Budget 2014-15 Comments


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Pakistan Budget 2014-15

Tariq Mian Ramzan Arshad & Co. Cost and Management Accountant s Page 2

PREFACE

This document has been prepared as a general guide for the benefit of our clients and is also

available to other interested persons upon request.

The sources of information to prepare this memorandum are; Economic Survey of Pakistan,

Budget in Brief 2014-15 and The Finance Bill 2014 as were available on the websites of Ministry

of Finance and Federal Board of Revenue, Government of Pakistan.

This memorandum is correct to the best of our knowledge and belief. However, this should notbe taken as legal text as it sets out interpretation of the significant amendments proposed by

the Finance Bill 2014 in tax laws etc. in a brief manner to assist the readers in understanding

important changes proposed in the Bill.

We hope that this memorandum will be beneficial for the readers in understanding the budget

proposals. It is suggested that the text of the Bill and the relevant notifications, where

applicable, be referred to in considering the interpretation of any provision of the law. Since

these are only general comments, no final decision on any issue may be arrived at without

further consideration. Specific professional advice should be sought before any action is taken.

TMRAC will not accept any responsibility in this regard.

We value your suggestions. Please e-mail us your questions and comments at

[email protected]

Contribution to compile the document by Following Members of TMRAC Team;

Aatif Mehmood, Team Member

Jawad Ahmed, Team Member

M. Hassaan, Team Member

Abdul Wahab, Team Member, Tax and Corporate

Ayesha Shahid, Team Member, Audit and Accounts Sadaf Humayun, Manager Tax and Corporate

Muhammad Naeem, Manager, Audit and Accounts

Muhammad Imran Malik, ACMA, Sr. Manager/Partner

Muhammad Arshad Bashir, FCMA, FPFA, Partner

M. Tariq Khurshid, FCMA,APA, Partner

Mian Muhammad Ramzan, FCMA, FPFA, ACFE, Partner


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TABLE OF CONTENTS

PREFACE ................................................................................................................................................................................2

TABLE OF CONTENTS............................................................................................................................................................3

ECONOMIC REVIEW .............................................................................................................................................................4

BUDGET AT A GLANCE .........................................................................................................................................................6

BUDGET HIGHLIGHTS ........................................................................................................................................................ 10

LAYOUT FEATURES ........................................................................................................................................................................................10

INCOME TAX................................................................................................................................................................................................10SALES TAX AND FEDERAL EXCISE ..........................................................................................................................................................13

CUSTOMS ACT.............................................................................................................................................................................................15

SALES TAX ACT, 1990 ........................................................................................................................................................ 17

FEDERAL EXCISE ACT, 2005 .............................................................................................................................................. 56

THE CUSTOMS ACT, 1969 ................................................................................................................................................. 57

INCOME TAX ORDINANCE, 2001....................................................................................................................................100

INCOME TAX RATES ...............................................................................................................................................................................113

OTHER LAWS.................................................................................................................................................................... 124


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Power generation, the most influential factor toward economic growth and progress has suffers

a lot in last decade and still a problematic symbol. However in current scenarios the GOP is

taking bold steps to evolve the shortcoming of power in order to stabilize the economic growth.

Its contribution in industrial sector is 9.15 percent and the share in the GDP is 1.9 percent. Thissub-sector has registered growth at 3.72 percent as compared to negative growth of 16.33

percent during last year, however Government has developed National Power Policy (2013)

which provides a roadmap for providing affordable energy in the country through efficient

generation, transmission and distribution system.

During the last two decades most of the developing countries are slackening the foreign direct

investment policy in order to attract the foreign investors to take part in their economic growth

as well, Pakistan as a trade hub in South Asia is also following the liberalize the foreign

investment policy. Total investment witnessed a growth of 8.5 percent as compared to 8.4

percent last year. Public investment recorded an impressive growth rate at 17.12 percent as

compared to (- 0.35) percent last year The FDI over the past five years remained slow due tonumber of internal and external factors. The present government’s resolve is to restore investor

confidence and create an enabling environment for foreign investment. Significant signs of

recovery can be seen in the capital market growth which has reached to new height and

emitting positive signals.

During the current FY positive developments have been witnessed on monetary side, as

government not only contained its borrowing from SBP for budgetary support but was also able

to achieve the target set under IMF condition by end March, 2014.

Inflation a hot topic now a days in developing economy like Pakistan, Hike in prices has been

absorbed in last two three years which has demolished all economic activity in the country as

the cost effectiveness is great problem for existing businesses and new investors as well.

Current GOP has taken some effective measures to reduce the inflationary factor to some

extent. Overview of inflationary trends during ten months of the current FY (July-April) 2013-14,

indicates that inflation moved at slow pace on account of improved supply position of essential

items and declining trend in major global commodities prices. Due to this slow trend the

inflation rate was recorded at 8.7 percent on average basis during July-April, 2013-14, over an

increase of 7.7 percent of corresponding period.

Government of Pakistan has tried to step forward for preventive measures and to formulate economic

policies to attract foreign investors, making economy documented to ensure mainstreamed in the

economically and socially vulnerable sectors of the economy and to steer Pakistan towards real

economic development. Efforts are underway to attain goals of sustainable social and economicdevelopment, ensuring water, food, energy and environment securities, without over-exploiting forests

and ecosystems, to meet the needs of present and future generations.


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BUDGET AT A GLANCE

Comparative Analysis with Previous Budget Rs. In Millions

Budget

Estimates

Revised

Estimates

Budget

Estimates

%age

Increase

2013-14 2013-14 2014-15

(i) Resources

Revenue Receipts (NET)

Tax Revenue Receipts 2,671,414 2,513,945 3,129,210 17.14%

FBR Taxes 2,475,000 2,275,000 2,810,000 13.54%

Other Taxes 196,414 238,945 319,210 62.52%

Non-Tax Revenue Receipts 748,582 1,083,197 816,294 9.05%

Net Capital Receipts 487,702 635,699 484,259 -0.71%

External Receipts 576,419 714,112 868,610 50.69%

Public Accounts Receipts 246,906 169,575 270,528 9.57%

Gross Federal Resources 4,731,023 5,116,528 5,568,901 17.71%

Less: Provincial share in federal

taxes 1,502,288 1,413,335 1,720,182 14.50%

Net Federal Resources 3,228,735 3,703,193 3,848,719 19.20%

Cash balance built up byprovinces 23,101 183,045 289,289 1152.28%

Credit from banking sector 974,988 376,271 227,906 -76.62%

TOTAL RESOURSES 4,226,824 4,262,509 4,365,914 3.29%

(ii) Expenditures

Current Expenditure 3,437,466 3,403,801 3,527,413 2.62%

Development Expenditure 789,358 858,707 838,500 6.23%

TOTAL EXPENDITURES 4,226,824 4,262,509 4,365,914 3.29%

Note: The difference in sources and expenditure is due to roundingoff of figures to nearest million rupees.


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Note: The difference is due to roundingoff of figures to nearest million rupees.

Detailed Budget Summary Rs.in million

Budget

2013-14

Revised

2013-14 %age

Budget

2014-15 %age

RECEIPTS

Tax Revenue

Direct Taxes 975,700 891,000 24.77% 1,180,000 29.91%

Indirect Taxes 1,499,300 1,384,000 38.47% 1,630,000 41.31%

Other Taxes 196,414 238,945 6.64% 319,210 41.31%

2,671,414 2,513,945 69.89% 3,129,210 79.31%

Non Tax Revenue

Proper and Enterprises 239,913 321,274 8.93% 191,992 4.87%

Civil Admin & Other Functions 316,782 389,515 10.83% 417,452 10.58%

Misc. Receipts 191,887 372,409 10.35% 206,850 5.24%

748,582 1,083,197 30.11% 816,294 20.69%

Gross Revenue Receipts 3,419,996 3,597,142 100.00% 3,945,504 100.00%Less: Provincial Share 1,502,288 1,413,335 1,720,182

Net Revenue Receipts 1,917,708 2,183,807 2,225,322

Net Capital Receipts 493,226 600,058 690,619

Estimated Provincial Surplus 23,101 183,045 289,289

External Receipts (Foreign Loans and Grants) 576,419 714,112 868,610

ESTIMATED NET RESOURCES AVAILABILITY 3,010,454 3,681,022 4,073,840

EXPENDITURES

Current Expenditures

Running Civil Government 274,693 271,349 8.48% 290,660 8.39%

Defense Affairs and Services 627,226 629,752 19.69% 700,148 20.22%

Pensions (Military & Civil) 171,263 187,684 5.87% 215,000 6.21%

Provision for Pay & Pension 25,000 - 0.00% 25,000 0.72%

Grants and Transfers (provinces and Others) 337,165 335,929 10.50% 370,782 10.71%

Subsidies 240,434 323,020 10.10% 203,248 5.87%

Interest Payment (on Domestic and Foreign Loans) 1,153,539 1,187,269 37.12% 1,325,232 38.27%

Foreign Loan Repayment 366,761 263,582 8.24% 333,174 9.62%

3,196,081 3,198,585 100.00% 3,463,244 100.00%

Development Expenditure

Federal PSDP 540,000 425,000 525,000

Dev. Loans & Grants to Provinces 77,540 144,348 151,688

Other Dev. Exp. (Outside PSDP) 171,815 289,360 161,813

789,355 858,708 838,501

TOTAL EXPENDITURE 3,985,436 4,057,293 4,301,745

Short fall -974,982 -376,271 -227,905

Bank Borrowings 974,988 376,271 227,906


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BREAKUP OF FEDERAL TAX REVENUE RECEIPTS

Rs.in million

Budget

2013-14

Revised

2013-14

%age of

T.Rev.

Budget

2014-15

%age of

T.Rev.

Direct Taxes

Income Tax 948,700 876,910 36.74% 1,163,821 39.62%

WWF 21,000 13,500 0.57% 15,500 0.53%

Capital Value Tax - 590 0.02% 679 0.02%

Income Support Levy 6,000 - - 0.00%

975,700 891,000 37.33% 1,180,000 40.17%

Indirect Taxes

Customs 279,000 241,000 10.10% 281,000 9.56%

Sales Tax 1,053,500 1,005,000 42.10% 1,171,000 39.86%

Federal Excise 166,800 138,000 5.78% 178,000 6.06%

Petroleum Levy 120,000 108,000 4.52% 123,000 4.19%

ICT Taxes 3,000 3,860 0.16% 4,720 0.16%

Airport Tax 75 85 0.00% 90 0.00%

1,622,375 1,495,945 62.67% 1,757,810 59.83%

Total Tax Revenue

Receipts 2,598,075 2,386,945 100.00% 2,937,810 100.00%


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Budget Highlights


BUDGET HIGHLIGHTSLAYOUT FEATURES

The total outlay of budget 2014-15 is Rs 4,301 billion. This size is 7.93% higher than the size of budget estimates 2013-14.

The resource availability during 2014-15 has been estimated at Rs 4,073 billion against Rs. 3,010

billion in the budget estimates of 2013-14.

The net revenue receipts for 2014-15 have been estimated at Rs 2,225 billion indicating an

increase of 16.04% over the budget estimates of 2013-14.

The provincial share in federal revenue receipts is estimated at Rs 1,721 billion during 2014-15,

which is 14.5% higher than the budget estimates for 2013-14

The external receipts in 2014-15 are estimated at Rs 869 billion. This shows an increase of

50.69% over the budget estimates for 2013-14.

The net capital receipts for 2014-15 have been estimated at Rs 691 billion against the budget

estimates of Rs 493 billion in 2013-14 i.e. an increase of 40.02%.

The overall expenditure during 2014-15 has been estimated at Rs 4,301 billion, out of which the

current expenditure is Rs 3,463 billion and development expenditure is Rs 839 billion. Current

expenditure has been estimated to be higher than the revised estimates for 2013-14 by around

8.27%, while development expenditure decreased by 2.37% in 2014-15 over the revised

estimates of 2013-14.

The share of current expenditure in total budgetary outlay for 2014-15 is 80.50% as compared

to 78.8% in revised estimates for 2013-14.

The expenditure on General Public Services is estimated at Rs 2,543 billion which is 73.4% of the

current expenditure.

The size of Public Sector Development Programme (PSDP) for 2014-15 is Rs 1,175 billion. Out of

this, Rs 650 billion has been allocated to provinces. Federal PSDP has been estimated at Rs. 525

billion, out of which Rs 296 billion to Federal Ministries / Divisions, Rs 175 billion to

Corporations, Rs 12.5 billion to Special Programmes, Rs 36 billion to New Development

Initiatives and Rs 05 billion to Earthquake Reconstruction and Rehabilitation Authority (ERRA).

The other development expenditure outside PSDP for 2014-15 has been estimated at Rs 162

billion

To meet expenditure, bank borrowing has been estimated at Rs 228 billion which is lower than

the revised estimates of 2013-14 at Rs 376 billion.

INCOME TAX

Simplification of Income Tax Law where different exemptions and concessions were part of

Second Schedule, now being included in the rate schedule (the first schedule) and few are being

incorporated in the relevant sections to make the law more understandable for a common

reader.

The corporate tax rate is to be reduced by one per cent to 33% for tax year 2015 as announced

in Budget Speech. Last year it was reduced from 35% to 34% for the TY2014. But the same is

missing in the rate schedule in the Finance bill.


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Budget Highlights


The existing rates of Withholding Tax on services at 6% and 7% for corporate and non-corporate

taxpayers respectively, are to be enhanced to 8% in corporate cases and 10% in other cases.

The existing rates Withholding Tax on Supplies at 3.5% and 4% for corporate and non-corporate

taxpayers respectively, are to be enhanced to 4% in corporate cases and 4.5% in other cases.

The existing rates Withholding Tax on Contracts at 6% and 6.5% for corporate and non-

corporate taxpayers respectively, are to be enhanced to 7% in corporate cases and 7.5% in other

cases.

Rate of tax withheld on mobile phone charges is being reduced from 15% to 14%. Last year it

was increased from 10% to 15%

Advance income tax on functions and gatherings being reduced from 10% to 5%.

Commission agents are taxed under Final Tax regime at the rate of 10% on commission paid

which is being increased to 12%. For advertising agents, the rate of tax is 5% which is being

increased to 7.5%. 05 years tax exemptions for persons setting up processing plants for locally grown fruits in

Balochistan Province, Malakand Division, Gilgit-Baltistan and FATA to reach the bigger markets

and to promote investment, growth and employment in these areas.

To exempt the profits and gains of coal mining projects in Sindh supplying coal exclusively to

power generation projects and also to tax their dividends at reduced rate of 7.5%.

The rate of capital gains tax was to increase from 10% to 17.5% with effect from 01.07.2014. It is

proposed that the CGT rates be reduced to 12.5% for securities held up to 12 months and 10%

for securities held for a period which is between 12 to 24 months. Currently, there was no tax

for the securities held for more than 12 months.

For Foreign Investors, the corporate tax rate is to be reduced to 20% if the investment is in anew industrial undertaking to be set up by 30.06.2017 and at least 50% of the project cost

including working capital is through FDI in equity.

50% Tax Rebate for the disabled persons on income up to Rs. 1 million.

The contract receipts of non-resident companies into a joint venture with a local entity were

taxed as final tax in the hands of the joint venture. Now the non-residents member of a JV ,if

one member of the JV is a Non Resident Company, to be taxed at the applicable rate while the

individuals should be taxed as an AOP separately.

The concessions earlier granted to PSA Gwadar PTE Limited through agreement dated

06.02.2007 are proposed to be transferred to “China Overseas Ports Holding Company Limited”

for the remaining period. Exemption from Income Tax is being granted to Sindh Pension Fund established by the Govt. of

Sindh.

Flying allowance/Submarine Allowance was being taxed @2.5% as separate block of income

upto the limit of the amount of such allowance equal to basic salary. The exceeding amount was

to be taxed by clubbing with normal taxable salary at applicable rates as may be applicable,

Now, the entire amount of flying allowance shall be tax as separate block and amount exceeding

an amount equal to the basic salary be taxed at a rate of 7.5%.

It is proposed that every steel melter, steel re-roller, composite unit of melting, re-rolling and

MS cold shall pay tax at the rate of one rupee per unit of electricity consumed with electricity


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Budget Highlights


bill and they will be exempted from deduction of WHT from their suppliers. They can opt out of

this option.

For domestic electricity consumers, it is proposed to collect adjustable advance tax @ 7.5% on

the monthly bill of above Rs.100,000.

To broaden the tax base, to incentivize the tax filers and to discourage/penalize the non-filers,

certain measures have been introduced specially advance/WHT tax rate difference for compliant

tax payers and non-compliant persons like;

Advance Tax on Air Tickets of first class and club/executive class at the rate of 3% if the

passenger is a compliant taxpayer, and 5% tax if the passenger is a non-compliant

person.

Advance tax be collected on purchase of immovable property at the rate of tax is 1% for

complaint taxpayers and 2% for non-compliant persons. However, properties with value

less than 3 million and schemes introduced by the government for expatriate Pakistaniswill be excluded.

Additional advance tax be collected from persons who do not file income tax returns on

certain transactions like 5% for dividend income, 5% for interest income above

Rs.500,000, 0.2% for cash withdrawals from banks and 0.5% in case of advance capital

gain tax collected from seller of immovable property.

Double rate of advance tax for non-filers for purchase of new car & advance tax at the

time of token renewals.

For non-filers, it is proposed that rate of deduction of tax at source be enhanced in the

case of commercial importers by 0.5%, resident and non-resident contractors by 1%,

suppliers by 0.5%, payments made by exporters/export houses on account of services of stitching, dying, printing, embroidery, sizing, weaving by 0.5%, petrol pump operators by

2% and commission agents by 2%. However, they will have the option of filing returns

and accounts in which case the current rates of tax deduction will be minimum tax rates

for them. If chose not to file the return the tax deducted will be final tax.

To make obtaining NTN a compulsory condition for obtaining commercial/ industrial

electricity and gas connections to broaden the tax net.

Advance Tax being collected by Excise and Taxation office at the time of registration of new

vehicle to be collected by the manufacturers of motor vehicles at the same rate as is prescribed

for registration of new locally manufactured private motor vehicle. In addition, currently the

highest rate of tax is for vehicles above 2000CC. It is also proposed that two higher slabs may be

added with higher rates of tax.

Rates of adjustable advance income tax collected with Motor Vehicle Token Tax from private

cars under section 234 are to be revised upward and the table of lump sum payment of such tax

is also being revised upward. Whereas the rate for non-filers would be double.

Practicing Cost & Management Accountants having 10 years’ experience are made eligible to be

appointed as accountant member of Appellate Tribunal Inland Revenue.


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Budget Highlights


An alternate corporate tax (ACT) @ 17% is proposed to be imposed on accounting income

excluding the exempt income. The companies shall have to pay ACT or corporate tax whichever

is higher. The ACT paid to be carried forward up to 10 years.

Proportionate allocation of expenses against different sources of income in the case of banks is

to be stipulated in law, as is already the case in non-banking businesses.

For buildings having a long useful life, the rate of initial depreciation is to be reduced to 10%

from existing 25%.

Non-profit entities to be granted a 100% tax credit instead of exemption by inserting new

section 100C in the ITO,2001 where related provisions already existed in the Second Schedule

are being incorporated to simplify the law.

The rate of tax applicable to the dividend distributed by Mutual Fund be same as is applicable to

class of income received by Mutual Fund. However, to encourage Mutual Funds the rate of tax

on dividend distributed by Mutual Fund to companies in respect of interest income shall be 25%instead of normal rates applicable to companies.

Issuance of bonus shares are exempt from income tax. Now bonus shares be treated as dividend

and taxed at the rate of 5% of the ex-bonus price of the shares.

Income Support Levy @ 0.5 percent of Net Movable Assets being abolished by repealing the Income

Support Levy Act, 2013.

SALES TAX AND FEDERAL EXCISE

Simplification of Sales Tax Law by inserting amending existing Schedules of Zero Rating and

Exemptions and by adding some new schedule to curtail the SRO Culture. Certain SROs

pertaining to Zero rating and Exemptions are being rescinded and same are being included inthe existing and new schedules to the Sales Tax Act 1990.

Federal Excise Act, 2005 is also being amended to remove anomalies in case of Excisable

Services as after the 18th amendments, the provinces have started collection of Sales Tax on

Services on certain services like telecommunication.

No Change in Standard General Sales Tax Rate i.e 17%.

Registration of retailers on two tier system basis whereby (i) retailers part of national and

international chains, located in air-conditioned malls having debit and credit machines; shall pay

sales tax according to the existing Special Procedures for Retailers on turnover basis (ii) For

other retailers, chargeability of the sales tax through Electricity Bills @ 5% in case of monthly

electricity bill upto Rs. 20,000 and @ 7.5% of the monthly electricity bill exceeding Rs. 20,000.

This tax would be in addition to the sales tax already being charged by utility companies.

The rates of Federal Excise Duty on cigarettes are being enhanced.

Federal Excise Duty on the cement sector is being replaced from specific basis (Rs. 400 per MT)

to 5% on retail price.

Federal Excise Duty on international travel is being enhanced.

Federal Excise Duty on chartered flights is being proposed to be levied at the standard rate on

full amount charged.


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Budget Highlights


Further tax charged @ 1% on supplies made to unregistered persons is being specifically

excluded from the purview of output tax.

Rationalization of sales tax on steel sector, ship breakers and steel melters operating in the

sugar mills.

Restricting undue claims of input tax. Input tax adjustment is proposed to be restricted only to

the extent of goods and services actually used in manufacturing/sales of the taxable activity.

Replacement of capacity tax on aerated waters. The capacity regime has led to excessive

litigation and the Lahore High Court has passed order against the scheme. Therefore, the

existing scheme shall be reverted to the normal tax regime.

Transposition of SRO 575(I)/2006 to schedules with certain changes. In accordance with the

policy of reviewing SROs, it is proposed to charge following seven sectors i.e. Sr. No. 2, 3, 4, 9,

15, 20 and 30 of SRO at reduced rate of 5% sales tax. The concessions for the socially sensitive

sectors shall be retained. However, the concessions against S. No. 8, 16, 17, 24, 25, 32, 33, 37and 38 shall be withdrawn..

Transposition of SRO 727(I)/2011 to Schedule with 5% rate of sales tax. This notification grants

exemption on import and supply of plant and machinery not manufactured locally subject to

certain conditions. It is proposed to charge sales tax at reduced rate of 5% on such plant and

machinery, subject to the same conditions, by transferring the notification to the relevant

Schedule of the Sales Tax Act, 1990.

Transposition of SRO 549(I)/2008, dated 11.06.2008 to Fifth Schedule. This notification grants

zero-rating on certain goods, including petroleum crude oil, certain raw materials for export

oriented sectors, etc. Since this zero-rating is considered essential, while the notification is

required to be deleted, it is proposed to transfer the items in the notification to the FifthSchedule of the Sales Tax Act, 1990.

Transposition of SRO 551(I)/2008, dated 11.06.2008 to Schedules with certain changes. This

notification grants exemption to a number of goods such as raw material for pharmaceutical

industry, iodized salt, medical equipment, components of energy saver lamps, renewable energy

items, raw cotton and oil seeds for sowing etc. The exemption on certain items is being

continued i.e. at S. No. 3, 4, 5, 7, 11, 13, 14, 16 and 29 of this SRO by transferring them to the

Sixth Schedule of the Sales Tax Act, 1990. Re-meltable scrap (S. No. 31) is proposed to be

deleted while oilseed for sowing, and raw and ginned cotton (S. No. 10 and 33) are proposed to

be charged to reduced rate of sales tax @ 5% by transferring them to the relevant Schedule of

the Sales Tax Act, 1990. However, local supply of raw and ginned cotton shall remain exempt bytransferring to the Sixth Schedule.

Transposition of SRO 501(I)/2013, dated 12.06.2013 to Schedules with certain changes. This

notification grants exemption to certain goods. It is proposed to charge sales tax at reduced rate

of 5% on soyabean meal, oil cake and directly reduced iron (S. No. 15, 16 and 21) by transferring

them to the relevant Schedule of the Sales Tax Act, 1990. Purpose built taxis (S. No. 25) is

proposed to be deleted, being redundant. Exemption on socially sensitive goods, such as

wheelchairs and energy saver lamps, is proposed to be retained by transferring them to the

Sixth Schedule to the Sales Tax Act, 1990.


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Sales Tax Act


Plant, machinery and equipment imported for setting up fruit processing and preservation

industrial units in Gilgit-Baltistan, Balochistan and Malakand Division exempted from whole of

customs duty.

Plant, machinery and equipment imported for setting up industries in FATA, exempted from

whole of customs duty.

Customs duty on UPS (PCT code 8504.4010) reduced from 20% to 15%to provide relief to

general public.

Customs duty on petroleum coke not-calcined (PCT code 2713.1100) decreased from 5% to

lowest slab of 1% to reduce input costs for manufacturing concerns.

Exemption of duty and taxes on Hybrid Electric Vehicles (HEVs) rationalized: HEVs upto 1800 cc

granted 50% exemption of duty and taxes and above 1800 cc granted 25% exemption of duty

and taxes.

Substitution of 0% duty slab with 1% customs duty in Tariff. Socially sensitive items continued at

0% in new Fifth Schedule to the Customs Act.

Customs duty on networking equipments increased from 5% to 10%.

Fixed amounts of duty and taxes on used vehicles revised upward by 10% approximately.

Customs duty on flat-rolled products of alloy steel (PCT codes 72.25 and 72.26) increased from 0

and 5% to 10% to bring them at par with flat-rolled products of non-alloy steel.

Customs duty @ 5 % levied on import of generators above 1100 KVA (PCT code 8502.1390).

A uniform rate of 15% customs duty levied on dyes except basic dyes (3204.1300) and indigo

blue dyes (3204.1510) being used in textile sector.

A uniform rate of 10% customs duty on all kinds of CDs/DVDs of PCT codes 8523.4000 levied. Customs duty on flavouring powders (PCT code 2106.9030) enhanced from 10% to 20% to avoid

misclassification

A uniform rate of 10% levied on Liquid paraffin (PCT code 2710.1995) and White oil (PCT

2710.1996) being same in nature.

Customs duty on dryers (PCT code 8421.1900) increased from 5% to 10%.

A uniform rate of 15% levied on starches (PCT code 11.08) to rationalize duty structure and

avoid classification disputes.

Customs duty on coloring matters (PCT code 3206.4990) enhanced from 5% to 10% to reduce

the chance of misclassification.

Customs duty on Satellite mobile phones whether or not functional on cellular networks (PCT

code 8517.1230) reduced from 25% to 10%.

In section 18, new subsection 1A is inserted to add the Fifth Schedule to the Customs Act, 1969

to levy specified conditional rates of customs duty on goods and class of goods.

Under the Control of Narcotics Substances Act, 1997 cases involving narcotics and narcotic

substances are to be tried in Special Courts created under the said Act. Necessary change made

in section 185B.


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Sales Tax Act


SALES TAX ACT, 1990

Definitions Section 2 Clauses 27

Finance Bill seeks to insert proviso to clause 27 ,defining retail price, empowering FBR to specify the

zones and areas for determination of highest retail price for any brand or variety of goods.

Reduced Rate of sales Tax

Section 3(2)(aa), 8th

Shedule

In accordance with the policy of reviewing SROs the bill proposed either to withdraw the concessions

against some items or charge sales tax at reduced rates but for the society sensitive sectors concessions

shall be retained. The goods mentioned in eighth schedule proposed to be charged with sales tax @ 5%subject to some conditions or restrictions given therein effective July 01, 2014.

The goods subject to reduced rate at 5 percent under proposed Eighth Schedule are generally exempt

from sales tax under SRO.551(I)/2008, dated 11 June 2008, SRO.727(I)/2011, dated 01 August 2011 and

SRO.501(I)/2013, dated 12 June 2013. Following item are included in 8th schedule .

Table-1

1. Soyabean meal (PCT Heading 304.0000).

2. Oil cake & other solid residues, whether or not ground or in pellets (PCT heading 2306.1000).

3. Directly reduced iron (PCT heading 72.03)4. Imported oilseeds meant for sowing subject to certification

5. Import of raw cotton and ginned cotton

6. Plant & machinery not manufactured locally, having no compatible local substitutes subject to

specified conditions.

Table-2

1. Machinery and equipment for development of grain handling and storage facilities.

2. Cool chain machinery and equipment.

3. Various items imported by Call Centers, Business Processing Outsourcing facilities duly approved by

Telecommunication Authority.

4. Machinery, equipment, materials for mineral exploration phase.5. Complete plants for relocated industries.

6. Machinery, equipment for oil refining etc.

7. Proprietary Formwork System for building/structures of a height of 100 ft and above and its various

items/ components

Sales Tax on Mobile Phones

Section 3(3B)), 9th

Schedule


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The finance bill proposed to charge, collect and pay sales tax ranging from Rs.150/- per phone to Rs.

500/- per phone on supply and import stage subject to some conditions and restrictions as given in ninth

schedule of Sales Tax Act, 1990. The liability of payment of sales tax will be on importer in case of importand in case of registration of new International Mobile Equipment Identity (IMEI) number , liability of

payment of tax will be on Cellular Mobile Operator. Currently these rates are applicable on mobile /

cellular phones under SRO.460(I)/2013, dated 30 May 2014 and now proposed to be embedded under

Ninth Schedule to the Act, subject to similar conditions.

sales Tax on CNG Stations Section 3(8)

Section 3(8) was inserted vide Finance Act, 2013, whereby the Gas Transmission and Distribution

Company was subjected to charge and pay sales tax on supply of natural gas to CNG stations at 9

percent in addition to standard sales tax at 17 percent. After the decision by apex court againstadditional sales tax of 9% the subsection was substituted through Sales Tax (Amendment) Ordinance

2014 , dated March 24, 2014 and this section was substituted to require the Gas Transmission and

Distribution Company to charge sales tax at 17 percent on its bills to CNG stations, on the value of

supply to CNG Consumers as notified by the Board from time to time. Now in order to give the legal

cover to earlier amendment made vide Sales Tax (Amendment ) Ordinance, 2014 this amendment is

proposed.

sales Tax for Retailers Section 3(9))

The Bill proposes to introduce two tier system for taxation of retailers by insertion of new sub-section

(9) to Section 3 of the Act and simultaneously exemption threshold of Rs.5 million as provided underTable-2 of the Sixth Schedule to the Act is proposed to be withdrawn.

Under first tier, the large retailers having outlets operating as part of national or multi-national chains,

or located in air-conditioned malls, having facilities of debit / credit cards, would be subject to sales tax

@ 17 percent under normal sales tax regime. Accordingly, amendments in Chapter-II [Special Procedure

for Retailers] of Sales Tax Special Procedure Rules, 2007 will be effected in due course.

Under second tier, the small retailers would be subject to sales tax at reduced rates, to be charged and

paid through monthly electricity bills as follows:

• sales tax @ 5% If monthly electricity bill does not exceed Rs.20,000

• sales tax @ 7.5% If monthly electricity bill exceeds Rs.20,000

Sales tax collectible on electricity bills would be in addition to sales tax applicable under Sections

3(1), 3(1A) and 3(5) of the Act. This amendment will take effect from July 01, 2014.

Collection of Excess Tax Section 3B(2)

In certain situations, the courts direct the taxpayers to deposit the disputed tax money which was


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charged and collected from the customers with the Court, till the time the appeal is decided. To cater

this situation, Section 3B(2) is proposed to be substituted to clarify that sales tax

collected as ‘excess tax’ shall be deemed to be an arrear of tax or charge payable to FederalGovernment and any claim for refund of such excess tax shall neither be admissible to the registered

person, nor payable to any court of law or to any person under direction of the court.

The Bill also seeks to give overriding effect to this provision without prejudice to any other law or

judgment of the court including Supreme Court and High Court. The legal sanctity of the proposed

substitution however appears debatable, considering that the jurisdiction of superior courts, being the

ultimate interpretational authority, should override the tax statues. Earlier this subsection was

substituted through Sales Tax (Amendment) Ordinance, 2014.

Further Tax and Admissibility of Input Tax Section 7(1) andsection 7(2)(iiia)

It is proposed that 1% further tax charged to unregistered persons shall not be part of out put tax, which

implies that the registered person will not be entitled to deduct input tax from the further tax as

charged and collected from unregistered persons during the tax period. As such, any collection of

further tax in a reporting month, will be payable with the return even if excess input tax arises in any tax

period. This seems to be harsh provision.

Subsection (2) of Section 7 prescribes certain conditions for admissibility of input tax against out put tax

i.e possession of valid sales tax invoice, goods declaration for imports, treasury challans for auctiongoods etc. The Bill seeks to insert a new clause (iiia) under Section 7(2) to restrict undue input tax claims

. Input tax adjustment is proposed to be restricted only to the extent of goods and services actually used

in manufacturing /sales of the taxable activity. Following additional conditions are required to be

fulfilled by the registered person while claiming input tax on acquisition of goods and services in order

to validate his claim.

(a) Imported or purchased for the purpose of sale or re-sale by the registered person on payment

of tax;

(b) used directly as raw material, ingredient, part, component or packing material by the registered

person in the manufacture or production of taxable goods;

(c) electricity, natural gas and other fuel consumed directly by the registered person in his declared

business premises for the manufacture, production or supply of taxable goods; or

(d) plant, machinery and equipment used by the registered person in his declared business

premises for the manufacture, production or supply of taxable goods.


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Inadmissible Input Tax Credit Section 8

Bill seeks to propose that the negative list of goods on which input tax is not admissible as mentioned

under SRO.490(I)/2004 is to be covered through Section 8 of the Act. As such new clauses from (f) to (i)

are proposed to be inserted in Section 8(1) of the Act, as reproduced below:

(f) goods and services not related to the taxable supplies made by the registered person;

(g) goods and services acquired for personal or non-business consumption;

(h) goods used in, or permanently attached to, immoveable property, such as building and

construction materials, paint, electrical and sanitary fittings, pipes, wires and cables, but

excluding such goods acquired for sale or re-sale or for direct use in the production or

manufacture of taxable goods and

(i) vehicles falling in Chapter 87 of the First Schedule to the Customs Act< 1969 (IV of 1969), parts of

such vehicles, electrical and gas appliances, furniture, furnishings, office equipment (excluding electronic

cash registers), but excluding such goods acquired for sale or re-sale.

Posting of Inland Revenue Officer to monitor Production Section 40B

Finance Bill seeks to insert an explanation in section 40B to empower the inland revenue officers to

monitor production, sale of taxable goods and stock position without obtaining warrants from

Magistrate under section 40 of the Act

Electronic Scrutiny and Intimation System Section 50B

Bill seek to introduce electronic scrutiny and intimation system and it will conduct all checks and analysis

objectively and will issue electronic intimation to the taxpayer. This system will facilitate automated

scrutiny, analysis and cross matching of returns and other available data of registered person and then

sending intimations electronically to such registered persons about the issue detected. The intimation so

transmitted shall either be in the form of instruction or advance notice allowing the registered person to

clarify his position or rectify the mistake before any legal proceeding. The Board may also prescribe

procedures for efficient operation of the proposed computerized system.

Normal Taxation for Aerated Water Production Capacity (Aerated

Water) Rules, 2013

Capacity based tax regime was introduced under FED and Sales Tax on Production Capacity (Aerated

Waters) Rules, 2013, which were challenged before the superior courts. The Hon’ble Lahore High Court

held such regime beyond the scope of charging provisions of sales tax law. As such, the budgetary

measures reflect that the afore-said Rules are being rescinded to bring the taxation of aerated waters

under normal sales tax regime. However, the notification to this effect is still awaited.


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Transposition of Zero Rating and Exemptions under specific

SROs to 5

th

and 6

th

Schedule

In accordance with the policy of the Government to phase out the SRO culture gradually, the goods on

which sales tax zero-rating is currently available under SRO.549(I)/2008, dated 11 June 2008 and

SRO.670(I)/2013, dated 18 July 21013, are proposed to be included in Fifth Schedule to the Act w.e.f. 01

July 2014, which inter-alia include petroleum crude oil, stationery articles, dairy products, preparation

for infant use for retail sale, bicycles, parts and components used in exempt capital goods subject to

specified conditions, exportation of exempt goods, etc.

This would mean that any amendment in the Sales Tax laws would preferably take place after approval

of the Parliament.

Further, various exemptions currently covered under SRO.575(I)/2006, dated 5 June 2006,

SRO.551(I)/2008, dated 11 June 2008 and SRO.501(I)/2013 dated 12 June 2013, SRO. 727(I)/2011, dated

August 01, 2011 and are proposed to be regulated through Sixth Schedule w.e.f. 01 July 2014, which

include:

SRO.575(I)/2006, dated 5 June 2006 [Import and supplies]

Plant, machinery, equipment & apparatus for various industrial segments, which inter-alia include

desalination plants, gas processing plants, hospitals, Thar Coal Field, power generation projects,

power transmission, technical training institutes, engineering works at Karachi Shipyard, granite and

gem stone extraction and processing industry, Effluent treatment plants, etc.

SRO.551(I)/2008, dated 11 June 2008 [Import and supply]

Raw materials for manufacture of leather goods, machinery for EPZ, ships of gross tonnage of less

than 15 LTD, all floating crafts, substances registered as drugs with specified exclusions, raw material

for active ingredients of pharmaceutical industry, import of edible offal of bovine animals, iodized salt,

parts of energy saver lamps, goods used for renewable source of energy, white crystalline sugar, medical

equipment & accessories, etc.

SRO.549(I)/2008, dated 11 June 2008 [Local supply only]

Reclaimed lead, waste paper, sprinkler equipment, drip equipment, spray pumps and nozzles, rawcotton and ginned cotton.

SRO.501(I)/2013, dated 12 June 2013 [Import and supplies]

Specified stationery articles, dairy products, preparation for infant use for retail sale, bicycles,

uncooked poultry meat, frozen/preserved meat, cotton seed, energy saver lamps, sewing machines,

wheel chairs, non-chemical fertilizers, construction materials for Gwadar Export Processing Zone,

vessels for breaking up, etc.


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Sales Tax Special Procedure Rules, 2007 , Rule 58F,

58G,58H,58Hb,58I58J, 58K & 58M

SRO 421(I)/2014

Rationalization of sales tax on steel sector , ship breakers and steel melters operating in the sugar mills is being

made by amending Sales Tax Special Procedure Rules,2007 enforced through SRO 421(I)/2014 effective

04.06.2014. Sugar mills or any other persons operating steel melting or steel re-rolling mills using self generated

electricity produced from bagasse or other means shall pay sales tax at the normal rate specified in sub-section (1)

of section 3 of the Sales Tax Act, 1990. i.e @17%

Through this amendment steel melting units, steel re-rolling units, composite unit of steel melting, re-rolling and

MS cold drawing and composite unit of steel melting and re-rolling (having a single meter of electricity) not

operated under sugar mills and using the electricity provided by public sector electricity distribution companies

shall pay sales @ Rs.7/- per unit of electricity consumed. Earlier this rate was Rs.4/- per unit and the same was

applicable to all persons in the sector. The tax so paid is final.

Sales tax on Import of remittable iron and steel scrap is being enhanced to Rs.5,600/- per MT and the same is

adjustable against the sales tax charged through electricity bill . The procedure for the same are still awaited.

Moreover as per SRO if the person failed to deposit the sales tax with in due date of electricity bill , it will

excluded from the ambit of Final Tax and sales tax @ 17% has to be paid on the basis of value od supply.

Commissioner Inland Revenue is empowered through this amendment to collect the sales tax directly from the

persons operating in the sector and later on it will be adjusted against the electricity bill.

Rate of sales tax on ship breakers has been enhanced from Rs.5,862/- per MT to Rs.6,700/- per MT payable at the

time of import of the ship for re-rollable purpose. The weight will be taken at 70.50% of the LDT of ship.

The due date of filing of tax return for the persons paying sales tax under these rules alongwith electricity bills oron the basis of gas bills shall be 28

thof the month following the tax period to which the electricity bill relates.

Following amended rates of sales tax will be mentioned in the sales tax invoice

S.No Invoices issued by and for or to Amount of sales tax to be mentioned

on the invoices

Existing rates Revised Rates

1 By steel melting or composite units of melting, re-rolling and

MS cold drawing to registered re-roller

Rs.6,447 per MT Rs.6,447 per

MT

2 By steel re-rollers, using ingots or billets or steel melters or

composite units of melting, re-rolling and MS cold drawing to

registered person

Rs.4,567per MT Rs.7,357 per

MT

3 By re-rollers , using billets of Pakistan eel Mills or people steel

Mills or Heavy Mechanical Complex or imported billets , to

registered persons

Rs.8,526 per MT Rs 8,092 per

MT

4 By re-rollers , using ship-plates and re-rollable scrap as raw

material, to registered persons


MT

5 By re-rollers to unregistered persons Rs.520 per MT Rs.910 per MT

6 By persons supplying imported MS products to registered

persons


MT

7 By persons supplying imported MS products, to unregistered

persons

Rs.910per MT Rs.910 per MT


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Reduced Rate abolished on Finish goods SRO 420(I)/2014

Import of finished goods ready for use by general public have been excluded from reduced rate of 5%

by amending SRO 1125 (1)2011 enforced through SRO 420(I)/2014 effective from 04.06.2014. Now

standard rate of 17% will apply in addition to 2% value addition tax at import stage.

ZERO RATING OF GOODS Fifth Schedule

Through Finance Bill List of items proposed to be added to fifth schedule being zero rated supplies. It is

further proposed to insert following further items of dairy and stationary industry and input materials of

these industries in fifth schedule from SRO 670(I)/2013 dated 18.07.2013 and rescission of the

notification is also proposed with effect from 01.07.2014

S.No Description PCT Heading

9 Goods exempted under Section 13, if exported by a manufactured who makes

local supplies of both taxable and exempt goods

10 Petroleum Crude Oil 2709.0000

11 Raw material, components, sub-components and parts, if imported or purchased

locally for use in the manufacturing of such plant & machinery as is chargeable to

sales tax at the rate of zero percent subject to condition that importer or

purchaser holds valid sales tax registration being manufacturer and in case of

import, all the conditions limitations and procedures are imposed by Notification

under section 19 of the Customs Act, 1969.

12 Following goods and the raw materials . packing materials, sub-components,

components, sub-assemblies and assemblies imported or purchased locally for the

manufacture of the said goods subject to the conditions, limitations and

restrictions as specified in Chapter XIV of the Sales Tax Special Procedure

Rules,2007.

I Colors in sets 3213.1000

Ii Writing, drawing and marking inks 3215.9010 and

3215.9090

Iii Erasers 4014.9210 and

4016.9290

Iv Exercise books 4820.2000V Pencil sharpeners 8214.1000

Vi Geometry boxes 9017.2000

Vii Pens, ball pens, markers and porous tipped pens 98.08

Viii Pencils including color pencils 96.09

Ix Milk including flavored milk 04.01

X Yogurt 0403.1000

Xi Cheese 0406.1010

Xii Butter 0405.1000

xiii Cream 04.01 and


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04.02

xiv Desi ghee 0405.9000

Xv Whey 04.04

Xvi Milk and cream, concentrated and added sugar or other sweetening matter 0402.1000

Xvii Preparations for infant use put up for retail sale 1901.1000

Xviii Fat filled milk 1901.9090

Xix Bicycles 87.12

Sales Tax Exemptions Sixth Schedule

Finance bill seeks to insert following new entries in the sixth schedule.

Table-1 (Imports or Supplies)

Serial

No

Description Heading Nos. of the First

Schedule to the Customs

Act, 1969 (IV of 1969)

(1) (2) (3)

1. Live Animals and live poultry. 0101.1000, 0101.9000,

0102.1010, 0102.1020,

0102.1030, 0102.1040,

0102.1090, 0102.9010,

0102.9020, 0102.9030,

0102.9040, 0102.9090,0104.1000, 0104.2000,

0105.1100, 0105.1200,

0105.1900, 0105.9400,

0105.9900, 0106.1100,

0106.1200, 0106.1900,

0106.2000, 0106.3110,

0106.3190, 0106.3200,

0106.3900 and 0106.9000

2. Meat of bovine animals, sheep and goat, excluding poultry and offal,

whether or not fresh, frozen or otherwise, preserved.

02.01, 02.02 and 02.04

3. Fish and crustaceans excluding live fish whether or not fresh, frozen or

otherwise preserved.

03.02, 03.03, 03.04, 03.05

and 03.0611. Eggs including eggs for hatching 0407.0010 and 0407.0090

12. Live plants including bulbs, roots and the like. 0601.1010, 0601.1090,

0601.2000, 0602.1000,

0602.2000, 0602.3000,

0602.4000, 0602.9010 and

0602.9090

13. Edible vegetables including roots and tubers, 1[except ware potato and

onions] whether fresh, frozen or otherwise preserved (e.g. in cold

storage) but excluding those bottled or canned [***].

0701.1000, [***], 0702.0000,

[***], 0703.2000, 0703.9000,

0704.1000, 0704.2000,

0704.9000, 0705.1100,

0705.1900, 0705.2100,


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0705.2900, 0706.1000,

0706.9000, 0707.0000,

0708.1000, 0708.2000,0708.9000, 0709.1000,

0709.2000, 0709.3000,

0709.4000, 0709.5100,

0709.5910, 0709.5990,

0709.6000, 0709.7000,

0709.9000, 0710.1000,

0710.2100, 0710.2200,

0710.2900, 0710.3000,

0710.4000, 0710.8000,

0710.9000, 0712.2000,

0712.3100, 0712.3200,

0712.3300, 0712.3900

and 0712.9000.

14. Pulses. 0713.1000, 1[713.2010,

0713.2020, 0713.2090],

0713.3100, 0713.3200,

0713.3300, 0713.3910,

0713.3920, 0713.3990,

0713.4010, 0713.4020,

0713.5000, 0713.9010,

0713.9020 and 0713.9090.

15. Edible fruits excluding imported fruits (except fruits imported from

Afghanistan) whether fresh, frozen or otherwise preserved but excluding

those bottled or canned [***].

0803.0000, 0804.1010,

0804.1020, 0804.2000,

0804.3000, 0804.4000,0804.5010, 0804.5020,

0804.5030, 0805.1000,

0805.2010, 0805.2090,

0805.4000, 0805.5000,

0805.9000, 0806.1000,

0806.2000, 0807.1100,

0807.1900, 0807.2000,

0808.1000, 0808.2000,

0809.1000, 0809.2000,

0809.3000, 0809.4000,

0810.1000, 0810.2000, [***],

0810.4000, 0810.5000,0810.6000, 0810.9010,

0810.9090, 0811.1000,

0811.2000, 0811.9000,

0813.1000, 0813.2000,

0813.3000, 0813.4010,

0813.4020 and 0813.4090.

16. Red chillies excluding those sold in retail packing bearing brand names

and trademarks.

0904.2010 and 0904.2020

17. Ginger excluding those sold in retail packing bearing brand names and 0910.1000


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Sales Tax Act


trademarks.

18. Turmeric excluding those sold in retail packing bearing brand names and

trademarks.

0910.3000

19. Cereals and products of milling industry. 1001.1000, 1001.9000,

1002.0000, 1003.0000,

1004.0000, 1005.1000,

1005.9000, 2 [1006.1010,

1006.1090], 1006.2000,

1006.3010, 1006.3090,

1006.4000, 1007.0000,

1008.1000, 1008.2000,

1008.3000, 1008.9000,

1101.0010, 1101.0020,

1102.1000, 1102.2000,

1102.3000, 1102.9000,

1103.1100, 1103.1300,

1103.1900, 1104.2200,

1104.2300, 1104.2900 and

1104.3000

20. Seeds, fruit and spores of a kind used for sowing. 1209.1000, 1209.2100,

1209.2200, 1209.2300,

1209.2400, 1209.2500, [***],

1209.2900, 1209.3000,

1209.9110, 1209.9120, 1209.

9130, 1209.9190 and

1209.9900.

21. Cinchona bark. 1211.9000

22. Sugar beet. 1212.9100

23. Sugar cane. 3[1212.9990]

24. Edible oils and vegetable ghee, including cooking oil, on which Federal

Excise Duty is charged, levied and collected by a registered manufacturer

or importer as if it were a tax payable under section 3 of the Act.

Explanation.– Exemption of this entry shall not be available to

distributors, wholesalers or retailers.

1507.9000, 1508.9000,

1509.1000, 1509.9000,

1510.0000,1511.1000

1511.9020, 1511.9030,

1512.1900, 1513.1900,

1513.2900, 1514.1900,

1514.9900, 1515.2900,

1515.5000, 1516.2010,

1516.2020, 1517.1000,

1517.9000 and 1518.0000.

26. Fruit juices, whether fresh, frozen or otherwise preserved but excludingthose bottled, canned or packaged.

2009.1100, 2009.1200,2009.1900, 2009.2100,

2009.2900, 2009.3100,

2009.3900, 2009.4100,

2009.4900, 2009.5000,

2009.6100, 2009.6900,

2009.7100, 2009.7900,

2009.8000 and 2009.9000.


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27. Ice and waters excluding those for sale under brand names or

trademarks.

2201.1010

28. Poultry feed and Cattle feed including their all ingredients except

soyabean meal of PCT heading 2304.0000 and oil-cake of cottonseed

falling under PCT heading 2306.1000.

2301.2090, 2305.0000,

2306.2000, 2306.3000,

2306.4100, 2306.5000,

2309.9010, 2309.9020,

2309.9090, 2936.2100,

2936.2200, 2936.2300,

2936.2400, 2936.2500,

2936.2600, 2936.2700 and

2936.2800

29. Table salt including iodized salt excluding salt sold in retail packing

bearing brand names and trademarks.

2501.0010

29C. Glass bangles 7020.0090

31. Holy Quran, complete or in parts, with or without translation; Quranic

Verses recorded on any analogue or digital media; other Holy books.

4901.9910, 8523.2100,

8523.2910, 8523.2990,

8523.4010, 8523.4030,

8523.4090, 8523.5100,

8523.5200, 8523.5910,

8523.5990, 8523.8010,

8523.8020 and 8523.8090

32. Newsprint, newspapers, journals, periodicals, books [***] but excluding

directories.

4801.0000,4901.9100,

4901.9990, 4902.1000,

4902.9000, and 4903.0000 ]

33. Currency notes, bank notes, shares, stocks and bonds. 4907.0000

36. Silver, in unworked condition. 7106.1000, 7106.9110 and

7106.9190

37. Gold, in un-worked condition. 7108.1100, 7108.1210 and

7108.1290

38. Monetary gold. 7108.2000 and 7108.2090

39. Incinerators of disposal of waste management, motorized sweepers and

snow ploughs.

8417.8000, 8430.2000 and

8479.8990

45. Dextrose and saline infusion giving sets [***] along with empty non-toxic

bags for infusion solution, Dextrose and saline infusion giving sets,

Artificial parts of the body, Intra-Ocular lenses and Glucose testing

equipment.

9018.3910, 9018.3920,

9021.3100, 9021.3900 and

9027.8000

46. Goods imported by various agencies of the United Nations, diplomats,

diplomatic missions, privileged persons and privileged organizationswhich are covered under various Acts and, Orders, rules and regulations

made thereunder; and agreements by the Federal Government provided

that such goods are charged to zero-rate of customs duty under Customs

Act, 1969 (IV of 1969), and the conditions laid therein

99.01, 99.02, 99.03 and 99.06

47. Import of articles of household and personal effects including vehicles

and also the goods for donation to projects established in Pakistan

imported by any of the rulers of Gulf Sheikhdoms who is in possession of

residential accommodation in Pakistan and goods including vehicles by

the United Arab Emirates dignitaries as are listed in column (2) against

heading No. 99.05 in column (1) of the First Schedule to the Customs

99.05


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Sales Tax Act


Act, 1969 (IV of 1969) for their personal use and for donation to welfare

projects established in Pakistan subject to the similar conditions as are

envisaged for the purposes of applying zero-rate of customs duty onsuch goods under the said Act.

48. Goods imported or supplied under grants-in-aid for which a specific

consent has been obtained from the Board; supplies and imports under

agreements signed by the Government of Pakistan before the 30th June,

1996, provided the agreements contained the provision for exemption of

tax at the time of signing of agreement.

99.03

49. Import of all goods received, in the event of a natural disaster or other

catastrophe, as gifts and relief consignments, including goods imported

for the President’s Fund for Afghan Refugees, relief goods donated for

Afghan Refugees, gifts for President’s Fund for Assistance of Palestine

and gifts received by Pakistani organizations from Church World Services

or the Catholic Relief Services subject to the similar conditions as are

envisaged for the purposes of applying zero-rate of customs duty under

the Custom Act.

99.07, 99.08 and 99.11

50. Articles imported through post as unsolicited gifts, subject to the same

conditions as are envisaged for the purposes of applying zero-rate of

customs duty under the Customs Act, 1969.

99.09

51. Imported samples, subject to the same conditions as are envisaged for

the purposes of applying zero-rate of customs duty under the Customs

Act, 1969.

99.10

52. Goods imported by or donated to hospitals run by the Federal

Government or a Provincial Government; and non-profit making

educational and research institutions subject to the similar restrictions,

limitations, conditions and procedures as are envisaged for the purpose

of applying zero-rate of customs duty on such goods under the CustomsAct, 1969 (IV of 1969).

99.13, 99.14, 99.15 and 99.15

52-A Goods 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.

Respective headings

53. Import of all such gifts as are received, and such equipment for fighting

tuberculosis, leprosy, AIDS and cancer and such equipment and

apparatus for the rehabilitation of the deaf, the blind, crippled or

mentally retarded as are purchased or otherwise secured by a charitable

non-profit making institution solely for the purpose of advancing

declared objectives of such institution, subject to the similar conditions

as are envisaged for the purposes of applying zero-rate of customs dutyunder the Customs Act, 1969 (IV of 1969).

99.12, 99.13 and 99.14

54. Educational, scientific and cultural material imported from a country

signatory to UNESCO Agreement or a country signatory to bilateral

commodity exchange agreement with Pakistan, subject to the same

conditions as are envisaged for the purposes of exemption under the

Customs Act, 1969 (IV of 1969).

99.15

55. Import of replacement goods supplied free of cost in lieu of defective

goods imported, subject to similar conditions as are envisaged for the

purposes of applying zero-rate of customs duty under the Customs Act,

1969.

99.16

56. Re-importation of foreign origin goods which were temporarily exported 99.18


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out of Pakistan subject to similar conditions as are envisaged for the

purposes of applying zero-rate of customs duty under the Customs Act,

1969.57. Goods (including dry fruits imported from Afghanistan) temporarily

imported into Pakistan, meant for subsequent exportation charged to

zero-rate of customs duty subject to the similar restrictions, limitations,

conditions and procedures as are envisaged for the purpose of applying

zero-rate of customs duty on such goods under the Customs Act, 1969

(IV of 1969).

99.19, 99.20 and 99.21

58. Import of ship stores, subject to the procedures, conditions and

restrictions as may be specified by the Collector of Customs in this behalf

including those consignments of such stores that have been released

without charging sales tax since the 1st July, 1998, but excluding such

consignments of ship stores as have been cleared on payment of sales

tax.

99.22

59. Artificial kidneys, eye cornea, hemodialysis machines, hemodialyzers,

A.V. fistula needles, hemodialysis fluids and powder, blood tubing tines

for dialysis and reverse osmosis plants for dialysis, double lumen

catheter for dialysis, catheter for renal failure patient and peritoneal

dialysis solution, Cochlear Implants system and angioplasty equipment

(balloons, catheters, wires and stents), subject to the similar conditions

and procedures as are envisaged for the purpose of applying zero-rate of

customs duty on these goods under the Customs Act, 1969 (IV of 1969).

99.24, 99.25, 99.37 and 99.38

60. Contraceptives and accessories thereof. 3926.9020 and 4014.1000

61. Goods produced or manufactured in and exported from Pakistan which

are subsequently imported in Pakistan within one year of their

exportation, provided conditions of section 22 of the Customs Act, 1969

(IV of 1969), are complied with.

Respective headings

63. Personal wearing apparel and bonafide baggage imported by overseas

Pakistanis and tourists, if imported under various baggage rules and is

exempt from Customs duties.

Respective headings

71. Goods and services purchased by non-resident entrepreneurs and in

trade fairs and exhibitions subject to reciprocity and such conditions and

restrictions as may be specified by the Board.

Respective headings

72 Uncooked poultry meat 02.07

73 Milk and cream 04.01 and 04.02

74 Flavored milk 0402.9900 and 22.02

75 Yogurt 0403.1000

76 Whey 04.04

77 Butter 0405.100078 Desi ghee 0405.9000

79 Cheese 0406.1010

80 Processed cheese not grated or powdered 0406.3000

81 Cotton seed 1207.2000

82 Frozen, prepared or preserved sausages and similar products of poultry

meat or meat offal

1601.1000

83 Meat and similar products of prepared frozen or preserved meat or

meat offal of all types including poultry meat and fish

1602.3200, 1602.3900,

1602.5000, 1604.1100,

1604.1200, 1604.1300,

1604.1400, 1604.1500,


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1604.1600, 1604.1900,

1604.2010, 1604.2020,

1604.2090, 1604.3000

84 Preparations for infant use, put up for retail sale 1901.1000

85 Fat filled milk 1901.9090

86 Colours in sets (Poster colours) 3213.1000

87 Writing, drawing and marking inks 3215.9090 and 3215.9010

88 Erasers 4016.9210 and 4016.9290

89 Exercise books 4820.2000

90 Pencil sharpeners 8214.1000

91 Energy saver lamps 8539.3910

92 Sewing machines of the household type 8452.1010 and 8452.1090

93 Bicycles 87.12

94 Wheelchairs 8713.1000 and 8713.9000

95 Vessels for breaking up 89.08

96 Other drawing, marking out or mathematical calculating instruments

(geometry box)

9017.2000

97 Pens and ball pens 96.08

98 Pencils including colour pencils 96.09

99 Compost (non-chemical fertilizer) produced and supplied locally Respective headings

100 Construction materials to Gawadar Export Processing Zone’s investors

and to Export Processing Zone

Gawadar for development of Zone’s infrastructure

Respective headings

101 Raw and pickled hides and skins, wet blue hides and skins, finished

leather, and accessories, components and trimmings, if imported by a

registered leather goods manufacturer, for the manufacture of goods

wholly for export, provided that conditions, procedures and restrictions

laid down in rules 264 to 278 of the Customs Rules, 2001 are duly

fulfilled and complied with.

Respective headings

102 Machinery, equipment and materials imported either for exclusive use

within the limits of Export Processing Zone or for making exports

therefrom, and goods imported for warehousing purpose in Export

Processing Zone, subject to the conditions that such machinery,

equipment,

materials and goods are imported by investors of Export ProcessingZones, and all the procedures, limitations and restrictions as are

applicable on such goods under the Customs Act, 1969 (IV of 1969) and

rules made thereunder shall mutatis mutandis, apply.

Respective headings

103 Import and supply thereof, up to the year 2020, of ships of gross

tonnage of less than 15 LDT and all floating crafts including tugs,

dredgers, survey vessels and other specialized crafts purchased

or bare-boat chartered by a Pakistan entity and flying the

Pakistan flag, except ships or crafts acquired for demolition

purposes or are designed or adapted for use for recreation or

pleasure purposes, subject to the condition that such subject to

Respective headings


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the condition that such ships or crafts are used only for the

purpose for which they were procured ,and in case such ships or

crafts are used for demolition purposes within a period of fiveyears of their acquisition, sales tax applicable to such ships

purchased for demolition purposes shall be chargeable.

104 Substances registered as drugs under the Drugs Act, 1976 (XXXI of

1976) and medicaments as are classifiable under Chapter 30 of the

First Schedule to the Customs Act, 1969 (IV of 1969) except the

following, even if medicated or medicinal in nature, namely:-

(a) filled infusion solution bags imported with or without

infusion given sets;

(b) scrubs, detergents and washing preparations;

(c) soft soap or no-soap soap;

(d) adhesive plaster;

(e) surgical tapes;

(f) liquid paraffin;

(g) disinfectants; and

(h) cosmetics and toilet preparations.

Respective headings

105 Raw materials for the basic manufacture of pharmaceutical active

ingredients and for manufacture of pharmaceutical products, provided

that in case of import, only such raw materials shall be entitled to

exemption which are liable to customs duty not exceeding ten per cent

advalorem, either under the First Schedule to the Customs Act, 1969 (IV

of 1969) or under a notification issued under section 19 thereof.

Respective headings

106 Import of Halal edible offal of bovine animals. 0206.1000,0206.2000,

0206.8000 and 0206.9000

107 Import and supply of iodized salt bearing brand names and trademarks

whether or not sold in retail packing.

108 Components or sub-components of energy saver lamps, namely:-

(a) Electronic Circuit

(b) Plastic Caps (Upper and Lower)

(c) Base Caps B22 and E27

(d) Tungsten Filaments

(e) Lead-in-wire

(f) Fluorescent Powder (Tri Band Phospher)(g) Adhesive Additive

(h) Al-Oxide Suspension

(i) Capping Cement

(j) Stamp Pad Ink

(k) Gutter for Suspension

8539.9040

8539.9040

8539.9040

8539.9040

3206.5010

3824.9099

3824.9099

3214.1050

3215.9010

2850.0000

109 Goods imported temporarily with a view to subsequent

exportation, as concurred by the Board, including passenger service

item, provision and stores of Pakistani Airlines.

Respective headings


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Sales Tax Act


110 The following items with dedicated use of renewable source of energy

like solar and wind, subject to certification by the Alternative Energy

Development Board (AEDB), Islamabad:-(a) Solar PV panels;

(b) LVD induction lamps;

(c) SMD, LEDs with or without ballast, with fittings and

fixtures;

(d) Wind turbines including alternators and mast;

(e) Solar torches;

(f) Lanterns and related instruments;

(g) PV modules along with related components, including

invertors, charge controllers and batteries.

8541.5000, 8539.3990

9405.1090 ,8502.3100

8513.1040 ,8513.10908541.4000,8504.4090,

9032.8990 and 8507.0000

111 White crystalline sugar 1701.9910 and 1701.9920

112 Following cardiology/cardiac surgery, neurovascular, electrophysiology,

endosurgery, endoscopy, oncology, urology, gynaecology, disposables

and other equipment:-

A. ANGIOPLASTY PRODUCTS

1. Coronary Artery Stents

2. Drugs Eluting Coronary Artery Stents

3. Coronary Artery Dilatation Catheters (Balloons)

4. PTCA Guide Wire

5. PTCA Guiding Catheters

6. Inflation Devices/Priority Packs

B. ANGIOGRAPHY PRODUCTS

1. Angiography Catheters

2. Sheaths

3. Guide Wires

4. Contrast Lines5. Pressure Lines

6. Mannifolds

C. CONTRAST MEDIA FOR ANGIOGRAPHY/ ANGIOPLASTY

1. Angiography Accessories

2. ASD Closure Devices

3. ASD Delivery Systems

4. VSD Closure Devices

5. VSD Delivery System

6. Guide Wires

7. Sizing Balloons

8. Sizing Plates

9. PDA Closure Devices

10. PDA Delivery system

D. TEMPORARY PACEMAKERS (with leads, connectors and accessories)

E. PERMANENT PACEMAKER (with leads, connectors and accessories)

F. HEART FAILURE DEVICES (with leads, connectors and accessories)

G. IMPLANTABLE CARDIOVERTES (with leads, connectors and

accessories)

H. CARDIAC ELECTROPHYSIOLOGY PRODUCTS

1. Electrophysiology catheters

2. Electrophysiology cables

3. Electrophysiology connectors

Respective headings


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Sales Tax Act


I. LEAR CARDIOLOGY PRODUCTS

1. Radioactive isotopes2. Cold kits (Cardioloite MAA, DTPA etc)

CARDIAC SURGERY PRODUCTS

1. Oxygenators

2. Cannulas

3. Prosthetic Heart Valves

4. Luminal Shunts for heart surgery

5. Artificial limbs and appliances

K. EQUIPMENT

1. Cardiac Angiography Machine

2. Echocardiography Machines

3. ETT Machines

4. Gamma Camera for Nuclear cardiology studies

L. PERIPHERAL INTERVENTIONS EQUIPMENT

Disposables and other equipment for peripheral interventions including

stents (including carotid and wall stents), balloons, sheaths, catheters,

guide wires, filter wires coils, needles, valves (including rotating

homeostatic valves), connecting cables, inflation devices adaptors.

113 High Efficiency Irrigation Equipment.

(If used for agriculture sector)

1) Submersible pumps (up to 75 lbs and head 150 meters)

2) Sprinklers including high and low pressure (center pivotal)

system, conventional sprinkler equipment, water reel traveling

sprinkler, drip or trickle irrigation equipment, mint irrigation

sprinkler system.

3) Air release valves, pressure gauges, water meters, back flow

preventers, and automatic controllers.

8413.7010

8424.8100, 8424.2010

8481.1000, 8481.3000,

9026.2000, 9032.8990

114 Green House Farming and Other Green House Equipment. (If used for

agriculture sector)

1) Tunnel farming equipment.

2) Green houses (prefabricated).

8430.3100, 8430.3900

9406.0010

115 Plant, machinery and equipment imported for setting up fruit processing

and preservation units in Gilgit-Baltistan, Balochistan Province and

Malakand Division subject to the same conditions and procedure as are

applicable for import of such plant, machinery and equipment under the

Customs Act, 1969 (IV of 1969).

Respective headings

116 Plant, machinery and equipment imported for setting up industries in

FATA subject to the same conditions and procedure as are applicable for

import of such plant, machinery and equipment under the Customs Act,

1969 (IV of 1969).

Respective headings


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Sales Tax Act


New insertions are highlighted as red and the serial numbers omitted are not included in the

schedule

Table 2

(Local Supplies only)

Serial

No

Description Heading Nos. of the First Schedule to the Customs Act,

1969 (IV of 1969)

(1) (2) (3)

1. Supply of cottonseed exclusively meant for

sowing purposes, subject to such conditions

as the Board may specify.

1207.2000.

2. Supply of locally produced crude vegetable

oil obtained from the locally produced seeds

[***], except cooking oil, without having

undergone any process except the process of

washing.

Respective headings.

3. Supplies made by cottage industry Respective headings.4. Raw material and intermediary goods

manufactured or produced, and services

provided or rendered, by a registered

person, consumed in-house for the

manufacture of goods subject to sales tax.


5. omitted

6. Supply of fixed assets against which input tax

adjustment is not available under a

notification issued in terms of clause (b) of

sub-section (1) of section 8 of the Sales Tax

Act, 1990.


7. Breads prepared in tandoors and bakeries,

vermicillies, nans, chapattis, sheer mal, bun,

rusk.


8. Foodstuff cooked or prepared in-house and

served in messes run on the basis of

mutuality and industrial canteens for

workers.


9. Foodstuff and other eatables prepared in the

flight kitchens and supplied for consumption

on-board in local flights.


10. Agricultural produce of Pakistan, not

subjected to any further process of



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Sales Tax Act


manufacture.

11. Supply of ware potato and onions 0701.9000 and 0703.1000

12 Omitted13 Reclaimed lead, if supplied to recognized

manufacturers of lead batteries

Respective headings

14 Waste paper Respective headings

15 (a) Sprinkler Equipment

(b) Drip Equipment

(c) Spray Pumps and nozzles

Respective headings

16 Raw cotton and ginned cotton Respective headings

Highlighted in red are new insertions

Table 3

The plant, machinery, equipment and apparatus, including capital goods, specified in column (2) of

the Annexure below, falling under the HS Codes specified in column (3) of that Annexure, shall be

exempt from the whole of sales tax, subject to the following conditions, besides the conditions

specified in column (4) of the Annexure, namely:-

(i) the imported goods as are not listed in the locally manufactured items, notified through a

Customs General Order issued by the Board from time to time or, as the case may be,certified as such by the Engineering Development Board. This condition shall, however,

not be applicable in respect of S. Nos. 1, 13, and 15 of the Annexure; and for such

machinery, equipment and other capital goods imported as plant for setting up of a new

industrial units provided the imports are made against valid contract(s) or letter(s) of

credit and the total C&F value of such imports for the project is US $50 million or above

(ii) except for S. No. 9 and 14 of the Annexure, the Chief Executive, or the person next in

hierarchy duly authorized by the Chief Executive or Head of the importing company shall

certify in the prescribed manner and format as per Annex-A that the imported items are

the company’s bonafide requirement. He shall furnish all relevant information online to

Pakistan Customs Computerized System against a specific user ID and passwordobtained under section 155D of the Customs Act, 1969. In already computerized

Collectorates or Customs stations where the Pakistan Customs Computerized System is

not operational, the Project Director or any other person authorized by the Collector in

this behalf shall enter the requisite information in the Pakistan Customs Computerized

System on daily basis, whereas entry of the data obtained from the customs stations

which have not yet been computerized shall be made on weekly basis; and

(iii) in case of partial shipments of machinery and equipment for setting up a plant, the

importer shall, at the time of arrival of first partial shipment, furnish complete details of


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Sales Tax Act


the machinery, equipment and components required for the complete plant, duly

supported by the contract, layout plan and drawings

Explanation.- For the purpose of Table-3, capital goods mean any plant, machinery, equipment,

spares and accessories, classified in Chapters 84, 85 or any other chapter of the Pakistan Customs

Tariff, required for-

(a). the manufacture or production of any goods and includes refractory bricks and

materials requir

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