Without abolishing CNIC conditions…: FBR comes up with alternative plan

ISLAMABAD: Without abolishing Computerized National Identity Cards (CNICs) condition, the FBR has come up with an alternative plan through Presidential Ordinance that it would not allow input adjustments to those manufacturers who would sell 10 million goods on monthly basis to unregistered buyer.

“The objective of this amendment through Presidential Ordinance is to bring major distributors into tax net,” the FBR’s Member Inland Revenues (Policy) Dr Hamid Ateeq Sarwar said while briefing reporters on salient features of Tax Laws (Second Amendment) Ordinance 2019 that was claimed to be promulgated by the President Arif Alvi on December 27, 2019.

Flanked by Members Customs Javed Ghani and Member IT Asim Ahmed on the occasion, Dr Hamid Ateeq Sarwar said that the big distributors who made purchases from Rs10 million on monthly basis to Rs100 million on annual basis, the manufacturers would not be granted input adjustments if they would sell their products to unregistered persons.

The FBR’s Member IR (Policy) said that the revenue collection stood at Rs2,083 billion in first half (July-Dec) period of the current fiscal against the revised target of Rs2,198 billion for this period. He said that the number of return filers stood at 21,50,000 till December 31, 2019 against 15,62,000 in the same period of last year. The number of active taxpayers list (ATL), he said, stood at 27, 50,000 so it was hoped that around 0.6 million more filers would come for filing of their returns in the extended period up to January 31, 2020.

On Point of Sale (POS), he said that the FBR wanted to install POS software system at 20,000 big retailers’ falling into tier-1 category and so far 4750 retailers had come into system. The FBR’s Member IT Asim Ahmed said that under newly launched POS campaign they had brought 186 retailers and integrated 5000 POS points with the FBR system. So far 40 shops started sharing online data with the FBR, he said and added that they had resolved all major problems because of technical hitches.

Dr Hamid Ateeq Sarwar said that the FBR was targeting purchases of affluent segment of the society as they used to buy branded clothes from brands shops and they did not have any problem to provide 17 percent GST on purchasing of expansive suiting in thousands of rupees.

He said that the FBR was considering to come up with 5 percent cash payback scheme for encouraging customers to get receipt. One proposal is provide them reward scheme and another one is refile scheme but in Punjab it was found that the car gift came out on names of employees of the restaurants because they cut and provided receipts on the name of their employees.

Regarding different clauses of Presidential Ordinance, it was told that the Ordinance has added a new subsection in Section 152, whereby, every banking

company is directed to deduct tax @ 10% on capital gains, earned by a non-resident Company, having no permanent establishment in Pakistan, arising on disposal of debt instruments and government securities including T-Bills and PIBs through

Special Convertible Rupee Account (SCRA).

The Clause (9A) of Part III of Second Schedule provides a 50% exemption on capital gain derived on first sale of immovable property acquired or allotted to ex-servicemen and serving personnel of Armed forces or ex-employees or serving personnel of Federal and Provincial Governments, being original allottees of immovable property. This Ordinance has further exempted capital gains up to 75% in case the property is sold after completion of three years from date of acquisition.

On Sales Tax side, the ordinance has explained tier-1 category of retailers. The limit of electricity bill increased from Rs 0.6 million to Rs 1.2 million on annual basis. The rate of minimum tax decreased from 1.5 to 0.5 percent. The determination of exact turnover tax on retailers will be done through committees constituted with traders. The dispute resolution will also be done by these committees through representation of FBR field formation and trader leaders, the FBR member said.

The Ordinance inserted certain changes including definition of green field so a definition of this term in section 2 of the Sales Tax Act, 1990 has now been inserted in clause 12A.

Penalty for Persons who violate FBR Integrated Software for Sale or Track and Trace System: In order to ensure that persons who are required to integrate with the FBR or have been integrated, either do not get themselves integrated or do not make proper compliance and tamper with the systems so installed so as to avoid reporting and recording of production and sales, it has been provided to amend section 33 of the Act to declare such act as an offence and punishable with imprisonment and fine both.

Penalty for violation of Printing requirement of Retail Price: Sales tax is levied on the basis of retail price on the items specified in the Third Schedule to the Act. Such retail price is required be printed with retail price. In order to ensure compliance in this respect, and to safeguard revenue associated therewith, it is penalty has been provided and also confiscation of contravening goods by amending section 33 of the Act.

Penalty for violation of Section 40D – To document further supplies from AJK:

In order to safeguard industry in Pakistan and to prevent misuse of exemption, a new section 40D in the Act has been added and amendment in this regard has also been made in section 33 relating to penalties and offences, so as to provide for powers to prescribe documentation in relation to such goods and to examine and check vehicles coming from tax-exempt areas such as AJ&K, Gilgit-Baltistan and Tribal Areas.

Amendment in Section 73 - Manufacturers to sell goods to Registered Persons Section 73 has been amended to provide that a registered manufacturer shall make all taxable supplies to a registered person excluding supplies not exceeding a value of rupees hundred million in a financial year and rupees 10 million in a month.

Enhancement of rate of Imported Cotton Sales tax on the imported cotton has been enhanced from 5% to 10% to remove disparity.

Correction of PCT of Brick Kilns

PCT heading of bricks had been inadvertently mentioned as “6901.1000”, whereas the correct PCT heading is “6901.0000”. Tenth Schedule has been amended to correct the PCT heading

Amendment in the 12th Schedule

Manufacturers using plant and machinery for in house installation have now been excluded from the purview of the 12th , further refund of 3% value addition tax may not be barred if paid on goods used in making of zero-rated supplies.

12 Chargeability of Mobile Phones

Sales tax on the mobile phones upto the value of 30 US dollars has been reduced from Rs130 to Rs100 and phones having value up to $100 from Rs1320 to Rs200.

Broadening the Scope of Tier 1 Retailer

Definition of tier-1 retailer has been amended in section 2(43A), whereby the Federal Board of Revenue is empowered to add any other category of retailers to tier-1.

In view of the higher tariff rates of electricity the conditions to qualify for a Tier 1 retailer have been amended so as to increase the threshold of electricity consumption from Rs600,000 to Rs1200,000.