamil Heights 7-Madina Town Ext. Off. Jaranwala Road,Faisalabad-Pakistan. Tel: +92-41-8725065-68 Fax: +92-41-8725070 Email:info@zahidjamilco.com

ISLAMABAD OFFICE House # 443,Street #40, I-8/2, Isalamabad. Pakistan Tel: +92-51-8317545 Fax: +92-51-4435640 Email:infoisb@zahidjamilco.com

Zahid Jamil & Co

Chartered Accountants

29

An Independent Member Firm of Prime Global