Amendments in Income Tax Rules, 2002

Federal Board of Revenue has proposed some amendments in the Income Tax Rules, 2002 vide SRO. 1119(I)/2010 .These amendments are applicable to Tx year  2010. The text of this SRO is as Below:-

S.R.O. 1119 (I)/2010.- The following draft of certain further amendments in the Income Tax Rules, 2002, which the Federal Board of Revenue proposes to make in exercise of the powers conferred by sub-section (1) of section 237 of Income Tax Ordinance, 2001 (XLIX of 2001), is hereby published, as required under sub-section (3) of the said section, for the information of all persons likely to be affected thereby and notice is hereby given that the draft will be taken into consideration after fifteen days of its publication in the official Gazette.

DRAFT AMENDMENTS
In the aforesaid Rules, in the Second Schedule, in Part IIA, in Annexure A,-

(a) after S. No. 12 and the entries relating thereto, the following new serial numbers and entries relating thereto shall be inserted, namely:-

“13. Machinery and equipment qualifying for 1st year allowance,

14. Computer hardware including printer, monitor and allied items that have been used previously in Pakistan.

15. Any plant or machinery that has been used previously in Pakistan.

16. Any plant or machinery in relating to which a deduction has been allowed under another section for the entire cost of the asset in the tax year in which the asset is acquired; and

(b) S. Nos. 13, 14, 15 and 16 shall be re-numbered to read as S. Nos. 13, 14, 15, 16 and 17 respectively.

2. This notification shall be applicable for the tax year 2010.

Source http://www.fbr.gov.pk/

NA body on Finance and Revenue mulls RGST over zero-rated textile sectors

A half day meeting of the Sub-Committee of the National Assembly’s Standing Committee on Finance and Revenue was chaired by Ms. Shahnaz Wazir Ali, MNA and Special Advisor to the Prime Minister on 7th December 2010 in FBR. The meeting was attended by two other MNAs namely Ms. Kashmala Tariq and Mr. Rashid Godil, Mr. Gohar Ejaz, Chairman APTMA, Mr. Zubair Motiwala, Chairman CAPTA, representatives of several textile sector associations, Chairman FBR and FBR officers.

Several issues relating to the five zero-rated sectors (Textile, leather, carpets, surgical goods and sports) and RGST were discussed extensively. The associations presented their point of view and requested that zero-rating be continued under the existing sales tax regime since removing zero-rating would lead to liquidity issues for these sectors. They requested that the intermediatary stages be not taxed and some other mechanism may be devised to collect taxes on the domestic sales of these sectors preferably at the retail stage.

There was a consensus that the exports of these five sectors should remain zero-rated whereas the domestic sales need to be taxed. The Sub-committee appreciated the concerns of the Textile associations and the need to facilitate the sector since it represented a major share of Pakistan’s exports.

The discussions of the sub-Committee with the representatives of these sectors shall continue in the next meeting of the sub-Committee scheduled on 11th December, 2010. Ms. Shahnaz Wazir Ali requested FBR and the representatives of the associations to present definite proposals on how the exports of these sectors could be facilitated and the local consumption brought into the tax net in the next meeting to help the Sub-committee firm up its views

Source: http://www.fbr.gov.pk/

The Senate of Pakistan on Friday 26 Nov 2010 approved 15 recommendations for inclusion in Reformed General Sales Tax Bill, 2010 and four recommendations in Finance (Amendment) Bill 2010. Four recommendations which was approved in  Finance (Amendment) Bill 2010 are listed below:-

  

• In clause 2(4A)(1) the words "having income above rupees five hundred thousand" be added after the words "every taxpayer".
• In clause 2(4A)(1) the word "income" in third line be deleted.
• In clause 2(4A)(2) the word "various" be substituted with the words "any of the".
• In the Federal Excise Act, 2005, in Section 3A, in sub-section (1), the following proviso shall be added, namely:- "Provided that during the period from the commencement of the Act to 30th June, 2011, the said rate shall be two percent."

GST Bill, 2010 (Proposed)

GST Bill 2010 has been presented in National Assembly for approval .It will replace existing Sales Tax act 1990.Salient features of the new proposed GST system are as follows:-

Most of exemption will be abolished only few exemption will be available such as exemption on basic food items including wheat, rice, pulses, vegetables, fruits, live animals, meat and poultry etc. Edible oil chargeable to Federal excise duty will remain exempt from GST as before.

Exemptions earlier available for philanthropic, charitable, educational, health or scientific research purposes or under international commitments/agreements including grants-in-aid will also continue. Moreover, life saving drugs, books and other printed materials including newspapers and periodicals have been kept exempt.

Local consumption of sectors like textile (including carpets), leather, surgical and sports goods has however, been subjected to tax. Similarly, defence stores, stationary items, dairy products, pharmaceuticals (other than lifesaving), agricultural inputs, agricultural machinery and implements, aviation/navigation equipments including ships & aircrafts etc. have also been proposed to be taxed. 

 GST will replace the existing regimes of sales tax and excises on services.

 GST will apply on both at import and local supply stages.


 Standard rate of 15% has been proposed instead of the present rate of 17% or multiple other rates going upto 25%.


 There shall be no fixed tax, reduced tax, enhanced tax, retail price-based tax or special tax scheme under the new GST system.


 A uniform enhanced annual exemption threshold of Rs.7.5 million (which is presently Rs. 5 million) shall be applied to keep small businesses including small traders/retailers/cottage industry out of mandatory tax compliance.


 All exports shall be zero-rated.


 Input tax adjustment of both direct and indirect constituents shall be allowed on “totals” basis (excluding entertainment and non-business use passenger vehicles).


 Sales tax on goods and services where so authorized by the Provinces shall be mutually adjustable so that double taxation does not occur.


 No general zero-rating shall be admissible on any commercial form of domestic supply or on any local consumption.


 The GST system will work purely on “self-assessment and self-policing” basis.


 Cash flow of businesses shall be facilitated through expeditious centralized (Electronic) refund payment system.


 Tax compliance shall be encouraged through transparent and fair audit system with increased use of modern information technology.


 Adjudication, appeal and alternative dispute resolution (ADR) systems have been provided as before.


 FBR will issue simplified rules to regulate the GST procedures and processes.


 The GST Bill 2010 shall take effect from such date as may be notified by the Federal government.


 The new GST system will be applied in FATA/PATA, the Province of Gilgit-Baltistan and AJ&K in due course.

Source http://www.fbr.gov.pk/

FINANCE ACT 2010

Subject: EXPLANATORY CIRCULAR ON RATE OF ADVANCE TAX DEDUCTIBLE ON MONTHLY ELECTRICITY BILLS UNDER SECTION 235 OF THE INCOME TAX ORDINANCE 2001

In order to rationalize the advance tax regime on electricity bills, the Finance Act 2010 has brought in few amendments in Division-IV of Part-IV of First Schedule to the Income Tax Ordinance 2001. The new amendments are explained as follows:

(i) In case of the minimum tax rate slab where the monthly electricity bill does not exceed Rs.400/-. No advance tax under section 235 shall be deductible. Earlier advance tax on monthly electricity bills not exceeding Rs.400 was chargeable @ Rs.60/-;

(ii) In case of the maximum tax rate slab where the monthly electricity bill exceeds Rs.20,000/-, advance tax under section 235 shall be deductible at a reduced rate of 5% only in case of industrial consumers. However, in the case of commercial consumers the advance tax shall continue to be deductible @ 10%; and

(iii) These amendments in the rates of advance tax under section 235 and as provided in Division-IV of Part-IV of First Schedule to the Income Tax Ordinance 2001, shall be effective from 1st July, 2010.

FINANCE ACT 2010

Government of Pakistan

Revenue Division

Federal Board of Revenue

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C.No.1(12)WHT/2010 Islamabad, June 30, 2010.

CIRCULAR NO.06/2010   INCOME TAX

Subject: EXPLANATORY CIRCULAR ON NEWLY INTRODUCED ADVANCE TAX DEDUCTIBLE ON AIR TICKETS UNDER SECTION 236B OF THE INCOME TAX ORDINANCE 2001

Through Finance Act 2010, a new section 236B has been inserted in the Income Tax Ordinance 2001. The new enactment provides that person preparing the air ticket shall charge advance tax on the gross amount of domestic air ticket, at the time of its purchase.

2. Accordingly a new Division-IX has been inserted in Part-IV of the First Schedule to the Income Tax Ordinance 2001, which provides that advance tax under section 236B shall be charged @ 5% of the gross amount of domestic air ticket.

3. This enactment shall be effective from 1st July 2010 onwards.

(MOHAMMED IMTIAZ)

Secretary (Withholding Tax)

Ph:/Fax# 051-9201448