ISLAMABAD: The federal government has decided to introduce more tax concessions for industrialists and businesses in the Finance Bill before final voting on it by the national assembly aimed at soothing some unnerved lobbies and reversing some aggressive taxation measures.
The decision had been taken on the day the government decided to increase petroleum products prices by up to 66% aimed at collecting additional Rs234 billion revenues in the next fiscal year from the rich and poor alike through petroleum levy. The petroleum levy collection target has been increased from Rs216 billion in the outgoing fiscal year to Rs450 billion for the fiscal year 2020-21.
In a major concession to industrials, that will also kill the spirit of documentation, the government has now decided that the maximum disallowance of expenses to an industrial undertaking attributable to sales made to an unregistered person will be 10%, according to sources in the finance ministry.
Earlier, the government had proposed that 20% of the expenses will be disallowed in case of sale to unregistered persons with effect from July. Now, instead of enforcing the condition from July, it is proposed to implement even the reduced rate from October 1, 2020, apprised the sources.
The Pakistan Tehreek-e-Insaf (PTI) government had introduced the Finance Bill 2020 in the national assembly on June 12 and the new amendments in the Bill are now proposed in light of recommendations by the stakeholders. It is a common practice of making certain changes in the finance bill before approval from the national assembly.
The national assembly is expected to vote on the finance bill on Sunday (today) or on Monday.
The government has proposed a tax collection target of Rs4.963 trillion for the Federal Board of Revenue (FBR) for next fiscal year, which has been termed unrealistic by the experts and the opposition parties.
The government has also decided to reverse some of the changes that were proposed in the budget. Against the budget proposal of charging 8% minimum income tax from the engineering services, it has now been decided that the rate will be 3% for residents as well as permanent establishments of non-residents, said the sources.
Similarly, the concessional rate of 3% on the provision of services for resident taxpayers may also be charged from warehousing services, services provided by asset management companies, data service provided under the license issued by Pakistan Telecommunication Authority (PTA) and telecom infrastructure (Tower) services providers, stated the sources.
It has also been decided that the rate of withholding tax on mutual funds will be 15% as against the budget proposal of 25%, the sources said.
It has decided to withdraw 25% federal excise duty (FED) proposed to be charged on energy drinks. It has decided to further reduce the rate of FED for cement from Rs1.75 per kg to Rs1.5 per kg in the budget, it had been proposed to reduce the rate from Rs2 per kg.
After resistance shown by the Senate Standing Committee on Finance, the government has also decided to withdraw the proposal of payment of 10% demand at the appeal stage, added the sources. The budget proposal was found unconstitutional by the standing committee.
The government has also decided to change the income tax exemption regime of Shaukat Khanum, SIUT, Karachi by shifting it to table-I of, clause 66 of part I of Second Schedule that deals with tax exempted entities. Earlier, it was proposed to be in the table-II that required fulfilment of certain conditions in the future.
It has also been decided to give permanent income tax exemption to National Endowment Scholarship for Talent (NEST), and Alamgir Welfare Trust International has been proposed to be added in table II of clause (66) and clause (61) of part-I of the Second Schedule to the Ordinance. The income tax exemption has also been proposed for Naya Pakistan Housing and Development Authority.
Moreover, the sources added that there was a certain dispute over extending concessional capital gains tax rates to the unlisted companies, which are currently available to only listed companies. The FBR has opposed extending the concessions. They said that there was the possibility that the concessional capital gains tax may be charged from the date of the company getting listed till the date of disposal. The capital gain before listing could be charged to tax as gains of private limited and unlisted companies said the sources.
Some more tax concessions have been proposed for the construction sector. It has also been decided to allow limited liability partnership companies to avail the prime minister’s tax amnesty scheme for the construction sector, said the sources.
Earlier, this facility was available to a company or association or person who shall have to be “single object (builder or developer) company or association of person registered under the Companies Act, 2017 or the Partnership Act of 1932”.
It has also been proposed to grant status of industrial undertaking to hospitality sector on the lines of the construction industry. However, the decision on exemption from minimum tax u/s 113, exemption from withholding tax on services, advance tax collection on utilities u/s 235 and 236 of Income Tax Ordinance (ITO) 2001 and carrying forward of business losses to 10 years period instead of six years for hospitality sector could not be taken till Saturday evening.
The government has decided to provide an exemption from income tax and sales tax withholding on the supply of sand, stone crush, clay, mud goods and daily wagers, artisans, plumbers, electricians provided to the construction sector. But these goods and services providers will not be exempted from the provision of CNIC.
It has also reduced sales tax rates on blocks being used in the construction sector. The new rates are Rs3 per piece and Rs5 per kerbstone of below one cubic foot ad Rs10 per piece of above one cubic foot kerbstone.
It has proposed minimum taxes on import of fully and partially built mobile phone handsets and sale of locally manufactured mobile phones in a fixed regime of Ninth Schedule. The sales tax on local supply of completely build mobile units is Rs10 while in case of imported mobiles it is in the range of Rs130 to Rs92,70, said the sources.
The FED on locally manufactured double cabin vehicle has also been imposed with effect from July 1, 2020. In the budget, the government had proposed to impose 25% duty on imported double-cabin vehicles and 7.5% locally assembled ones.
As against the budget proposal to charge federal excise duty on imported cigarettes equal to 100% of the price, it has now decided to reduce rates to 70% of the retail price or Rs5,200 per 1,000 cigarettes whichever is higher.
Similarly, the federal excise duty rate on imported cigars has also been proposed to reduce from 100% of the retail price to 70% or Rs10,000 per kg whichever is higher.
Published in The Express Tribune, June 28th, 2020.
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