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Finance Bill 2015
Zahid Jamil & Co.
Chartered Accountants www.zahidjamilco.com An Independent Member Firm of Prime Global
www.primeglobal.net
Tax Hand Book
http://www.zahidjamilco.com/http://www.zahidjamilco.com/http://www.primeglobal.net/http://www.primeglobal.net/http://www.primeglobal.net/http://www.zahidjamilco.com/
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TAX HAND BOOK FINANCE Bill 2015
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Strictly for circulation to
Clients & Staff of Zahid Jamil & Co.
This handbook elaborates the important changes brought down through Finance Bill, 2015
relating to Income Tax, Sales Tax and Federal Excise Duty. For considering the precise effect of
a particular change, reference should be made to the specific wordings in the relevant statute,
therefore, not generally be acted upon without obtaining appropriate advice.
The handbook can also be accessed on our web site www.zahidjamilco.com
Dated: June 07, 2015
http://www.zahidjamilco.com/http://www.zahidjamilco.com/http://www.zahidjamilco.com/
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TAX HAND BOOK
TABLE OF CONTENTS
Sr. # Description Page #
1. EXECUTIVE SUMMARY………………….………………………………………………………………………………………. 4-7
2. AMENDMENTS IN INCOME TAX ORDINANCE, 2001 ………………………………………………………………. 8-33
3. AMENDMENTS IN SALES TAX ACT, 1990 ……………………………………………………………………………….. 34-39
4. AMENDMENTS IN FEDERAL EXCISE ACT, 2005 ……………………………………………………………………… 40-45
5. AMENDMENTS IN CUSTOMS ACT, 1969………… ……………………………………………………………………… 46-48
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EXECUTIVE SUMMARY
INCOME TAX
A public company deriving profit for the year and having reserves in excess of hundred percent of its paid up
capital is now further taxable on such excess reserves at the rate of ten percent. However, a scheduled bank, a
modaraba and a government owned public company are not chargeable to such tax.
A one-time super tax @ 4% of income of banking companies and 3% of income of Rs.500 million or more has been
proposed to be levied on all persons for the tax year 2015 invariably on all types of income whether taxable under
the normal law or under the Final Tax Regime (FTR).
Capital gain on securities that are held for a period less than 4 years are proposed to be taxed based on the
following holding period of securities and rates-
Holding Period
Tax Period
2015 2016
Less than 12 months 12.5% 15%
12 months or more but lessthan 24 months 10% 12.5%
24 months or more but less
than 48 months
0% 7.5%
Profit on debt derived by all taxpayers is now taxable as a separate block of income at progressive slab rates of
ten, twelve and half and fifteen percent applicable on gross amount of profit on debt.
Tax credit available to a company on its enlistment on a registered stock exchange is proposed to be enhanced
from 15% to 20% of the tax payable.
Like banking companies, other companies and AOPs are proposed to estimate the advance tax before the secondinstallment is due in cases where higher income and tax payable is anticipated. 50% of the estimated advance tax
is required to be paid in the second quarter and balance in remaining quarters.
A tax credit of 1% of tax payable, for every 50 employees employed by a newly established industrial undertaking
shall be allowed for 10 years. The maximum credit is allowed upto 10% of tax payable.
The eligible threshold of admissible investment in shares and premium on life insurance for claim of tax credit is
proposed to be enhanced from Rs.1 million to Rs.1.5 million.
Instead of tax credit on profit on debt paid on a housing loan, the Bill proposes to allow deductible allowance with
reference to profit on debt paid on a housing loan for the purpose of construction of a new house or acquisition ofa house.
Exporters are to be given an option to opt out of the final tax regime and pay tax on normal basis but the tax
deducted will be treated as minimum tax.
CNIC issued by NADRA to be treated as NTN effective from the tax year 2015.
Non-filers are proposed to subject to collection of tax @ 0.6% on all banking transactions where the value of
transactions in a day exceeds Rs.50, 000.
The Bill proposes to enact provisions enabling automatic exchange of information by the Government with other
countries. Rate of tax on dividend increased from 10% to 12.5%
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The due date of payment of tax demand is proposed to be enhanced from 15 days to 30 days. Moreover, the
Commissioner (Appeals) has been empowered to grant stay from recovery of tax demand for a period of 60 days
instead of 30 days at present.
Remittance of education and related expenses abroad is proposed to be subject to collection of tax @ 5%.
Concept of Special Audit Panels comprising officers of Inland Revenue and professionals introduced.
Automatic selection for audit of such retailers proposed who do not file their returns or pay tax as per the
conditions prescribed.
Whistleblower who reports concealment to be rewarded. Amendments made on the following tax laws for this
purpose:
Income Tax Ordinance, 2001
Sales Tax Act, 1990
Federal Excise Act, 2005
Single rate of tax for banking companies on dividend income and capital gain of 35% is proposed
Application of minimum tax on builders has been deferred until 30 June 2018.
Minimum tax on land developers has been levied at the rate of two percent of the value of land notified by any
authority for the purpose of stamp duty.
Payments to resident persons for use of machinery and equipment is proposed to be subject to withholding tax @
10%
Board no longer empowered to exempt goods or person from collection of tax at import stage.
Manufacturers of cooking oil and vegetable ghee subject to final tax at the rate of two percent on purchase of
locally produced edible oil.
Commissioner empowered to issue reduced/nil withholding tax certificate to a permanent establishment of a non-
resident person.
Scope of collection of advance tax on private motor vehicles has been expanded. The term “motor vehicle” has also
been defined.
Collection of advance tax also required in respect of internet bills and prepaid card for internet.
Wholesalers of specified goods now exposed to collection of advance tax by manufacturers, wholesaler, dealers
and distributors.
Exemption from collection of tax under Chapter-XII (transitional advance tax provisions) as available to various
persons has been consolidated under a single section for ease of reference.
The rate of default surcharge in respect of various non-compliances has been reduced from eighteen percent to
twelve percent.
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Penalties for non-filing of statement in respect of income governed by the final tax regime, withholding
statements, furnishing of information by banks and wealth statements have been amended.
Rate of compensation for delayed refund reduced from fifteen percent per annum to KIBOR plus zero point five
percent per annum.
SALES TAX
Certain amendments made in the definitions of Active taxpayer, Cottage Industry, Retailer and Supply.
Rate of further tax enhanced from 1% to 2%.
Custom Authorities empowered to recover short payments or non-payments of sales tax at import stage.
Manner of claiming input tax adjustment on import rationalized.
Disallowance of input tax scope enhanced.
Joint or several liabilities for unpaid sales tax amount in the supply chain.
Withdrawal of board’s power to grant exemption except for emergency situation Now such exemptions wouldstands rescinded at the close of the financial year.
Extended requirement of registration under the Act.
Special audit panel to conduct audit
Certain amendments made in offences and penalties
Monitoring or tracking of production, sales, clearance, stocks etc. through electronic or other means.
Agreements for the exchange of information with provincial or foreign governments.
Prize scheme to promote tax culture.
Certain amendments in the following Schedules: -Fifth Schedule -Sixth Schedule -Eighth Schedule -Ninth Schedul
FEDERAL EXCISE
Powers of the Board granting exemption from the levy of FED are proposed to be withdrawn.
Federal Government is now only empowered to exempt good or services from the levy of FED subject to theapproval of Economic Coordination Committee.
Commissioner to pass orders under section 35 of the FE Act, upon receipt of an application from the aggrievedperson in addition to taking suo-moto action.
Board to appoint special audit panels for conducting audit.
Federal Government to enter into bilateral or multilateral agreements with provincial governments or withgovernments of foreign countries for exchange of information.
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INCOME TAX
AMENDMENTS IN INCOME TAX ORDINANCE, 2001
Sr.
#Section Before Amendment After Amendment
1. Sec. 5(A)
Sec 4(B)
Excess Reserves of Public
Company to Suffer tax
Section 5 was not previously
existed.
Super tax for rehabilitation
of temporary displaced
persons
Clause (B) in Section 4was
not previously existed
Tax has been proposed to be charged at the rate of ten percent
of so much of the reserves as exceed hundred percent of the
company’s paid-up capital after the distribution of cash
dividend within six months of the end of tax year . This section
shall not apply to a public company being a scheduled bank,
modaraba or a public company in which fifty percent or more
shares are held by the Government.
A one-time super tax has been proposed to be levied on all
persons for the tax year 2015 invariably on all types of income
whether taxable under the normal law or under the Final Tax
Regime (FTR). To remove any sort of ambiguity, it has been
stated that the super-tax will apply to income from all sources
and on all persons including income of insurance companies,
oil and gas and mineral companies, banking companies and on
capital gains of listed securities.
The super tax is proposed to be charged as
follows –
Banking company
4% of
income
Person other than a banking companyhaving income equal to or exceeding
Rs.500 million
3% of
income
The super tax is required to be paid at the time of filing thereturn of income and in case it is not paid, the Commissioner is
empowered to collect the same by passing an order in writing.
2. Sec. 37(A) Capital Gain on Disposal of
Securities
Gain on disposal of securities
was taxable if the security
was held for a period less
than 2 years.
It has been proposed that tax capital gain on securities
that are held for a period less than 4 years. Rates of tax
are–
Holding period 2015 2016
Less than 12 months 12.5% 15%
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12 months or more but lessthan 24 months 10% 12.5%
24 months or more but less
than 4 years 0% 7.5%
It is proposed to be required form mutual fund or a collective
investment scheme or a REIT scheme to deduct capital gain tax
on redemption of securities in the following way-
Category Filer Non-filer
Individuals and
AOP10% 17.5%
Company10% for stock
funds
25% for others
25%
3. Sec. (53&159) Exemptions and tax
concessions
The Federal Government was
empowered to amend the
Second Schedule to the
Ordinance to provide or carry
away exemptions and tax
concessions or to offer
conditions in respect thereof.
Such powers were exercised
by the Board under delegated
authority of the Federal
Government which at times
was criticized by certain
quarters on the touchstone of
discretion exercised by the
Federal Government.
Now, the discretion that was available to the Federal
Government has been proposed to be taken away, relocated the
authority of granting exemptions or concessions to the
Parliament.
Federal Government, with the approval of the ECC of theCabinet, can still amend the Second Schedule if the following
circumstances-
national security issues
natural disaster
national food security in emergency situations
protection of national economic interests in situationsowing to abnormal fluctuation in international
commodity prices
removal of anomalies in taxes
development of backward areas
implementation of bilateral/ multilateral agreements
Powers of the Board available under section 159 to amend the
rates of withholding tax, exempt persons, classes of persons,
goods or classes of goods form withholding tax under the
Ordinance have been proposed to be withdrawn.
4. Sec. 151 & 7B Profit on Debt
Section 151, regarding
profit/yield on certain
categories of debt is subject
to withholding tax at the
gross amount, after deduction
of zakat. The tax deducted
under this section is generally
construed as a final discharge
An introduction of a separate scheme of taxation in respect of
profit on debt derived by all categories of taxpayers, including
corporate taxpayers has been launched which would be taxed
via newly proposed Section 7B at following rates.
Sr.No. Profit on Debt Rate of Tax
1 Where profit on debt
does not exceed
Rs.25,000,000
10%
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of tax liability for all
categories of taxpayers, other
than companies.
2 Where profit on debtexceeds
Rs.25,000,000 but
does not exceed
Rs.50,000,000
2,500,000 + 12.5% ofthe amount exceeding
Rs.25,000,000
3Where profit on debt
exceeds
Rs.50,000,000
Rs.5,625,000 + 15% of
the amount
exceeding
Rs.50,000,000
Under the proposed amendments, companies would no longer
be able to allocate expenses against its interest income.
Profit or debt u/s 151 would be adjustable against the tax
determined pursuant to the proposed Section 7B.
5. Sec. 152(4A) Commissioner Empowered
to Issue Reduced/Nil
Withholding tax Certificate
to a Permanent
Establishment of a Non-
resident
Sub-section (4A) in Section
152 was not previously
existed.
The purposed new sub section (4A) in Section 152 confers
powers to the Commissioner to provide nil or reduced
withholding tax certificates in appropriate circumstances to
PEs of non-resident persons.
6. Sec. 65 (6)
Sec. 65(C)
Tax credit on Industrial
Investments
Sub-section (6) in Section 65
was not previously existed.
Tax Credit for Enlistment
Company was allowed tax
credit up to 15% of the tax
payable for the tax period in
which company has been
enlisted on registered stock
exchange in Pakistan.
A new sub- section has been proposed to be inserted in section
65, to provide general guidance relating to claim of tax credits,
to take away the ambiguity.
The Bill proposes to enhance the tax credit from 15% to 20% of
the tax payable.
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Sec. 65(E)
Tax credit for Industrial
Undertaking
Tax credit was admissible for
the period of 4 years after
installation of plant or
machinery.
The tax credit for a period of 5 years has been proposed to be
allowed, beginning from the date of setting up oncommencement of commercial production from the new plant
or expansion project whichever is later.
7. Sec. 147 Advance Payment of Tax
Previously, a company or an
AOP was required to pay
advance tax in 4 equal
installments on a quarterly
basis. Where they estimate
that the tax payable for the
relevant tax year is likely to
be more than the amount
based on latest assessed
income and tax liability they
can make an estimate at any
time before the last
installment is due and pay the
advance tax accordingly.
Now taxpayers are required to estimate the tax payable for the
relevant tax year at any time before the second installment is
due i.e. even before completion of half year after such
estimation. The proposed amendment requires payment of
50% of the estimated advance tax by the due date of the second
quarter of the relevant tax year. The remaining 50% is required
to be paid in the 3rd and 4th installments.
8. Sec 64B
Sec. 64(A)
Tax Credit for Employment
Generation by
Manufacturers
Section 64B was not
previously existed
Deductible Allowance for
Profit on Debt
Presently a person was
entitled to a tax credit in
respect of any profit or share
in rent/ share in appreciation
for value of house which is
paid on a loan given by a bank
A tax credit has been introduced for companies to encourage
employment generation. Under this provision, any company
engaged in manufacturing formed between, July 1, 2015 to June
30, 2018 shall be allowed a tax credit of 1% of tax payable for
every 50 employees registered with EOBI and social security
schemes. The maximum tax credit shall, however, not exceed
10% of the tax payable.
It has been proposed to insert a new section 64A in the same
Part X of Chapter III which deals with tax credits. Although this
section caters to almost the same benefit on the amount paid
for the purpose of construction a new house or acquisition of a
house, however, instead of allowing a tax credit, the proposed
section allow a deductible allowance to the individual. All
other aspects and threshold for eligibility remain the same as
discussed above except that the ceiling of Rs.750,000 is
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or NBFI or by government or
local government or a public
company listed on the stock
exchange. The tax
credit is available if the loan
is utilized for construction ofa new house or acquisition of
house. The tax credit is
presently available at the
average rate of tax of the
person on the lesser of the
total amount paid or 50% of
the person’s taxable income
for the year or
Rs.750,000.
proposed to be enhanced to Rs.1 million.
9. Sect. 62 Tax Credit for Investment
in Shares and Life
Insurance Premium Paid
Tax credit was allowed up to
lower of the cost of acquiringthe shares/ premium paid or20% of the person’s taxable
income for the year or Rs.1
million.
Limit regarding granting tax credit has been proposed to be
enhanced from Rs.1 million to Rs.1.5 million
10. Sec 154 Exports
Previously, tax deductible in
proceeds of export was
considered as FTR.
An irrevocable option has been proposed to be offered to
exporters to opt out of final taxation at the time of filing the
return. As per the option the tax deducted under this section
shall be treated as minimum tax instead of a final tax of the
person opting out of FTR.
11. Sec.181 Taxpayers Registration
Previously it was on the
direction of the board to
allow CNIC of individual as
his/her NTN.
It has been proposed that the Board may in the case of
individuals allow use of NIC, issued by the NADRA, in place of
NTN .Every CNIC holder would become NTN holder regardless
of the fact whether he has taxable income or not. Hence, such
an individual will be required to file a tax return since under
section 114 of the Ordinance, the requirement of filing a return
of income is also on a person who has obtained NTN.
12. Sec. 236P Advance Tax on Banking
Transaction Otherwise
Than Through Cash
A unique regime for collection of tax on banking transactions
has been proposed to be introduced for non-filer persons for
tax purposes. Under this regime almost all banking
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transactions including sale of instrument like demand draft,
pay order, etc. and transfer of any sum through cheque and
other similar manners or clearing interbank transfer through
cheques shall be subject to collection of tax at the rate of 0.6%
of the transaction amount. This provision will only be
applicable where the sum total of paymentsFor all transactions exceed Rs 50,000 in a day.
13. Sec.165 B Collection and Exchange of
Information
Sec.165B was not previously
existed As per proposed section 165B every financial institution would
be required to provide information to the Board in respect of
non-resident persons.
14. Sec.94 Dividend
Rate of Dividend was 10%
and reduced rate of tax was
7.5% applicable to dividends
paid by certain specified
companies.
The rate of tax on dividends for all tax payers has been
proposed to be increased from 10% to 12.5%, with no change
in reduced rate applicable to dividends paid by certain
specified companies.
15. Sec. 114 Revision of Return
The persons who were
obliged to file a return of for a
tax year. The revision of said
return was subject to certain
circumstances and one such
option was permission of
commissioner.
It has been proposed that where a return of income is revised
within 60 days of its filing, the condition of obtaining prior
approval from the Commissioner will not be applicable.
16. Sec.128 Grant of Stay by
Commissioner
(Appeal)
Previously, the Commissioner
(Appeals) was empowered to
grant stay from recovery of
tax demand to a taxpayer for
an aggregate period not
exceeding 30 days.
Powers have granted to the Commissioner (Appeals) to grant
stay from recovery of tax demand for a further period of 30
days subject to the condition that the appeal shall be decided
within the extended period of 30 days.
17. Sec. 137 Due Date for Payment of
Tax Demand
Previously, due date for
payment of tax was
Within 15 days from the date
of service notices
30 days would be available for payment of tax demand arising
from an order passed by the tax authorities.
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18. Sec. 236Q Payment to Residents for
Use of Machinery and
Equipment
Sec.263Q was not previously
existed
As per proposed Sec 236Q withholding of tax @ 10% from
payments to a resident person for use of or right to useindustrial, commercial and scientific equipment as well as on
account of rent of machinery is proposed. Tax under this
section would be considered as Final tax. The obligation to
withhold tax under this section has been proposed on a
“prescribed person” as per the definition given in section
153(7) of the Ordinance.
19. Sec. 236R Collection of Tax on
Remittance of Education
Expenses Abroad
Sec. 236 (R) was not
previously existed As Per Sec. 236R collection of advance tax @ 5% proposed to
be levied on the amount of education expenses remitted
abroad. Education expenses include tuition fee, boarding and
lodging expenses, any payment for distant learning to any
institution or university in a foreign country and any other
expense related or attributable to foreign education.The obligation to collect tax from education related expenses is
on banks, financial institutions, foreign exchange companies or
any other person responsible for remitting foreign currency
from the payer of education related expenses. It would be
adjustable against the tax liability of the payer of education
related expenses.
20. Sec. 227B Concept of Whistleblower
Sec. 227B was not previously
existed
Under Proposed new Sec. 227B new concept regarding
whistle-blower has been introduced in following tax laws:
Income Tax Ordinance, 2001
Sales Tax Act, 1990
Federal Excise Act, 2005
Whistle-blower is a person who reports concealment or
evasion of tax/duty leading to detection or collection of
tax/duty, corruption or misconduct, to the competent authority
having power to take action against the person or a income tax,
sales tax or federal excise authority committing fraud,
corruption, misconduct, or involved in concealment or evasionof tax/duty.
Board may sanction reward to whistleblowers in cases of
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concealment or evasion of tax/duty, corruption or misconduct
providing credible information leading to such detection of
evasion of tax/duty.
The procedure for sanction of award and its apportionment is
to be notified in the official Gazette by the Board.
The claim of reward by the whistleblower shall be rejected inthe following circumstances-
the information provided is of no value;
the Board already had the information;
the information was available in public records; or
no collection of duties is made from the informationprovided from which the Board can pay the reward
21. Sec.236T Collection of Tax by
Pakistan Mercantile
Exchange Limited
Sec. 236T was not previously
existed
The proposed Section 236T obliges PMEX to collect tax @ 0.1%
from its members
(i) on purchase and sale of futures commodity contracts, and
(ii) on purchase and sale of futures commodity contracts in
lieu of tax on the commission earned by such members.
It is proposed that the tax so collected shall be a minimum tax.
PMEX has been defined in the proposed Clause (42A) of Section
2 of the Ordinance.
22. Sec. 177(11) Audit
Sub-section 11 in Sec. 177
was not previously existed
A Panel comprising of two or more persons will be empowered
to conduct an audit including a forensic audit of income tax
affairs of a taxpayer. The Panel shall consist of an Officer of
Inland Revenue or a Firm of Chartered Accountant or Cost and
Management Accountant or any other person as directed by
the FBR.
23. Sec. 214 D Automatic Selection for
Audit of Retailers
Sec. 214D was not previously
existed.
It has been proposed that retailers who are registered under
Rules (4) and (6) of Sales Tax Special Procedures Rules, 2007
i.e. large retailers either operating as unit of a national or
international chain of stores, operating an air-condition mall,
retailer who has a credit and debit card machine, retailer
whose annual preceding electricity bill exceeds Rs.600,000 and
a wholesaler-cum-retailer engaged in bulk import and other
retailers who pay sales tax on electricity bills. The aforesaid
retailers are proposed to be automatically selected for audit if
they do not fulfill the following conditions –
enlistment on the active taxpayer list in case of large
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retailer registered under Rule (4)
Complete return of income furnished within time
The tax payable along with the return has been dulypaid
2% tax is paid under section 113 i.e. on turnover basisin case of small retailer registered under Rule (6) who
files the return below taxable limit and in the
preceding tax year has either declared income belowtaxable limit or not filed the return
In case of small retailer who has declared taxableincome in previous year he must pay 25% higher tax
than the previous tax year.
24. Sec. 15A Deductions Against Income
from Property
A deduction not exceeding
6% of the rent chargeable to
tax in respect of property was
allowed
on account of expenditure
incurred for the purpose of
collecting rent.
Deduction allowed has been proposed to be enhanced to cover
expenses incurred including administration expenses subject
to the threshold of 6% of rent chargeable to tax in respect of
such property.
25.
Sec.113 B Minimum Tax on Land
Developers
Minimum tax at the rate ofRs.50 per square yard as per
the layout or site plan had
been proposed.
It has been proposed that imposition of minimum tax at the
rate of two percent of the value of land notified by anyauthority for the purpose of stamp duty.
26. Sec. 148 Power of the Board to
Exempt Goods from
Collection of Income Tax at
Import stage
The Board has the power to
exempt certain goods or
persons from collection of
income tax at the time of
import.
Such power has been proposed to be withdrawn.
27. Sec. 148A Tax on Local Purchase of
Cooking Oil or Vegetable
Ghee
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Sec. 148A was not previously
existed
It has been purposed as per Sec. 148A the manufacturers of
cooking oil or vegetable ghee shall be chargeable to tax at the
rate of two percent on purchase of locally produced edible oil.
Such tax shall be final tax in respect of income accruing from
locally produced edible oil.
28. Sec.171 Additional Payment forDelayed Refunds
Previously compensation rate
for delay was 15% of the
amount of refund.
Compensation rate for delay has been proposed to be changed
i.e KIBOR Plus 0.5% per annum.
29. Sec.205 Default Surcharge
Previously, rate of surcharge
was 18% per annum
Rate of surcharge has been proposed to be reduced to 12% per
annum.
30. Sec.
207
INCOME TAX AUTHORITIES
(PREVIOUSLY NOT EXISTED)
Consequent t o the proposal of Section 177 whereby “special
audit panel” shall be appointed, the Bill also seeks to insert a
new clause in section 207 whereby “special audit panel” shall
also be treated as a Tax Authority.
31. Sec.231B Advance Tax on Private
Motor Vehicles
Every manufacturer of motor
car or jeep is required to
collect advance tax at the
time of sale.
The purposed Scope of this section has been broaden by
replacing word “motor car or jeep” with vehicle.
The motor vehicle includes car, jeep, van, sports utility vehicle,
pickup trucks, caravan automobile, limousine, wagon or any
other automobile used for private use. It has also been
proposed to insert the definition of the expression “date of first
registration” for different modes of acquisition of
Vehicles.
32. Sec. 236 Advance Tax on Telephone
and Internet user
Advance tax was previously
collected on telephone bill,
prepaid card and sales of
units through electronic
medium.
Internet bills and prepaid card for internet has been proposed
to be within the ambit of this section. It would be taxed at rate
of 14% of amount of bill.
33. Sec. 236H Advance Tax on Sale to
Retailers and Wholesalers
Every manufacturer,
distributor, dealer, Bill has excluded sales of fertilizer from collection of advance
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wholesaler or commercial
importer of various items
listed in this section including
fertilizer are required to
collect advance tax on sale to
a retailer
tax under Sec.236H.
34. Sec.231A,
231AA,236B,
236C,236,D236I,
236k
New Sec.236 O
Exemption Was Available
to Various Persons
Regarding Advance Tax
Bill has been proposed to delete these section and has
introduced new section in their respect Sec.236O where by
following person shall be exempted from collection of advance
tax under the entire chapter XII:
the Federal Government or a Provincial Government
a foreign diplomat or a diplomatic mission in Pakistan
a person who produces a certificate from theCommissioner that his income during the tax year is
exempt.
35. Sec.
236S
DIVIDEND IN SPICIE
(PREVIOUSLY NOT
EXISTED)
The Bill proposes to insert a new section viz. section 236S
which provides for collection of tax from the gross amount of
dividend in specie @ 12.5%. The tax so collected shall be final
tax in terms of section 5 of the Ordinance.
FIRST SCHEDULE
TAX RATES FOR INDIVIDUALS AND ASSOCIATION OF PERSONS
The rates of tax chargeable for the tax year 2016 (corresponding to the income year ending at any time between
01 July 2015 to 30 June 2016) have been revised as under. The basic threshold has remained unchanged:
Salaried taxpayers
No. SALARIED TAXPAYER RATE
1 Upto Rs.400,000 Nil
2 Rs.400,001 – 500,000 2% of excess over Rs.400,000
3 Rs.500,001 – 750,000 Rs.2,000 + 5% of excess over Rs.500,000
4 Rs.750,001 – 1,400,000 Rs.14,500 + 10% of excess over Rs.750,000
5 Rs.1,400,001 – 1,500,000 Rs.79,500 + 12.5% of excess over Rs.1,400,000
6 Rs.1,500,001 – 1,800,000 Rs.92,000 + 15% of excess over Rs.1,500,000
7 Rs.1,800,001 – 2,500,000 Rs.137,000 + 17.5% of excess over Rs.1,800,000
8 Rs.2,500,001 – 3,000,000 Rs.259,500 + 20% of excess over Rs.2,500,000
9 Rs.3,000,001 – 3,500,000 Rs.359,500 + 22.5% of excess over Rs.3,000,000
10 Rs.3,500,001 – 4,000,000 Rs.472,000 + 25% of excess over Rs.3,500,000
11 Rs.4,000,001 – 7,000,000 Rs.597,000 + 27.5% of excess over Rs.4,000,000
12 Over Rs.7,000,000 Rs.1,422,000 + 30% of excess over Rs.7,000,000
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Non-salaried taxpayers
NO. Non-Salaried taxpayers RATE
1 Upto Rs.400,000 Nil
2 Rs.400,001 – 500,000 7% of excess over Rs.400,0003 Rs.500,001– 750,000 Rs.7,000 + 10% of excess over Rs.500,000
4 Rs.750,001– 1,500,000 Rs.32,000 + 15% of excess over Rs.750,000
5 Rs.1,500,001 – 2,500,000 Rs.144,500 + 20% of excess over Rs.1,500,000
6 Rs.2,500,001 – 4,000,000 Rs.344,500 + 25% of excess over Rs.2,500,000
7 Rs.4,000,001 – 6,000,000 Rs.719,500 + 30% of excess over Rs.4,000,000
8 Over Rs.6,000,000 Rs.1,319,500 + 35% of excess over Rs.6,000,000
Reduction in tax liability
A senior citizen of Pakistan, being a taxpayer, aged sixty years or more on the first day of the relevant tax year, isallowed a rebate of 50% of the tax payable if his/her taxable income in that tax year is Rs.1,000,000/- or less. The
said rebate continues and the rule, that in determining the threshold as above, income under final tax regime shall
be excluded, also remains unchanged.
In addition, the relief as above shall also be available to an individual who, irrespective of his age, is registered as a
disabled person according to his/her Computerized National Identity Card.
RATES OF TAX FOR COMPANIES
[Clause (i), Division II, Part I of First Schedule]
NO.Companies Tax Year 2015 2016
1 Public and Private 33 32
2 Cooperative and Finance Society 33 32
3 Banking 35 35
4 Small 25 25
The threshold on capital for small Companies is proposed to be enhanced for a maximum Rs.25 million to Rs.50
million
Rate of Super tax for rehabilitation of temporarily displaced persons
The rate of super tax for rehabilitation of temporarily displaced persons have been proposed as under:
Taxpayer RATE %
Banking Company 4
Person, other than a banking company, having income of Rs.500
million or more 3
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RATE OF DIVIDEND TAX
[Division III, Part I of First Schedule]
Dividend from Tax Year 2015 2016
Companies owning power project privatized by WAPDA,
companies set-up for power generation and companies
supplying coal, exclusively to power generation projects
7.5 7.5
Others 10 12.5
Stock fund, if dividend receipts are less than capital gains 12.5 15
Dividend received by a company from a collective investment scheme, REIT Scheme or a mutual fund, other than a
stock fund, shall be taxed at the rate of 25%.
However, if a Developmental REIT Scheme with the object of development and construction of residential
buildings is set up by 30th June, 2018, dividend received by a person from such Developmental REIT Scheme shall
be reduced by fifty percent for three years from 30th June, 2018.
Rate of tax on profit on debt
The existing rate of tax on profit on debt is 10%. The proposed rates of tax are as under:
AMOUNT Rate %
Upto Rs.25,000,000 10%
Rs.25,000,001 –50,000,000
Rs.2,500,000+ 12.5% of the
amount exceeding
Rs.25,000,000
Over Rs.50.000,000
Rs 5,625,000 + 15% of the
amount exceedingRs.50,000,000
CAPITAL GAINS ON DISPOSAL OF SECURITIES U/S 37A
[Division VII , Part I of First Schedule]
The rate card for levying tax on capital gains arising on sale of securities (other than Companies), as referred to in
Section 37A have been proposed as under:
Holding period Tax Year 2015 2016TAX YEAR
2015 2016
Less than 12 months 12.5 15
More than 12 months but less than 24 months 10 12.5
More than 24 months but less than 48 months - 7.5
The rate for companies in respect of debt securities shall be as specified in Division II of Part I of First Schedulewhich is proposed to be 32%
However, mutual fund or a collective investment scheme or a REIT scheme shall deduct, on redemption of
securities, capital gains tax at the revised rates as specified below:
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TaxpayerRATE (%)
FILER NON FILER
Individual and AOP10% for stock funds
17.510% for others
Company10% for stock funds
2525% for others
In case of a stock fund if dividend receipts of the fund are less than capital gains, the rate of tax deduction shall be
12.5%
CAPITAL GAINS ON DISPOSAL OF IMMOVABLE PROPERTY
[Division VIII , Part I of First Schedule]
The rate of tax on capital gain on immovable property remained unchanged and are as under:
Holding period of immovable property Rate % RATE %
Upto 1 year 10
More than 1 year but not more than two years 5
More than 2 years -
MINIMUM TAX UNDER SECTION 113
[Division IX , Part I of First Schedule]
The rates of minimum tax as a percentage of the taxpayers’ turnover have remained unchanged and are as under
S.
No.Person(s)
Minimum tax
as percentage
of person’s
turnover for
the year
(1) (2) (3)1. (a) Oil marketing companies, Oil refineries, Sui Southern Gas Company Limited and
Sui Northern Gas Pipelines Limited ( for the cases where annual turnover exceeds
rupees one billion.);
(b) Pakistani Airlines; and
(c) Poultry industry including poultry breeding, broiler production, egg production
and poultry feed production.
0.5%
2. (a) Distributors of pharmaceutical products, fertilizers and cigarettes;
(b) Petroleum agents and distributors who are registered under the Sales Tax Act,
1990;
(c) Rice mills and dealers; and
0.2%
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(d) Flour mills.
3. Motorcycle dealers registered under the Sales Tax Act, 1990. 0.25%
4. In all other cases. 1%
Advance tax on imports
The Bill proposes to enhance the scope of the table and has specified separate tax rates for filer and non-filer and
now the table reads as under:
Taxpayer Rate
Rate % (of import
value as increased
by customs duty,sales tax and
federal excise
duty)
FilerNon-filer
Industrial undertaking importing remeltable steel (PCT Heading 72.04) and
directly reduced iron for its own use
1 1.5
Persons importing plastic fertilizers in pursuance of Economic Coordination
Committee of the cabinet's decision No. ECC-155/12/2004 dated 9
December 2004
Persons importing urea
Manufacturers covered under Notification No. S.R.O. 1125(I)/2011 dated 31
December 2011
Proposes to insert Persons importing Gold; andProposes to insert Persons importing Cotton
Persons importing pulses 2 3
Commercial importers covered under Notification No. S.R.O. 1125(I)/2011
dated 31 December 20113 4.5
Ship breakers on import of ships 4.5 6.5
Industrial undertakings not covered above5.5 8
Companies not covered above
Persons not covered above 6 9
Advance tax on dividends
The Bill proposes to enhance the rate of withholding tax on dividend for non-filer to 17.5% from existing 15%.
However, a collective investment scheme, REIT Scheme and mutual fund would deduct tax on payment to a non-
filer as per the following table:
Stock FundMoney market fund, Income Fund or any
other fund
Individuals 10 10
Company 10 25AOP 10 10
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Further, the Bill proposes to reduce the withholding rates of taxes to 50% on the dividend paid by the
Developmental REIT scheme set up to 30th June 2018 for development and construction of residential buildings
for three years from 30 June 2018.
However, in the case of stock fund, if dividend receipts are less than the capital gains, the rate of tax to be
deducted shall be 15% instead of the existing 12.5%.
Advance tax on profit on debt
The advance tax rate for recipients who are non filers is proposed to be 17.5% from 15% if the yield or profit paid
exceeds Rs. 500,000.
Advance income tax on payment to non-residents
The Bill proposes to segregate the rates of withholding taxes between corporate and others on account of making
payment to a permanent establishment (PE) and brings the rate of withholding in line with the rates applicable to
a resident person which are as under:
Rate of tax
Corporate Non-Corporate
Filer Non-Filer Filer Non-Filer
For supply of goods 4 6 4.5 6.5
For services other than transport services 8 12 10 15
For execution of contract 7 10 7.5 10
The Bill also seeks to include the payment to a sportsperson under the ambit of execution of contract by PE on
which the rate of withholding tax at 10% of the gross amount payable.
Advance income tax on payment to resident on payments for goods and services
The Bill seeks to introduced the rate of withholding tax for non-filer when making payments on account of goods
and services, which are as under
Rate of tax
Corporate Non-Corporate
Filer Non-Filer Filer Non-Filer
For supply of goods 4 6 4.5 6.5
For services other than transport services 8 12 10 15
For execution of contract 7 10 7.5 10
The Bill seeks to treat the payment of sportsperson under the ambit of execution of contract at 10% as final tax
effective from the tax year 2013.
Collection of advance income tax on petroleum products
The Bill seeks to introduce the rate of collection of tax for non-filer which at 15% of gross amount for every
person selling petroleum products to a petrol pump operator. However, the withholding rates for a filer remain
unchanged at 12% of the gross amount.
Collection of advance income tax on Brokerage and Commission
The Bill seeks to enhance the rate of collection of tax from advertising agents along with introduction of rate of
collection of taxes from a non-filer which are as under:
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Rate of tax
Filer Non-Filer
For advertising agents 10% 15%
Other than advertising agents 12% 15%
Collection of advance income tax on goods transport vehicles
Vide Finance Act, 2012 a tax was introduced on goods transport vehicles at the rate of Rs.5 per KG of the laden
weight. Now the Bills seeks to reduce the rates of collection of tax on goods transport vehicles which are as under:
Rate of tax
Filer Non-Filer
Amount of tax on per KG of laden weight Rs. 2.5 Rs. 4
Collection of advance income tax on passenger transport vehicles
The Bill seeks to revise the rate of collection of tax on passenger transport vehicles plying for hire for on the basis
of seating capacity which are as under:
CapacityRs. Per seat per annum
Filer Non-Filer
Four or more persons but less than ten Rs. 50 Rs.100
Ten or more persons but less than twenty Rs.100 Rs.200
Twenty persons or more Rs.300 Rs.500
Collection of advance income tax on private motor vehicles
The Bill also seeks to revise the rate of collection of advance income tax payable for tax year 2016 at the time of
paying annual motor vehicle tax, in the case of private motor vehicles as under:
Engine Capacity Amount of tax
Filer Non-Filer
Up to 1000 cc Rs.800 Rs.1,200
1001 cc – 1199 cc Rs.1,500 Rs.4,000
1200 cc – 1299 cc Rs.1,750 Rs.5,000
1300 cc – 1499 cc Rs.2,500 Rs.7,500
1500 cc – 1599 cc Rs.3,750 Rs.12,000
1600 cc – 1999 cc Rs.4,500 Rs.15,000
2000 cc & above Rs.10,000 Rs.30,000
Advance tax on purchase, registration and transfer of Motor Vehicles
[Clause IV, Division III, Part IV of First Schedule]
Where the motor vehicle tax is deducted in lump sum, the previous table has been replaced by this one:-
Amount of Tax
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Engine Capacity Filers Non-filers
Upto 850cc - 5,000
851cc - 1000cc 5,000 15,000
1001cc – 1300cc 75,00 25,000
1301cc – 1600cc 12,500 65,000
1601cc – 1800cc 18,750 100,000
1801cc – 2000cc 25,000 135,000
2001cc - 2500cc 37,500 200,000
2501cc – 3000cc 50,000 270,000
Above 3000cc 62,500 300,000
RATES OF COLLECTION OF TAX UNDER SECTION 236 [TELEPHONE USERS]
[Clause (b), Division V, Part IV of First Schedule]
The Bill seeks to levy the tax on internet bill of a subscriber and pre-paid cards for internet at the rate of 14%.
CASH WITHDRAWL FROM BANK
[Division VI, Part IV of First Schedule]
The Bill proposes to enhance the rate of collection of advance tax on cash withdrawal by non-filer from 0.5% to
0.6% for transactions exceeding Rs. 50,000 per day.
ADVANCE TAX ON TRANSACTION IN BANK
[Division VIA, Part IV of First Schedule]
The Bill proposes to introduce the rate of collection of advance tax on banking transactions other than cash
transactions by a non-filer to 0.6% if the amount exceeds Rs. 25,000 in a day.
ADVANCE TAX ON SALE TO DISTRIBUTORS, DEALERS AND WHOLESALERS
[Division XIV, Part IV of First Schedule]
The rate of collection of tax under section 236G shall be as follows:-
Category of Sale Rate of Tax
Filer Non-Filer
Fertilizers 0.7% 1.4%
ADVANCE TAX ON DOMESTIC ELECTRICITY CONSUMPTION
[Division XIX, Part IV of First Schedule]
The rate of tax to be collected under section 235A shall be-
7.5% if the amount of monthly bill is Rs.75,000 or more; and
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ADVANCE TAX ON INTERNATIONAL AIR TICKET U/S 236L
[Division XX, Part IV of First Schedule]
The rate of tax to be collected under section 236L shall be-
Sr.# Type of ticket Rs. Per Person
1 First/ Executive Class 16,000
2 Other than economy 12,000
3 Economy 0
Advance tax on Banking transactions otherwise than through cash for non-filer
The rate of collection of advance tax for tax year 2016 banking transaction for non-filer are proposed to be
leviable at the rate of 0.6% of the transaction for non-filer if the total transactions in a day exceeds Rs. 50,000.
Rate of collection of tax by Pakistan Mercantile Exchange Limited
The rate of collection of tax by Pakistan Mercantile Exchange Limited is proposed as under:
1. Sale or purchase of future commodity contract from its member @ 0.1%
2. Commission on sale or purchase of future commodity contract from its members on commission
earned by them @ 0.1%
Advance tax on the payment to residents for use of machinery and equipment
The rate of deduction of tax is proposes at 10% of the gross amount of payment for the use or the right to use
industrial, commercial and scientific machinery and equipment.
Collection of advance tax on remittances of education expenses
The bill proposes to collect tax at the rate of 5% from the amount remitted abroad on account of education related
expenses.
SECOND SCHEDULE
EXEMPTIONS FROM TOTAL INCOME
[Clause (35), (113) & (126F) Part I of Second Schedule]
Clause (20) (113) (126F) has been omitted.
[Clause (61), Part I of Second Schedule]
Tax credit in respect of donations to The Indus Hospital, Karachi
The above Clause contains a list of names of approved donees, to whom donation made is exempt from tax. The
name of “The Indus Hospital, Karachi” has been proposed to be added to the said list .
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[Clause (66), Part I of Second Schedule]
Exemption to The Indus Hospital, Karachi
The Bill proposes to grant exemption to the income of “The Indus Hospital, Karachi” by inserting its name in the
list of institutions and entities whose income is exempt from tax.
[Clause (99A), Part I of Second Schedule]
Sale of immoveable property to a REIT Scheme
The above Clause grants exemption to profits and gains accruing to a person on sale of immoveable property to
REIT Scheme upto 30 June 2015. The Bill proposes to enhance the period of sale to 30 June 2020 in case of sale of
immoveable property to a Developmental REIT Scheme with the objective of development and construction of
residential buildings.
[Clause (126A), Part I of Second Schedule]
Exemption to the income derived by China Overseas Port Holding Company Limited
The income derived by China Overseas Port Holding Company Limited from Gwadar port operations presently
enjoys exemption from tax for a period of twenty years beginning 06 February 2007. The Bill proposes to extend
the exemption period from 20 years to 23 years.
[Clause (126I), Part I of Second Schedule]
Income of Manufacturer of certain Plant, Machinery & Equipment
A new Clause is being proposed to be inserted as a consequence of which profits and gains derived by a taxpayer
from an industrial undertaking set-up by 31 December 2016, which is engaged in the manufacturing of plant,
machinery, equipment and items with dedicated use (no multiple uses) for generation of renewable energy from
sources like solar and wind for a period of five years beginning from 01 July 2015.
[Clause (126J), Part I of Second Schedule]
Income of Warehousing or Cold Chain facilities
A new Clause is being proposed to be inserted as a consequence of which profits and gains derived by a taxpayer
from an industrial undertaking set-up between 01 July 2015 and 30 June 2016 which is engaged in operating,
warehousing or cold chain facilities for storage of agriculture produce for a period of three years beginning with
the month in which the industrial undertaking is set-up or commercial operations are commenced whichever is
later.
[Clause (126K), Part I of Second Schedule]
Income from operating Halal Meat production
A new Clause is being proposed to be inserted as a consequence of which profits and gains derived by a taxpayer
from an industrial undertaking set-up between 01 July 2015 and 31 December 2016 which is engaged in
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operating halal meat production and has obtained halal certification for a period of four years beginning with the
month in which the industrial undertaking is set-up or commercial production is commenced whichever is later.
[Clause (126L), Part I of Second Schedule]
Income from industrial undertaking set-up in KPK
A new Clause is being proposed to be inserted as a consequence of which profits and gains derived by a taxpayer
from a manufacturing unit set-up in KPK Province between 01 July 2015 and 30 June 2018 for a period of five
years beginning with the month in which the industrial undertaking is set-up or commercial production is
commenced whichever is later. However, the exemption is subject to the following conditions:
- The manufacturing unit is set-up between 01 July 2015 and 30 June 2018 both days inclusive.
- The manufacturing unit is not established by splitting up or reconstruction or reconstitution of an undertaking
already in existence or by transfer of machinery of plant from an undertaking established in Pakistan at any time
before 01 July 2015.
[Clause (126M), Part I of Second Schedule]
Income from Transmission Line Project
A new Clause is being proposed to be inserted as a consequence of which profits and gains derived by a taxpayer
from transmission line project set-up in Pakistan between 01 July 2015 and 30 June 2018. The exemption is
applied to projects:
- Owned and managed by a company formed for operating the said project and registered under the Companies
Ordinance, 1984 and having its registered office in Pakistan;
- Not formed by the splitting up, or the reconstruction or reconstitution, of a business already in existence or by
transfer to a new business of any machinery or plant used in a business which was being carried on in Pakistan at
any time before the commencement of the new business; and
Owned by a company fifty percent of whose shares are not held by the Federal Government or Provincial
Government or a Local Government or which is not controlled by the Federal Government or a Provincial
Government or a Local Government.
[Clause (141), Part I of Second Schedule]
Exemption to LNG Terminal Operators and Terminal Owners
A new clause is being proposed to be inserted by virtue of which profits and gains derived by LNG Terminal
Operators and Terminal Owners will be exempt from tax for a period of five years from the date of
commencement of commercial operations.
[Clause (142), Part I of Second Schedule]
Exemption to income from social security contribution
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A new clause is being proposed to be inserted as a consequence of which income from social security
contributions derived by Employees’ Social Security Institutions of Balochistan, Khyber Pakhtunkhwa, Punjab and
Sindh shall be exempt from tax. However, income other than income from social security contributions would
remain taxable.
[Clause (13C), (14), (14A), (14B), (21), (56B), (56H), (59)(sub clause(iii)), (72A) & (83) Part II of Second
Schedule]
These clauses have been omitted.
[Clause (11A), Sub-clause (iv) Part II of Second Schedule]
Exemption from minimum tax to KAPCO
Exemption provided to income arising to the purchaser of Kot Addu Power Station from owning and operating the
power station under Clause (138), Part I of the Second Schedule to the Ordinance, was withdrawn through the
Finance Act, 2008.
The Bill now proposes to omit sub-clause (iv) of Clause (11A), which provided exemption from levy of minimum
tax to KAPCO under section 113 of the Ordinance, being redundant provision.
[Clause (11A), Sub-clause (xviii), Part II of Second Schedule]
Coal Mining Project in Sindh – Exemption from minimum tax
Profits and gains derived by a taxpayer from coal mining project in Sindh, supplying coal exclusively to power
generation projects is exempt from tax under Clause (132B) of Part-I of the Second Schedule to the Ordinance
which was introduced vide Finance Act, 2014. The Finance Act, 2014 also inserted reference of Clause (132B) in
Sub-clause (v) of Clause (11A) of the Part-IV of the Second Schedule to the Ordinance exempting from levy of
minimum tax, under Section 113 of the Ordinance receipts from sale of electricity, which was not appropriate
since Clause (132B) exempts profits and gains from coal mining projects. The Bill has now rectified the situation
and proposes to delete the reference of Clause (132B) from Sub-clause (v) of Clause (11A). The Bill proposes to
exempt coal mining projects from levy of minimum tax under Section 113 of the Ordinance.
[Clause (11A), Sub-clause (xix) & Clause (11D) Part II of Second Schedule]
Exemption from minimum tax and alternate corporate tax to LNG Terminal Operators and Terminal Owners
With the proposed exemption from tax to profits and gains derived by LNG Terminal Operators and Terminal
Owners under Clause (141), Part I of the Second Schedule to the Ordinance, the Bill also proposes to exempt such
LNG Terminal Operators and Terminal Owners from the levy of minimum tax under section 113 of the Ordinance.
In line with the above proposed exemptions to LNG Terminal Operators and Terminal Owners, the Bill also seeks
to provide exemption from the levy of Alternative Corporate Tax under section 113C of the Ordinance.
[Clause (11A), Sub-clause (xx) Part II of Second Schedule]
Exemption from minimum tax for businesses in KPT, FATA & PATA
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Clause 126F, Part I of the Second Schedule to the Ordinance provided exemption to profits and gains derived by a
taxpayer, excluding manufacturers and suppliers of cement, sugar, beverages and cigarettes, located in the most
affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and PATA for the tax years 2010, 2011 and
2012.
Consequent amendment has now been proposed to be brought in Clause (11A) by way of inserting a new sub-
clause (xx) wherein exemption from the levy of minimum tax under section 113 of the Ordinance is beingproposed.
The proposed amendment would have a retrospective impact being related to tax years 2010, 2011 and 2012.
However, the Bill does not provide for any mechanism as to how such amendment would be applied in cases
where minimum tax has already been charged and paid for the above tax years. The viable medium to avail the
benefit of such exemption would either be revision of return already filed or, in cases where assessments have
been amended, rectification of the amended assessment orders passed for the relevant tax years.
[Clause (11A), Sub-clause (xxi) Part II of Second Schedule]
Rice Mills – Exemption from minimum tax for the tax year 2015
SRO 57(1)/2012 dated 24 January 2012 inserted Clause (13) in Part-III of the Second Schedule to the Ordinance
whereby rice mills were subject to a reduced rate of minimum tax, under Section 113 of the Ordinance at 0.2% of
the turnover. The Bill now proposes to exempt the levy of minimum tax in case of rice mills for the tax year 2015.
[Clause (11A), Sub-clause (xxii), (xxiii), (xxiv) & (xxv) Part II of Second Schedule]
Exemption from minimum tax
With the proposed exemption from tax on profits and gains derived by a taxpayer from the following industrial
undertakings, under respective Clauses of Part-I of the Second Schedule to the Ordinance, the Bill also proposes to
exempt such projects from the levy of minimum tax under Section 113 of the Ordinance.
Industrial Undertaking
Relevant Clauses of
Part-I of the Second
Schedule
Income of Manufacturer of equipment with dedicated used for
generation of renewable energy
126I
Income of Warehousing or Cold Chain Facilities126J
Income from Operating Halal Meat Production126K
Income from Industrial Undertaking set-up in KPK126L
[Clause (11A), Sub-clause (xix) & Clause (11D) Part II of Second Schedule]
Exemption from minimum tax and alternate corporate tax to LNG Terminal Operators and Terminal Owners
Clause (11A), Sub-clause (xix) & Clause (11D)With the proposed exemption from tax to profits and gains derived by LNG Terminal Operators and Terminal
Owners under Clause (141), Part I of the Second Schedule to the Ordinance, the Bill also proposes to exempt such
LNG Terminal Operators and Terminal Owners from the levy of minimum tax under section 113 of the Ordinance.
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In line with the above proposed exemptions to LNG Terminal Operators and Terminal Owners, the Bill also seeks
to provide exemption from the levy of Alternative Corporate Tax under section 113C of the Ordinance
[Clause (16A), Part II of Second Schedule]
Exemption from withholding of tax for advertisement services
Under the aforesaid Clause, exemption was provided from withholding of tax under section 153(1)(b) of the
Ordinance in respect of payments to electronic and print media for advertisement services. The exemption thereinhas been proposed to be withdrawn in the Bill.
[Clause (46), Part II of Second Schedule]
Exemption from withholding of tax while making payment to PE of a non-resident E&P companies
Earlier, payments in respect of supply of goods, rendering of services and execution of contracts to a permanent
establishment (PE) of a non-resident person were subject to withholding of tax under section 153(1) of the
Ordinance. Clause (46), Part IV of the Second Schedule to the Ordinance provided for exemption from withholding
of tax under section 153(1) in respect of payment received by an oil distribution company or an oil refinery or a
PE of non-resident Petroleum Exploration and Production (E&P) Companies.
Through the Finance Act, 2012, payment to a PE of non-resident was excluded from the purview of section 153(1)
and a new sub section (2A) was inserted in section 152 of the Ordinance, providing for withholding of tax inrespect of above payments to a PE of non-residents.
However, corresponding change was not brought into Clause (46), Part IV of the Second Schedule to the
Ordinance resulting in withdrawal of exemption from withholding of tax on account of payment received by a PE
of non-resident Petroleum Exploration and Production (E&P) Companies.
The Bill now proposes to introduce amendment in the aforesaid clause by inserting reference to section 152(2A)to account for the above anomaly and restore exemption from withholding of tax to the above companies.
[Clause (56), Part II of Second Schedule]
Exemption from payment of tax at import stage under Section 148
The goods classified under Pakistan Custom Tariff falling under Chapter 27 is presently exempted from payment
of tax at import stage. The Bill seeks to withdraw the said exemption.
Likewise all goods classified under Chapter 99 of Pakistan Custom Tariff are also presently exempted from
payment of tax at import stage. The Bill seeks to withdraw said exemption from goods falling under PCT heading
9918.The Bill also proposes to exempt from payment of tax at import stage in case of certain petroleum products
imported by oil marketing companies and oil refineries as under:
- Petroleum oils and oils obtained from bituminous minerals crude- Furnace Oil
- High Speed Diesel Oil
- Motor split- JP-1
- Base Oil for lubricating oil
[Clause (57), Part II of Second Schedule]
Large Trading Houses
Large Trading Houses, subject to certain conditions, are exempt from payment of minimum tax under Section 113
of the Ordinance and are not subject to withholding of tax under Section 153 of the Ordinance. The Bill seeks to
propose to insert a further explanation to Clause (57) to clarify that in-house preparation and processing of food
and allied items for sale to customers shall not disqualify a company from being treated as a Trading House,provided all other conditions as mentioned therein are fulfilled and sale of such items does not exceed 2% of total
sales.
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[Clause (61A) & (28B) Part II of Second Schedule]
Deduction of tax from cash withdrawal by exchange companies
The Bill proposes to omit Clause (61A) which grants exemption from withholding of tax under Section 231A in
respect of cash withdrawal by exchange companies duly licensed and authorized by the SBP on bank accounts
exclusively dedicated for authorized business related transactions, subject to certain conditions.
However, Clause (28B) has been proposed to be inserted in Part II of the Second Schedule to the Ordinance
wherein a reduced rate of 0.15% has been proposed on cash withdrawals by such exchange companies.
[Clause (86) Part II of Second Schedule]
Exemption from invocation of Section 111
The above Clause was inserted in the Ordinance through SRO 1065(I)/2013 dated 20 December 2013, whereby
the investment made by an individual, AOP or company in a Greenfield industrial undertaking was granted
exemption, subject to certain conditions as specified therein, from probe of source of investment under Section
111 of the Ordinance. One of the conditions is that the investment has to be made on or after 01 January 2014 and
commercial production of the said industrial undertaking has to be commenced on or before 30 June 2016. The
Bill proposes to extend the period of commencement of commercial production from 30 June 2016 to 30 June
2017.
[Clause (90) Part II of Second Schedule]
Collection of advance tax on functions and gathering
The aforesaid clause provided exemption from collection of advance tax on functions and gatherings under
section 236D of the Ordinance to Federal Government, Provincial Government, an individual entitled to privileges
under the United Nations (Privilege and Immunities) Act, 1948 and a foreign diplomat or a diplomatic mission.The Bill now proposes to withdraw the above exemptions by omitting the above clause.
[Clause (91) & (92)Part II of Second Schedule]
Exemption from payment of tax at import stage under Section 148
The Bill proposes to exempt payment of tax at import stage at the time of import of certain equipment as under
[Clause (91)]:
- Tillage and seed bed preparation equipments.
- Seeding or planting equipments.- Irrigation, drainage and agro – chemical application equipments.
- Harvesting, threshing and storage equipments.
- Post-harvest handling and processing equipments.
The Bill further proposes to exempt payment of tax at import stage while importing [Clause (92)]:
- Aircraft whether imported or acquired on wet or dry lease.
- Maintenance kit for use in trainer aircrafts.
- Spare parts for use in aircrafts, trainer aircrafts or simulators.
- Machinery, equipment and tools for setting up maintenance, repair and overhaul workshops.
- Operational tools, machinery, equipment and furniture and fixtures on one time basis for setting up
Greenfield airports.
- Aviation simulators.
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SALES TAX
AMENDMENT IN SALES TAX ACT, 1990
Sr. Sec. Before Amendment After Amendment
1. Sec. 2(1)
Sec.
2(5)(ab)
Section
2(28)
Section
2(33)
DEFINITION
No such provision was available.
Cottage industry is already defined as
a manufacturer whose annual
turnover from taxable supplies
made in any tax period during
the last twelve months does not
exceed five million rupees.
Whose annual utility
(electricity, gas and telephone)bills during the last twelve
months do not exceed seven
hundred thousand rupees.
The def inition of “retailer” inter alia
states that “the total turnover per
annum shall be taken into account for
the purposes of registration of the
retailer under section 14”
Previously activities of the toll
manufacturer were considered as
“Service” and sales tax was charged at
the same rate.
ACTIVE TAXPAYERS The concept of ‘Active Taxpayers’ is aregistered person who does not fall in any of the following:
Black listed, blocked or suspended;
Fails to file return for 2 consecutive months;
Fails to file income tax return by due date;
Fails to file two consecutive monthly or annual
statements under section 165 of the Income Tax
Ordinance, 2001.
The Bill proposes to increase the limit of seven hundred
thousand to eight hundred thousand rupees. The
amendment is aimed to give effect to the increase in the
prices of the utilities in the recent years.
The scheme of registration and charging of sales tax by the
retailers is no more linked or based on turnover.
It is proposed that the transfer or delivery of goods
manufactured by the toll manufacturers (who manufacture
goods from the raw material not belonging to them, on
charges basis) to the owners or their nominated persons
would be considered as supply.
Proposed change is just to provide legal coverage to the
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the supplier in his return at the time of filing of
return by the buyer.
6. Sec.
14
Registration
Previous requirement for getting
register has been amended:
As per the proposed amendment every person who is
engaged in making taxable supplies in Pakistan, including
zero-rated supplies and falling in any of the following
categories is required to be registered under the Sales Tax
Act, 1990:-
a manufacturer who is not running a cottage
industry;
a retailer who is liable to pay sales tax under the Act
or rules made thereunder, excluding such retailer
required to pay sales tax through his electricity bill
under sub-section (9) of section 3;
an importer;
an exporter who intends to obtain sales tax refund
against his zero-rated supplies;
a wholesaler, dealer or distributor; and
a person who is required, under any other Federal
law or Provincial law, to be registered for the
purpose of any duty or tax collected or paid as if it
were a levy of sales tax collected under the Act
7 Sec. 33 Offences and Penalties
The penalty for late filing of the sales tax
return or for late deposit of tax is at a
concessional rate of Rupees 100 per day
provided the delay does not exceed
fifteen days.
The Bill now proposes to restrict the availability of the
concessional rate of Rs. 100 per day to a delay of upto ten
days only
8 Amendment in Fifth Schedule
Supply of locally manufactured plant and
machinery earlier zero rated under SRO
397(I)/2001.
Export of exempted goods by
manufacturer was zero rated.
Now continue to be treated as zero rated under fifth
schedule.
Now respective input tax adjustment would be available to
such manufacturer/exporter.
9 Sixth Schedule Exemptions
Not previously exempted Import or supply of following goods is proposed to be
exempted:
Aircraft, whether imported or acquired on wet or
dry lease
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Maintenance kits for use in trainer aircrafts of PCT
headings 8802.2000 and 8802.3000
Spare parts for use in aircrafts, trainer aircrafts or
simulators
Machinery, equipment and tools for setting up
maintenance, repair and overhaul (MRO) workshop
by MRO company recognized by Aviation Division
Operational tools, machinery, equipment and
furniture and fixtures on one-time basis for setting
up Greenfield airports by a company authorized by
Aviation Division.
Aviation simulators imported by airline company
recognized by Aviation Division.
Local supply of the following goods is proposed to be
exempted:
Raw and pickled hides and skins, wet blue hides and
skins
Bricks (upto June 30, 2018)
Crushed stone (upto June 30, 2018)
Items exempted under SRO 880(I)/2007, SRO 408(I)/2012
and SRO 760(I)/2012 are proposed to continue to be
exempted under Sixth Schedule.
Supplies of marble and granite by manufacturers exempted
under SRO 76(I)/2008 are proposed to continue to be
exempted under Sixth Schedule subject to conditions of
annual turnover of less than Rs 5 million and annual utility
bills not more than Rs 800,000.
Items covered under Fifth Schedule to the Customs Act, 1969now proposed to be exempted under Sixth Schedule.
Import and supply of equipment under PCT codes
3006.9100, 3926,9050 and 8539.3930 are proposed to be
exempted under Sixth Schedule.
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10 Eighth Schedule
Not previously existed
These goods were Previously subject to
reduce rate of 5%
Following items are proposed to be subject to reduced rate
of 7%:
Tillage and seed bed preparation equipment
Seeding or planting equipment
Irrigation, drainage and agro- chemical application
equipment
Harvesting, threshing and storage equipment
Post-harvest handling and processing &
miscellaneous machinery
Following items are proposed to be subject to reduced rate
of 10%
Machinery and equipment for development of grain
handling and storage facilities
Complete plants for relocated industries
Machinery, equipment and other capital goods
meant for initial installation, balancing,
modernization, replacement or expansion of oil
refining (mineral oil, hydro- cracking and other
value added petroleum products), petrochemical
and petrochemical down-stream products including
fibers and heavy chemical industry, cryogenic
facility for ethylene storage and handling.
11 Prescribed items were subject to
reduce rate of 5%
Following items are proposed to be omitted from eighth
schedule:
Following items imported by Call Centers, Business
Processing Outsourcing facilities duly approved by Pakistan
Telecommunication Authority.
(1) Telephone sets/head sets.
(2) Cat 5/Cat 6/Power cables
(3) PABX Switch
(4) Plasma TV
(5) Dedicated telephone exchange system for call centers.
(6) Other digital cell recorders
Proprietary Formwork System for building/structures of a
height of 100 ft and above and its various items/
components consisting of the following, namely:-
(1) Plastic tube.
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(2) Plastic tie slot filters/plugs, plastic cone.
(3) Standard steel ply panels, Special sized steel ply panels,
wedges, tube clamps (B-Type & G Type), push/pull props,
brackets (structure), steel soldiers (structure), drop head,
standard, prop tic, buard rail post (structure), coupler brace,
cantilever frame, decking beam/Infill beam and doorwayangles.
(4) Lifting Unit (Structure)
(5) Bolts, tie bolts, anchor bolt assembly (fastener), anchor
screw (fastener).
(6) Nuts
(7) Steel pins, tie wing nut (fastener).
(8) Steel washers, water plate (fastener).
(9) Adjustable base jack (thread rod with nut and steelplate), adjustable fork head (threaded rod with nut and steel
channel).
Import and supply of ingredients of poultry and cattle feed
exempt under SRO 1007(I)/2005 are proposed to be taxed at
5% under Eighth Schedule.
Reduced rate notified vide the following notifications areproposed to be subject to same reduced rate and conditions
under the Eighth Schedule: - SRO 69(I)/2006 @ 16% - SRO
313(I)/2006 @ 6% - SRO 657(I)/2013 @ 5% - SRO
572(I)/2014 @ 10%
12 Ninth Schedule
Prescribed rates were used Sales tax rates under the Ninth Schedule on import and/or
registration of IMEI by Cellular Mobile Operators have been
doubled.
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FEDERAL EXISE DUTY
AMMENDMENTS IN FEDERAL EXISE ACT , 2015
Sr. Section Before Amendment After Amendment
1. Sec.
16(2)(3)
Exemptions
The Federal Government may, bynotification in the official Gazette, exempt
any goods or class of goods or any
services or class of services from the
whole or any part of the duty leviable
under this Act.
Further The Board may by special order,
exempt from the payment of the whole or
any part of the duty leviable under this
Act, any goods or services on which such
duty is leviable.
The powers of the Board to grant exemption from thelevy of the FED have been withdrawn. In view of the
proposed withdrawal of powers of the Board, the Federal
Government is only vested with the powers to grant
exemption for levy of FED on any goods or class of goods
or any services or class of services as the case may be,
subject to the approval of the Economic Coordination
Committee of Cabinet. This approval is sought for
whenever circumstances exist to take immediate action
for the purposes of national security, natural disaster,
national food security in emergency situations arising out
of abnormal fluctuation in international commodity
prices, removal of anomalies in duties, development of
backward areas and implementation of bilateral and
multilateral agreements.
All notifications by the Federal Government for
providing exemption shall be placed before the National
Assembly in a financial year. Further, any notification
issued after 1st July 2015 shall, if not earlier rescinded,
stand rescinded on the expiry of the financial year in
which the said notifications was issued.
2. Sec.
35 (1)
Power of Board or Commissioner to
Pass Certain Orders
The Board or the Commissioner was
authorized to take suo moto action to
call for and examine the records of any
proceedings under this Act, or for
verifying the legality or propriety of any
decision or order passed by a subordinate
Officer and may pass such order as he
may think fit.
It has been proposed that the Board or the
Commissioner, as the case may be may take action on the
application by the aggrieved person in addition to their
suo moto action.
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3.
4.
Sec.
45 (A)
Sec.
46
Monitoring or Tracking by Electronic
or Other Means
Section 45A was inserted by the Finance
Act, 2013, whereby the Board may, by
notification in the official Gazette, specify
any registered person or class ofregistered persons or any goods or class
of goods in respect of which monitoring
or tracking of production, sales,
clearances, stocks or any other related
activity may be implemented through
electronic or other means as may be
prescribed. In such cases, no excisable
goods shall be removed or sold by the
manufacturer or any other person
without affixing tax stamp, banderole,
stickers, labels, etc. in any such form, style
and manners as may be prescribed by the
Board.
Departmental Audit
The heading of Section 46 was read as
“Departmental Audit”.
Previously, sub-section 4 of section 46
authorizes the Board to appoint a
Chartered Accountant or a Cost and
Management Accountant or a firm of such
accountants to conduct audit of a person
liable to pay duties under this Act in such
manner and subject to such conditions itmay specify.
The prop