Budget 2019 - 20 | Highlights & Comments

Budget 2019-20
Highlights & Comments
Deloitte Yousuf Adil

Tax
Chartered Accountants
Member
0 of Deloitte Touche Tohmatsu Limited
Budget 2019 - 20 | Highlights & Comments

Foreword

This memorandum contains an economic review,

highlights of fiscal proposals and explanatory
description of the significant changes in the
Income Tax, Sales Tax, Federal Excise and
Customs Duty laws proposed through Finance Bill,
2019. It also contains our comments on the
Assets Declaration Act, 2019.

Amendments proposed in the Finance Bill, 2019

will take effect from July 01, 2019, unless stated
otherwise, once it is approved by the Parliament.
The memorandum is aimed at providing general
guidance with the objective of keeping our clients
and staff abreast of the changes in the
aforementioned laws. Deloitte Yousuf Adil accepts
no duty of care or liability for any loss occasioned
to any person acting or refraining from action as a
result of any material in this publication. The users
are therefore advised to seek professional advice
before exercising any judgment, interpretation of
any legal provision and acting thereupon.

The memorandum can also be accessed on our

Website.
www.deloitte.com/view/en_PK/pk/index

Karachi
June 12, 2019

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Budget 2019 - 20 | Highlights & Comments

Contents

Budget at a Glance 03

Economic Review 04

Highlights of Important Fiscal Proposals 11

Significant Amendments Proposed In

Income Tax Ordinance, 2001 20

Sales Tax Act, 1990 57

The Islamabad Capital Territory (Tax on Services) Ordinance, 2001 68

Customs Act, 1969 69

Federal Excise Act, 2005 81

Assets Declaration Act, 2019 85

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Budget 2019 - 20 | Highlights & Comments

Budget at a glance

2019-20

Rs. in billion Rs. in billion

2019-20 2019-20
Tax revenue 5,822.2 Domestic financing:

Non-tax revenue 894.5  Bank 339.0

Gross revenue receipts 6,716.6  Non-Bank:

Less: Provincial share in Federal taxes (3,254.5) o Public debt 582.7
Net revenue receipts 3,462.1 o Public account 250.8
Expenditure o Privatization proceeds 150.0
Current expenditure (6,192.9) 983.4
Development expenditure (843.4) 1,322.4
(7,036.3) Net external financing 1,828.8
Estimated provincial surplus 423.0
Overall fiscal deficit (3,151.2) Financing of fiscal deficit 3,151.2

Source: Annual Budget Statement, 2019-20

Revised 2018-19 estimates

Rs. in billion Rs. in billion

Revised Revised
2018-19 2018-19
Resources Expenditure
 Internal resources 3,659.6  Current expenditure 5,589.4
 External resources 1,403.1  Development expenditure 829.7
 Privatization proceeds -

5,062.8
Bank borrowing 1,356.3

6,419.1 6,419.1

Source: Annual Budget Statement, 2019-20

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Budget 2019 - 20 | Highlights & Comments

Economic Review 2018-19

Macroeconomic and fiscal indicators present a gloomy picture of Pakistan’s economy under the
first year of current government, the second consecutive transition of elected governments in the
country’s history with the political parties who led the previous two regimes now in opposition
with legal challenges involving their leaders.

The Economic Survey of Pakistan, 2018-19 (ESP) highlighted fiscal year 2018-19 as a “break
from the past” referring to the difference of the current regime with a more “egalitarian
development agenda” as against the agendas of previous regimes. Before presenting the bleak
indicators reflecting the current government’s performance, Dr. Abdul Hafeez Shaikh set the
stage by highlighting the state of the economy the current government inherited.

Current account Depleted forex

Significant budget
High fiscal deficit; deficit highest in reserves;
spent on debt
6.5% recent history at insufficient for 2
servicing
6.3% months of imports

While it is highlighted that the new government took policy actions to meet these challenges, the
end result for fiscal year 2019 showed that the economic growth rate retarded to an estimated
3.3%, well below target of 6.2% set last year which the Advisor to PM on Finance, Revenue and
Economic Affairs called “ambitious”. Nevertheless, the real GDP growth rate reflects a broad-
based weakening of domestic demand, as fiscal and monetary policies have been tightened to
contain macroeconomic imbalances.

Real GDP Growth

The current government regards this 9 year low GDP growth as a “short term cost” of
stabilization measures taken to lower trade and current account deficits. Among other short term
costs are larger fiscal deficit and higher inflation discussed further below.

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Budget 2019 - 20 | Highlights & Comments

Targets in nearly all sectors stood unmet. Industrial sector which contributes 20% to the GDP
grew by a meagre 1.4% against a 7.6% target. Manufacturing sector slid by 0.27%, and Large
Scale Manufacturing (LSM) came at a worrying decline of 2.06% against the target of 8.1%. LSM
is a key factor in propelling exports based growth and the results highlight the challenges
Pakistan may have to face to sustain a decent economic growth and produce exportable surplus.
Pakistan has vowed to double its exports to China, which now seems quite challenging. The poor
performance of the LSM sector underscores the importance of pushing ahead with reforms to
strengthen small and medium enterprises and export industries in order to achieve a broad-based
medium-term growth.

Agriculture which contributes around 19% of the GDP grew by just 0.8% compared with a 3.8%
target. Cotton, rice and wheat, the vital crops of Pakistan took a major hit due to unfavourable
weather conditions, shortage of irrigation water, and use of low quality inputs such as inferior
seed and fertilizers at the early stage of the crops.

Services sector, which contributes a 61% of the GDP grew by only 4.7%, compared with a target
of 6.5%. This growth was mainly driven by Retail Trade and Transport since these segments
contribute the most to the service sector. However, the growth is not impressive. When you have
the most important engine in reverse gear, it spells downside risk to growth, going forward.
When the sector turns, the economy follows. This essentially makes for significant downside risk
to growth in the coming quarters.

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Budget 2019 - 20 | Highlights & Comments

Spiraling inflation; policy rate hiked to

12.25%

Dollar plunged by more than 20%;

Weakest currency in Asia*

Negative growth in LSM sector

Twin deficit; 22nd IMF loan

No targets met other than livestock

*Source: Bloomberg, Basket of 13 currencies

Current account deficit

FY2019 showed a trade deficit in Pakistan, at USD 24 billion for July-Apr period. Despite the
devaluation of PKR, Pakistani goods exports decreased by 1.9%, and imports decreased by 4.9%
during July-April’19. The workers’ remittances played a major role in containing current account
deficit to 4.03 percent of GDP.

Trade Deficit (USD billion)

60 40
50
30
40
30 20
20
10
10
0 0
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19*

Import Export Trade Deficit

Source: SBP

The observed trade deficit resulted from the combination of consumption-led growth that fueled
demand for imports, and mounting constraints to export competitiveness. According to World
Bank, between 2005 and 2018, Pakistan’s merchandise exports rose from USD 16 billion to USD
23 billion, an increase of only 47% compared to an increase of 286% in Bangladesh, 563% in

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Budget 2019 - 20 | Highlights & Comments

Vietnam or 193% in India. To make a significant impact on the current account deficit, Pakistan
needs to ensure an environment conductive to investment, one that attracts more foreign direct
investment (FDI), instead of relying so heavily on foreign aid. Pakistan’s record in FDI inflows is
lackluster, with inflows averaging 1.5 percent of GDP between 2005 and 2017.

The World Bank’s recent report “Exports Wanted” outlined three main constraints for Pakistan:

 anti-export bias of its trade policy,

 the inadequate export promotion infrastructure, and
 an ambiguous regulatory framework around FDI.

In 2018, Pakistan ranked 107th out of 140 on the Global Competitiveness Index (GCI), and
ranked 136th out of 190 economies in World Bank’s Ease of Doing Business report. The low
rankings signify that the government needs to take measures to stimulate economic growth and
provide favorable business environment through more flexible tax policies, building export
promoting infrastructure, stimulating access to finance, and leveraging regional and Global Value
Chains (GVCs). Promoting manufacturing by creating a more investment-friendly environment,
broadening its tax base, and encouraging innovation and modernization in export-led industries
are just some of the most urgent measures the government can take to address the growing
fiscal and current account deficit. Pakistan must take advantage of this moment of hard-won
reprieve by building a truly stable and sustainable economy before it once again finds itself
digging its own economic grave.

Public debt
By the end of March 2019, the total public debt of Pakistan reached Rs 28,607 billion, showing an
increase of Rs 3,655 billion within a year. More than half of this increase in total public debt was
due to an increase in external public debt, which contributed Rs 1,900 billion to the public debt in
the first 9 months. The hit to PKR further proliferated the amount of public debt, which is evident
from the fact that around 32% of total public debt was denominated in foreign currencies
exposing public debt portfolio to exchange rate risk.

Public Debt and Debt to GDP Ratio

35 80
Amount in PKR Trillion

Percentage %
30
25 60
10.4
20 6.6 8.5
6.1 40
15 5.1 5.2
10 5.1 4.8
4.8 14.9 16.4 18.2 20
5 2.9 3.9 4.4 9.5 10.9 12.2 13.6
3.3 3.9 4.7 6.0 7.6
- -
FY-08 FY-09 FY-10 FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 FY-18 FY-19
BE

Domestic Currency Debt Foreign Currency Debt Debt to GDP Ratio

Source: Economic Survey, Ministry of Finance

Due to previous years’ consumption led growth based strategy, Pakistan found itself knocking on
the door of IMF for its 22nd loan of US$6 billion to curtail its ballooning current account deficit
and balance of payments crisis. This bailout came with conditions to take a number of corrective

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Budget 2019 - 20 | Highlights & Comments

measures to revive the national economy and put it on path to sustained growth. The effects of
the implementation of conditions are outlined below:

Depreciation of PKR
The IMF had asked Pakistan to shift from the managed exchange rate to market-based flexible
exchange rate, which led to a sharp depreciation of PKR against the Dollar. Even though the
depreciation helped curtail trade deficit by 7.3%, it had a fatal cascading effect on inflation and
interest rate hike.

Spiraling Inflation
CPI inflation was recorded at the highest level in 17 consecutive quarters at 8.8% in April 2019.
However, it averaged from July-Apr at around 7%. This was owing to exchange rate depreciation,
demand side pressures and higher fuel prices.

Policy rate hike

One of the demands of IMF was to raise discount rate which SBP doubled the policy rates from
6.5% in May 2018 to 12.25% in May 2019. These raises were needed to reduce capital outflows,
defend the currency and curb import demand that resulted in a large current account deficit. The
intended effect of this hike was to curb consumption and boost savings, but it came at the cost of
negative impact on investments by increasing the cost of borrowing and shaking investor
confidence. Pakistan already has one of the lowest investment figures in the region. Total gross
investment (including government investment) in Pakistan was reported at just 15.4% of GDP in
FY19 whereas India’s figure stands at close to 30% and Bangladesh is at 31% of GDP, and with
the increase in interest rates it is likely to diminish investment figure even further.

Increase in taxes
An immediate concern for the government was to adjust its fiscal policy by widening the tax net.
Only 1% of the population bears the burden of tax for the expenditure for the population of 200
million. Thus strengthening tax reforms have been set in motion to curtail tax evasion and
increase government revenue. The government set the revenue collection target at Rs 4,398
billion for the fiscal year 2019-20 which seems a bit ambitious, as the government was only able
to meet 67.7% of the target in the first ten months.

Source: Economic Survey, Ministry of Finance, SB

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Budget 2019 - 20 | Highlights & Comments

Budget overview 2019-20

With an aggregate total outlay of Rs 8.2 trillion, the budget targets an economic growth of 3.3%
by 2019-20 to be attained by raising net revenue receipts by Rs 5.5 trillion and aggressive
expenditure controls to reduce primary deficit to 0.6% of the GDP in accordance with the terms of
the IMF facility. Given the unfavourable economic conditions, the targeted growth appears
challenging.

Source: Economic Survey, Ministry of Finance

3.3% 3.1
7%
Real GDP Trillion Inflation
Growth Fiscal Deficit

13.9% 5.5 74.2%

Net public
Tax to GDP Trillion debt to GDP
ratio
FBR Revenue ratio

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Budget 2019 - 20 | Highlights & Comments

Key highlights of budget FY20

 Scaling down of tax exemptions and concessions to broaden the tax net.

 IT based interface between taxpayer and tax collector shall be introduced to minimize point
of contacts between the two by employing virtual platforms.

 Duty on more than 1600 tariff lines, being raw materials and intermediaries in principle, is
being exempted in this budget.

 Tax rates increased for salaried and non-salaried persons.

 The corporate tax rate has been fixed at 29%.

 New division of Poverty Alleviation and Social Safety called Ehsaas has been established to
design and implement social safety programs in the country. The beneficiaries of Ehsaas
programme are extreme poor, orphans, widows, the homeless, the differently abled,
medically challenged, and the jobless.

 Sehat Sahulat, a health insurance scheme for the poor has been launched in 42 districts of
Pakistan addressing the needs of 15 million poor Pakistanis.

 Kamyab Jawan program has been established that provides Rs.100 billion in low cost loans
for entrepreneurs to setup / expand businesses.

 The Prime Minister has inaugurated 25,000 housing units at Rawalpindi / Islamabad and
110,000 units in Baluchistan which includes low-cost housing facilities for fishermen.

 Combined allocation for infrastructure programs is 1,863 billion.

 A project worth Rs. 1 trillion to be provided for the development of districts previously
known as FATA out of which Rs. 48 billion will be provided by the federal government.

 10% cut in cabinet member salaries.

The federal budget 2019-20 has been presented in the backdrop of a complex economic situation.
This budget is unique as it has been prepared by the new government to reflect economic crisis
by tightening of fiscal and monetary policies in response to try to culminate economic pressures
as well as the bailout conditions set by the IMF.

The salient features of this budget reflected austerity measures taken by the government to
expand revenue by increasing the tax net through imposing direct and indirect taxes. Salaried
and non salaried classes income tax slabs have been revised. There was an impact c. Rs. 80
billion shortfall when the last government slashed these taxes. It is expected that this new tax
will increase revenue especially in the time of economic emergency.

Another feature of the budget FY20 is that duties were slashed. The government defended this
decision by highlighting that this will increase trade openness. With a ballooning current account
deficit and a dire need to increase revenue, this decision was remarkable, yet understandable in
the context of the recent IMF facility.

All in all, with the bleak macroeconomic and fiscal indicators, there is heavy reliance on the
various reform efforts being introduced by the government to make sure that these tough times
and ambitious revenue targets may be achieved.

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Budget 2019 - 20 | Highlights & Comments

Highlights of Important
Fiscal Proposals

Income tax
1. The minimum slab for salaried and to the extent of prescribed
individual’s taxable income is percentage of gain depending on
enhanced to Rs.600,000 from holding period as under:
Rs.400,000. Further, number of slabs
have been increased from 7 to 12.
Highest tax rate on salaried individuals S.No. Holding Holding Gain
is 35% where income exceeds Rs. period in period in
75,000,000 per annum. case of case of
open constructed
2. Applicability of the salaried individual plot property
slab rate is enhanced from 50% to
75% of the taxable income. 1. Upto one Upto one year 100%
year
3. The Corporate tax is restrict to 29%
for Tax Year 2019 and onwards, as 2. Between Between one 75%
compared gradual reduction of 1% one to ten to five years
each year till the rate reached 25% by years
tax year 2023.
3. Exceeding Exceeding five 0%
4. Brought forward depreciation and ten years years
losses are not to be adjusted against
the taxable income for computing
super tax liability in case of income 9. Any amount or fair market value of
covered under Fourth, Fifth, Seventh any property received without
and Eighth Schedules. consideration or as a gift (other than
gift received from grandparents,
5. Profit on debt exceeding Rs.36 million parents, spouse, real brother, real
during a tax year is excluded from the sister, son or a daughter) will be taxed
purview of section 7B and will be taxed under the head “income from other
under normal tax regime. sources”.

6. Commission paid in excess of 0.2% of 10. A person employing fresh graduate in

the gross amount of supplies as listed
in Third Schedule of the Sales Tax Act,
1990 will not be allowed as deductible
expense, if paid to an unregistered
person and the person is not
appearing in the Active Taxpayers List.
7. For intangibles not having
ascertainable useful life, useful life has
been enhanced from 10 to 25 years for
computation of tax amortization.
8. Capital gain on sale of immoveable
property will now be taxed under
normal tax regime at normal tax rates
title to tax credit to the extent of the
lesser of amount of annual salary paid
to fresh graduates employed or 5% of
person’s taxable income for the year.
11. Tax credit equal to 10% available to a
corporate industrial undertaking
investing in purchase of plant &
machinery for the purpose of
extension, expansion, balancing,
modernizing & replacement at any
time between 1st July 2010 and 30th
June 2021 has been reduced to 5%
with curtailment of time period upto
June 30, 2019.

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Budget 2019 - 20 | Highlights & Comments
12. Persons purchasing immovable
property having fair market value
greater than Rs.5 million or any other
asset having fair market value of Rs.1
million or more, would now be
required to make payment for the said
purchase through a crossed banking
instrument in order to be eligible for
booking the cost of such asset and
claiming deductions / depreciation and
amortization / in respect of such
assets.
13. An additional criteria for being a
resident individual has been
introduced whereby an individual who
is present in Pakistan for a period or
periods in aggregate to “90 days or
more” in a particular tax year and
whose aggregate presence in Pakistan
for 4 years preceding the tax year is
“365 days or more” will be treated as
tax resident.
14. The concept of filer and non-filer
abolished and replaced with a person
not appearing in active taxpayers list.
Tenth Schedule covering the collection
or deduction of advance tax,
computation of income and tax
payable thereon by the persons not
appearing in active taxpayers list has
been introduced. Such persons will be
subject to 100% additional withholding
tax for specified payments.
15. Similar to NPOs, effective from July
2020, trusts and welfare institutions
shall also be required to obtain
approval from the Commissioner under
section 2(36) to avail the facility of
100% tax credit under section 100C.
16. Commissioner, having an opinion that
a transaction has not been declared at
arm's length, may obtain report from
an independent chartered accountant
or cost and management accountant
to determine the fair market value of
asset, product, expenditure or service
at the time of transaction.
12
17. An amount equal to 75% of the
dealer's margin shall be added to the
income of the person making such
supplies, where the person supplies
products listed in the Third Schedule
to the Sales Tax Act, 1990 or any
other products as prescribed by the
Board, under a dealership
arrangement with the dealers who are
not registered under the Sales Tax Act,
1990 and are not appearing in the
active taxpayers’ list.
18. Tax authorities can now probe the
source and nature of the foreign
remittances in excess of Rs. 5 million
in a tax year as compared to previous
limit of Rs 10 million.
19. The threshold of ownership of
immovable property to file return of
income has been enhanced from 250
square yards to 500 square yards.
20. Date of filing of return by salaried
individuals changed from August 31 to
September 30.
21. No proceedings shall be undertaken
under this Ordinance, where any
person entitled to declare undisclosed
assets, undisclosed expenditure and
undisclosed sales under the Assets
Declaration Act, 2019 declare such
assets, expenditures or sales to pay
tax.
22. Cost and management accountants
can now be part of Alternate Dispute
Resolution Committee (ADRC).
Minimum experience of ten years
prescribed for senior chartered
accountants, senior advocates and
cost and management accountants, to
be part of ADRC.
23. Tax payable by an AOP, which could
not be recovered from the AOP, can be
recovered from any person who was
the member of the AOP for that
particular tax year.
Budget 2019 - 20 | Highlights & Comments
24. Commissioner is empowered to freeze
any domestic asset of the person
including any asset beneficially owned
by the person for a period of 180 days
or till the finalization of proceedings, if
he has reason to believe that such
person is likely to leave Pakistan and is
involved in offshore tax evasion or
such person is about to dispose of any
such asset.
25. Minimum tax reintroduced for
commercial importers. Tax collected at
import stage from ship breakers will
also be treated as minimum tax.
26. The option of taxation under final tax
regime by non-resident persons on
execution of a contract or sub-contract
under a construction, assembly or
installation project in Pakistan,
including a contract for supply of
supervisory activities in relation to
such project and other contracts
mentioned in section 152(1A) has
been abolished and is replaced with
minimum tax.
27. Final Tax regime for following
payments to non-residents is abolished
and replaced with minimum tax:
(i) a contract for advertisement
services rendered by T.V.
Satellite Channels;
(ii) a payment of insurance premium
or reinsurance premium to a
non-resident person;
(iii) a payment for advertisement
services to a non-resident media
person relaying from outside
Pakistan.
28. Commissioner is empowered to issue
an order in writing in response to an
application filed in writing by a person
intending to make a payment on
account of cohesive business
operations, to make such payment
after deduction of tax at 30% of the
tax chargeable under section 152 (2)
13
on such payment. The credit of tax so
deducted would be available to the
permanent establishment of the non-
resident person accounting for overall
profits arising on overall cohesive
business operations.
29. Final tax regime replaced with
minimum tax:
(i) for the sale of goods;
(ii) on the execution of a contract
including contract signed by a
sportsperson, but not including a
contract for the sale of goods or
the rendering of or providing
services; and
(iii) payment to electronic and print
media for advertising services.
30. Banks are now required to report profit
on debt for amount exceeding
Rs.500,000.
31. An additional mechanism for payment
of refunds through income tax refund
bonds to be issued by FBR Refund
Settlement Company Limited has been
introduced.
32. Commissioner is empowered to raid
premises where there is reliable
information of undeclared gold, bearer
security or foreign currency and
confiscate the same.
33. Every person engaged in any business,
profession or vocation is required to
obtain and display a business license
as prescribed by the Board.
34. Non-filing or inaccurate filing
withholding statements is to be
treated as a prosecutable offence,
punishable on conviction with a fine or
imprisonment for a term not exceeding
one year, or both.
35. Person who fails to declare an offshore
asset to the Commissioner or furnishes
inaccurate particulars of an offshore
Budget 2019 - 20 | Highlights & Comments

asset and revenue impact of such (ii) Income of CNG stations

concealment or furnishing of
inaccurate particulars is Rs. 100,000 42. Tax rate on dividend paid by Power
or more shall be treated to commit an Companies has been enhanced from
offence punishable with imprisonment 7.5% to 15%.
up to 7 years or with a fine up to
200% of the amount of tax evaded or 43. Reduced rate of 10% and 12.5% on
both. dividend received from mutual fund
has been withdrawn.
36. Any person who, fails to comply with a
notice section 116A(2) related foreign 44. Profit on debt received by Individual or
assets, without reasonable excuse, AOP is now subject to minimum tax.
shall be treated as committed an Further, tax rate on profit on debt has
offence punishable with imprisonment been enhanced which is tabulated
up to 2 years or with a fine up to a below:
penalty of 2% of the offshore asset not
declared or both.
Rate of Tax
S.
37. Any enabler who enables, guides or Profit on Debt
No.
advises any person to design, arrange Existing Proposed
or manage a transaction or declaration
in such a manner which results in 1. Where profit on
offshore tax evasion shall be treated debt does not
10% 15%
as committed an offence punishable exceed
with imprisonment up to seven years Rs.5,000,000
or with a fine up to Rs. 5 million or
both. 2. Where profit on
debt exceeds
38. Board is empowered to publish the Rs.5,000,000
12.5% 17.5%
names of offshore evaders through but does not
print and electronic media, who exceed
evaded offshore tax, equal to or Rs.25,000,000
exceeding Rs. 2.5 Million, and offshore
tax enablers who enabled offshore tax 3. Where profit on
evasion. debt exceeds
Rs.25,000,000
39. Section 227C, introduced vide Finance 15% 20%
*but does not
Act, 2018, to restrict the purchase of exceed
immovable property exceeding value Rs.36,000,000
of Rs. 5 million and imported and
newly manufactured motor vehicles by
non-filers is deleted. 45. Turnover tax rate has been enhanced
from 1.25% to 1.5%.
40. The Board is to design an Automated
Impersonal Tax Regime to minimize 46. Exemption provided on dividend
personal interaction between received from Group Company as per
taxpayers and officers. formula prescribed under Clause
(103C) to the Second Schedule is
41. Final Tax Regime for following applicable for all companies that are
transactions has been abolished and eligible for group relief under section
replaced with minimum tax: 59B of the Ordinance.
47. Tax rebate on tax payable for full time
(i) Commission and Brokerage; teacher or a researcher is now reduced

14
Budget 2019 - 20 | Highlights & Comments
from 40% to 25%. The said exemption
will only be available to research
institution. Teachers of medical
profession who derive income from
private medical practice or who receive
share of consideration received from
patients will not be covered under this
exemption.
48. Income derived by an individual
domiciled or company and association
of persons resident in the Tribal Areas
forming part of the Provinces of Khyber
Pakhtunkhwa and Balochistan under
paragraph (d) of Article 246 of the
Constitution with effect from the 1st
day of June, 2018 to the 30th day of
June, 2023 (both days inclusive) shall
be exempt from tax.
49. Profit and gains on sale of immoveable
property to a rental REIT Scheme shall
be exempt from tax upto 30 June 2021.
Previously, this exemption was
available on profit and gain on sale of
immoveable property to a
developmental REIT Scheme, which is
applicable upto 30 June 2020.
50. New penalties are prescribed for certain
offences and various existing penalties
are enhanced significantly.
51. Name of a person shall be included in
the Active Taxpayers’ List, if the person
pays the surcharge as prescribed under
respective provision of the Ordinance.
52. Taxable income of a Banking company,
arising from additional income earned
from additional investment in Federal
Government securities will be taxed at
the higher rate of 37.5% instead of
applicable rate of 33% from Tax Year
2020.
53 For Banks, additional obligation of
obtaining a certificate from the external
auditor for following is prescribed:
(i) Investment in Federal
Government Securities during
preceding Tax Year;
15
(ii) Additional Investment made
during the Tax Year; and
(iii) Mark Up earned from Additional
Investment
Such certificate is to be filed by the
banking company alongwith return of
income.
Sales Tax
1. As per salient features,
SRO.1125(I)/2011 is proposed to be
rescinded with the intention to
streamline and prevent leakage of
revenue due to misuse of SRO.
Accordingly, following proposals have
been made:
 standard rate of 17% be
restored on items covered
under SRO
 rate of sales tax on local
supplies of finished articles of
textile and leather & finished
fabric be raised from 6% to
15% for integrated business.
 zero-rating of utilities to these
export-oriented sectors be
withdrawn
 refund of sales tax to said
sectors be automated
2. SRO 769(I)/2009 is proposed to be
rescinded which will result in
withdrawal of zero rating on import
and supply of polyethylene and
polypropylene for manufacture of
mono filament yarn and net cloth.
3. Exempt Ginned Cotton is proposed to
tax at reduced rate of 10%.
4. The power of Federal Government to
grant zero-rating and exemption is
proposed to be restricted subject to
certain circumstances.
5. Minimum VAT of 3% applicable on
import of furnace oil by licensed
Budget 2019 - 20 | Highlights & Comments
OMCs and mobile cellular phones and
satellite phones has been withdrawn.
6. Brick Kilns have been explicitly
brought within the ambit of fixed
amount of sales tax ranging from
Rs.7,500 to Rs.12,500.
7. Reduced rate of 7.5% has been
introduced on food supplied by
restaurants, bakeries, caterers etc.
with an aim to document this sector.
8. Tax rate for sweetened and
unsweetened/unflavored milk and
cream has been rationalized which
are proposed to be taxed at same
rate of 10%.
9. Extra tax regime as per Chapter XIII
of Sales Tax Special Procedure Rules,
2007 is proposed to abolished
whereby the majority of items have
been brought under the Third
Schedule to be taxed at retail price
with the exception of the following
items which will be charged to tax as
per standard provisions.
 Auto-parts and accessories
 Arms and Ammunitions
 Tiles
 Biscuits, confectionary,
chocolates, toffees and candies
10. Government/ semi-government
bodies and statutory regulatory
authorities have been explicitly
excluded from applicability of further
tax of 3% and extra tax of 5% on
supplies made or electricity and gas
bills raised to such bodies/ regulatory
authorities respectively.
11. Special regime of tax for the steel
sector has been abolished and in lieu
thereof FED at 17% in sales tax mode
has been proposed to be imposed.
12. Commercial Importers of goods listed
in Third Schedule have been brought
within the Retail Price Regime
accordingly, such importers shall pay
16
sales tax at import stage as well as
charge sales tax on further supply at
the ‘Retail Price’. Minimum VAT of 3%
on commercial import of aforesaid
goods has also been imposed which
appears to be an anomaly since it
could not be adjusted against output
tax and the commercial importers are
not allowed to claim refund of such
VAT amount.
13. Scope of definition of cottage industry
has been changed whereby the
condition of annual utility bills not
exceeding Rs. 800,000to to qualify as
cottage industry has been done away
with and maximum threshold of
annual turnover has been decreased
from Rs.10 million to Rs.2 million with
imposing certain other conditions.
14. The option of 2% turnover tax
payment available to Tier – 1 retailers
is withdrawn as a result of which such
retailers would be required to pay
sales tax at the rate as applicable to
the goods sold under the relevant
provisions of the Act or any
notification issued thereunder. As per
salient features it may be made
mandatory to integrate their points of
sales (POSs) with FBR Computerized
System so that sales be reported in
real time.
15. The rate of sales tax applicable on
supply of sugar is enhanced from 8%
to 17%.
16. Various items including gold, silver,
electricity & natural gas supplied to
hospitals, fat filled milk, meat,
products of milling industry etc. which
were exempted under Sixth Schedule
are now included in the Eighth
Schedule and are proposed to be
taxed at reduced rate.
17. Special procedure available for
marble industry for payment of sales
tax at Rs.1.25 per unit of electricity
consumed has been done away with
and it has been proposed to restore
Budget 2019 - 20 | Highlights & Comments
standard regime of 17% for the
industry.
18. Certain powers given under the Act
like notification of procedure to
regulate the issuance, redemption
and other matters relating to the
refund bonds, specifying the goods in
respect of which the liability to pay
tax shall be of the person receiving
the supply etc. conferred upon the
Federal Government have been
transferred to be exercised by the
Board subject to approval of minister-
in-charge.
19. With the spirit to promote ease of
doing business sales tax registration
is proposed to be done through an
automated interface, without any
physical contact with the tax officers,
with facility of biometric verification
through NADRA e-Sahulat centres.
20. The provisions of Sales Tax Special
Procedure (Withholding) Rules, 2007
are transformed into proposed
Eleventh Schedule to the Act.
Moreover, the rate of sales tax
withholding is enhanced from 1% to
5% in case of supplies made by
unregistered persons to the
Companies as defined in the Income
Tax Ordinance, 2001.
21. The Director of private companies or
business enterprises paying the
amount of tax due to provisions of
joint and several liability have been
entitled to recover the tax paid by
him from the company or business
enterprise, or a share of the tax from
other director or partner, or a share
in the proportion of holding from
another shareholder, as the case may
be.
22. As per salient features it is proposed
to amend SRO 190(I)/2002 to delete
entries relating to PVC and PMC
materials so as to allow zero-rating
on export of these items to
17
Afghanistan and Central Asian
Republics.
23. As per salient features it is proposed
to re-notify the value of supply from
gas distribution company to CNG
dealers for sales tax so as to increase
sales tax amount.
24. As per salient features all the special
procedures and redundant SROs are
being abolished in order to facilitate
taxpayers to comprehend and follow
the law.
The Islamabad Capital
Territory (Service Tax)
25. The rate of sales tax on services of
Call Centre has been reduced from
18.5% to 17%.
26. Seventeen new services have been
included under the Schedule to ICT
Ordinance which are proposed to be
taxed at the rate of 16%.
Federal Excise Duty
1. FED on supply of steel products is
proposed to be charged at 17% ad
valorem in sales tax mode which shall
be based on minimum production as
prescribed in newly inserted Fourth
Schedule.
2. FED on cement is proposed to be
increased from Rs. 1.50/ kg to Rs. 2/
kg.
3. FED on edible and vegetable ghee
and cooking oil is proposed to be
increased from 16% to 17%.
4. Fixed FED on import of oil and oil
seeds is withdrawn.
5. FED on un-manufactured tobacco
shall be borne by the manufacturer
and not by the grower.
Budget 2019 - 20 | Highlights & Comments
6. FED on Cigarettes is proposed to be
increased to Rs. 5,200/1000 sticks for
the upper slab and to Rs. 1,650/1000
sticks for the lower slab.
7. FED on certain kinds of aerated water
is proposed to be increased from
11.5% to 14%.
8. FED on LNG is to be levied at Rs.
10/MMBTU in place of Rs.17.80/100
cubic meter. However the Bill propose
to re-notify the value for sales tax on
supply from gas distribution company
to CNG dealers in order to realize due
sales tax.
9. FED on locally
manufactured/assembled motor
vehicles is proposed to be revised and
levied at the rate of 2.5% upto
1000cc, 5% from 1001cc to 2000cc
and 7.5% on 2001 cc and above.
10. FED on domestic air travel is
proposed to be reduced from
Rs.2,000 to Rs.1,500 for long routes
and Rs.1,250 to Rs.900 for short
routes.
11. FED is proposed to be levied on non-
aerated sugary/ flavoured juices/
syrups and squashes at the rate of
5% of retail price.
12. The exemption of duty on internet
services is proposed to be withdrawn
while the exemption on broadband is
proposed to be restricted to terrestrial
broadband.
13. The Board may prescribe rules to
initiate criminal proceedings against
the Federal Excise Officers and
taxpayer.
The Customs Act, 1969
1. The Bill proposes to allow import of
good quality duty free Art paper for
18
the publication and preservation of
Holy Quran.
2. Customs Duty is withdrawn on import
of 18 medicinal items and specific
medicines for rare disease to facilitate
the consumer’s.
3. Exemption of Customs duty is
proposed on modular particle system
which is utilized for the free
operational theatre.
4. Duty is reduced on import of pre-
fabricated structures for hotels to
encourage tourism in Pakistan.
5. The Bill proposes to exempt Customs
duty on import of 1650 raw
materials/industrial inputs to support
local industry.
6. A reduction in Customs Duty on
printing papers from 20% to 16% is
proposed.
7. To support paper industry, the Bill
proposes to exempt customs duty on
import of various kind of raw materials
used in the said industry.
8. Proposal is made to provide exemption
on import of various Wood items.
9. The Bill proposes to reduce Customs
duty on Glass Board for LED Panel
manufacturing.
10. The Bill proposes to reduce Customs
duty for input goods for paper based
Liquid Food Packaging Industry and
Nonwoven fabrics.
11. A reduction in customs duty from 16%
to 11% on import of Acetic acid is
proposed.
12. To encourage investment in textile
sector, the Bill proposes to exempt
customs duty on import of various
Machinery Parts / Accessories used in
said sector.
Budget 2019 - 20 | Highlights & Comments

13. Customs duty is proposed to be tea, mobile phones etc.) other

exempt on Elastomeric Yarn.
14. Customs Duty is proposed to be
rationalized on Aluminium Beverage
Cans and Inputs thereof.
15. Raw material for hemodialyzers used
for kidney patients is proposed to
exempt from Customs Duty.
industrial items used thereof and
Tyres.
24. The Bill proposes to increase levy of
additional Customs Duty for certain
non-essential items.
25. It is proposed to withdraw Custom
Duty exemption on import of LNG.

16. Tariff Rationalization measures are

proposed for Home Appliance sector
and SIM card manufacturing industry.

17. The Bill proposes to reduce Custom

Duty on Base oil as input for coning
oil, white oil and other textile oils.

18. Reduction of Customs Duty is

proposed for imports of raw material
for manufacturing of Pre-Sensitized
Printing Plates.

19. To support local industry, it is

proposed to exempt preparations of
Metal Surfaces as input for Solar
Panels.

20. The Bill proposes to exempt customs

duty on import of Foundation cloth for
usage in various occupations.

21. Customs Duty on import of Oxalic

Acid, Raw material of Powder Coating
Industry, Paper Sizing agents, Bobbins
& Spools of Paperboard and wooden
Sheets Veneering has been reduced.

22. The Bill proposes to exempt Customs

Duty on import of Hydrocracker
industry for oil refining.

23. Reduction in Regulatory Duty is on

cards for Mobile Phones, smuggled
prone (commodities like petroleum,

19
Budget 2019 - 20 | Highlights & Comments
Income Tax Ordinance, 2001
1. Definitions [Section 2]
Bill proposes to insert / introduce following
new definitions:
1. “Active taxpayers list” means the list
instituted by the Board under section
181A and includes such list issued by
the Azad Jammu and Kashmir Council
Board of Revenue or Gilgit-Baltistan
Council Board of Revenues;
2. “Asset move” means the transfer of an
offshore asset to an unspecified
jurisdiction by or on behalf of a person
who owns, possesses, controls, or is
the beneficial owner of such offshore
asset for the purpose of tax evasion;
3. “FBR Refund Settlement Company
Limited” means the company with this
name as incorporated under the
Companies Act, 2017 (XIX of 2017),
for the purposes of settlement of
income tax refund claims including
payment by way of issuing refund
bonds under section 171A;
4. “offshore asset” in relation to a
person, includes any movable or
immovable asset held, any gain, profit,
or income derived, or any expenditure
incurred outside Pakistan;
5. “offshore enabler” means a person
who owns, possesses, controls, or is
the beneficial owner of an offshore
asset and does not declare, or under
declares or provides inaccurate
particulars of such asset to the
Commissioners;
6. “offshore evader” includes any person
who, enables, assists, or advises any
person to plan, design, arrange or
manage a transaction or declaration
relating to an offshore asset, which
has resulted or may result in tax
evasion;
7. “specified jurisdiction” means any
jurisdiction which has committed to
20
automatically exchange information
under the Common Reporting
Standard with Pakistan;
8. “unspecified jurisdiction” means a
jurisdiction which is not a specified
jurisdictions.
Further definitions of “filer” and “non-filer”
are proposed to be deleted.
2. Super tax for rehabilitation
of temporarily displaced
persons [Section 4B]
Presently, the taxable income considered for
computing super tax liability excludes
brought forward depreciation and brought
forward losses. However, such losses are not
excluded in the case of banking, insurance,
oil and mineral exploration companies. To
harmonize the taxation for all taxpayers, it is
proposed to exclude brought forward
depreciation and brought forward losses
from incomes computed under Fourth, Fifth,
Seventh and Eight schedule of the
Ordinance.
3. Tax on profit on debt
[Section 7B]
Presently the profit on debt is taxed
separately as per slab rates defined in
Division IIIA of Part I of the First Schedule
and not as part of normal tax regime. The
Bill proposes to exclude profit on debt
exceeding Rs.36 million during a tax year
from the purview of section 7B thereby
taxing the same under normal tax regime.
4. Deductions not allowed
[Section 21]
Bill proposes to disallow the amount of
commission paid in excess of 0.2% of the
gross amount of supplies as listed in the
Third Schedule of the Sales Tax Act, 1990
(the Act) unless the person (dealer) to
whom commission is paid or payable is
registered under the Act and also appears in
Budget 2019 - 20 | Highlights & Comments

the Active Taxpayers List. Through this The bill proposes to tax any amount or fair
measure the manufacturers would be market value of any property received
restricted from reducing their profits by without consideration or as a gift under the
claiming excessive commission expense. head “income from other sources”. However
gifts received from grandparents, parents,
5. Intangibles [Section 24] spouse, real brother, real sister, son or a
daughter would not be chargeable to tax as
Presently, expenditure regarding intangibles income from other sources.
with useful life of more than 10 years or with
unascertainable useful life are amortized Through Finance Act, 2018 amendments
over the maximum period of 10 years. The were made in section 79(1)(c) non-
Bill proposes to amortize expenditure recognition rules and section 37 (4A) by
regarding intangible with ascertainable life virtue of which non taxability in the case of
over its actual useful life and for intangible gifts was restricted to relations as defined in
with unascertainable useful life over the section 85. Now the Bill proposes to tax the
period of 25 years. This measure intends to gifts that are not received from such
match the revenue and expense / cost of relations under the head income from other
projects with life exceeding ten years. sources.
6. Capital gain on immoveable
8. Exemptions and tax
property [Section 37]
concessions in the Second
Presently, capital gains arising on disposal of Schedule [Section 53]
immovable properties are subject to
separate taxation on the basis of holding At present, the Federal Government has the
period as per rates mentioned in Division power to grant exemption from any tax or
VIII of Part I of the First Schedule. The Bill reduce a tax rate or tax liability whenever
now proposes to tax such capital gains under circumstances exist due to various reasons
normal tax regime as per normal tax rates. mentioned in the said section. The Bill
However, gain arising on disposal of open proposes to limit such powers to grant
plot as well as constructed property would exemption to the extent of emergency
be taxable subject to its holding period as situations only and the power to grant
stated below: exemption to remove anomaly in taxes and
for development of backward areas is
proposed to be withdrawn.
S.No. Holding Holding Gain
period in period in case
case of of constructed 9. Tax credit for investment in
open plot property health insurance
1. Upto one Upto one year 100%
[Section 62A]
year
Presently, a resident individual who is also a
2. Between Between one 75% filer is entitled to a tax credit in respect of
one to ten to five years any health insurance premium paid,
years provided the person is deriving income
chargeable to tax under the head “salary” or
3. Exceeding Exceeding 0% “income from business”.
ten years five years
The Bill proposes to omit the word “filer”
from the said section, resulting in allowance
7. Income from other sources of tax credit to any resident individual
[Section 39] regardless of his tax status.

21
Budget 2019 - 20 | Highlights & Comments
10. Tax credit for persons
employing fresh graduates
[Section 64C]
A new section is proposed to be introduced
through the Bill in order to encourage
creation of employment opportunities for
fresh graduates.
A person employing fresh qualified
graduates, having graduated after 1st July
2017, from universities or institutions
recognized by the Higher Education
Commission would be given a tax credit to
the extent of the lesser of amount of annual
salary paid to fresh graduates or, 5% of
persons taxable income for the year.
Further, tax credit would be allowed in the
year in which the fresh graduates are
employed.
However, the credit will be restricted to
salary of those number of fresh graduates
not exceeding 15% of the total employees.
11. Tax credit for investment in
plant and machinery [Section
65B]
Presently corporate industrial undertakings
investing in purchase of plant & machinery
for the purpose of extension, expansion,
balancing, modernizing & replacement are
allowed tax credit equal to 10% of the
purchase price of machinery and if the plant
and machinery is purchased and installed at
any time between 1st July 2010 and 30th
June 2021.
The Bill proposes to restrict this credit to 5%
of the amount invested for the tax year
2019. The period for purchase and
installation of machinery is proposed to be
restricted upto June 30, 2019 as against
June 30, 2021 currently provided.
It is further clarified that the provisions of
sub-section (5) providing for carry forward
of any excess tax credit shall remain
applicable even after tax year 2019.
22
12. Purchase of assets through
banking channel [Section
75A]
A new section is proposed to be introduced
through the Bill in order to ensure
documentation of real estate transactions
and also to ascertain the actual value of an
asset purchased.
Persons purchasing immovable property
having fair market value greater than Rs.5
million or any other asset having fair market
value of Rs.1 million or more, would now be
required to make payment for the said
purchase through a crossed banking
instrument, failure of which would result in
disallowance of deductions claimed in
respect of depreciation and amortization in
respect of such assets. Further, the amount
of purchase shall not be treated as cost for
calculation of any gain on subsequent sale of
such asset.
13. Revision in the definition of
resident individual [Section
82(ab)]
The existing law provides that an individual
shall be treated as resident person if the
individual is present in Pakistan for a period
of or periods aggregating to 183 days or
more.
The Bill proposes to extend the definition of
resident individual by including any
individual who is present in Pakistan for a
period or periods in aggregate to “90 days or
more” in a particular tax year and whose
aggregate presence in Pakistan for 4 years
preceding the tax year is “365 days or
more”. It is interesting to note that similar
criteria was prescribed under the Ordinance
and was omitted vide Finance Act, 2003.
Similar criteria are also applicable in other
jurisdictions to ensure their taxing rights.
By introduction of the criteria, individuals
who frequently visit Pakistan, but were able
to avoid tax residential status will now be
categorized as tax resident in Pakistan and
Budget 2019 - 20 | Highlights & Comments
will be taxed in Pakistan for their world over
income.
14. Federal Government is
empowered to introduce
simplified procedures for
certain sectors [Section 99C]
In order to broaden the tax net and simplify
the tax procedures, the Bill proposes to
empower the Federal government to
prescribe special procedures for scope and
payment of tax, documentation, filing and
tax assessments for small businesses,
construction businesses, medical
practitioners, hospitals, educational
institutions and any other specified sectors.
15. Special provisions for
persons not appearing in
active taxpayers’ list
[Section 100BA]
The Bill proposes to introduce Tenth Schedule
providing for the collection or deduction of
advance tax, computation of income and tax
payable thereon by the persons not
appearing in active taxpayers’ list, replacing
the concept of Filer and Non-Filer.
16. Condition of recognition by
Commissioner is also
applicable for trusts and
welfare institutions to claim
100% Tax credit
[Section 100C]
Currently, under section 100C, Non Profit
Organizations (NPOs), trusts and welfare
institutions are allowed 100% tax credit
subject to certain conditions. NPOs are,
however, only allowed such credit on the
condition that they are recognized by the
Commissioner according to a prescribed
procedure.
In order to ensure similar treatment for all
entities, the Bill proposes that effective from
July 2020, trusts and welfare institutions shall
23
also be required to obtain approval from the
Commissioner under section 2(36) to avail
the facility of 100% tax credit. The
entitlement for approval of a trust or welfare
institution or an NPO by the Chief
Commissioner is also proposed to be omitted.
Further, in order to claim such credit the Bill
also proposes one additional condition that
none of the assets of trusts or welfare
institutions confers, or may confer, a private
benefit to the donors or family, children or
author of the trust or his descendants or the
maker of the institution or to any other
person. If such private benefit is conferred,
the amount of such benefit shall be added to
the income of the donors.
There appears to be some ambiguity in
taxation of the amount in the hands of
benefactor. It needs to be clarified whether or
not the amount should also be taxed in the
hands of other benefiting parties such as
family, children or author of the trust or his
descendants or the maker of the institution or
to any other person.
The streamlining of the process for all
entities is a good step to remove the
ambiguity and provide equal treatment to all
eligible persons claiming the same credit.
However, NPOs are currently facing
difficulties in obtaining approval under
section 2(36) from the Commissioner and
process takes considerable time. The
process should be simplified to cater the
existing NPOs and new entities for which this
conditions is proposed to be applicable.
17. Confidentiality of Information
is not applicable for person
acting in execution of the
Ordinance [Section 107 (1B)]
Section 107 provides for confidentiality of
any information received or supplied and
any concomitant, communication or
correspondence made under a tax treaty, a
tax information exchange agreement a
multilateral convention, similar arrangement
or mechanism. The Bill proposes that these
provisions will not apply to any person
acting in execution of the Ordinance, where
Budget 2019 - 20 | Highlights & Comments
it is necessary to disclose such information
to that person for the purposes of the
Ordinance.
18. Report from independent
chartered accountant or cost
and management accountant
may be obtained by the
Commissioner for
determination of arm’s
length price [Section 108A]
In order to curb tax evasion in respect of
transaction between associated entities by
entering into transactions not representing
arm’s length value, the Bill proposes to
introduce a new section, whereby with the
approval of Board, the Commissioner,
having an opinion that a transaction has not
been declared at arm's length, may obtain
report from an independent chartered
accountant or cost and management
accountant to determine the fair market
value of asset, product, expenditure or
service at the time of transaction.
The scope, terms and conditions of the
report shall be as may be prescribed.
It is provided that where the Commissioner
is satisfied with the report of the
independent chartered accountant or cost
and management accountant, the fair
market value of asset, product, expenditure
or service determined in the report shall be
treated as definite information for the
purpose of sub-section (8) of section 122.
However, where the Commissioner is not
satisfied with the report of the independent
chartered accountant or cost and
management accountant, the Commissioner
may record reasons for being not satisfied
with the report and seek report from another
independent chartered accountant or cost
and management accountant, to determine
the fair market value of asset, product,
expenditure or service at the time of
transaction.
It is a positive step towards implementation
of transfer pricing provisions; however,
24
necessary steps should also be taken for
development of database containing
comparable information.
19. Measures to avoid profit
shifting under dealership
arrangements [Section
108AB]
In order to handle profit shifting by
manufacturers to dealers for availing
reduced rate taxation applicable for dealer’s
commissions, the Bill proposes to introduce
new section providing that where a person
supplies products listed in the Third
Schedule to the Sales Tax Act, 1990 or any
other products as prescribed by the Board,
under a dealership arrangement with the
dealers who are not registered under the
Sales Tax Act, 1990 and are not appearing
in the active taxpayers’ list under this
Ordinance, an amount equal to 75% of the
dealer's margin shall be added to the income
of the person making such supplies.
The section also provides that 10% of the
sale price of manufacturer shall be treated
as dealers’ margin. The Salient features
issued by the FBR mentions that these
provisions will apply for transactions
between associates, however, the Bill does
not specifically mention transaction between
associates. Necessary clarification or
redrafting of the section is required to reflect
legislature’s intention.
20. Reduction in threshold of
foreign remittance for
unexplained income or
assets [Section 111(4)(a)]
Earlier, undisclosed foreign exchange
remittances brought into Pakistan through
banking channel could not be questioned by
tax authorities as per section 111(4) of the
Ordinance. Through amendment in
subsection (4) of section 111 vide Finance
Act, 2018, such exclusion was curtailed to
the extent of foreign exchange remittances
not exceeding Rs. 10 million per person per
Budget 2019 - 20 | Highlights & Comments
tax year. The Bill proposes to reduce the
limit from Rs. 10 million to Rs. 5 million. The
tax authorities can now probe the source
and nature of the foreign remittances in
excess of Rs. 5 million in a tax year.
21. Immunity from tax
authorities’ queries in
respect of immovable
property abolished [Section
111(4)(c)]
Under the existing law, tax authorities
cannot probe and raise queries where the
registered value of immoveable property is
lower than FBR value under section 68. The
Bill proposes to withdraw this immunity.
22. Return filing threshold
extended for owners of
immoveable property
[Section 114(1)(b)(iii)]
Currently, the owner of immovable property
with an area of 250 square yards is required
to file the return of income. The Bill
proposes to enhance the threshold area for
this purpose to 500 square yards.
23. Extension in filing date for
salaried individuals [Section
118(3)(a)]
In order to facilitate the individual
taxpayers, the Bill proposes to amend the
date of filing of return from “August 31” to
“September 30”. This is positive step,
considering the fact return forms are not
finalized by August 31 and return filing date
is mostly extended beyond September 30.
24. Immunity from proceedings
and confidentiality of
information of persons
declaring assets,
expenditures, sales under
Assets Declaration Act, 2019
25
[Section 120B]
The Bill proposes to introduces new section
providing that no proceedings shall be
undertaken under this Ordinance, where any
person entitled to declare undisclosed
assets, undisclosed expenditure and
undisclosed sales under the Assets
Declaration Act, 2019 declared such assets,
expenditures or sales to pay tax.
The section also provides for confidentiality
of information disclosed under the Act,
subject to specific provision of section 216 of
the Ordinance.
25. Alternate Dispute Resolution
[Section 134(2)(ii)]
In order to facilitate the settlement of
disputes between the tax authorities and
taxpayers, a revamped alternate dispute
resolution mechanism was introduced
through the Finance Act 2018. The Bill
proposes to include cost and management
accountants in Alternate Dispute Resolution
Committee and prescribes minimum
experience requirement of ten years for
senior chartered accountants, senior
advocates and cost and management
accountants.
26. Tax Payable by an
Association of Persons (AOP)
can be recovered from its
members [Section 139(5)]
Under the existing provisions of law, an AOP
is liable to pay tax in respect of member’s
share of income from the AOP, if the same
cannot be recovered from the member. The
Bill now proposes that any tax payable by
the AOP, which could not be recovered from
the AOP, can be recovered from any person
who was the member of the AOP for that
particular tax year. The member can
subsequently recover such tax paid from the
AOP or share of tax from another member of
the AOP.
Budget 2019 - 20 | Highlights & Comments
27. Powers granted to
Commissioner for freezing
assets of the person leaving
Pakistan and involved in
offshore tax evasion [Section
145(5)]
The Bill proposes to empower the
Commissioner to freeze any domestic asset
of the person including any asset beneficially
owned by the person for a period of one
hundred and twenty days or till the
finalization of proceedings including but not
limited to recovery proceedings under this
Ordinance; whichever is earlier. Such
powers may be exercised, where on the
basis of information received from any
offshore jurisdiction, the Commissioner has
reason to believe that such person, who is
likely to leave Pakistan, may be involved in
offshore tax evasion or such person is about
to dispose of any such asset.
The Term ‘beneficial owner’ is not defined
under the tax laws. However, the Benami
Transactions (Prohibition) Act, 2016 defines
the term ‘beneficial owner’ to mean a
person, whether his identity is known or not,
for whose benefit the benami property is
held by a benamidar. Such definition
reflecting legislator’s intention for the
purpose of this section may also be included
in the Income Tax Ordinance, 2001.
28. Tax Collected from
commercial importers and
ship breakers at import
stage made minimum
[Section 148(7) & (8A)]
The Tax collected at import stage from
commercial importer remained under final
tax regime till Finance Act, 2018. In order to
document the economy, Finance Act 2018
made tax collected at import stage from
commercial importer as minimum tax.
However, subsequently, the minimum tax
for commercial importer was abolished to
reintroduce final tax vide Finance
26
Supplementary (Second Amendment) Act,
2019. The Bill now proposes to reintroduce
minimum tax for commercial importers and
ship breakers for tax collected at import
stage.
The intention of legislature to promote
documentation of economy by abolishing
final tax regime is a positive step. However,
the policy should be implemented
consistently to avoid unnecessary confusion,
which affects the decision making of the
business community.
29. Tax deducted on profit on
debt is to be treated as
minimum tax [Section 151]
Currently tax deducted from profit on debt is
treated as final tax, except for profit on debt
received by a company or the profit on debt
taxable under section 7B. The Bill proposes
to make such tax deduction as minimum
tax, considering overall policy of gradually
abolishing final tax regime for different
transactions.
30. Withdrawal of option to be
taxed under final tax regime
for non-resident persons on
execution of contracts
[Section 152(1B)]
The existing law provides for availing the
option of taxation under final tax regime by
non-resident persons on execution of a
contract or sub-contract under a
construction, assembly or installation project
in Pakistan, including a contract for supply of
supervisory activities in relation to such
project and other contracts mentioned in
section 152(1A). The Bill proposes to abolish
such option, as a policy step. Tax deducted
on such transactions is proposed to be
minimum tax. The Bill also proposes to
abolish final tax regime and replace the
same with minimum tax for the following
transactions:
(i) a contract for advertisement services
Budget 2019 - 20 | Highlights & Comments
rendered by T.V. Satellite Channels;
(ii) a payment of insurance premium or
reinsurance premium to a non-resident
person;
(iii) a payment for advertisement services
to a non-resident media person
relaying from outside Pakistan.
The recipient of such income will now be
required to compute the tax liability on net
income basis and if the same is higher than
the tax deducted by the payer, then the
recipient would be required to discharge
balance tax liability at the time of filing of
return of income.
The Bill also proposes to empower the
Commissioner to issue an order in writing in
response to an application filed in writing by
a person intending to make a payment on
account of cohesive business operations, to
make such payment after deduction of tax at
30% of the tax chargeable under section
152(2) on such payment. Accordingly, tax at
6% [30% of 20% of tax under section
152(2)] would be required to be deducted by
the payer. The credit of tax so deducted
would be available to the permanent
establishment of the non-resident person
accounting for overall profits arising on
overall cohesive business operations.
A clarification as to justification of using tax
rate under section 152(2) is required, as
such contracts are taxable under section
152(1A) of the Ordinance.
31. Abolition of Final Tax Regime
for various transactions
[Section 153]
The Bill proposes to abolish final tax regime
and replace the same with minimum tax:
(i) for the sale of goods , except where
payment is less than Rs 75,000 in
aggregate, during a financial year;
(ii) on the execution of a contract
including contract signed by a
27
sportsperson but not including a
contract for the sale of goods or the
rendering of or providing services;
and
(iii) payment to electronic and print media
for advertising services.
It has been clarified that tax deducted on a
payment on account of sale or supply of
goods, by:
(i) a company being a manufacturer of
such goods; or
(ii) a public company listed on a
registered stock exchange in Pakistan;
would not be treated as minimum tax.
The Bill also proposes to abolish Clause (94)
of Part IV of the Second Schedule, which
provided relief from minimum tax to certain
entities of service sectors, subject to
fulfillment of certain conditions. Due to
omission of said Clause, the sectors covered
under Clause (94) will now also be subject to
minimum tax at 4%.
32. Failure to Pay Tax Deducted
or Collected [Section 161]
Currently, an order under section 161(1) of
the Ordinance, providing for recovery of tax
from a person who failed to withhold tax on
payments liable to tax withholding, could
only be corrected through the mechanism of
section 221 of the Ordinance; however, an
erroneous order for a tax year suffering from
deficiency of prejudicial to the interest of
revenue cannot be corrected through
amended assessment because of the
limitation of section 221 of the Ordinance.
A new sub-section is proposed empowering
the Commissioner to amend or further
amend such recovery order under section
161 (1) of the Ordinance which is erroneous
in so for it is prejudicial to the interest of the
revenue. Such amendment or further
amendment can only be made after making
Budget 2019 - 20 | Highlights & Comments
necessary enquiries and providing the
taxpayer an opportunity of being heard.
Although there is nothing mentioned in the
Finance Bill but the Salient Features states
that such power shall not be exercised by an
officer below the rank of Additional
Commissioner Inland Revenue
33. Statements [Section 165]
and Rule 4(7) of Tenth
Schedule
Section 165 of the Ordinance requires every
withholding tax agent to furnish a bi-annual
statement containing the detailed
information about the person from whom
withholding tax was collected or deducted
including the quantum of related payment.
Finance Bills seeks to insert the reference of
newly inserted Tenth Schedule [Rules for
Persons not appearing in ATL] to the
Ordinance in this section primarily related to
withholding tax statement. The cross
reference seems to further emphasize the
fact that complete and accurate particulars
of the persons not appearing in active
taxpayer list ought to be included in the
statement under section 165 of the
Ordinance.
The strict interpretation of this amendment
may create problems for taxpayers who
normally do not exercise caution with
respect to suppliers of petty payments or
below the threshold payments prescribed in
various sections.
34. Furnishing of Information by
Banks [Section 165A]
This section contains certain threshold based
additional information requirement from
Banks pertaining to cash withdrawal,
deposits, credit card monthly bill and profit
on debt with respect to certain filers and
non-filers. In the Bill the concept of filer and
non-filer is proposed to be replaced with the
concept of person not appearing in Active
Taxpayer List. A consequential amendment
28
is proposed in this section whereby the term
filer and non-filer has been omitted.
In furtherance, the threshold for reporting
profit on debt is proposed for amount
exceeding Rs.500,000.
35. Credit for tax collected or
deducted [Section 168(3)]
Section 168(3) of the Ordinance specifically
disallows any tax credit against the income
from certain imports, Profit on Debt, non-
resident and resident person’s contracts,
non-resident’s insurance or re-insurance
premium, satellite channels advertisement
services, supplies of goods, exports, prizes
and winnings, petroleum products,
Brokerage and Commission covered under
Final Tax Regime.
The finance bill seeks to move the income
covered under the Final Tax Regime to
minimum Tax Regime, hence, this sub-
section is proposed to be deleted.
This omission would entitle persons earning
income from export, prizes or winnings and
petroleum products to claim tax credits
though their income is still covered under
Final Tax Regime. This seems to be an
oversight.
36. Tax collected or deducted as
a final tax [Section 169(4)]
The existing sub-section allows adjustment
of excess tax deducted from a non-filer at
the time of becoming filer. The Finance Bill
seeks to replace the concept of filer and
non-filer with person not appearing in the
Active Taxpayer List where the tax collected
or deducted is final tax under any provision
of the Ordinance, hence, this sub-section
has also been substituted in line with newly
inserted Tenth Schedule wherein 100%
higher withholding tax rate has been
prescribed for a person not appearing in the
Active Taxpayer List in respect of specified
payments.
Budget 2019 - 20 | Highlights & Comments
The substituted sub-section seeks to provide
for adjustment of tax withholding at higher
rate under the Tenth Schedule as compared
to withholding tax rates prescribed in the
First Schedule where return is filed before
finalization of assessment that is before the
expiry of 45 days after the provisional
assessment, as provided in rule 4 of the
Tenth Schedule.
37. Payment of refund through
income tax refund bonds
[Section 171(A)]
Currently, a taxpayer is allowed to claim
refund of excess payment of tax under
section 170 of the Ordinance from the
Commissioner. Moreover, a taxpayer can
claim additional payment on refund due
which is not paid under section 171 of the
Ordinance. The refund and related additional
payment is paid through refund voucher or
cheque drawn on State Bank of Pakistan.
Finance Bill seeks to provide for an additional
mechanism for payment through income tax
refund bonds [Bonds] to be issued by FBR
Refund Settlement Company Limited. Bond
will be issued in lieu of payment to be made
through issuance of cheque or bank debit
advice. FBR will issue the promissory note to
the FBR Refund Settlement Company Limited
by incorporating the details of refund
claimants and amount of refund determined
as payable to each claimant for issue of
income tax refund Bonds of the same
amount. The FBR Refund Settlement
Company Limited shall return the promissory
note to the Board after the period of maturity
and the Board shall make the payment
amount due under the Bonds along with
profit due to Bond holders.
These bonds possess the quality of:
 Being freely tradeable in the secondary
market.
 Acceptable as collateral by the banks.
29
 Approved security for the purpose of
computing statutory liquidity reserves of
the Banks.
 Exempt from compulsory deduction of
zakat.
 Contain simple interest rate of 10%.
 to be issued in multiples of Rs.100,000
with a maturity period of three years.
The existing compensation rate of KIBOR +
0.5% under section 171 may make the
simple 10% interest rate on the Bonds under
section 171A less lucrative.
Bonds shall be redeemable before maturity
only at the option of the Bond alongwith
simple profit payments at the time of
redemption in the light of general or specific
policy to be formulated by the Board.
38. Power to enter and search
Premises [Section 175(6A)]
Section 175 of the Ordinance provides for
enforcement of any provision of the
Ordinance including audit and survey of
taxpayer. This section empowers the
Commissioner to impound and retain
taxpayer’s manual or computerized record.
Finance Bill seeks to enhance the powers of
Commissioner to raid a premises where
there is reliable information of undeclared
gold, bearer security or foreign currency and
confiscate the same. The conditions being
pre-requisite for such raid will be prescribed
later.
The proposed amendment is in line with the
Government’s commitment to bring into tax
net all the undeclared assets, discourage the
hoarding of foreign currency and to
encourage documentation of economy.
However, such discretionary power must be
exercised carefully after seeking necessary
approval from competent authorities to
avoid undue harassment.
Budget 2019 - 20 | Highlights & Comments

39. Audit [Section 177(6) and
(6A)]
Section 177 of the Ordinance provides for a
detailed mechanism of Tax Audit under the
Ordinance. Existing sub-section (6) of this
section bridles with discretionary powers to
the Commissioner for seeking explanation
from the taxpayer pertaining to issues raised
upon completion of audit prior to amending
the assessment under section 122(4) of the
Ordinance.
Finance Bill seeks to substitute the existing
sub-section (6) whereby the Commissioner
is obliged to seek taxpayer’s explanation on
all issues raised during the course of audit
and issue an audit report containing audit
observations and findings.
Finance Bill seeks to require every person
engaged in any business, profession or
vocation to obtain and display a business
license as prescribed by the Board. The
salient feature provides some explanation
about the possible procedure whereby
registration with the Board will be done
through NADRA E Sahulat Centers. Such
registered persons will not be liable to file
return of total income.
The purpose of this amendment is to create
a database of Business, Profession or
Vocation for detecting taxpayers in the
future. It is imperative to note that globally
this registration is done by a separate
authority responsible for issuance of
commercial registration certificate for
starting the business.

Finance Bill also seeks to insert a new sub-

section (6A) whereby after issuing the audit
report, the Commissioner may, if considered
necessary, amend the assessment either
under sub-section (1) or (4) of section 122
after providing a reasonable opportunity of
being heard under sub-section (9) of Section
122 of the Ordinance.

Although, it was not provided in the Bill but

the intent of the amendment and addition in
section 177 as per notes to the clauses and
salient feature is to separate the audit
function from assessment function. This is a
positive step whereby the taxpayer could
provide the explanation to another officer
having independent mindset to review the
explanation under section 122 of the
Ordinance.

40. Business License Scheme

[Section 181D]
Presently, there is no mechanism for
registration of persons earning below taxable
limit like, sole proprietorships including but
not limited to small shopkeepers,
freelancers, professionals including doctors,
lawyers, engineers, actuaries, architects etc.

30
Budget 2019 - 20 | Highlights & Comments

41. Offences and penalties [Section 182]

The Bill proposes to enhance the monetary limits of the existing penalties and has also introduced
new penalties. Table providing comparison of existing and proposed penalties is as under:

Applicable
S No. Offences Existing Penalties Proposed Revision
Sections
1 Failure to furnish Higher of; Higher of; 114
return of income  Rs. 20,000  Rs. 40,000
within due date.  0.1% of tax payable  0.1% of tax payable
for the tax year per for the tax year per
day of default upto a day of default upto a
maximum penalty of maximum penalty of
50% of the tax 50% of the tax
payable payable

Provided that if 75% of the

income is from salary and
the amount of income
under head of salary is
less than Rs. 5 million per
annum, then in that case
minimum amount of
penalty shall be Rs. 5,000.
1AA Failure to furnish Higher of: Higher of: 114, 115
wealth statement  Rs. 20,000, or  Rs. 100,000, or and 116
or wealth  0.1% of the taxable  0.1% of the taxable
reconciliation income per week income per week
statement.

3 Failure to apply Rs. 5,000 Rs. 10,000 181

for registration
under the
Ordinance
6 Any person who Higher of; Higher of; 137
repeats erroneous  Rs. 5,000 rupees or  Rs. 30,000 rupees or
calculation in the  3%of the amount of  3%of the amount of
return for more
the tax involved. the tax involved.
than one year
whereby amount
of tax less than
the actual tax
payable under
this Ordinance is
paid.
11 Any person who Higher of; Higher of; 175 & 177
denies or  Rs. 25,000 or  Rs. 50,000 or
obstructs the

31
Budget 2019 - 20 | Highlights & Comments

Applicable
S No. Offences Existing Penalties Proposed Revision
Sections
access of the  100% of the amount  100% of the amount
Commissioner or of tax involved. of tax involved.
any officer
authorized by the
Commissioner to
the premises,
place, accounts,
documents,
computers or
stocks.
12 Where a person Higher of; Higher of; 20, 111 &
has concealed general
income or
 Rs. 25,000 or  Rs. 100,000 or
furnished
inaccurate  an amount equal to  an amount equal to
particulars of the tax which the the tax which the
such income, person sought to person sought to
including but not evade. evade.
limited to the
suppression of
any income or
amount
chargeable to tax,
the claiming of
any deduction for
any expenditure
not actually
incurred or any
act referred to in
sub-section (1) of
section 111, in
the course of any
proceeding under
this Ordinance
before any
Income Tax
authority or the
appellate tribunal.
15 Any person who Higher of; Higher of; 148, 149,
fails to collect or  Rs. 25,000 or  Rs. 40,000 or 150, 151,
deduct tax as  10% of the amount of  10% of the amount of 152, 153,
required under 153A, 154,
tax tax
any provision of 155, 156,
this Ordinance or 156A,
fails to pay the
156B, 158,
tax collected or
160, 231A,
deducted as
231B, 233,
233A, 234,

32
Budget 2019 - 20 | Highlights & Comments
S No. Offences Existing Penalties
required under
section 160.
Table summarizing the new penalties proposed is as under:
S. No Offence
21 Any person who purchases
immovable property having fair market
value greater than rupees five million
through cash or bearer cheque
22 Where an offshore tax evader is
involved in offshore tax evasion in the
course of any proceedings under this
Ordinance before any Income Tax
authority or the appellate tribunal.
23 Where in the course of any transaction
or declaration made by a person an
enabler has enabled, guided, advised or
managed any person to design, arrange
or manage that transaction or
declaration in such a manner which has
resulted or may result in offshore tax
evasion in the course of any
proceedings under this Ordinance.
24 Any person who is involved in asset
move as defined in clause (5C) of
section 2 of the Ordinance from a
specified territory to an un-specified
territory.
25 Where a Reporting Financial Institution
fails to comply with any provisions of
section 165B of the Ordinance or
Common Reporting Standard Rules in
XIIA of Income Tax Rules, 2002.
33
Applicable
Proposed Revision
Sections
234A, 235,
236, 236A,
Penalty Section
Such person shall pay a penalty 75A
of five percent of the value of
property determined by the
Board under sub¬section (4) of
section 68 or by the provincial
authority for the purposes of
stamp
Such person shall pay a penalty General
of one thousand rupees or an
amount equal to two hundred per
duty, whichever
cent of is higher.
the tax which the person
sought to evade whichever is
higher.
Such person shall pay a penalty General
of three hundred thousand
rupees or an amount equal to two
hundred per cent of the tax which
was sought to be evaded,
whichever is higher.
Such person shall pay a penalty General
of one hundred thousand rupees
or an amount equal to one
hundred per cent of the tax
whichever is higher.
Such Reporting Financial
Institution shall pay a penalty of
10,000 PKR for each default and
an additional Rs. 10,000 each
month until the default is
redressed.
Budget 2019 - 20 | Highlights & Comments
S. No Offence
26 Where a Reporting Financial Institution
files an incomplete or inaccurate report
under the provisions of section 165B of
the Ordinance, and Common Reporting
Standard Rules in Chapter XIIA of
Income Tax Rules, 2002.
27 Where a Reporting Financial Institution
fails to obtain valid self-certification for
new accounts or furnishes false self-
certification made by the Reportable
Jurisdiction Person under Common
Reporting Standard Rules in Chapter
XIIA of Income Tax Rules, 2002.
28 Where a Reportable Jurisdiction Person
fails to furnish valid self-certification or
furnishes false self-certification under
Common Reporting Standard Rules in
Chapter XIIA of Income Tax Rules,
2002.
42. Return not filed within due
date [Section 182A]
Finance Bill seeks to insert a new proviso
after clause (a) whereby the taxpayer shall
be included in the active taxpayer list upon
payment of surcharge as follows:
Type of Taxpayer
Surcharge
(Rs)
 Company 20,000
 Association of Persons 10,000
 Individual 1,000
This surcharge shall be payable without
prejudice to any other liability applicable
under the Ordinance.
Finance Bill also proposes two additional
restrictions upon the taxpayers who do not
file return upon due date as follows:
 Refund will not be issued during the
period the person is not included in the
active taxpayer list
34
Penalty Section
Such Financial Institution shall
pay a penalty of Rs. 10,000 for
each default and an additional Rs.
10,000 each month until the
default is redressed.
Such Reporting Financial
Institution shall pay a penalty of
Rs.10,000 for each default and an
additional Rs. 10,000 each month
until the default is redressed.
Such Reportable Jurisdiction
Person shall pay a penalty of Rs.
5,000 for each default and an
additional Rs. 5,000 each month
until the default is redressed.”
 Additional Payment under section 171
will not be computed during the period
a person is not included in active
taxpayer list.
43. Prosecution for non-
furnishing or inaccurate filing
of withholding statements
[Section 191]
Currently, non-filing or inaccurate filing of
statements under section 165 is a non-
prosecutable offence. The Bill proposes to
make non-filing or inaccurate filing
withholding statements as prosecutable
offence, punishable on conviction with a fine
or imprisonment for a term not exceeding
one year, or both.
This seems to be very harsh measure as
there could be instances where such
statements were filed late due to genuine
reason not filed with inaccurate particulars
due to some honest mistake.
Budget 2019 - 20 | Highlights & Comments
44. Prosecution for concealment
of an offshore asset [Section
192B]
A new section 192B is proposed to be added
through which concealment of an offshore
asset will be a prosecutable offence.
Two amnesty schemes have been
announced in the recent past giving ample
time to disclose offshore assets. Further,
government is claiming to have information
regarding the ownership of properties from
other countries and is ready to take punitive
actions for the non-disclosure of the same.
The proposed amendment provides that
where any person who fails to declare an
offshore asset to the Commissioner or
furnishes inaccurate particulars of an
offshore asset and revenue impact of such
concealment or furnishing of inaccurate
particulars is Rs. 100,000 or more shall be
treated as committed an offence punishable
with imprisonment up to 7 years or with a
fine up to two hundred percent of the
amount of tax evaded or both.
45. Prosecution for non-
compliance with notice under
section 116A
[Section 195A]
Through Finance Act, 2018 under section
116A every resident individual having
foreign income equal to or in excess of USD
10,000 or foreign assets with a value of USD
100,000 or more in a tax year required to
furnish a statement in the prescribed form.
Further, the Commissioner may require a
person to furnish a foreign income and
assets statement through notice who was
required to furnish said statement but has
failed to do so.
Under the proposed section, non-compliance
of notice under section of 116A will be a
prosecutable offence.
35
The proposed amendment provides that
where any person, without reasonable
excuse, who fails to comply with a notice
under section (2) of section 116A shall be
treated as committed an offence punishable
with imprisonment up to 2 years or with a
fine up to a penalty of 2% of the offshore
asset not declared or both.
It needs to be clarified whether the penalty
would be 2% of the fair market value or the
cost of the offshore asset.
46. Prosecution for enabling
offshore tax evasion [Section
195B]
A new section 195B is proposed to be added
through which any enabler enabling tax
evasion will be a prosecutable offence.
The proposed amendment provides that
where any enabler who enables, guides or
advises any person to design, arrange or
manage a transaction or declaration in such
a manner which results in offshore tax
evasion shall be treated as committed an
offence punishable with imprisonment up to
seven years or with a fine up to Rs. 5 million
or both.
Offshore Tax evasion is a serious financial
crime which deprives the Government of
much needed funds to run public services
and reduce the deficit, placing a greater
burden on the vast majority of people who
pay their fair share of tax. It seems tackling
offshore tax evasion and catching such
enablers is an important part of this
Government’s long-term economic plan and
it intends to take tough action against
evaders and those who help others to evade
tax.
Over the last few years the United Kingdom
has led the drive in Europe, in the G20 and
through its G8 Presidency to revolutionize
international tax transparency. Currently
they have agreement, reached with over 90
countries and jurisdictions, to exchange
information on financial accounts
automatically every year. Similarly, after
Budget 2019 - 20 | Highlights & Comments
signing OECD convention Government is
collecting information from different
countries and jurisdictions which would help
in taking strict actions against such evaders
and enablers.
47. Disclosure of names of
offshore evaders and
offshore enablers [Section
216]
Two new sub-sections proposed to be added
through which Board is empowered to
publish the names of offshore evaders
through print and electronic media
who evaded offshore tax equal to or
exceeding Rs. 2.5 Million and offshore tax
enablers who enabled offshore tax evasion.
48. Proceedings against the
persons committing financial
malpractices
[Section 216A]
A new section proposed to be added through
which Board shall prescribe the rules for
initiating the criminal proceedings against the
authority and any person subordinate to such
authority mentioned in section 207 and
officers of Directorates General and their
subordinates who willfully and deliberately
commits or omits an act which results in
personal benefits and undue advantage to the
authority or the person or taxpayer or both.
49. Restriction on purchase of
certain assets [Section 227C]
The concept of filer and non-filer was
introduced in Income Tax Ordinance, 2001
through Finance Act, 2014 with respect to
Return of Total Income. The very purpose of
introducing this concept was to encourage
documentation and to penalize non-filers
through higher incidence of withholding tax
rates in order to persuade them to become
filer and claim the excess withholding tax as
refundable on achieving filer status.
36
Section 227C was introduced vide Finance
Act, 2018 in order to restrict the purchase of
immovable property exceeding value of Rs 5
million and imported and newly
manufactured motor vehicles by non-filers.
The newly inserted section 227C is proposed
to be deleted being a departure from the
policy of previous government when for the
first time non-filers were barred from
economic activity. It appears that the
revision in policy has been made owing to
persistent pressure from Automakers and
Builders who strongly opposed this
amendment on premise of curbing
fundamental rights and hampering their
business.
50. Automated impersonal tax
regime [Section 227D]
A new section proposed to be added which
empowers the Board to design an
Automated Impersonal Tax Regime to
minimize personal interaction between
taxpayers and officers.
51. Advance Tax on private
motor vehicles [Section
231B]
The Bill proposes to substitute word “non-
filer” with the expression “person whose
name is not appearing in the active taxpayer
list”.
52. Brokerage and commission
[Section 233]
The Bill proposes to change the taxation
regime on brokerage and commission from
final tax to minimum tax.
53. CNG Stations [Section 234A]
Currently, a person preparing gas
consumption bill shall charge advance tax at
4% of the gas consumption charges. Tax so
collected is treated as final tax of a CNG
station arising from the consumption of gas.
The Bill proposes to change the taxation
Budget 2019 - 20 | Highlights & Comments

regime on CNG stations from final tax to

minimum tax.

54. Advance tax on sale or

transfer of immovable
property [Section 236C]
Currently, person responsible for registering,
recording or attesting transfer of
immoveable property is required to collect
tax from seller of such property at applicable
rates. Such advance tax is, however, not
collected in respect of a property held for a
period of 3 years. The Bill proposes to
extend the time limit from 3 years to 5
years.

55. Tax on purchase or transfer

of immovable property
[Section 236W]
Under the existing law, after paying the 3%
tax authorities cannot probe and raise
queries where the registered value of
immoveable property is lower than FBR
value under section 68. The Bill proposes to
withdraw this immunity by omitting section
111(4)(c).

In view of the above amendment, tax to be

collected from the purchaser of property on
difference of FBR value of property and DC
value under section 236W is also proposed
to be withdrawn.

37
Budget 2019 - 20 | Highlights & Comments

The First Schedule

Rates of Tax
Part I

Division I (Rates of Tax for Individuals and Association of Persons)

The Finance Bill proposes to increase the rates of tax for individuals and association of persons
(AOP) to the maximum tax rate of 35% as it stood in tax year 2006. Maximum rate of taxation
was earlier reduced to 25% to reduce the tax burden of the taxpayers and to encourage
compliance. This change is likely to have a negative impact on compliance.

1. Similar rates of taxation have been proposed for non-salaried individuals and AOP as
against the currently applicable different rates. There is no change in the basic threshold for
taxation. Proposed tax slabs for AOP and non-salaried individual are as follows:

S. No. Income Slabs Rate of Tax Proposed

1 Where taxable income does not exceed Rs. 0%

400,000

2 Where taxable income exceeds Rs. 400,000 but 5% of the amount exceeding Rs.
does not exceed Rs. 600,000. 400,000.

3 Where taxable income exceeds Rs. 600,000 but Rs. 10,000 plus 10% of the amount
does not exceed Rs. 1,200,000 exceeding Rs. 600,000

4 Where taxable income exceeds Rs. 1,200,000 Rs. 70,000 plus 15% of the amount
but does not exceed Rs. 2,400,000 exceeding Rs. 1,200,000

5 Where taxable income exceeds Rs. 2,400,000 Rs. 250,000 plus 20% of the
but does not exceed Rs. 3,000,000 amount exceeding Rs. 2,400,000

6 Where taxable income exceeds Rs. 3,000,000 Rs. 370,000 plus 25% of the
but does not exceed Rs. 4,000,000 amount exceeding Rs. 3,000,000

7 Where taxable income exceeds Rs. 4,000,000 Rs. 620,000 plus 30% of the
but does not exceed Rs. 6,000,000 amount exceeding Rs. 4,000,000

8 Where taxable income exceeds Rs. 6,000,000 Rs. 1,220,000 plus 35% of the
amount exceeding Rs. 6,000,000

38
Budget 2019 - 20 | Highlights & Comments

As is clear from the below comparison, proposed tax rates will adversely effect the taxpayers
falling in each of the tax slabs.

Annual Annual Tax Liability (Rs)

S. No. Taxable Increase /
Income (Rs) Existing Proposed
(Decrease)

1 400,000 - - -
2 600,000 1,000 10,000 9,000
3 900,000 2,000 40,000 38,000
4 1,500,000 15,000 115,000 100,000
5 2,000,000 40,000 190,000 150,000
6 2,500,000 75,000 270,000 195,000
7 3,000,000 150,000 370,000 220,000
8 3,500,000 250,000 495,000 245,000
9 4,000,000 350,000 620,000 270,000
10 5,000,000 600,000 920,000 320,000
11 6,000,000 890,000 1,220,000 330,000
12 7,000,000 1,180,000 1,570,000 390,000

2. Historically, salaried individual has been categorized to be an individual having salary

income in excess of fifty percent of the taxable income. A significant amendment has been
proposed in the finance bill, whereby the threshold for salary income is proposed to
increase to 75% of the taxable income. Basic threshold for taxability is proposed to
increase from Rs. 400,000 to Rs. 600,000. The bill also proposes to increase the number of
progressive tax slabs from 7 to 12. Five new tax slabs are proposed to be introduced for
individuals earning salary income in excess of Rs. 8,000,000. Comparison of the existing
and proposed tax slabs for salaried individuals is as follows:

Existing Proposed
S. No
Income Slabs Rate of Tax Income Slabs Rate of Tax
1 Where the taxable 0% Where taxable income 0%
income does not does not exceed Rs.
exceed Rs. 400,000. 600,000
2 Where the taxable Rs. 1,000 Where taxable income 5% of the amount
income exceeds Rs. exceeds Rs. 600,000 exceeding Rs.
400,000 but does but does not exceed 600,000.
not exceed Rs. Rs. 1,200,000.
800,000.
3 Where the taxable Rs. 2,000 Where taxable income Rs. 30,000 plus
income exceeds Rs. exceeds Rs. 10% of the amount
800,000 but does 1,200,000 but does exceeding Rs.
1,200,000.

39
Budget 2019 - 20 | Highlights & Comments

Existing Proposed
S. No
Income Slabs Rate of Tax Income Slabs Rate of Tax
not exceed Rs. not exceed Rs.
1,200,000. 1,800,000.
4 Where the taxable 5% of the Where taxable income Rs. 90,000 plus
income exceeds Rs. amount exceeds Rs. 15% of the amount
1,200,000 but does exceeding 1,800,000 but does exceeding Rs.
not exceed Rs. Rs.1,200,000 not exceed Rs. 1,800,000.
2,500,000. 2,500,000.
5 Where the taxable Rs. 65,000 + Where taxable income Rs. 195,000 plus
income exceeds Rs. 15% of the exceeds Rs. 17.5% of the
2,500,000 but does amount 2,500,000 but does amount exceeding
not exceed Rs. exceeding Rs. not exceed Rs. Rs. 2,500,000.
4,000,000. 2,500,000. 3,500,000.
6 Where the taxable Rs. 290,000 + Where taxable income Rs. 370,000 plus
income exceeds Rs. 20% of the exceeds Rs. 20% of the amount
4,000,000 but does amount 3,500,000 but does exceeding Rs.
not exceed Rs. exceeding Rs. not exceed Rs. 3,500,000.
8,000,000. 4,000,000. 5,000,000.
7 Where the taxable Rs. 1,090,000 Where taxable income Rs. 670,000 plus
income exceeds + 25% of the exceeds Rs. 22.5% of the
Rs.8,000,000. amount 5,000,000 but does amount exceeding
exceeding Rs. not exceed Rs. Rs. 5,000,000.
8,000,000. 8,000,000.
8 Where taxable income Rs. 1,345,000 plus
exceeds Rs. 25% of the amount
8,000,000 but does exceeding Rs.
not exceed Rs. 8,000,000.
12,000,000.
9 Where taxable income Rs. 2,345,000 plus
exceeds Rs. 27.5% of the
12,000,000 but does amount exceeding
not exceed Rs. Rs. 12,000,000.
30,000,000.
10 Where taxable income Rs. 7,295,000 plus
exceeds Rs. 30% of the amount
30,000,000 but does exceeding Rs.
not exceed Rs. 30,000,000.
50,000,000.
11 Where taxable income Rs. 13,295,000 plus
exceeds Rs. 32.5% of the
50,000,000 but does amount exceeding
not exceed Rs. Rs. 50,000,000.
75,000,000.
12 Where taxable income Rs. 21,420,000 plus
exceeds Rs. 35% of the amount
75,000,000. exceeding Rs.
75,000,000.

40
Budget 2019 - 20 | Highlights & Comments

With few exceptions, proposed tax rates will adversely effect the salaried individuals falling in
each of the tax slabs.

Monthly Tax Liability (Rs)

Monthly Salary
S. No. Increase /
Income Existing Proposed
(Decrease)
1 35,000 83 - (83)
2 50,000 83 - (83)
3 70,000 167 1,000 833
4 100,000 167 2,500 2,333
5 150,000 2,500 7,500 5,000
6 200,000 5,000 15,000 10,000
7 250,000 11,667 23,542 11,875
8 300,000 19,167 32,500 13,333
9 350,000 27,500 42,500 15,000
10 400,000 37,500 52,500 15,000
11 450,000 47,500 63,333 15,833
12 500,000 57,500 74,583 17,083
13 550,000 67,500 85,833 18,333
14 600,000 77,500 97,083 19,583
15 650,000 87,500 108,333 20,833
16 700,000 99,167 120,417 21,250
17 800,000 124,167 145,417 21,250
18 900,000 149,167 170,417 21,250
19 1,000,000 174,167 195,417 21,250
20 1,100,000 199,167 222,917 23,750
21 1,200,000 224,167 250,417 26,250
22 1,300,000 249,167 277,917 28,750
23 1,400,000 274,167 305,417 31,250
24 1,500,000 299,167 332,917 33,750
25 2,000,000 424,167 470,417 46,250
26 2,500,000 549,167 607,917 58,750
27 3,000,000 674,167 757,917 83,750
28 3,500,000 799,167 907,917 108,750
29 4,000,000 924,167 1,057,917 133,750
30 4,500,000 1,049,167 1,216,250 167,083

41
Budget 2019 - 20 | Highlights & Comments

Monthly Tax Liability (Rs)

Monthly Salary
S. No. Increase /
Income Existing Proposed
(Decrease)
31 5,000,000 1,174,167 1,378,750 204,583
32 5,500,000 1,299,167 1,541,250 242,083
33 6,000,000 1,424,167 1,703,750 279,583
34 6,500,000 1,549,167 1,872,500 323,333
35 7,000,000 1,674,167 2,047,500 373,333

Division II (Rate of Tax for Companies)

To promote corporatization, the Finance Act, 2018 introduced gradual reduction in tax rates by
1% per year for Companies, other than Banking and Small Companies, to be frozen at 25% for
the tax year 2023 and onwards. The finance bill proposes to withdraw this benefit and fix the tax
rate for these companies at 29% for the tax year 2019 and onwards. We understand that this
would have an adverse impact on the confidence of the investors.

Division III (Rate of Dividend Tax)

Currently, reduced rate of tax of 7.5% on dividend declared or distributed by purchaser of a

power project privatized by WAPDA or on shares of a company set up for power generation or on
shares of a company, supplying coal exclusively to power generation projects; and 12.5% for
dividend received from a mutual fund if the amount of dividend is above 2.5 million and 10% if
the amount of dividend is less than or equal to 2.5 million are applicable. The finance bill
proposes to increase the rate of tax on Dividend declared by power sector companies from 7.5%
to 15%. Reduced rate of 10% and 12.5% on dividend declared by mutual fund is proposed to be
withdrawn.

The finance bill proposes to introduce a new category of companies declaring dividend. Taxation
of dividend is proposed at 25% for a company where no tax is payable due to exemption of
income or carry forward of business losses or claim of tax credits. This is likely to create an
adverse impact on investments in such companies.

Division IIIA (Profit on Debt)

Profit on Debt is taxable under the final tax regime of the Ordinance for individual and AOP. Three
different tax slabs exist for taxation of profit on debt. The Finance Bill proposes to increase these
tax rates by 5% in each of these slabs and to treat this tax as minimum tax instead of final tax.
Comparison of the existing and the proposed tax rates is as follows:

S. No. Profit on Debt Rate of Tax

Existing Proposed
1. Where profit on debt does not exceed Rs.5,000,000 10% 15%
2. Where profit on debt exceeds Rs.5,000,000 but does not 12.5% 17.5%
exceed Rs.25,000,000
3. Where profit on debt exceeds Rs.25,000,000 *but does 15% 20%
not exceed Rs.36,000,000

42
Budget 2019 - 20 | Highlights & Comments

As per proposed amendment in section 7B, profit on debt exceeding Rs.36 million is to be tax
under normal tax regime at normal rates.

Division VIA (Income from Property)

The Finance Bill proposes to increase the number of tax slabs from 5 to 8. Three new tax slabs
are proposed for income exceeding Rs. 4,000,000 to match the maximum rate with that of the
individual tax rates. Rates of tax on income from property, based on the finance bill, shall be as
follows:

S. No. Gross Amount of Rent Rate of Tax

1. Where the gross amount of rent does not
exceed Rs.200,000.
2. Where the gross amount of rent exceeds
Rs.200,000 but does not exceed Rs. 600,000.
3. Where the gross amount of rent exceeds
Rs.600,000 but does not exceed Rs. 1,000,000.
4. Where the gross amount of rent exceeds
Rs.1,000,000 but does not exceed Rs.
2,000,000.
5. Where the gross amount of rent exceeds
Rs.2,000,000 but does not exceed Rs.
4,000,000.
6. Where the gross amount of rent exceeds
Rs.4,000,000 but does not exceed Rs.
6,000,000.
7. Where the gross amount of rent exceeds
Rs.6,000,000 but does not exceed Rs.
8,000,000.
8. Where the gross amount of rent exceeds Rs.
8,000,000.
Nil
5 per cent of the amount exceeding
Rs. 200,000.
Rs. 20,000 plus 10 per cent of the
amount exceeding Rs. 600,000.
Rs. 60,000 plus 15 per cent of the
amount exceeding Rs. 1,000,000.
Rs. 210,000 plus 20 per cent of the
amount exceeding Rs. 2,000,000.
Rs. 610,000 plus 25 per cent of the
amount exceeding Rs. 4,000,000.
Rs. 1,110,000 plus 30 per cent of
the amount exceeding Rs.
6,000,000.
Rs. 1,710,000 plus 35 per cent of
the amount exceeding Rs.
8,000,000.

Division VII (Capital gains on disposal of securities)

The Finance Bill seeks to replace the existing table with the following table. Only reference to
non-filers has been dealt away with in the proposed table.

Tax Tax Tax

Tax Years 2018, 2019 and
S.No. Period Year Year Year
2020
2015 2016 2017
Securities Securities
acquired acquired
before after
01.07.2016 01.07.2016

(1) (2) (3) (4) (5) (6) (7)

43
Budget 2019 - 20 | Highlights & Comments

Tax Tax Tax

Tax Years 2018, 2019 and
S.No. Period Year Year Year
2020
2015 2016 2017
Where holding period of
1. a security is less than 12.5% 15% 15% 15% 15%
twelve months
Where holding period of
a security is twelve
2. months or more but 10% 12.5% 12.5% 12.5%
less than twenty-four
months
Where holding period of
a security is twenty-four
months or more but
3. 0% 7.5% 7.5% 7.5%
the security was
acquired on or after 1st
July, 2013
Where the security was
4. acquired before 1st July, 0% 0% 0% 0% 0%
2013
Future commodity
contracts entered into
5. by the members of 0% 0% 5% 5% 5%
Pakistan Mercantile
Exchange

An explanation to the fifth proviso to the table is proposed to be inserted. The proposed
explanation restricts the benefit of non-deduction of capital gains tax to a mutual fund or
collective investment scheme or a REIT scheme, where the holding period of the security is more
than four years.

Division IX (Minimum Tax under Section 113)

The Finance Bill proposes to increase the rates for minimum tax under section 113 as under:

S. Persons Minimum Tax as

No. percentage of the
person's turnover for
the year
Existing Proposed
1. (a) Oil marketing companies, Oil refineries, Sui Southern
Gas Company Limited and Sui Northern Gas Pipelines
Limited (for the cases where annual turnover exceeds
rupees one billion.); 0.50% 0.75%
(b) Pakistani Airlines; and

44
Budget 2019 - 20 | Highlights & Comments

S. Persons Minimum Tax as

No. percentage of the
person's turnover for
the year
Existing Proposed
(c) Poultry industry including poultry breeding, broiler
production, egg production and poultry feed
production.
(d) Dealers or distributors of fertilizers; and
(e) person running an online marketplace as defined in
clause (38B) of section 2.

2. (a) Distributors of pharmaceutical products, fast moving

consumer goods and cigarettes;
(b) Petroleum agents and distributors who are registered
under the Sales Tax Act, 1990; 0.20% 0.25%
(c) Rice mills and dealers; and
(d) Flour mills.

3. Motorcycle dealers registered under the Sales Tax Act, 0.25% 0.30%
1990.

4. In all other cases. 1.25% 1.50%

Part II (Rates of Advance Tax)

With the proposed insertion of Tenth Schedule to the Ordinance, tax rates prescribed for non-
filers are proposed to be omitted by the Finance Bill and corresponding amendments be made to
delete the reference to filers.

The Finance Bill seeks to insert advance tax collection on import of finished pharmaceutical
products at the rate of 4% that are not manufactured in Pakistan and are certified by the Drug
Regulatory Authority of Pakistan.

Part III (Deduction of tax at source)

With the proposed insertion of Tenth Schedule to the Ordinance, tax rates prescribed for non-
filers are proposed to be omitted by the Finance Bill and corresponding amendments be made to
delete the reference to filers.

Division I (Advance Tax on Dividend)

Dividend declared or distributed by purchaser of a power project privatized by WAPDA or on

shares of a company set up for power generation or on shares of a company, supplying coal
exclusively to power generation projects is subject to deduction of advance tax at 7.5%. The
Finance Bill proposes to increase this rate to 15%.

45
Budget 2019 - 20 | Highlights & Comments

Special rates for collection of advance tax on dividend by a collective investment scheme, REIT
scheme of a mutual fund are proposed to be omitted. This means that dividend on these
investment shall attract collection of advance tax at standard rates.

Division IA (Profit on Debt)

The Finance Bill proposes to increase the rate of deduction of tax under section 151 of the
Ordinance to 15%, where the yield or profit paid is more than five hundred thousand rupees.

Division III (Payments for Goods and Services)

Clause (94) of the Part IV of the Second Schedule to the Ordinance, subject to certain conditions,
used to provide for reduced rate of taxation to service sector Companies enlisted therein. This
clause is valid upto June 30, 2019. The Finance Bill proposes to omit this clause and introduces
the reduced withholding tax rate of 4% on payments for following services:

 transport services,
 freight forwarding services,
 air cargo services,
 courier services,
 manpower
 outsourcing services,
 hotel services,
 security guard services,
software development services,
 IT services and IT enabled services as defined in clause (133) of Part I of the Second
Schedule,
 tracking services,
 advertising services (other than by print or electronic media),
 share registrar services,
 engineering services,
 car rental services,
 building maintenance services,
 services rendered by Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange
Limited
 inspection, certification, testing and training services;

Division IIIB (Royalty paid to resident persons)

The Bill seeks to provide tax withholding rates for royalty paid to resident persons at 15% of the
gross amount payable.

Division V (Income from Property)

The Finance Bill proposes to increase the number of tax slabs from 5 to 8. Three new tax slabs
are proposed for income exceeding Rs. 4,000,000 to match the maximum rate with that of the
individual tax rates. Rates of tax on income from property, based on the Finance Bill, shall be as
follows:

46
Budget 2019 - 20 | Highlights & Comments

S.
Gross Amount of Rent
No.
1. Where the gross amount of rent does not exceed
Rs.200,000.
2. Where the gross amount of rent exceeds
Rs.200,000 but does not exceed Rs. 600,000.
3. Where the gross amount of rent exceeds
Rs.600,000 but does not exceed Rs. 1,000,000.
4. Where the gross amount of rent exceeds
Rs.1,000,000 but does not exceed Rs. 2,000,000.
5. Where the gross amount of rent exceeds
Rs.2,000,000 but does not exceed Rs. 4,000,000.
6. Where the gross amount of rent exceeds
Rs.4,000,000 but does not exceed Rs. 6,000,000.
7. Where the gross amount of rent exceeds
Rs.6,000,000 but does not exceed Rs. 8,000,000.
8. Where the gross amount of rent exceeds Rs.
8,000,000.
Rate of Tax
Nil
5 per cent of the gross amount
exceeding Rs. 200,000.
Rs. 20,000 plus 10 per cent of the
gross amount exceeding Rs. 600,000.
Rs. 60,000 plus 15 per cent of the
gross amount exceeding Rs.1,000,000.
Rs. 210,000 plus 20 per cent of the
gross amount exceeding Rs.2,000,000.
Rs. 610,000 plus 25 per cent of the
gross amount exceeding Rs.4,000,000.
Rs. 1,110,000 plus 30 per cent of the
gross amount exceeding Rs.6,000,000.
Rs. 1,710,000 plus 35 per cent of the
gross amount exceeding Rs.8,000,000.

Part IV (Deduction or Collection of Advance Tax)

With the proposed insertion of Tenth Schedule to the Ordinance, tax rates prescribed for non-
filers are proposed to be omitted by the Finance Bill and corresponding amendments be made to
delete the reference to filers.

Division XVII (Advance tax on dealers, commission agents and arhatis

etc)

The Finance Bill proposes to increase the rate of collection of advance tax from dealers,
commission agents and arhatis etc. This increase is ten times of the existing tax rates. Following
rates are proposed in the Finance Bill.

Group or Class Amount of tax (per

annum)
Group or Class A Rs.100,000
Group or Class B Rs. 75,000
Group or Class C Rs. 50,000
Any other category Rs. 50,000

Division XVIII (Advance tax on purchase of immovable property)

Two categories of immovable properties have been defined in the Ordinance for the purpose of
collection of advance tax, i.e. properties having value upto Rs.4 million and properties having
value more than Rs.4 million. The Finance Bill proposes to simplify tax collection by imposing tax
@ 1% of the market value of the property.

47
Budget 2019 - 20 | Highlights & Comments
The Second Schedule
Exemptions and Tax Concessions
Part I
Exemption from Total Income
Clause (39) Exemption of
Internal security allowance and
compensation in lieu of bearer
allowance to Armed Force
Personnel
The Bill seeks to extend the exemptions in
respect of special allowance by including
internal security allowance and compensation
in lieu of bearer allowance paid to Armed
Force Personnel.
Clause (61) New Non-profit
charitable institutions included
In order to encourage people and
organizations paying charity to documented
non-profit institution, the Bill proposes to
include the following organizations within the
scope of exemptions:
(i) Layton Rahmatullah Benevolent Trust
(LRBT)
(ii) Akhuwat
Donations paid to these organizations would
now be available for deduction from taxable
income of the payer.
Clause (66) Non-profit charitable
institutions
In order to acknowledge the non-
profit/charitable institutions, the Bill proposes
to exempt the income of the following
organizations:
(i) Akhuwat
(ii) Audit Oversight Board
48
Clause (99A) Profit and gains on
sales of immovable property to a
Rental Scheme
The Bill seeks to insert a new clause whereby
profit and gains on sale of immovable
property to a rental REIT scheme shall be
exempt upto June 2021.
Clause (103C) Dividend from
Group Company
At present, an exemption is provided on
dividend received from Group Company as
per formula prescribed under Clause (103C)
to the Second Schedule to the Ordinance;
however, such exemption is only available to
such company who has availed group relief
under section 59B of the Ordinance. The Bill
now proposes to provide such exemption to
all eligible companies, irrespective of the fact
whether or not group relief has been availed
under section 59B of the Ordinance.
Clause (114B) Profit and gain on
sale of immovable property by
Dependent of Shaheed belonging
to the Armed Force Personnel
covered under section 236(c)(1)
The Bill seeks to provide exemption by
inserting a new Clause, whereby profit and
gain derived from disposal of immovable
property shall be exempted under the
Ordinance subject to the conditions that the
seller is the dependent of a Shaheed
belonging to Pakistan Armed Forces or a
Budget 2019 - 20 | Highlights & Comments
person who dies while in the service of the
Pakistan Armed Forces or the service of
Federal or Provincial Government, in respect
of first sale of immovable property acquired
from or allotted by the Federal Government
or Provincial Government or any authority
duly certified by the official allotment
authority, and the property acquired or
allotted is in recognition of or for services
rendered by the Shaheed or the person who
dies in service.
Clause (146) Income derived by
individual domiciled or company
and association of persons
resident in the Tribal Areas
forming part of the Provinces of
Khyber Pakhtunkhwa and
Baluchistan
The Bill seeks to provide exemptions by
inserting new clause whereby income which
was not chargeable to tax prior to the
commencement of the Constitution (Twenty-
fifth Amendment) Act, 2018 (XXXVII of 2018)
of any individual domiciled or company and
association of persons resident in the Tribal
Areas forming part of the Provinces of Khyber
Pakhtunkhwa and Baluchistan under
paragraph (d) of Article 246 of the
Constitution with effect from the 1st day of
June, 2018 to the 30th day of June, 2023
(both days inclusive).
After the passing of the 25th Amendment to
the Constitution of Pakistan, Federally
Administered Tribal Areas (FATA) have been
merged into the Khyber-Pakhtunkhwa
province and Baluchistan, consequent to
which the provision of the Ordinance becomes
applicable.
The Bill continues to provide exemption on
income derived by Individual domiciled or
company and association of persons resident
in that Tribal Areas which is now part of
Khyber Pakhtunkhwa and Baluchistan.
49
Part III
Exemption from Specific
Provisions
Clause (2) Full time teacher or a
researcher
At present, tax payable of 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 can claim reduction
in tax payable equal to 40% of the total
liability on his income from salary.
The Bill seeks to restrict said exemption upto
25% of the tax payable on salary income
derived by full time teacher. Further, the bill
also seeks to limit said exemption only to
research institution and also exclude teachers
of medical profession who derive income from
private medical practice or who receive share
of consideration received from patients.
Clause (9) Capital gain on
disposal of immovable property
by ex-servicemen and serving
personnel of Armed Forces or ex-
employees or serving personnel of
Federal and Provincial
Governments
The bill seeks to provide exemption by
inserting a new clause, whereby tax payable
under head of capital gain derived from
disposal of immovable property shall be
reduced by 50%, subject to the conditions
that such capital gain is derived on the first
sale of immovable property acquired or
allotted to ex-servicemen and serving
personnel of Armed Forces or ex-employees
or serving personnel of Federal and Provincial
Governments, being original allottees of the
immovable property, duly certified by the
allotment authority.
Budget 2019 - 20 | Highlights & Comments
Part IV
Clause (43E) Withholding Tax on
goods transporter contractor
At present, the goods transport contractor is
exempt from withholding tax under section
153(1)(a) of the Ordinance, subject to the
conditions such contractor has paid tax at
rate of 2.5% on payments for rendering or
providing of carriage services. The Bill seeks
to enhance tax rate from 2.5% to 3%.
Clause (81) Non-filing of
withholding statement in respect
of tax collected under section
236H of the Ordinance
The Bill seeks to abolish the exemption from
non-applicability of the filing of withholding
statement in respect of advance tax collected
under section 236H of the Ordinance by a
manufacturer, distributor, dealer and
wholesaler.
Clause (81A) Non-filing of
withholding statement in respect
of tax collected under section
231A and 151 of the Ordinance
The Bill seeks to abolish exemption from non-
applicability of the filing of withholding
statement in respect of advance tax collected
under section 231A and 151 of the Ordinance
by banking companies.
Clause (94) Exemption from
withholding under section
153(3)(b) of the Ordinance
The Bill seeks to omit clause (94), whereby
the provisions of 153(3)(b) of the Ordinance
was not applicable on payment made to a
company who is engaged in providing or
rendering freight forwarding services, air
cargo services, courier services, manpower
outsourcing services, hotel services, security
guard services, software development
50
services, IT services and IT enabled services
tracking services, advertising services (other
than by print or electronic media), share
registrar services, engineering services, car
rental services , building maintenance
services, services rendered by Pakistan Stock
Exchange Limited and Pakistan Mercantile
Exchange Limited inspection, certification,
testing and training services.
The said exemption was available upto June
30, 2019. The Bill does not propose to extend
exemption from withholding tax on payment
made to services covered under clause (94).
Consequently, services covered under clause
(94) shall now be subject to tax at the rate as
prescribed under First Schedule to the
Ordinance.
Clause (105) Selection of Audit
under section 214C of the
Ordinance
The Bill seeks to omit clause, whereby a
person is excluded from selection of audit
under section 177 and 214C of the
Ordinance, whose case have been selected
for audit in any of the preceding three tax
years.
Due to proposed amendment, a person’s
case may be selected for audit for any tax
year under section 177 or 214C, irrespective
of the fact whether such person was selected
for audit for any of the three preceding tax
years.
Clause (110) Withholding tax on
payment to individual domiciled
or company and association of
persons resident in the Tribal
Areas forming part of the
Provinces of Khyber Pakhtunkhwa
and Baluchistan
The Bill seeks to provide exemptions from
withholding tax on payments which are
covered under the Division III, Part V of
Chapter X, by inserting a new clause on
Budget 2019 - 20 | Highlights & Comments

payment to those person whose income was amend the amount of income as disclosed in
not chargeable to tax prior to the the financial statement presented to the
commencement of the Constitution (Twenty- Securities and Exchange Commission of
fifth Amendment) Act, 2018 (XXXVII of 2018) Pakistan with respect to commission paid
of any individual domiciled or company and and claim for losses.
association of persons resident in the Tribal
Areas forming part of the Provinces of Khyber
Pakhtunkhwa and Baluchistan under
paragraph (d) of Article 246 of the
Constitution with effect from the 1st day of
June, 2018 to the 30th day of June, 2023
(both days inclusive).

Such exemption from withholding tax on

payments is in line with exemption of income
proposed through Clause (146), Part-I,
Second Schedule.

Third Schedule
Part-II, Initial allowance and first
allowance

The Bill seeks to omit initial allowance at the

rate of 15% on buildings as provided under
section 23A of the Ordinance. The salient
features issued by FBR states that such
initial allowance was not in line with the
general useful life of the building which
extends to 30 years and therefore allowing
25% cumulative deprecation (10% normal
depreciation and 15% initial allowance) is
not justified. We are of the view that such
amendment should be revisited as
construction of building involve utilization of
significant cash flows of a taxpayer and
therefore, such relief in first year of usage of
building is commercially justified and an
accepted global practice.

Fourth Schedule
Rules for the Computation of the Profits
and Gains of Insurance Business

The Bill seeks to insert clause whereby the

Commissioner is authorized to examine and

51
Budget 2019 - 20 | Highlights & Comments

The Seventh Schedule

Rules for the Computation of the Profits and Gains of a Banking
Company and Tax Payable thereon [Seventh Schedule]

1. Provision of Advances and standard bad debts as defined in prudential

regulations issued by State Bank of Pakistan.
Off Balance Sheet Items Finance Bill seeks to enhance the scope of
[Rule 1(c)] inadmissibility by inserting the doubtful bad
debt as well.
Existing sub rule (c) provides following
allowable limits of certain provisions of a 3. Re-classified Bad Debt [Rule
Banking Company:
1(e)]
Provision Limit
Existing sub rule (e) provides that the
Advances and Off 1% of Total reclassified provision under sub-rule (d) as
Balance Sheet Items or actual doubtful or loss shall be used in computing
Advance and Off *5% of deduction of provisions under sub-rule (c).
Balance Sheet Items Total or Finance Bill seeks to remove the doubtful
for Consumers and actual category in line with amendment made in
SMEs sub-rule (c).

*subject to submission of external auditors 4. Explanation for Powers of

certificate.
Finance Bill seeks to include three
explanations with respect to this sub-rule. It
is clarified that the provision for advances
and off balance sheet items shall be
exclusive of reversals of such provisions. It
is further clarified that reversal of bad debt
classified as doubtful or loss shall be taxable
because the respective provision have
already been allowed as deduction. In
furtherance, the reversal of bad debts
classified as loss shall also be taxable with
effect from Tax Year 2020 because the
respective provision has already been
allowed as deduction. There seems to be
duplication with respect of reversal of bad
debts classified as loss whereby proposed
explanation (ii) and (iii) contains the concept
of its taxability.
2. Sub-Standard Bad Debt
[Rule 1(d)]
Existing sub rule (d) provides for
inadmissibility of expense pertaining to sub-
Commissioner for Audit
Finance Bill seeks to add an explanation for
the purpose of removal of doubt that nothing
in this Schedule restricts the powers of the
Commissioner to call for record or such
other information and documents as he may
deem appropriate in order examine accounts
and records to conduct enquiry into
expenditure, income, assets and liabilities of
a banking company for the purpose of audit
under section 177 and all provisions of the
Ordinance shall be applicable.
5. Enhanced rate of tax on
Taxable Income from Federal
Government Securities
[Rule 6C]
Finance Bill seeks to tax the taxable income
arising from additional income earned from
additional investment in Federal Government
securities at the higher rate of 37.5%

52
Budget 2019 - 20 | Highlights & Comments

instead of applicable rate of 33% from Tax
Year 2020.
The term additional income has been defined
in the sub-rule while the formula for the
purpose of computation of additional
investment has also been provided.
Additional Income
6. Income for Super Tax
purpose [Proviso to Rule 7C]
Finance Bill seeks to exclude the brought
forward losses from income computed under
this Schedule for the purpose of computation
of Super Tax under section 4B of the
Ordinance.

The term additional income means average

earned in addition to average amount of
such income earned by the Bank during a
Tax Year from investment in Federal
Government Securities.

Determination of Taxable Income

from Additional Investment

Taxable Income from additional investment

shall be determined in accordance with
following:

Taxable Income of Bank X Net Mark Up

Income from additional income / Bank’s
Total Income [Mark Up and Non Mark Up] as
per account

External Auditor Certificate

This rule seeks to place an additional

obligation of obtaining a certificate from the
external auditor about the following:

 Investment in Federal Government

Securities during preceding Tax Year
 Additional Investment made during the
Tax Year
 Mark Up earned from Additional
Investment

A banking company shall be required to file

this certificate while filing return of total
income for the Tax Year.

53
Budget 2019 - 20 | Highlights & Comments

Tenth Schedule
Rules Relating to Persons not appearing in Active Taxpayer List

Finance Bill also seeks to insert a new Tenth

Schedule, namely, Rules for Persons not
appearing in the Active Taxpayer List and
the salient features of the schedule are as
follows:
 Electricity Consumption 235
1. Increased Rate of Deduction
or Collection of Tax  Domestic Electricity 235A
Consumption
In general, the rate of withholding tax  Tax on Steel Melters, Re- 235B
deduction or collection from the payment of Rollers etc
a Person not appearing in the Active
Taxpayer list shall be increased by 100% of  Advance Tax on Purchase of 236B
the rates specified in the First Schedule of Air Tickets
the Ordinance.  Advance Tax on Functions 236D
and Gatherings
2. Inapplicability of increased  Advance Tax on Cable 236F
Operators and Other
Rate of Deduction or Electronic Media
Collection of Tax  Collection of Advance Tax 236I
by Educational Institutions
The increased withholding tax rates specified  236J
Advance Tax on Dealers,
under this schedule are inapplicable with
Commission Agents and
respect to following payments and related
Arthis etc
withholding tax provisions in the case of
Person not appearing in the Active Taxpayer  Advance Tax on Purchase of 236L
list: International Air Tickets
 Advance Tax on Banking 236P
Nature of Payment Section Transactions otherwise than
 149 through Cross Cheque
Salary
 Payment to residents for 236Q
 Export 154 use of machinery and
equipment

 154  Collection of advance tax on 236R

Income from Property
education related expenses
remitted abroad
 Withdrawal of Balance 156B
under Pension Fund  Advance Tax on Insurance 236U
Premium
 Cash withdrawal from Bank 231A
 Advance Tax on extraction 236V
of minerals
 Advance Tax on 231AA
 Advance Tax on Tobacco 236X
Transactions in Bank
 Collection of Tax by NCCPL 233AA

54
Budget 2019 - 20 | Highlights & Comments
3. Obligation of Withholding
Tax Agent
A withholding tax agent may collect or
deduct withholding tax from the payment of
a Person not appearing in the Active
Taxpayer List either at the rate specified in
the First Schedule or increase the rates
specified in the First Schedule by 100%.
The option to deduct withholding tax at the
rate specified in the First Schedule from the
payment of a Person not appearing in the
Active Taxpayer List could only be exercised
where the withholding agent is satisfied that
the person is neither required to file a return
of total income under section 114 nor a
statement under section 115(4) of the
Ordinance. In furtherance, the withholding
agent will be required to electronically
furnish a notice to the Commissioner
containing the following information about
the Person not appearing in the Active
Taxpayer List:
 CNIC/NTN and Address
 Nature and Amount of Transaction
 Basis of consideration that person is not
required to file return or statement
4. Obligation of Commissioner
4.1 Order against Notice
The Commissioner is empowered to either
accept or reject contention of withholding
tax agent by directing to deduct or collect
the tax within thirty days of receipt of
notice. It is pertinent to note that the
concept of deemed acceptance has been
introduced whereby in case the
Commissioner does not pass any order
within thirty days of receipt of notice from
withholding tax agent then contention of
withholding tax agent would deem to be
accepted and approval need to be granted.
4.2 Provisional Assessment and its
Finalization
The Commissioner shall frame a provisional
assessment of the imputed taxable income
55
and tax due thereon pertaining to the person
not appearing in the Active Taxpayer list
from whom increased withholding tax has
already been collected or deducted in
accordance with this schedule. It is pertinent
to note that imputed taxable computed on
the basis of increased withholding tax
collected or deducted in accordance with this
schedule shall be treated as concealed
income under section 111(1)(d) of the
Ordinance.
The term imputed income is defined
separately for Individual/Association of
Person and Companies in relation to rates
specified in First Schedule, that is, imputed
income means income worked back on the
basis of applying tax rates mentioned in Para
(1) of Division I of the First Schedule
equating to tax collected or deducted under
this schedule for Individual / Association of
Person and tax rates mentioned in Division
II of the First Schedule equating to tax
collected or deducted under this schedule for
Companies.
The Provisional Assessment must be framed
within sixty days of the due date either
provided under section 118 or as extended
by the Board for filing of Return of Total
Income under section 114 or statement
under section 115. This Provisional
Assessment shall be treated as final
assessment order after the expiry of forty
five days from the date of service of
provisional assessment order.
4.3 Proceeding under Section 182 and
191
The Commissioner may initiate proceeding
for imposition of penalties under section 182
on account of non-furnishing of return and
concealment upon expiry of thirty days of
the finalization of provisional assessment.
It is pertinent to note Commissioner shall
initiate proceedings under section 182 and
191 of the Ordinance against withholding tax
agents who either fails to furnish or
furnishes inaccurate particulars of persons
not appearing in the active taxpayer list. The
proceedings will be initiated within thirty
Budget 2019 - 20 | Highlights & Comments

days of filing of withholding statement under
section 165 of the Ordinance.
5. Abatement of Provisional
Assessment
The Person not appearing in the Active
Taxpayer List from whom increased
withholding tax has been collected or
deducted may file the Return of Total
Income under section 114 or Statement
under section 115(4) of the Ordinance
maximum before the expiry of forty five
days from the date of service of provisional
assessment order along with preceding Tax
Year. In such case, the provisional
assessment shall stand terminated and
assessment deemed to have been finalized
under section 120(1) of the Ordinance.
The term definite information includes
information on sales or purchases of any
goods made by the taxpayer, receipts of the
taxpayer from services rendered or any
other receipts that may be chargeable to tax
under this Ordinance and on the acquisition,
possession or disposal of any money, asset,
valuable article or investment made or
expenditure incurred by the taxpayer.
7. Applicability of Provisions of
the Ordinance
The provisions of the Ordinance shall be
mutatis mutandis applicable in case of
proceedings against the persons not
appearing on active taxpayers list in case
such provisions are not specifically dealt
within this Schedule.

6. Amendment in Assessment
The Commissioner may amend an
assessment order on the basis of definite
information acquired from an audit or
otherwise and the Commissioner is satisfied
that:

 Income chargeable to tax escaped

assessment; or

 Total Income is under-assessed,

assessed at too low rate, subject to
excessive relief or refund; or

 Head of income is misclassified

The Commissioner is also empowered to

amend the following erroneous assessments
in so far as prejudicial to the interest of
revenue after making necessary enquiries as
he deems necessary:

 Provisional Assessment treated as Final

 Return deemed under section 120(1)

filed within 45 days of Provisional
Assessment

 Amended assessment.

56
Budget 2019 - 20 | Highlights & Comments
Sales Tax Act, 1990
Cottage Industry [Sections
2(5AB)]
The Bill proposes to substitute the current
definition of the term “Cottage Industry” to
means a manufacturing concern, which
fulfils each of following conditions, namely:
(a) does not have an industrial gas or
electricity connection;
(b) is located in a residential area;
(c) does not have a total labor-force of
more than ten workers; and
(d) annual turnover from all supplies
does not exceed two million rupees
The Bill proposes to do away with the
existing condition of having annual utility
bills not exceeding Rs. 800,000 and has also
reduced the turnover limit from Rs. 10
million in the last twelve tax periods to
annual turnover of Rs. 2 million to qualify for
cottage industry.
1. Retail Price Regime
[Commercial Imports]
[Section 2(27), (46) & 3(2)]
The Bill proposes to bring the ‘Commercial
Importer’ of goods listed in Third Schedule in
the Retail Price Regime. Earlier Commercial
Importers were included in such regime from
2003 till 2005. It means that the
Commercial Import of goods listed in Third
Schedule shall charge sales tax on Retail
Price fixed by them, inclusive of all duties,
charges and taxes (other than sales tax) at
which any particular brand or variety of any
article should be sold to the general body of
consumers.
The Bill also proposes that Commercial
Importers of goods listed in Third Schedule
shall also pay sales tax at import stage on
‘retail price’ instead of value determined
under section 25 of the Customs Act, 1969
(as currently applicable for Commercial
Importers). Accordingly, the commercial
57
importers will not be able to adjust input tax
paid on other goods or services.
The commercial imports of taxable goods
(subject to certain exclusions) is also liable
to minimum Value Addition Tax (VAT) at the
rate of 3% ad valorem which is allowed to
be adjusted against output tax but no refund
will be allowed for such VAT amount.
However, such amount would be carried
forward in subsequent periods for
adjustment. It is pertinent to mention that
imposition of 3% minimum VAT on
Commercial Import of goods listed in Third
Schedule will result in revenue stuck-up in
the hands of FBR as it could not be adjusted
against output tax and the commercial
importers are not allowed to claim refund of
such VAT amount. It appears to be an
anomaly and commercial importer of goods
listed in Third Schedule should be declared
immune from 3% minimum VAT.
2. Transfer of powers of Federal
Government to the Board
The Federal Government is currently
authorised to perform certain functions
under the Act. The Bill proposes to transfer
such powers to the Board with the approval
of Minister-in-charge. The gist of such
powers are as under
Heading Releva Powers
nt
Section
Supply Section To specify, by
2(33) notification in the
official Gazette,
any transaction
which shall or shall
not constitute
‘supply’ for the
purpose of the
Act.
Tax Period Section To specify, by
2(43) notification in the
official Gazette,
any period to be
Budget 2019 - 20 | Highlights & Comments

Heading Releva Powers Heading Releva Powers

nt nt
Section Section
treated as ‘Tax the powers and
Period’ for the perform the
purpose of the specified functions
Act. of an Officer
Inland Revenue
for arrest of a
Tax on Section To specify, by a person, subject to
taxable 3(3A) notification in the such conditions, if
supply official Gazette, any, that it may
the goods in deem fit to
respect of which impose.
the liability to pay
tax shall be of the Payment of Section To notify
person receiving refund 67A(12) procedure to
the supply. through regulate the
sales tax issuance,
Determinati Section To allow a refund
on of tax 7(3) registered person redemption and
bonds other matters
liability to deduct input tax
paid by him from relating to the
the output tax refund bonds, as
may be required.
determined or to
be determined as Special Section To prescribe, by
due from him procedure 71(1) notification in the
under this Act, by official Gazette
a special order, (subject to the
subject to such provisions of the
conditions, Sales Tax Act),
limitations or special procedure
restrictions as may for scope and
be specified payment of tax,
therein. registration, book
keeping and
Tax credit Section To specify any
invoicing
not allowed 8(6) goods or class of
goods, by requirements and
notification in the returns, etc. in
official Gazette, respect of such
supplies as may
which a registered
be specified
person cannot
therein.
supply to any
person who is not
registered under 3. Retailers & Tier-1 Retailers
this Act
[Section 2(43A) & 3(9),
Procedure Section To authorize, by (9A)]
to be 37B(13) notification in the
followed on official Gazette,
arrest of a any officer Retailers, excluding Tier-1 Retailers, are
person working under the required to pay variable sales tax depending
Board to exercise on amount of electricity bills, in lieu of sales
tax payable on supply stage, through their

58
Budget 2019 - 20 | Highlights & Comments
electricity bill. Such payment of sales tax is
in addition to normal sales tax payable on
supply of electricity. Whereas, Tier-1
Retailers are required to pay sales tax as per
normal procedures. However, they are also
allowed to opt for 2% turnover tax, including
turnover relating to exempt supplies, by
filing written option subject to the condition
that no input tax adjustment will be allowed.
The Bill proposes to withdraw the aforesaid
option to pay 2% turnover tax by the Tier-1
Retailers who shall then pay sales tax at the
rate as applicable to the goods sold under
the relevant provisions of the Act or any
notification issued thereunder.
The Bill also proposes as under:
 inclusion of a retailer having shop
measuring area of 1,000 square feet
or more, in the category of Tier-1
Retailer.
 amount of sales tax collected from
Retailers through electricity bills by the
electricity supplier shall be deposited
directly without adjusting any input
tax there-against.
 the concerned Commissioner IR shall
issue Order to the electricity supplier
regarding exclusion of the person who
is either Tier-1 Retailer or not a
retailer.
 customers of a Tier-1 Retailer shall be
entitled to receive a cash back up to
five percent of the tax involved from
such date in the manner and to the
extent as may be prescribed by the
Board.
4. Value of Supply [Section 2
(46)]
The Bill proposes to substitute definition of
value of supply in respect of toll
manufacturing of goods as actual
consideration received by the manufacturer
for the value addition carried out in relation
to goods belonging to another person.
59
The Bill also proposes to define value of
supply of electricity by an Independent
Power Producer (IPP) as the amount
received on account of energy purchase
price only. Whereas, the amount received on
account of capacity purchase price, energy
purchase price premium, excess bonus,
supplemental charges etc. shall not be
included in the value of supply.
The Bill also proposes to define value of
supply of electric power and gas by a
distribution company as the total amount
billed including price of electricity and
natural gas, as the case may be, charges,
rents, commissions and all duties and taxes
local, provincial and federal but excluding
the amount of late payment surcharge and
the amount of sales tax.
Above definitions of value of supply for
electricity and natural gas presently exist in
respective chapters of Sales Tax Special
Procedure Rules, 2007.
5. Sales Tax on Fixed Basis
[Section 3(1B)]
The Bill proposes to introduce Tenth
Schedule for prescribing alternate method of
taxation. The new Schedule envisages to
charge fixed amount of sales tax on Bricks
falling under PCT heading 6901.1000 with
reference to area, cities / locations ranging
from Rs. 7,500 to Rs. 12,500 through
monthly return.
6. Sales Tax Withholding
[Sections 3(7)]
The Bill proposes to transform the provisions
of the Sales Tax Special Procedure
(Withholding) Rules, 2007 into proposed
dedicated Eleventh Schedule to the Act.
Sales tax withholding rate is also envisaged
to increase from 1% to 5% of gross value of
supplies in case of supplies made by
unregistered persons to the Companies as
defined in the Income Tax Ordinance, 2001.
Budget 2019 - 20 | Highlights & Comments
7. Zero Rating & Exemption
[Section 4, 13, SRO 1125 &
769]
The Bill has contemplated to revamp the
powers of Federal Government to grant zero
rating and exemption which is now proposed
to be granted only in circumstances which
require to take immediate action for the
purpose of national security, natural
disaster, national foods security in
emergency situations and implementation of
bilateral and multilateral agreements.
The Bill proposes to omit clause (d) to
withdraw powers of the Board to grant zero
rating through General Orders.
As per salient features, SRO.1125(I)/2011 is
proposed to be rescinded with intention to
streamline and prevent leakage of revenue
due to misuse of SRO. Accordingly, following
proposals have been made:
 standard rate of 17% be restored on
items covered under SRO
 rate of sales tax on local supplies of
finished articles of textile and leather
& finished fabric be raised to 15% for
integrated business.
 zero-rating on supply of electricity and
gas to these export-oriented sectors
be withdrawn.
 refund of sales tax to said sectors be
automated.
SRO 769(I)/2009 is proposed to be
rescinded which will result in withdrawal of
zero rating on import and supply of
polyethylene and polypropylene for
manufacture of mono filament yarn and net
cloth.
8. Determination of tax liability
[Section 7]
The Bill proposes to allow a taxpayer to
claim input tax adjustment on bill issued in
60
case of supply of electricity or gas, if such
bill is bearing his registration number and
the address where the connection is
installed. Through C.B.R Letter Number
1(3)/STR/2000 dated July 13, 2002, a
registered person is already allowed to claim
input tax adjustment if his registration
number is printed on the bill and address
mentioned in the electricity bill is the same
as that declared to Commissioner IR.
9. Levy and collection of tax on
specified goods on value
addition [Section 7A]
Twelfth Schedule to the Act has been
introduced to transform therein the existing
provisions of the Sales Tax Special
Procedure Rules, 2007 relating to importers.
The Bill also proposes to exclude the import
of cellular mobile phones, satellite phone
and Furnace Oil, as well, from payment of
3% minimum VAT. However, the Bill seeks
to withdraw exclusion from payment of 3%
minimum VAT on LNG/RLNG and second
hand and worn clothing or footwear (PCT
Heading 6309.0000).
The Bill also proposes to restrict the
exclusion from payment of 3% minimum
VAT only on raw materials and intermediary
goods meant for use in an industrial process
which are subject to customs duty at 16% or
20% ad valorem under First Schedule to the
Customs Act, 1969. Currently, all goods
imported by manufacturer for in-house
consumption is excluded from payment of
3% minimum VAT.
10. Tax credit not allowed
[Section 8(m)]
The Bill proposes to restrict claim of input
tax paid on input goods attributable to
supplies made to unregistered person, on
pro-rata basis, for which sale invoices do not
bear the CNIC number of the buyer. The
Board, through notifications SRO. No.
821(I)/2011 dated September 2011 and
SRO. No. 191(I)/2012 dated February 23,
Budget 2019 - 20 | Highlights & Comments
2012, had introduced the similar provisions.
However, after facing the fierce opposition
from the business community, the
aforementioned notifications were
subsequently withdrawn by the Board.
The Bill also proposes to withdraw restriction
on claim of input tax paid on import of scrap
of compressors falling under PCT heading
7204.4940.
11. Adjustable input tax [Section
8B]
Section 8B restricts a registered person from
claiming input tax in excess of ninety per
cent of the output tax. The Bill proposes to
empower Board to relax such limit to 95%
by notification in the official Gazette.
12. Tax Invoice [Section 23]
It is now required specifically to mention
particulars on invoices in Urdu or English
language. Tax Invoice is also required to
reflect CNIC Number of recipient in case
supplies are made to unregistered person.
The Bill also proposes to require a supplier of
textile yarn and fabric to mention count,
denier and construction, in addition to
description, on tax invoice at the time of
making taxable supply.
13. Access to record, documents,
etc. [Section 25]
Through Finance Act, 2018, a proviso was
inserted to restrict the Officer of Inland
Revenue to conduct audit of sales tax
records of a person once in every 3 years.
However, such amendment contradicts to an
existing provision in the said section
authorizing the Officer of Inland Revenue to
conduct audit once in every year. The Bill
proposes to omit the last amendment
regarding restriction of audit once in every 3
years.
61
14. Return [Section 26]
The Bill proposes to allow automatic
approval for revision of return to a person if
revised return is filed, with more tax payable
or lesser amount of refund claimed, within
sixty days of filing of return.
15. Penalties [Section 33]
The existing penalty rates for not filing
return after 10 days of due date are
proposed to increase from Rs. 5,000 to
Rs.10,000. Similarly per day penalty of Rs.
100 for late filing the return within 10 days
of due date, has been increased to Rs. 200
per day.
16. Proceedings against persons
[Proposed Section 33A]
The Bill proposes to insert new section
relating to initiating criminal proceedings
against any authority mentioned in sections
30 to 30DDD including any person
subordinate to the aforesaid authorities, who
willfully and deliberately commits or omits
an act which results in personal benefits and
undue advantage to the authority or the
person or taxpayer or both.
The Bill also proposes to empower Board to
prescribe rules for this purpose.
Similar criminal proceedings can be initiated
against taxpayer by the relevant
government agency. Further, criminal
proceedings are besides any liability which
the authority, person or taxpayer may incur
under any other law for the time being in
force.
17. Liability for payment of tax
in case of private companies
or business enterprises
[Section 58]
In case an amount is recoverable from
private company or business enterprise
being wound up, every owner, partner,
Budget 2019 - 20 | Highlights & Comments

director, or shareholder, as the case may be,

shall jointly and severally with such persons,
be liable for the payment of such amount.

The Bill seeks to make the said person

legally entitle, who pays tax as above, to
recover the tax paid by him from the
company or business enterprise, or a share
of the tax from other director or partner, or
a share in the proportion of holding from
another shareholder, as the case may be.

18. Selection of audit by the

Board [Section 72B]
The Board may select persons or classes of
persons for audit of tax affairs through
computer ballot which may be random or
parametric as the Board may deem fit. The
Lahore High Court in its judgment has
directed the Board to formulate and make
public the selection parameters for audit.
The Bill, however, proposes to require the
Board to keep the selection parameters
confidential.

62
Budget 2019 - 20 | Highlights & Comments

The Third Schedule

As per salient features, Extra Tax Regime is intended to be abolished and the goods mentioned
therein are now intended to be included in Third Schedule in respect of which the sales tax is
levied on their retail price. Many of these items were also included in Third Schedule through
Finance Act, 2013 which were then brought under Extra Tax Regime through SRO No.
896(I)/2013 dated October 4, 2013. The Bill also proposes to include certain new items in Third
Schedule. Details of said items are as under:

Serial Description
No. Remarks

38. Household electrical goods, including air Extra Tax Regime to Third
conditioners, refrigerators, deep freezers, Schedule
televisions, recorders and players, electric bulbs,
tube-lights, electric fans, electric irons, washing
machines and telephone sets.

39. Household gas appliances, including cooking range, Extra Tax Regime to Third
ovens, geysers and gas heaters. Schedule

40. Foam or spring mattresses and other foam products Excluded from Extra Tax
for household use. Regime through SRO No.
775(I)/2018 dated June 21,
2018.

41. Paints, distempers, enamels, pigments, colours, Extra Tax Regime to Third
varnishes, gums, resins, dyes, glazes, thinners, Schedule
blacks, cellulose lacquers and polishes sold in retail
packing

42. Lubricating oils, brake fluids, transmission fluid, and Extra Tax Regime to Third
other vehicular fluids sold in retail packing Schedule

43. Storage batteries excluding those sold to automotive Extra Tax Regime to Third
manufacturers or assemblers Schedule

44. Tyres and tubes excluding those sold to automotive Extra Tax Regime to Third
manufacturers or assemblers Schedule

45. Motorcycles New insertion

46. Auto rickshaws New insertion

63
Budget 2019 - 20 | Highlights & Comments

The Sixth Schedule

a) The Bill proposes to grant exemption on the following items:

Serial No. Description

Table I (Import or Supplies)

151. Supplies and imports of plant, machinery, equipment for installation in tribal areas
and of industrial inputs by the industries located in the tribal areas, as defined in the
Constitution of Islamic Republic of Pakistan, as made till 30th June, 2023, to which
the provisions of the Act or the notifications issued thereunder, would have not
applied had Article 247 of the Constitution not been omitted under the Constitution
(Twenty- fifth Amendment) Act, 2018 (XXXVII of 2018):

Provided that, in case of imports, the same shall be allowed Clearance by the
Customs authorities on presentation of a post-dated cheque for the amount of sales
tax payable under the Sales Tax Act, 1990, and the same shall be returned to the
importer after presentation of a consumption or installation certificate, as the case
may be, in respect of goods imported as issued by the Commissioner Inland
Revenue having jurisdiction:

Provided further that if plant, machinery and equipment, on which exemption is

availed under this serial number, is transferred or supplied outside the tribal areas,
the tax exempted shall be paid at applicable rate on residual value

153. Supplies of electricity, as made from the day of assent to the Constitution (Twenty-
fifth Amendment) Act, 2018, till 30th June, 2023, to all residential and commercial
consumers in tribal areas, and to such industries in the tribal areas which were set
and started their industrial production before 31st May, 2018, but excluding steel
and ghee or cooking oil industries

154. Steel billets, ingots, ship plates, bars and other long re-rolled profiles, on such
imports and supplies by the manufacturer on which federal excise duty is payable in
sales tax mode.

Table II (local Supplies Only)

25. Cotton Seed Oil

26. Wheat Bran

64
Budget 2019 - 20 | Highlights & Comments

b) The Bill proposes to withdraw exemption on the following items:

Serial No. Description

Table I (Import or Supplies)

19. Products of milling industry, other than wheat and meslin flour, as sold in retail
packing bearing brand name or a trade mark. (now proposed to be taxed under Eight
Schedule at the rate of 10%).

36 & 37. Silver and Gold (in unworked condition)

(now proposed to be taxed under Eight Schedule at the rate of 1% plus 2% value
addition).

52A. Electricity and natural gas supplied to hospitals run by the Federal or Provincial
Governments or charitable operating hospitals of fifty beds or more or the teaching
hospitals of statutory universities of two hundred or more beds.

82. Frozen prepared or preserved sausages and similar products of poultry meat or meat
offal as sold in retail packing bearing brand name or a trade mark.

83. Meat and similar products of prepared frozen or preserved meat or meat offal of all
types including poultry, meat and fish as sold in retail packing bearing brand name or
a trade mark.

85. Fat filled milk as sold in retail packing bearing brand name or a trade mark.

Table II (Local Supplies Only)

2. Cotton ginned

(Now proposed to be taxed under Eight Schedule at the rate of 10%)

The Eight Schedule

a) The Bill proposes to impose sales tax at standard rate on the following items by omitting
the relevant entries from Eight Schedule:

Serial No. Description

18. Reclaimed lead

21. Rapeseed, sunflower seed and canola seed

22. Soya bean seed

32. White crystalline sugar

65
Budget 2019 - 20 | Highlights & Comments

b) The Bill proposes to impose reduce rate of sales tax on the following items:

Serial No. Description Rate

59. Products of milling industry, except wheat and 10%
meslin flour, as sold in retail packing under a brand
name or trademark

60. Fat filled milk as sold in retail packing under a 10%

brand name or trademark

61. Silver in unworked condition 1% plus 2% value

addition

62. Gold in unworked condition 1% plus 2% value

addition

63. Articles of jewelry, or parts thereof, of precious 1.5% of value of gold,

metal or of metal clad with precious metal. plus 0.5% of value of
diamond, used therein,
plus 3% of making
charges
(No input tax adjustment to be allowed except of
the tax paid on gold)
64. Supplies of Prepared Food, foodstuff and 7.5%
sweetmeats supplied by restaurants, bakeries,
caterers and sweetmeat shops subject to condition
that no input tax adjustment shall be allowed

65. Ginned cotton 10%

66. Supplies of finished articles of textile, textile made- 15%

ups, leather and artificial leather, as made by
retailers, If they are integrated with FBR’s online
system and data is transmitted to the FBR’s
computerized system in real time in such mode and
manner as may be prescribed by the Board.

67. LNG imported for servicing CNG sector and local 5%

supplies thereof

66
Budget 2019 - 20 | Highlights & Comments

The Ninth Schedule

a.) The Bill proposes to reduce the fixed rate of sales tax on cellular mobile phones as under:

Description Sales tax on Sales tax

Serial import or chargeable at
No. local supply the time of
registration
(IMEI number
by CMOs)

2. Cellular mobile phones or satellite phones to

be charged on the basis of
import value per set, or equivalent value in
rupees in case of supply by the
manufacturer, at the rate as indicated against
each
A. Notcategory:--
exceeding US$ 30 Rs. 135 Rs. 135

B. Exceeding US$ 30 but not exceeding US$ Rs. 1,320 Rs. 1,320
100
C. Exceeding US$ 100 but not exceeding US$ Rs. 1,680 Rs. 1,680
200

D. Exceeding US$ 200 but not exceeding US$ Rs. 1,740 Rs. 1,740
350

E. Exceeding US$ 350 but not exceeding US$ Rs. 5,400 Rs. 5,400
500
F. Exceeding US$ 500 Rs. 9,270 Rs. 9,270

67
Budget 2019 - 20 | Highlights & Comments

The Islamabad Capital

Territory (Tax on Services)
Ordinance, 2001
It is proposed to reduce the rate of ICT sales tax on ‘Call Centre’ from existing 18.5% to 17%. The
Bill also proposes to impose ICT sales tax on following new services:

S. No. Description PCT Heading, Rate of Tax

if applicable

43. Advertisement on hoarding boards, pole signs 9802.9000 Sixteen percent

and signboards, and websites or internet
44. Services provided by landscape designers 9814.4000 Sixteen percent
45. Sponsorship services 9805.9100 Sixteen percent
46. Services provided or rendered for purchase or Sixteen percent
sale or hire of immovable property
47. Services provided or rendered by legal 9815.2000 Sixteen percent
practitioners and consultants
48. Services provided by accountants and auditors 9815.3000 Sixteen percent
49. Service provided or rendered by Stockbrokers, 9819.1000, Sixteen percent
future brokers and commodity brokers, money 9819.2000,
exchanger, surveyors, outdoor photographers, 9819.5000,
event photographers, videographers, art 9819.7000,
painters, auctioneers (excluding value of goods) 9819.8000,
and registrar to an issue 9819.9100,
9819.9500
and
9819.9090
50. Services provided by race clubs: Sixteen percent
Entry/ admission and other services
51. Services provided or rendered by corporate law 9815.9000 Sixteen percent
consultants
52. Visa processing services, including advisory or Sixteen percent
consultancy services for migration or visa
application filing services
53. Debt collection services and other debt recovery Sixteen percent
services
54. Supply chain management or distribution Sixteen percent
(including delivery) services
55. Services provided or rendered by persons Sixteen percent
engaged in intercity transportation or carriage of
goods by road or through pipeline or conduit
--
56. Ready mix concrete services Sixteen percent
--
57. Public relations services Sixteen percent
58. Training or coaching services other than Sixteen percent
education services
59. Cleaning services including janitorial services, 9822.2000, Sixteen percent
collection of waste and processing of domestic 9822.3000
waste and
9822.9000

68
Budget 2019 - 20 | Highlights & Comments

Customs Act, 1969

1. Customs Controls 5. Transfer of powers of Federal

[Proposed Section 2(ic)] Government to the Board
[Various Sections]
The Bill seeks to add one new definition of
‘Customs controls’ to mean measures The Federal Government is currently
applied by the officers of customs or authorised to perform certain functions
through Customs Computerized System to under the Act. The Bill proposes to transfer
manage risks and ensure compliance. such powers to the Board with the approval
of Minister-in-charge. The gist of such
2. Risk Management System powers are as under
[Section 2(gb)]
Heading Relevant
Powers
The Bill also proposes to define ‘Risk Section
Management System’ to mean the Levy of fee Section To impose,
systematic application of Customs Controls and service 18D levy fee and
and Management Procedures on pre-arrival, charges service charges
Customs clearance processes and post for
clearance of goods and passengers, for examination,
identifying, analyzing, evaluating, scanning,
monitoring, reviewing and treating the risk inspections,
associated with them. sealing and de-
sealing,
valuation check
3. Selectivity Criteria or in respect of
[Section 2(rrr)] any other
service or
A new definition of ‘Selectivity Criteria’ is control
proposed to be introduced to mean the risk mechanism
parameters determined by the Risk provided by
Management Committee constituted under any formation
the rules for the application of Risk under the
Management System. control of the
Board,
4. Powers and functioning of including
ventures of
the Directorates, etc. public-private
[Section 3E] partnership, at
such rates as
The Board is empowered to specify, by may be
notification in the official Gazette, the specified in the
functions, jurisdiction and powers of the notification.
Directorates and their officers specified in Date of Section To specify any
the Act. The Bill proposes to include determination 30 other date for
‘Directorates General’ as well in the ambit of rate of the
of this section. import duty determination
of rate of Duty
for any goods
or class of
goods.

69
Budget 2019 - 20 | Highlights & Comments

Heading Relevant
Powers
Section 8. False statement error
Date of Section To specify any
determination 30A other date for
[Section 32(3A)]
of rate of duty the Currently, a show cause notice can be
for clearance determination served to an importer where any duty, taxes
through the of rate of duty or charge has not been levied or has been
Customs in respect of short-levied or has been erroneously
Computerized any goods or refunded which is discovered as a result of
System class of goods. an audit or examination of an importer’s
accounts. The Bill proposes to enhance the
Date for Section To specify any scope of section to brought the exporter as
determination 31 other date for well into its ambit.
of rate of duty determination
on goods of the rate of
exported duty for any
9. Compounding of offence.
goods or class [Section 32B]
of goods.
The Collector is authorised to compound any
offence on payment of duty or tax due along
6. Transfer of powers of Federal with payment of penalty. The Bill proposes
Government to the Board to empower Director Customs as well.
[Section 19]
10. Mis-declaration of value for
The Federal Government is empowered to illegal transfer of funds
exempt any goods imported into, or
abroad.-
exported from, Pakistan or into or from any
specified port or station or area therein, [Proposed Section 32C]
from the whole or any part of the customs-
duties including fine, penalty or any other The Bill proposes to authorised Officer of
amount in the case of certain specified Pakistan Customs to prosecute a person if
circumstances including removal of such person overstates the value of
anomalies in duties, development of imported goods or understates the value of
backward areas. exported goods or vice versa, through a
notice within a period of two months from
The Bill proposes to withdraw powers of the seizure of goods to show cause as to
federal government in respect of ‘removal of why such goods may not be confiscated.
anomalies in duties, development of
backward areas’ from the scope of such 11. Refund to be claimed within
eventualities or circumstances.
one year. [Section 33]
7. Power to determine the The refund claim filed under this section is
required to be disposed of within a period
customs value [Section 25A] not exceeding one hundred and twenty days
from the date of filing of such claim. The Bill
The Bill proposes to withdraw the powers of
proposes to link the sanctioning of aforesaid
the Collector of Customs to determine value
refund with pre-audit.
of the imported or exported goods on his
own motion. However, the Collector of The Bill also empowers the Board to specify
Customs may determine value of the the jurisdiction and powers of the officers of
imported or exported goods on a reference Customs to sanction refund in terms of
made to him by any person or an officer of amount of Customs duty and other taxes
Customs. involved, by notification in the official Gazette.

70
Budget 2019 - 20 | Highlights & Comments
12. Declaration and assessment
for home-consumption or
warehousing [Section 79]
The Bill proposes to reduce the time for filing
of Goods Declaration from fifteen to ten days
from the date of arrival of goods.
13. Establishment of Risk
Management System.
[Section 80AA]
The Bill proposes to insert new Section for
the purpose of enforcing Customs Controls
through establishment of Risk Management
System to be used in manner to be
prescribed by rules.
14. Provisional determination of
liability [Section 81]
The Bill seeks to broaden the scope of
section 81 to cover assessment of exported
goods and thereby entitle an officer of
Customs, during the checking of the goods
declaration to satisfy himself of the
correctness of the assessment of the goods
and may require chemical or other test or
a further inquiry, an officer, not below
the rank of Assistant Collector of
Customs, may order that the duty, taxes
and other charges payable on such goods,
be determined provisionally.
15. Reduction in time period in
case of goods not cleared or
warehoused or transshipped
or exported or removed from
the port [Section 82]
The Bill seeks to reduce the current time
period for placing un-cleared goods on their
arrival on port, from twenty days to fifteen
days and further extendable period from ten
days to five days.
71
16. Warrant to be given when
goods are warehoused.
[Sections 90(2) and 90(4)]
Currently, whenever any goods are lodged in
a public warehouse or a licensed private
warehouse, the warehouse-keeper delivers a
warrant signed by him as such to the person
lodging the goods. The Bill proposes to for
issuance of such warrant and subsequent
transfer of warrant through Customs
Computerized System when such system is
operational.
The Bill also seeks to insert new sub-section
which empowers the Board to make rules for
regulating the transfer of goods.
17. Period for which goods may
remain warehoused
[Section 98]
The Bill proposes to reduce the warehousing
period of perishable goods from three
months to one month.
The Bill also proposes to empower the Chief
Collector to extend the time period for
warehousing of non-perishable goods till the
time as he deemed appropriate as against
the current authority of extending time for
one month.
The Bill now seeks to empower the Board to
regulate the period for which the goods may
remain in the warehouse as against the
current power vested to the Federal
Government.
18. Application of the Customs
Computerized System.
[Section 155A]
The Bill proposes to transfer the powers of
Federal Government to the Board to
determine the date for application of all or
specific provisions of Act related to the
Customs computerized system on any
Customs station.
Budget 2019 - 20 | Highlights & Comments
19. Punishment for offences.
[Section 156]
The Bill proposes to impose new penalties
under different sections of the Act.
20. Proceedings against persons
[Section 156A]
The Bill proposes insertion of new provision
which empowers the Board to prescribe rules
for initiating criminal proceedings against
Custom officers and their subordinates, who
wilfully and deliberately commits or omits an
act which results in personal benefits and
undue advantage to them.
The aforementioned act also empowers the
Board to initiate criminal proceedings
against the taxpayer by concurrently
intimate the relevant government agency.
The proceedings shall be initiated without
prejudice to any liability that the authority,
person or taxpayer may incur under any
other law for the time being in force.
It seems that the Federal Government wants
to squeeze the professional misconduct and
undertake timely corrective measures.
21. Power of adjudication.
(Section 179)
Section 179 deals the jurisdiction and
powers of the officers of Customs in terms of
amount of duties and other taxes involved.
The Bill seeks to withdraw the powers of the
Assistant Collector to adjudicate cases and
proposes to enhance the pecuniary limit of
cases adjudicated by Superintendent and
Principal Appraiser from fifty thousand to
one hundred thousand.
The Bill also proposes to reduce the time
period for passing an order to ninety days
from one hundred and twenty days of
issuance of show cause notice.
72
22. Option to pay fine in lieu of
confiscated goods.
(Section 181)
The Bill proposes to widen the scope of this
section for any violation under the Act.
23. Special Judges.
(Section 185D)
The Bill proposes to empower Prime Minister
instead of the Federal Government, to
appoint Special Judge Customs in
consultation with the Chief Justice of the
concerned High Court.
24. Transfer of cases.
(Section 185D)
The Bill proposes to empower Prime Minister
instead of the Federal Government, to
transfer cases from the jurisdiction of one
Special Judge Customs to another, in
consultation with the Chief Justice of the
concerned High Court.
25. Appeals to Collector
(Appeals).
(Section 193)
The Bill proposes to give an option for
appeal against an order passed under
section 131 of the Act.
26. Procedure in Appeal
(Section 193-A)
The Bill proposes to reduce the statutory
time period for deciding an appeal by
Collector (Appeals) from one hundred and
twenty days to ninety days.
27. Customs Appellate Tribunal.
(Section 194)
The Bill proposes to authorize the Prime
Minister of Pakistan, instead of Federal
Government, to select the Chairman of the
Budget 2019 - 20 | Highlights & Comments
Tribunal and to set terms and conditions of
appointment of the chairman and judicial
and technical members of the Tribunal.
Further, the appointment of the an advocate
of High Court as judicial member of the
Tribunal shall be in accordance with the Civil
Servants Act, 1973 and the Federal Public
Service Commission Ordinance, 1977. The
technical member of the Board shall be an
officer of Pakistan Customs Service
equivalent in rank of member of the Board
or Chief collector of Customs or Director
General or a Collector or Director or Chief of
Board having at least three years’
experience in that position. Also seeks to
include Director or Chief of the Board with
minimum three years’ experience for
appointment as technical member in
Appellate Tribunal, to make selection of
advocate of High Court as judicial member
subject to FPSC Ordinance, 1977 and Civil
Servants Act, 1973 and to fix the tenure of
the technical member to two years. The
tenure of technical member shall be at least
two years.
28. Powers of Board or Collector
to pass certain orders.
(Section 195)
The Bill proposes to reassign the powers to
probe the records of any proceeding under
the Act, assess the legality of any decision or
order of subordinate officers and pass order
accordingly, to Chief Collectors from
Collector of Customs. The proposition also
reduces the time limit for re-opening of
cases from two years to one hundred and
twenty days subject to an extension of sixty
days.
29. Alternative Dispute
Resolution.
(Section 195C)
The Bill proposes to update the regulations
for the composition, proceedings, time limit
and disposal of the case under the ADR. The
Bill seeks to enhance the timeline for the
composition of ADR from 30 days to 60 days
73
and also prescribe the guidelines for the
appointment of the members of as follows:
a) an officer of customs not below the
rank of Chief Collector
b) a person to be nominated by the
applicant from a panel notified by the
Board, comprising-
i. senior chartered accountants and
senior advocates having minimum
ten year experience in the field of
taxation provided that the
nominee is or has not been
auditor or authorized tax
representative of the person; and
ii. reputable businessmen as
nominated by Chambers of
Commerce and Industry:
iii. retired judge not below the rank
of District and Session Judge to be
nominated through consensus by
the other members of the ADR
Further, the aggrieved person is required to
withdraw the appeal file before the court or
appellate tribunal after constitution of the
committee by the Board.
30. Owner to make all
arrangements and bear all
expenses.
(Section 200)
The Bill proposes to enhance the scope of
examination to include exported goods
placed at custom stations to be undertaken
by custodian of the cargo with operational
customs computerized system. The related
cost of the examination shall be borne by
the exporter.
31. Authorised economic
operators program.
(Section 212A)
The Bill proposes to amend section 212A to
omit approval of the Federal Government to
make rules for authorized economic
operators program.
Budget 2019 - 20 | Highlights & Comments

First Schedule
19. The Bill proposes to introduce concession of Customs Duty on import of
1650 raw materials/industrial inputs. Major items are listed as follows:

PCT code Description Rate

2710.1911 Kerosene 0
2710.1913 J.P.4 0
2710.1998 Spin finish oil 0
2711.1200 Propane 0
2711.1300 Butanes 0
2711.1400 Ethylene, propylene, butylene and butadiene 0
2711.1910 L.P.G. 0
2711.1990 Other 0
2711.2100 Natural gas 0
2711.2900 Other 0
2805.1200 Calcium 0
2805.1900 Other 0
2805.4000 Mercury 0
2808.0010 Nitric acid 0
2808.0090 Sulphonitric acids 0
2809.1000 Diphosphorus pentaoxide 0
2809.2010 Phosphoric acid 0
2814.1000 Anhydrous ammonia 0
2814.2000 Ammonia in auqeous solution 0
2817.0000 Zinc oxide; zinc peroxide. 0
2818.3000 Aluminium hydroxide 0
2819.1000 Chromium trioxide 0
2819.9010 Chromium oxide 0
2819.9020 Chromium hydroxide 0
2936.2100 Vitamins A and their derivatives 0
2936.2200 Vitamin B1 and its derivatives 0
2936.2300 Vitamin B2 and its derivatives 0
D- or DL-Pantothenic acid (Vitamin B3 or Vitamin B5) and its
2936.2400 0
derivatives
2936.2500 Vitamin B6 and its derivatives 0
2936.2600 Vitamin B12 and its derivatives 0
2936.2700 Vitamin C and its derivatives 0

74
Budget 2019 - 20 | Highlights & Comments

PCT code Description Rate

2936.2800 Vitamin E and its derivatives 0
2937.1200 Insulin and its salts 0
3002.9010 Human blood 0
3002.9020 Animal blood 0
Mineral or chemical fertilisers containing the three fertilising
3105.2000 0
elements nitrogen, phosphorus and potassium
8427.1000 Self- propelled trucks powered by an electric motor 0
Machines for cleaning, sorting or grading eggs, fruit or other
8433.6000 0
agricultural produce
8436.8000 Other machinery 0
Machines for extruding, drawing, texturing or cutting man- made
8444.0000 0
textile materials.
8530.1000 Equipment for railways or tramways 0

20. The Bill proposes to reduce Customs duty on following items.

CD (%)
PCT Code Description
(Existing) (Proposed)
2915.2100' Acetic Acid 16 11
2917.1110' Oxalic acid 11 3
3302.1010' Flavours for use in aerated beverages 11 11
3824.9940' Anti-scaling compounds 16 16
4408.1000' Coniferous 11 3
Dark Red or Light Red Meranti and Meranti
4408.3100' 11 3
Bakau
4408.3900' Other 11 3
4408.9090' Other 11 3
4411.9200' Of a density exceeding 0.8 g/cm2 16 11
4411.9310' Not mechanically worked or surface covered 16 11
4411.9390' Other 16 11
4411.9400' Of a density not exceeding 0.5 g/cm2 16 11
4802.5510' Printing Papers 20 16
4802.6100' In rolls 20 16
4822.1000' Of a kind used for winding textile yarn 20 16
Weighing 40 g/ m² or more but not more
than 150 g/ m², in sheets with one side not
4802.5600' 20 16
exceeding 435 mm and the other side not
exceeding 297mm in the unfolded state
5603.1100' Weighing not more than 25 g/m2 16 11
Weighing more than 25 g/m2 but not more
5603.1200' 11 16
than 70 g/m2
Weighing more than 70 g/m2 but not more
5603.1300' 11 16
than 150 g/m2
5603.1400' Weighing more than 150 g/m2 11 16
5603.9100' Weighing not more than 25 g/m2 11 16

75
Budget 2019 - 20 | Highlights & Comments

CD (%)
PCT Code Description
(Existing) (Proposed)
Weighing more than 25 g/m2 but not more
5603.9200' 11 16
than 70 g/m2
Weighing more than 70 g/m2 but not more
5603.9300' 11 16
than 150 g/m2
5603.9400' Weighing more than 150 g/m2 11 16
Steel cord brass plated (2x0.30HT,
7312.9010' 2+2x0.32HT and 3x0.2+6x0.35) of a kind 3 3
used in manufacture of tyres

Fifth Schedule
Imports of Plant, Machinery, Equipment and Apparatus, including Capital Goods for
various industries/sectors

Part-I

The Bill proposes to withdraw concession of customs duty on “Solar air water generator”.

The Bill proposes to allow duty free import of plant, machinery and equipment imported during
the period commencing on the 1st July, 2014 and ending on the 30th June, 2019 for setting up
Industries in FATA certain to subject condition.

The Bill proposes to enhance the rate of customs duty from 8%” to “11%” on prefabricated room
structure for hotel / motel is hill station, GB, AJK and Coastal Areas of Baluchistan.

The Bill seeks to withdraw concession of customs duty on

 plant, machinery and equipment, materials, specialized vehicles or vessels, accessories,

spares, chemicals and consumables, as are not manufactured locally, imported by
developers, contractors and service companies involved in infrastructure development of
Large Diameter Pipelines of 24” and above projects namely, North South Gas Pipeline
Project (NSGP), Turkmenistan, Afghanistan, Pakistan and India Pipeline Project (TAPI), Iran
Pakistan Gas Pipeline Project (IP), RLNG-III Pipeline (RLNG-III), or any other project
declared as “Large Diameter Gas Pipeline Project” by the Ministry of Energy (Petroleum
Division).

 plant, machinery and equipment, materials, specialized vehicles or vessels, accessories,

spares, chemicals and consumables, as are manufactured locally, imported by developers,
contractors and service companies of the above projects, HR Coils, Line Pipe, Pylons/Piles,
whether or not manufactured locally, imported by developers and contractors of above
projects, machinery, equipment, vessels, dumpers, specialized vehicles, accessories, spares
and all other items essentially required for the above projects imported by developers,
contractors and service companies on an import-cum-export basis for a period of five years.

76
Budget 2019 - 20 | Highlights & Comments

Part-II

The Bill proposes to withdraw exemption of customs duty on “Cystagon, Cysta drops and
Trientine Capsules (for personal use only). These items are Active Pharmaceutical Ingredients,
Excipients/Chemicals, Drugs, Packing Material/ Raw Materials for Packing and Diagnostic Kits
and Equipment, Components and other Goods.

Part-III

The Bill proposes to withdraw concessional rate of customs duty on “Epoxide resin, Aluminum lids
and refrigerated outdoor cabinet designed for insertion of electric and electronic apparatus”.

The Bill also proposes to enhance customs duty on Polyester Resin from “10%” to “15%” and
Coils of Aluminum alloys from “5%” to “8%, magnetic shields, blue tape lamination, PVC rigid
film, BOPP films laminated from “0%” to “5%”

The Bill proposes to allow concessional rate of customs duty of 11% on “Lead Acid Batteries for
Telephone Exchanges and Set top boxes for gaining access to internet, TV broadcast transmitter,
Reception apparatus for receiving satellite signals of a kind used with TV (satellite dish receivers),
other set top boxes.

The Bill proposes to restrict the exemption on customs duty on Paper having specification 60
gm/m2 in 23X36 inches or 20X30 inches sheets , Art paper having specification 20x30 inches,
23x30 inches, 23x33 inches, 23x36 inches and 700x1000 mm” to Paper for printing of Holy
Quran only.

The Bill proposes to withdraw exemption of customs duty on Dextrose, Aluminum sheets, Carbon
steel strip, AKD wax and dispersing agents, Refrigerant gas, Base Oil and CNG vehicle conversion
kits

Part-VII

The Bill proposes to withdraw concessional rate of customs duty on following items:

Customs
Sr. No. Description PCT Code duty Condition
%
(10A) Natural gas”. 2711.1100 5 Nil
4 Formic Acid 2915.1100 16% Nil
14 Other 3204.9000 16% Nil
19 Vitrifiable enamels and 3207.2000 3% Nil
glazes,engobes (slips) and similar
preparations
20 Of a kind used In the leather or like 3403.1110 16% Nil
industries
23 Of a kind used In the leather or like 3403.9110 16% Nil
industries including fat liqours
28 Of a kind used In the leather or like 3403.9110 11% Nil
industries
31 Insulation tape double sided 3919.1010 0% Nil
32 Shoe lasts 3926.9060 16% Nil

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Budget 2019 - 20 | Highlights & Comments

Customs
Sr. No. Description PCT Code duty Condition
%
35 Other 4016.1090 5% Nil
38 Containing by weight more than 50% 6903.1000 3% Nil
of graphite or other carbon or of a
mixture of these products
39 Other 6903.2090 3% Nil
42 Other 8501.4090 16% Nil
43 Other 9032.1090 16% Nil

The Bill proposes to allow concessional rate of customs duty on following items which will
primarily be for Import of Industrial inputs/raw materials. The rate of customs duty alongwith
category of components are illustrated below.

S. Description PCT Customs Conditions

No. Code Duty (%)
1 Magnesium oxide 2519.9010 0% Nil
2 Other 2836.9990 0% Nil
3 Cyclopentane 2902.1910 0% Nil
4 o-Xylene 2902.4100 0% Nil
5 Tetrafluoroethane 2903.3930 0% Nil
6 Octanol (octyl alcohol) and isomers 2905.1600 0% Nil
thereof
7 Formic acid 2915.1100 16% Nil
8 Sodium formate 2915.1210 0% Nil
9 Other 3204.9000 16% Nil
10 Vitrifiable enamels and glazes, engobes 3207.2000 3% Nil
(slips) and similar
preparations
11 Of a kind used in the leather or like 3403.1110 16% Nil
industries
12 Of a kind used in the leather or like 3403.9110 16% Nil
industries including fat liquors
13 Of a kind used in the paper or like 3809.9200 11% Nil
industries
14 Of a kind used in the leather or like 3809.9300 11% Nil
industries
15 Acrylonitrile butadiene styrene (ABS) 3903.3000 0% Nil
copolymers
16 Other poly-ethers 3907.2000 0% Nil
17 Polyurethanes 3909.5000 0% Nil
18 Insulation tape double sided 3919.1010 0% Nil

78
Budget 2019 - 20 | Highlights & Comments

S. Description PCT Customs Conditions

No. Code Duty (%)
19 Shoe lasts 3926.9060 16% Nil
20 Latex 4002.1100 0% Nil
21 Other 4002.1900 0% Nil
22 Other 4016.1090 5% Nil
23 Containing by weight more than 50 % of 6903.1000 3% Nil
graphite or other carbon
or of a mixture of these products
24 Other 6903.2090 3% Nil
25 Adhesive tape 7607.1910 0% Nil
26 Used with HCFC and non-CFC gases 8414.3010 0% Nil
27 Of machines of heading 8414.1000 and 8414.9010 0% Nil
8414.3010
28 Evaporators (roll bond / fin / tube on 8418.9910 0% Nil
plate types)
29 Machines for reeling, unreeling, folding, 8451.5000 0% Nil
cutting or pinking textile
fabrics
30 Other 8452.2900 0% Nil
31 Machinery for preparing, tanning or 8453.1000 0% Nil
working hides, skins or leather
32 Machinery for making or repairing 8453.2000 0% Nil
footwear
33 Parts 8453.9000 0% Nil
34 Other 8465.9190 0% Nil
35 Other 8477.3090 0% Nil
36 Parts 8477.9000 0% Nil
37 Injection or compression types 8480.7100 0% Nil
38 Motors of an output not exceeding 37.5 8501.1000 0% Nil
W
39 Other 8501.4090 16% Nil
40 Burglar or fire alarms and similar 8531.1000 0% Nil
apparatus
41 Other 9030.8900 0% Nil
42 Of a kind used in refrigerators, deep 9032.1010 0% Nil
freezers and air conditioners
43 Other 9032.1090 16% Nil
(i) Other 3506.9190 5% If imported by
manufacturers of
diapers/sanitary

79
Budget 2019 - 20 | Highlights & Comments

S. Description PCT Customs Conditions

No. Code Duty (%)
napkins registered
under the Sales Tax
44 Act, 1990, subject
to annual quota
determination and
verification by the
Input Output Co-
efficient
Organization (IOCO)
and certification by
the Engineering
Development Board.
(ii) Other 3906.9090 5%
(iii) Of polymers of ethylene 3920.1000 16%
(iv) Of other plastics 3921.1900 16%
(v) Of polymers of ethylene 3923.2100 5%
(vi) Weighing not more than 25 g/m2 5603.1100 11%

(vii) Weighing more than 25 g/m2 but 5603.9200 16%

not more than 70 g/m2

(viii) Weighing more than 70 g/m2 but 5603.9300 11%

not more than 150 g/m2

45 Other 1901.9090 5% Imports by

manufacturers of
infant formula milk,
registered under the
Sales Tax Act, 1990,
subject to annual
quota determination
and verification by
the Input Output
Co-efficient
Organization
(IOCO).”

80
Budget 2019 - 20 | Highlights & Comments

Federal Excise Act, 2005

1. Delegation of Powers to the liability to pay duty shall be discharged

accordingly. The duty is imposed through
Board [Sections 2, 7(2) and introducing S. No. 58 in the First Schedule
22(13)] (Table 1) at the rate of seventeen percent
under sales tax mode.
The Bill proposed to delegate powers of the
Federal Government to the Board with the This appears to be a facilitation drive
approval of the Minister-in-charge in respect enabling steel sector to adjust its input
of the following matters: tax/duty and preclude said sector from the
fixed sales tax regime.
 Enhancement of the domain of supply
under this Act. Production
S. No. Product
 Declare that any of the provisions of criteria
the Sales Tax Act,1990 shall, with such 1. Steel billets and One metric ton per
modifications and alterations as it may ingots. 700 kwh of
consider necessary applicable in same electricity
manner in respect of the duty leviable consumed.
under this this Act.
2. Steel bars and One metric ton per
other re-rolled 110 Kwh of
 Authorize any other officer working
long electricity
under the Board to exercise the powers
profiles of consumed.
and perform the functions of an officer
of Inland Revenue. steel.
3. Ship plates. 75% of the weight
Above amendments will decrease legislative of the vessel
burden of Federal Government/ Cabinet imported for
enabling it to retain substantive powers of breaking.
making law and to assign the Board with
respect to the procedural powers. According to the Fourth schedule, the
minimum production for steel products shall
2. Levy, collection and payment be determined as under:
of duty on steel products
Procedure and conditions in Fourth
[Section 3(5A)] Schedule:

The Bill proposes insertion of new sub-
section and Fourth Schedule to provide
mechanism for levying duty in respect of
steel products in lieu of sales tax under the
Sales Tax Act, 1990.
The proposed insertion provides that the
minimum production of steel product for a
month shall be determined on the basis of a
single or more inputs as consumed in the
production process as per criterion specified
in the Fourth Schedule of the Act. If the
minimum production so determined exceeds
the actual supplies for the month, such
minimum production shall be treated as
quantity supplied during the month and the
The taxpayer is required to declare both
actual and minimum production and local
supplies in its monthly return.
When minimum production/month is greater
than actual supplies/month, liability shall be
discharged on the basis of minimum
production.
In subsequent month, if actual supplies are
greater than minimum production, the
registered person shall be entitled to get
adjustment of excess duty on account of
minimum production over actual supplies.

81
Budget 2019 - 20 | Highlights & Comments
The Fourth Schedule further provides that in
a full year, as per financial year of the
company or registered person, or period
starting from July to June next year, in other
cases, the duty actually paid shall not be
less than the liability determined on the
basis of minimum production for that year.
However, in case of ship-breaking, the
liability against minimum production, or
actual supplies, whichever is higher, shall be
deposited on monthly basis on proportionate
basis depending upon the time required to
break the vessel.
3. Exemption [Section 16(2)]
The Bill proposes to narrow the power of the
Federal Government to exempt any goods or
class of goods or any services or class of
services from the whole or any part of the
duty leviable under this Act.
After approval of the proposal, the Federal
Government cannot provide exemption in
the following circumstances:
 Protection of national economic
interests in situations arising out of
abnormal fluctuation in international
commodity prices;
 Removal of anomalies in duties;
 Development of backward areas and
 Matters relating to international
financial institutions or foreign
government-owned financial
institutions.
4. Offences, penalties and fines
[Section 19(2)]
The Bill seeks to broaden the scope of
section 19(2) to cover the person who
sells cigarettes in retail at a price lower
82
than the retail price plus the amount of
sales tax as printed thereon. Such
person shall now also be liable to a fine
which may extend to twenty thousand
Rupees.
5. Proceedings against person
[Section 19A]
The Bill proposes insertion of new
provision which empowers the Board to
prescribe rules for initiating criminal
proceedings against Federal Excise
officers and their subordinates, who
wilfully and deliberately commits or
omits an act which results in personal
benefits and undue advantage to them.
The aforementioned act also empowers
the Board to initiate criminal proceedings
against the taxpayer by concurrently
intimating the relevant government
agency.
The proceedings shall be without
prejudice to any liability that the
authority, person or taxpayer may incur
under any other law for the time being in
force.
Through the above legislative measures
the Federal Government wants to deter
wrong doings and squeeze the
professional misconduct and undertake
timely corrective measures.
Budget 2019 - 20 | Highlights & Comments

6. First Schedule – Modification in Rates of FED in Table I

a. The Bill proposes to bring changes in FED rates for the following items of the First
Schedule of this Act:

Proposed FED
S. No Description Existing FED Rate
Rate
1 Edible oils excluding epoxidized soybean 16 % ad val. 17 % ad val.
oil falling under heading 15.18

2 Vegetable ghee and cooking oil

(a) in retail packing 16 % ad val. 17 % of retail price

(b) not in retail packing 16 % ad val. 17 % ad val.
4 Aerated waters 11.5 % of retail price 14 % of retail price
5 Aerated waters, containing added sugar or 11.5 % of retail price 14 % of retail price
other sweetening matter or flavored
6 Aerated waters if manufactured wholly 11.5 % of retail price 14 % of retail price
from juices or pulp of indigenous
vegetables, food grains or fruits and which
do not contain any other ingredient,
indigenous or imported, other than sugar,
coloring materials, preservatives or
additives in quantities prescribed under
the West Pakistan Pure Food Rules, 1965
9 Locally produced cigarettes if their on- Rs.4,500 per Rs.5,200 per
pack printed retail price exceeds 5,960 thousand thousand
rupees (previously 4,500) per thousand cigarettes cigarettes
cigarettes
10 Locally produced cigarettes if their on- Rs.1,840 per Rs.1,650 per
pack printed retail price does not exceed thousand thousand
5,960 rupees (previously 4,500) per cigarettes cigarettes
thousand cigarettes
10a Locally produced cigarettes if their on- Rs.1,250 per Omission, now
pack printed retail price does not exceed thousand merge with S. No.
two thousand nine hundred and twenty- cigarettes 10
five rupees per thousand cigarettes
13 Portland cement, aluminous cement, slag Rs.1.50 per Kg. Rs.2 per Kg.
cement, super sulphate cement and
similar hydraulic cements, whether or not
coloured or in the form of clinkers
31 Liquefied Natural Gas Rs.17.18 Rs.10 per MMBTu
Per hundred cubic
meters
54 Oilseeds Rs.0.4 per kg Omission

83
Budget 2019 - 20 | Highlights & Comments

b. Allowing zero-rating
on supply of tobacco of exporters: juices, syrups and squashes, waters
containing added sugar or sweetening
In order to facilitate the exporters of
matter etc. excluding mineral and aerated
unmanufactured tobacco, it is proposed that
waters at the rates of 5 % of retail price.
the FED shall be charged at zero per cent on
unmanufactured tobacco as supplied to a
registered person / trader who intends to 7. First Schedule – Table II
export the same subject to furnishing of
necessary security. Reduction in levy on facilities for travel

c. Increase in scope of FED on Cars The Bill proposes to reduce duty on services
Presently the FED is imposed on vehicles of provided or rendered in respect of travel by
cylinder capacity of 1700cc or above air of passengers within the territorial
principally designed for the transport of jurisdiction of Pakistan, for Long routes
persons including station wagons and racing reduce from 2,000 Rupees to 1,500 Rupees
cars at the rate of ten percent ad vol. Levy and for Short routes reduce from 1250
on vehicles has recently been introduced Rupees to 900 Rupees.
through the Finance Supplementary (Second
Amendment) Act, 2019 dated March 09, 8. Third Schedule (Conditional
2019. However, the Bill seeks to exert Duty Exemptions)
on locally manufacture or assembles vehicles
as under: Withdrawal of Exemption on FED on
Internet services and Foreign Satellite
S. Description Proposed Bandwidth Service
No FED Rate
55B Locally manufactured or The Bill seeks to withdraw exemption of FED
assembled motor cars, on Internet services and Foreign Satellite
SUVs and other motor bandwidth service. However, in order to
vehicles, principally protect the local bandwidth service provider,
designed for the the exemption is still maintain for terrestrial
transport of persons bandwidth services.
(other than those of
headings 87.02),
including station
wagons and racing cars:

(a) of cylinder capacity 2.5 % ad

up to 1000cc val.
(b) of cylinder capacity 5 % ad
from 1001cc to 2000cc val.
(c) of cylinder capacity 7.5 % ad
2001cc and above val.

d. Levy on packaged non-aerated

sugary / flavored juices, syrups and
squashes

The Bill proposes to levy FED through S. No.

57 in Table 1 – First Schedule on Fruit

84
Budget 2019 - 20 | Highlights & Comments
Assets Declaration Act, 2019
The President of Pakistan had promulgated
the Assets Declaration Ordinance, 2019 on
May 14, 2019 for voluntary declaration of
undisclosed assets, sales and expenditures.
The objective for promulgation of the
Ordinance is to give effect to the tax
amnesty scheme to allow inclusion of non-
documented economy in taxation system
and to promote economic revival and
growth by encouraging tax compliance.
In the past, 9 amnesty schemes have been
announced by various Governments under
the premise of documentation, increasing
tax registration, waiver of penalties and
declaration of foreign and domestic assets.
Although, the Government officials and
representatives of FBR have stated that the
core objective of the current amnesty is for
documentation of economy, however,
timing of promulgation suggests that it is
also a step to reduce the expected revenue
shortfall of approximately Rs 400 billion.
Considering the recent amendments in
International tax laws and execution of
various multilateral agreements for
exchange of information, it is a good
opportunity for the persons who hold
undeclared assets and have undeclared
sales and expenditures to avail benefit
provided under the scheme.
This scheme is unique from previous
schemes as it also provides for the
declaration of Benami assets. This has
been made possible only after the
promulgation of Benami Transactions
(Prohibition) Act, 2017 which provides for
confiscation of Benami assets and
imprisonment of the holder alongwith fines.
The Benami Transaction (Prohibition) Act,
2017 was made operational effective from
March 11, 2019 i.e. the date when the
Benami Transactions (Prohibition) Rules,
2019 were notified whereby the procedure
for appointment of Chairperson and
Members of Adjudicating Authority and
related matters have been explained.
85
Through Finance Bill, 2019, the Asset
Declaration Ordinance, 2019, is proposed
to be repealed from the date of
commencement of the Asset Declaration
Act, 2019.
1. Important definitions
a) "Board" shall have the same meaning
as defined in clause (8) of section 2 of
the Income Tax Ordinance, 2001 (XLIX
of 2001).
b) "court of law" means a High Court or
Supreme Court of Pakistan.
c) "declarant" means a person making a
declaration under section 5.
d) "holder of public office" means a
person as defined in the Voluntary
Declaration of Domestic Assets Act,
2018 or his benamidar as defined in
the Benami Transactions (Prohibition)
Act, 2017 (V of 2017) or their spouses
and dependents.
e) "undisclosed assets" means all
domestic and foreign assets of every
kind the value of which has been
unreported, under-reported or
understated and includes benami
assets as defined in the Benami
Transactions (Prohibition) Act, 2017 (V
of 2017).
Our Comments
The term Benami Property rather Benami
Assets is defined in the Benami Transactions
(Prohibition) Act, 2017 to mean any property
which is subject matter of Benami
transaction and also includes the proceeds
from such property.
g) "undisclosed expenditure" means any
unexplained or unaccounted
expenditure under the provisions of
the Income Tax Ordinance, 2001 (XLIX
of 2001) up to the tax year 2018,
which has not been declared in the
Budget 2019 - 20 | Highlights & Comments

return of income or for which a return proceedings are initiated, pending or

of income has not been filed and such assessed / adjudicated in the following
expenditure is not accounted for. cases:

h) "undisclosed sales" means sales or  Under the Income Tax Ordinance,

supplies chargeable to sales tax or
federal excise duty under the Sales
Tax Act, 1990 or the Federal Excise
Act, 2005, respectively, which were
not declared or have been under-
declared up to 30th June, 2018.
2001 with respect to undisclosed
assets or expenditure
 Under the Sales Tax Act, 1990 or
Federal Excise Act, 2005 pertaining to
undisclosed sales or supplies

Our Comments However, the Act provides that no

declaration can be filed where the matter
It is pertinent to note that service income is has attained finality. The Act should have
altogether excluded from the definition of explained what is meant by “attained
Undisclosed Sales. Consequently, sales or finality” to avoid unnecessary dispute.
supplies that are chargeable to Sales Tax or
Excise Duty under the federal legislations
are embodied in the definition of undisclosed
Sales.

2. Declaration of Undisclosed
Asset, Sales and Expenditure
The declaration of the undisclosed Assets,
Sales and Expenditure under this Act can be
made on or before June 30, 2019 by any
person in respect of any:

 undisclosed assets, held in Pakistan

and abroad, acquired up to 30th June,
2018;

 undisclosed sales made up to 30th

June, 2018.

 undisclosed expenditure incurred up to

30th June, 2018; or

 benami assets acquired or held on or

before the date of declaration.

It is pertinent to note that the term person

has been used in the Act as against citizen
of Pakistan that was used in the amnesty
scheme introduced in the year 2018.

3. Pending proceedings
A person may also declare assets, sales or
expenses under this Act even in case the

86
Budget 2019 - 20 | Highlights & Comments

4. Rates of Tax
The Act provides different rates for different classes of assets. A table showing these rates and
comparison thereof with the rates as per Assets Declaration Ordinances, 2018, is tabulated below:

Under Amnesty Scheme, 2019 Under Amnesty Scheme, 2018

S.no Undisclosed assets, Rate
Undisclosed assets Rate of tax
sales or expenditure of tax
Foreign Domestic
Domestic Immovable
1. 1.5% Domestic Immovable properties - 5%
properties
Foreign immovable
2. 4% Foreign immovable properties 3% -
properties
Foreign liquid assets
3. 4% Foreign liquid assets repatriated 2% -
repatriated
Foreign liquid assets not Foreign liquid assets not
4. 6% 5% -
repatriated repatriated
Foreign currency held in
Foreign currency held in foreign
5. foreign currency account 4% - 2%
currency account in Pakistan
in Pakistan
Other assets both Other assets both domestic and
6. 4% 5% 5%
domestic and foreign foreign
7. Unexplained expenditure 4% Unexplained expenditure - -
8. Undisclosed sales 2% Undisclosed sales - -

5. Default surcharge on late payment

The declarant may make payment of tax as mentioned above on or before June 30, 2019.
However, the declarant is allowed to make payment of tax after June 30, 2019 but on or before
June 30, 2020, alongwith the default surcharge levied at the following rates:

S. No Time of payment Rate

1. If the tax is paid after June 30, 2019, and on or before the 30th 10% of the tax
September, 2019 amount
2. If the tax is paid after the September 30, 2019, and on or 20% of the tax
before the 31st December, 2019 amount
3. If the tax is paid after the December 31, 2019, and on or 30% of the tax
before March 31, 2020 amount
4. If the tax is paid after the March 31, 2020, and on or before 40% of the tax
the June 30, 2020. amount

The declaration shall become void, where a declarant fails to pay the tax within the above deadlines.

In case of outstanding demand at the time of filing of declaration, the declarant may pay the
amount of such tax determined by the Officer of Inland Revenue, under the provisions of the Sales
Tax Act, 1990 or the Income Tax Ordinance, 2001 (XLIX of 2001), or the Federal Excise Act, 2005,
without payment of default surcharge and penalty.

87
Budget 2019 - 20 | Highlights & Comments
6. Value of assets
6.1 Immovable Property
The value of domestic immovable
property shall not be less than the
150% of the FBR value notified under
section 68(4) of the Income Tax
Ordinance, 2001.
Where the FBR has not notified the
value of the area or the fair market
value of FBR is less than DC value,
than price shall be 150% of DC value.
Where FBR has not notified value for
constructed property than value shall
be 150% of DC value for constructed
property. The value of land shall be
150% of FBR value notified under
section 68(4) of the Income Tax
Ordinance.
*FBR has published the FMV of
specified areas through notification
which can be accessed through the
following link:
https://www.fbr.gov.pk/valuation-of-
immovable-properties/51147/131220
6.2 Other Assets
All other assets are to be valued at
higher of cost or open market price of
the assets determined at the date of
declaration.
6.3 Foreign Assets
In case of valuation of foreign assets
denominated in foreign currency, the
fair market value is to be calculated at
the exchange rate applicable at the
date of declaration.
6.4 Option to file revised
declaration for domestic
immovable property only
In case, a declarant who filed a
declaration for domestic immovable
property either under the Income Tax
88
Ordinance, 2001 or Voluntary
Declaration of Domestic Assets Act,
2018, and wishes to enhance the
declared value of such property, he
may file a declaration under the new
scheme.
The Act further provides that no
proceeding or action under the Act will
be initiated against a person who filed
a declaration in respect of immovable
property which is in line with section
68 of the Income Tax Ordinance,
2001, or Voluntary Declaration of
Domestic Assets Act, 2018.
7. Act not to apply to certain
persons, assets or
Proceedings
The provisions of this Act shall not
apply to:
1. Holders of public office.
2. A public company as defined
under clause (47) of section 2 of
Income Tax Ordinance, 2001.
3. Assets / proceeds that are
involved in or derived from the
commission of criminal offence.
4. Gold, precious metals, precious
stones or jewelry.
5. Bearer prize bonds.
6. Bearer securities, bearer shares,
bearer certificates, bearer bonds
or any other bearer assets; or
7. Proceedings pending in any court
of law.
In order to make declared cash a part
of documented economy, the
deposition of such cash into a Bank
account is mandatory under the Act.
However, Gold, Precious stones, bearer
prize bonds and bearer securities are
excluded from the ambit of the
amnesty for the apparent reason that
said assets are not registered in the
Budget 2019 - 20 | Highlights & Comments
name of a person and there is a
possibility that these cannot be
inducted in the documented economy
even after declaration under the Act.
8. Declaration not admissible in
evidence
The declaration made under this Act
shall not be considered a conclusive
evidence in any proceedings for the
purpose of imposition of penalty or
adverse action or for the purpose of
prosecution under any law.
9. Overriding impact and
confidentiality
The provisions of this Act shall have
effect notwithstanding anything to the
contrary contained in any other law
for the time being in force.
Particulars of any person making a
declaration under this Act or any
information received in any declaration
made under this Act shall be
confidential notwithstanding anything
to the contrary contained in any other
law for the time being in force. The
only exception to this are the
provisions of the clause (a) and (g) of
the sub-clause (3) of section 216 of
the Income Tax Ordinance, 2001.
10. Misrepresentation
A declaration shall be void where it
has been made by misrepresentation
or suppression of facts.
Consequently, in such cases, it will be
presumed that the declaration shall
never deemed to have been made
under this Act.
11. Non-refundable tax
Any tax or default surcharge paid
under this Act shall not be refundable.
89
12. Recording in books of
accounts
A declarant will be entitled to
incorporate undisclosed asset, sales
or expenditure in his Return of Total
Income, Wealth Statement or
Financial Statement, whichever is
applicable, upon payment of tax
under this Act.
However, no credit, allowance or
deduction shall be available for
undisclosed assets which are disclosed
under this Act.
13. Conditions for declaration
The declaration under this Act shall
only be valid if following conditions
are fulfilled:
Mode Condition
Cash Deposit of declared cash
into bank account which
must be retained in the
bank account till June 30,
2019
Foreign Deposit of foreign
Currency currency into declarant’s
foreign currency bank
account which must be
retained in the bank
account till June 30, 2019
Repatriated It must be deposited into
Foreign declarant’s bank account
Liquid Asset either in PKR or FCY
account in Pakistan
Alternatively, it could be
invested into Pakistan
Banao Certificates or any
foreign currency
denominated bonds issued
by the Federal
Government.
Foreign Declarant must deposit in
Liquid his own foreign bank
Assets not account on or before June
repatriated 30, 2019
to Pakistan
Budget 2019 - 20 | Highlights & Comments

14. Mode and manner of

repatriation of assets held
outside Pakistan and
payment of tax thereon
The State Bank of Pakistan shall notify
the mode and manner of following:

 repatriation of assets to Pakistan;

 deposit of tax in foreign currency

through State Bank of Pakistan;
and

 method of conversion of value of

assets held outside Pakistan in Pak
rupees.

15. Revision of declaration

A declarant may revise the original
declaration on account of any
omission, mistake, computational
error or wrong statement therein,
within the due date subject to the
condition that the value of asset or
tax shall not be less than the value of
asset and tax declared in the original
declaration.

90
 Budget 2019 - 20 | Highlights & Comments

Contacts

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Atif Mufassir Arshad Mehmood Farrukh Jamil

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