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BUDGET HIGHLIGHTS

2013-14
FINANCE BILL 2013 HIGHLIGHTS
INCOME TAX ORDINANCE, 2001
REVENUE MEASURES Increased burden on the easiest to tax class of tax payers i.e. salaried class. The tax slabs have been once again changed and maximum rate of taxation has been proposed to be increased to 30% from existing 20%.

Non-salaried individuals and association of persons have also


been targeted by increasing the highest rate from existing 25% to proposed 35% with a major focus to discourage non corporate entities in business. Many professional service providers would be mainly at disadvantage by this measure as they are legally not allowed to form companies. under the ambit of final tax regime.

Inter-corporate dividends have been proposed to be brought Tax under section 148 on imports by person other than industrial
undertakings and companies is proposed to be increased to 5.5% from prevailing general rate of 5%. increased withholding taxes on account of payments for sales of goods, rendering of services and contracts have been proposed.

Non-corporate taxpayers will also be at disadvantage now as

The rate for deduction of tax at source on prize on prize bonds or

cross-word puzzles has been proposed to be increased from existing rate of 10% to a proposed rate of 15%. therefrom has been sought to be increased significantly reaching the highest level at 17.5% as against the existing maximum of 10%. Rs. 50,000 per day from existing 0.2% to a proposed rate of 0.3%.

Rates of taxation on property and withholding of advance tax

Increase the rate of advance tax on cash withdrawals exceeding

Rate of minimum tax proposed to be increased from existing 0.5% to 1%. Minimum tax proposed on builders and land developers based on
their sales or bookings during the year at Rs. 25 per sq. ft for builders and Rs. 50 per sq. yd for developers.

3 The prevailing rate of initial allowance for plant and machinery has been proposed to be reduced from existing 50% to 25%, bringing it at par with the allowance on buildings, which certainly would increase in taxable profits and thus taxation.

ADVANCE TAX WITHHOLDING / COLLECTION

Persons registered under the Sales Tax Act, 1990 have been proposed
to be made obliged to deduct withholding tax under section 153.

Despite the proposal to omit section 153A on collection of withholding


tax from distributors, dealers and wholesalers, 13 sectors have now been proposed where advance tax is required to be collected from the supply chain partners 0.1% from distributors, dealers and wholesalers and 0.5% from retailers.

Private educational institutions, boutiques, beauty parlours, hospitals,

clinics, maternity homes to withhold advance tax from property rentals. advance tax where annual rentals on property is Rs. 1.5 Million or above. financiers and lenders providing any margin financing, margin trading or securities lending. been sought to be introduced.

Individuals or association of persons also been sought to withhold

NCCPL proposed to collect advance tax from margin financiers, trading

Lump sum (one-off) payment of advance tax on motor vehicles has Functions of almost every type are proposed to be brought under the

ambit of advance tax collections at 10% of total bill including expenditure on food. The clubs, restaurants, wedding halls and lawns are required to act as withholding agents.

Persons responsible for censoring or certifying a foreign- produced

film, a TV drama serial or a play, for screening and viewing to collect advance tax at specified rates. Majorly the foreign produced dramas have been proposed to be subjected to Rs.100,000 per episode tax.

PEMRA proposed to collect advance tax upon grant and renewal of

licenses to cable TV operators and other electronic media activities being regulated by PEMRA. 5% on the gross amount of fee where the annual fee exceed Rs. 200,000. sought to be collected through market committees at the time of issuance or renewal of licenses.

Educational institutions are being required to collect advance tax at

Advance tax on dealers, commission agents & arhatis etc. is also

Advance tax on cash withdrawals exceeding Rs. 50,000 per day from
existing 0.2% to a proposed rate of 0.3%.

4 Rates for collection of advance tax have been proposed to drastically increase from a minimum increment of 33.33% up to 492.59% depending upon the engine capacities.

Advance tax at the time of sale by public auction from prevailing


5% of the gross sale price is proposed to increase to a rate of 10%.

Measures have also been taken to increase collections from


minimum tax. WITHDRAWAL OF EXEMPTIONS

Exemption

on free or concessional passage provided by transporters including airlines to its employees (including the members of their household and dependents). available to universities or other educational institutions established solely for educational purposes and not for purposes of profit.

Exemption

Exemption on dividend in specie derived in the form of shares in a company. Tax concession on lying allowance received by specified officials of
Pakistan Armed Forces, Pakistani Airlines or Civil Aviation Authority, Pakistan Armed Forces and submarine allowance received by the officers of the Pakistan Navy.

Tax concession / rebate of 75% available to full time teachers or researchers. Exemption of profit on debt on DSCs, SSCs, Savings Accounts or
Post Office Savings Accounts, or TFCs requiring tax to be deducted from profit on debt on these instruments and accounts irrespective of the quantum of investment.

REGULATORY MEASURES
Amendments proposed to Income Tax law endeavoring to override the provisions of statues regulating the business of banking in Pakistan to make it obligatory upon banks to provide information of their account holders and customers to be used only for tax purposes. Specially, details of persons depositing more than one million during a particular month is required to be reported to tax authorities. Similarly, details of persons whose credit card spending exceed one hundred thousand during a particular month required to be reported to tax authorities. Tax authorities direct access to data base has also be sought.

RELIEF MEASURES

It has been proposed to insert a proviso relating to a relief of 1%,

reducing the tax rate for companies other than a banking company from existing 35 % to 34% applicable to tax year 2014. Zones has been proposed to be increased from existing 5 years to 10 years. engine capacity from 25% to 100% of tax upon import of hybrid cars.

Tax exemption to an enterprise operating in Special Economic

Enhance relaxation on income tax at import stage based on

Relaxation from the provisions of section 148 is sought to be

given to such industrial undertakings which opt to pay tax liability for the current tax year on the basis of determined tax liability for preceding two tax years, whichever is the higher.

It has been proposed to maintain the rate of tax on dividend

received by a banking company from Money Market Funds and Income Funds at 25% for tax year 2014 and onwards.

CLARIFICATORY MEASURES
Explanation to section 171 has been proposed to clarify that the date from which compensation for delayed refund shall be calculated shall be the date of issuance of refund order and not the date of assessment order. However, even the provisions of existing section depict so but the in various cases the superior courts have already ruled that it should be the date of assessment order because on that date commissioner has been treated to have issued assessment order thus accepting the claim of refund of the appellant.

SALES TAX ACT, 1990


Salient features of the amendments in Sales Tax Act, 1990 proposed through Finance Bill 2013 are provided hereunder for perusal.

REVENUE MEASURES
TIME OF SUPPLY After a long process of litigation, historically the law was amended by Finance Act, 2007 to restrict the definition of time of supply to the delivery of goods or rendering of services. The definition has been proposed to be amended to include advance payment / part payment as event of determination of time of supply. Under the proposed amendment time of supply would be earlier of delivery of goods or time when payment is received. ENHANCEMENT IN TAX RATES General rate of sales tax has been proposed to be enhanced from 16% to 17%. Consequent to issuance of declaration under The Provisional Collection of Taxes Act, 1931, this rate would be effective from 13.06.2013. Following other rate changes have also been introduced.

2% further tax has once again been introduced for supplies to un-registered persons effective from 13.06.2013. Earlier this further tax was being collected @ 3% and was abolished through Finance Act, 2004. Now, the further tax has been re-introduced with outsourcing power to Federal Government to announce any exclusions through notification official Gazette;

5% additional sales tax introduced on commercial and industrial

electricity and gas consumers having monthly bill in excess of Rs.15,000. Special procedures rules for collection of above mentioned additional sales tax @ 5% tax have been introduced.

INTRODUCTION OF FIXED TAX REGIME Through introduction of new sub-section (1B) in section 3 of the Sales Tax Act, 1990, the bill seeks to empower Board to collect and levy tax:

On production capacity of plants, machinery, undertaking,

establishments or installations producing or manufacturing such goods; or position to collect such tax due to the nature of the business.

On fixed basis, as it may deem fit, from any person who is in a


EXPANDING LIST OF ITEMS IN THIRD SCHEDULE The Third Schedule to the Sales Tax Act, 1990 has been expanded to include the following items on which now sales tax would be chargeable on printed retail price at the start of supply chain.

Finished or made-up articles of textile and leather, including garments,

footwear, bed ware sold in retail packing; Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tubelights, fans, electric irons, washing machines and telephone sets; House hold gas appliances, including cooking range, ovens, geysers and gas heaters; Foam or spring mattresses, and other foam products for household use; Auto parts and accessories sold in retail packing;

Lubricating oils, brake fluid, transmission fluid, and other vehicular Tyres and tubes; Storage batteries; Arms and Ammunition; Paints, distempers, enamels, pigments, colors, varnishes, gums, resins,
fluids and maintenance products in retail packing;

dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing; Fertilizers; Cement sold in retail packing; Tiles sold in retail packing; Biscuits, confectionary, chocolates, toffees and candies; Other goods and products sold in retail packing. WITHDRAWAL OF EXEMPTIONS Exemption of sales tax on following items / supplies have been withdrawn with effect from 13.06.2013.

Milk preparations obtained by replacing one or more of constituents of


milk by another substance; and Supplies against international tenders.

LAW HARMONISING MEASURES

Power to grant 30 days stay against recovery of sales tax

demand in hardship cases has been given to Commissioner (Appeals) just like the power of stay provided in Income Tax Law through Finance Act, 2012. Rectification of mistake provisions introduced to harmonize the provisions with Income Tax Ordinance, 2001.

PROCEDURAL STREAMLINING MEASURES

During the period of blacklisting of any registered person, even if


follow the provisions of section 73, the invoices issued by it shall no longer be considered genuine input tax and shall be rejected. Powers of investigation into the affairs of persons believed to be engaged in issuance of fake or flying invoices, claiming fraudulent input tax or refunds or does not physically exist or conduct business or any other fraudulent activity, have been given to the Commissioner having jurisdiction. A new section 40C has been proposed to be introduced to provide powers and legal backing to the authorities for maintaining a monitoring or tracking system by electronic or other means on production, sales, clearances, stocks of registered persons. Through these powers, the much campaigned tax stamp affixing, banderole, stickers and labels, seems in the planning for tracking the tax paid goods and identify the black economy.

CLARIFICATORY MEASURES

By adding an explanation paragraph to section 25 Access to record, documents, etc, the bill seeks to once again empower the commissioner to himself enjoy the powers of selecting a case for audit and call for any records necessary. Historically, by introduction of section 72B by Finance Act, 2010 the power of selection of cases on parametric balloting was vested to the Board and courts ruled that Commissioner does not have independent power of selection of cases after introduction of section 72B.

FEDERAL EXCISE ACT, 2005


REVENUE MEASURES
ENHANCEMENT IN TAX RATES

2% further duty has been introduced for supplies / rendering of

services to un-registered persons in line with the rate of 2% further tax introduced in Sales Tax. Rate of duty on aerated waters / beverages enhanced from 6% to 9% effective with effect from 13.06.2013. Duty structure on Cigarettes has been changed from three tiers to two tiers. DUTY ON NEW ITEMS Duty levied on Oilseeds at the rate of 40 paisa per kg;

10% ad valorem duty levied on Motor cars, SUVs and other motor
vehicles of cylinder capacity of 1800 cc or above.

Duty levied on services provided or rendered by cooperative financing

societies, Modarbas, Musharika, leasing companies, foreign exchange dealers, assets management companies and other persons dealing in any such services at the rate of 16% of the charges.

FIXED TAX REGIME

Fixed duty @ Rs. 1 per kg on locally produced oil purchased by a


manufacturer of vegetable gee and cooking oil, in lieu of duty payable @ 16% effective 13.06.2013; Fixed duty @ 40 paisa per kg on oilseeds, at the import stage, in lieu of duty payable at production or manufacturing stage of vegetable ghee or cooking oil effective from 13.06.2013. WITHDRAWAL OF EXEMPTIONS Exemption of federal excise duty on following items / supplies have been withdrawn with effect from 13.06.2013. Hydraulic cement, lubricating oil and transformer oil. Services provided or rendered by Asset Management Companies.

LAW HARMONISING MEASURES


Power to grant 30 days stay against recovery of sales tax demand in hardship cases has been given to Commissioner (Appeals) just like the power of stay provided in Income Tax Law through Finance Act, 2012.

PROCEDURAL STREAMLINING MEASURES


Facility of repayment-cum-drawback of federal excise duty on the export of vegetable ghee to Afghanistan by the units located in the violence affected areas withdrawn. A new section 45A has been proposed to be introduced to provide powers and legal backing to the authorities for maintaining a monitoring or tracking system by electronic or other means on production, sales, clearances, stocks of registered persons.

CLARIFICATORY MEASURES

By adding an explanation paragraph to section 35 Power of the Commissioner to pass certain orders, the bill seeks to once again empower the commissioner to himself enjoy the powers of selecting a case for audit and call for any records necessary. Historically, by introduction of section 42B by Finance Act, 2010 the power of selection of cases on parametric balloting was vested to the Board and courts ruled that Commissioner does not have independent power of selection of cases after introduction of section 42B.

2 INCOME TAX ORDINANCE, 2001


SALARIED PERSON TAX RATES
The bill seeks to provide new rates for salaried individuals in Division I Part I of First Schedule. The existing six slabs of salaried individuals are proposed to be increased to twelve slabs. The provisions relating to marginal relief under clause 1A are proposed to be omitted, which certainly would result in lesser take home salary if increase in salaries pushes the person marginally in the upper tax slab.
The proposed amendment in rates will increase the tax liability of salaried persons which is a harsh step as these persons are already paying taxes on their income.

The proposed tax rates are as under:


Salaried Taxpayer Slab # 1 2 Taxable income Upto 400,000 400,001 to 500,000 Rate of Tax 0% 5% of the amount exceeding Rs 400,000 Rs 5,000 + 7.5% of the amount exceeding 3 500,001 to 800,000 Rs 500,000 Rs 27,500 + 10% of the amount exceeding 4 800,001 to 1,300,000 Rs 800,000 Rs 77,500 + 12.5% of the amount exceeding 5 1,300,001 to 1,800,000 Rs 1,300,000 Rs 140,000 + 15% of the amount exceeding 6 1,800,001 to 2,200,000 Rs 1,800,000 Rs 200,000 + 17.5% of the amount 7 2,200,001 to 2,600,000 exceeding Rs 2,200,000 Rs 270,000 + 20% of the amount exceeding 8 2,600,001 to 3,000,000 Rs 2,600,000 Rs 350,000 + 22.5% of the amount 9 3,000,001 to 3,500,000 exceeding Rs 3,000,000

Rs 462,500 + 25% of the amount exceeding 10 3,500,001 to 4,000,000 Rs 3,500,000 Rs 587,500 + 27.5% of the amount 11 4,000,001 to 7,000,000 exceeding Rs 4,000,000 Rs 1,412,500 + 30% of the amount 12 7,000,001 and above exceeding Rs 7,000,000

The proposed rate will result in increase of tax liability at different levels. A chart showing comparison at different levels of income is as under:
Salaried Taxpayer Tax Liability Individuals Present Income (Rs.) 400,000 750,000 1,500,000 2,500,000 4,000,000 7,000,000 8,000,000 6,000,000 10,000,000 Rs. 17,500 92,500 262,500 720,000 1,320,000 1,520,000 1,120,000 1,920,000 Propose d Rs. 23,750 102,500 252,500 587,500 1,412,500 1,712,500 1,137,500 2,312,500 Differenc e Increase / (Decrea se) % 6,250 10,000 (10,000) (132,500) 92,500 192,500 17,500 392,500 35.71 10.81 (3.81) (18.40) 7.01 12.66 1.56 20.44

Rs.

NON SALARIED PERSON AND AOP TAX RATES


The bill seeks to provide new rates for business individuals and AOPs in Division I Part I of First Schedule. The existing five slabs of business individuals and AOPs are proposed to be increased to seven slabs. The proposed amendment in rates will increase the tax liability of business individuals and AOPs which is a good step as it will bring the business person into tax net.

The proposed tax rates are as under:


Non Salaried Taxpayer Rate of Tax Taxable income Upto 400,000 0% 10% of the amount exceeding 2 400,001 to 750,000 Rs.400,000 Rs.35,000 + 15% of the amount 3 750,001 to 1,500,000 exceeding Rs.750,000 Rs.147,500 + 20% of the amount 4 1,500,001 to 2,500,000 exceeding Rs.1,500,000 Rs.347,500 + 25% of the amount 5 2,500,001 to 4,000,000 exceeding Rs. 2,500,000 Rs. 722,500 + 30% of the amount 6 4,000,001 to 6,000,000 exceeding Rs.4,000,000 Rs. 1,322,500 + 35% of the amount 7 6,000,001 and above exceeding Rs.6,000,000

Sla b# 1

The proposed rate will result in increase of tax liability at different levels. A chart showing comparison at different levels of income is as under:
Non Salaried Taxpayer Individuals Tax Liability /Association of Persons Income (Rs.) 400,000 750,000 1,500,000 2,500,000 4,000,000 6,000,000 10,000,000 12,000,000 Present Rs. 35,000 147,500 347,500 722,500 1,222,500 2,222,500 2,722,500 Propose d Rs. 35,000 147,500 347,500 722,500 1,322,500 2,722,500 3,422,500 Rs. 100,000 500,000 700,000 Differen ce Increase / (Decrea se)

% 8.18 22.50 25.71

25,000,000 50,000,000

5,972,500 12,222,50 0

7,972,500 16,722,50 0

2,000,000 4,500,000

33.49 36.82

MINIMUM TAX
The bill seeks to extend the facility of carry forward of unadjusted minimum tax to individuals and AOPs in the same manner available to companies currently. Additionally, the current reduction by eighty percent in minimum tax on the turnover under section 113, available to companies, as per Clause 7 of Part III of Second Schedule, engaged in business of distribution of cigarettes manufactured in Pakistan is proposed to be extended to Individuals and AOPs also. The bill also proposes to increase minimum tax to 1% which is currently payable by companies, certain individuals and AOPs @ 0.5%.

TAX HOLIDAY
The corporate income tax holiday for a period of 5 years is currently available for projects in the Special Economic Zones as announced by the Federal Government as per Clause 126E of Part I of Second Schedule. The bill seeks to extend income tax holiday to projects in special Economic Zones for a period of 10 years.

TAX ON MOTOR VEHICLE


The bill seeks to make the withholding tax adjustable, payable on the goods transport vehicle at the time of payment of provincial motor vehicle tax which is currently final tax on their income.

TAX INCENTIVE ON HYBRID CARS


Through induction of Clause 28 of Part II of Second Schedule, rate of tax on import of hybrid cars is proposed to be exempted up to engine capacity of 1200cc. Similarly tax on import of hybrid cars of engine capacity of above 1200cc is proposed to be reduced as below: Rate of Engine Capacity Reduction Up to 1200 CC 1201 to 1800 CC 1801 to 2500 CC 100% 50% 25%

EXEMPTION FOR INDUSTRIAL UNDERTAKINGS ON IMPORT OF RAW MATERIAL


The bill seeks to provide facility to industrial undertaking of exemption from the provision of section 148 regarding withholding tax on imports if the tax liability for the current tax year, on the basis of determined tax liability for any of the preceding two tax years, whichever is higher, has been paid and a certificate to this effect is issued by the Commissioner.

COMPANIES TAX RATE


The rate of tax for companies is currently at 35%. The bill seeks to reduce the rate of tax for non banking companies from 35% to 34%.

TAX INCENTIVE ON DIVIDENDS EARNED BY BANKS FROM MONEY MARKET & INCOME FUNDS
The bill seeks to propose tax on dividend received by banks from money market funds and income funds at the rate of 25% for tax year 2014 onwards from currently @ 30%.

INCOME FROM PROPERTY- TAX RATES


The bill seeks to provide new rates for property income in Division V Part III of First Schedule. The existing three slabs of property income applicable to companies are proposed to be increased to six slabs with maximum rate increased to 17.5% as under:
Proposed Taxable income Rs Upto 400,000 Existing % 5% Rs 20,000 plus 7.5% of the amount exceeding Rs 400,000 % No change

400,001 to 1,000,000 1,000,001 to 2,000,000

No change

No change Rs 165,000 plus 12.5% of the amount exceeding Rs.2,000,000 Rs 290,000 plus 15% of the amount exceeding Rs.3,000,000 Rs 440,000 plus 17.5% of the amount exceeding Rs.4,000,000

2,000,001 to 3,000,000

Rs 65,000 plus 10% of the amount exceeding Rs 1,000,000

3,000,001 to 4,000,000

Above 4,000,001

The existing slabs of property income applicable to all taxpayers other than companies are proposed to be increased as under:
Proposed Taxable income Rs Upto 150,000 Existing % Nil 5% of the amount exceeding No change Rs150,000 Rs 12,500 plus 7.5% of the No change % No change

150,001 to 400,000

400,001 to 1,000,000

amount exceeding Rs 400,000 1,000,001 to 2,000,000 No change Rs 157,500 plus 12.5% of the amount exceeding Rs 2,000,000 Rs 282,500 plus 15% of the amount exceeding Rs 3,000,000 Rs 432,500 plus 17.5% of the amount exceeding Rs 4,000,000

2,000,001 to 3,000,000

3,000,001 to 4,000,000

Rs 57,500 plus 10% of the amount exceeding Rs 1,000,000

Above 4,000,001

ADVANCE TAX ON FUNCTIONS


The bill proposes to add new section 236D to impose tax at the rate of 10% which shall be collected by the hotels/clubs/marriage halls/ restaurants etc from persons arranging functions.

TAX ON ELECTRONIC MEDIA


The bill seeks to impose adjustable withholding tax on renewal and license fee of cable operators and other electronic media which shall be collected by Pakistan Electronic Media Regulatory Authority.

TAX ON MARGIN FINANCERS


NCCPL is required to collect advance tax from members of stock exchange in respect of margin financing in share business @ 10%. The bill proposes to extend the scope of withholding tax to margin financers, trading financers and lenders in respect of providing any margin financing, margin trading or securities lending under Securities (Leveraged Markets and Pledging) Rules, 2011 in share business @ 10% of profit or markup or interest earned by the members, margin financers or securities lender.

TAX ON CASH WITHDRAWALS


The bill seeks to increase the rate of withholding tax on cash withdrawals from banks of amount exceeding Rs. 50,000 from 0.2% to 0.3%.

TAX ON BUILDERS & DEVELOPERS


The bill seeks to impose minimum tax @ Rs. 25 per square foot as per construction or site plan approved by the regulatory authority on the income of a person deriving from business of construction and sale of residential, commercial or other buildings and further imposes minimum tax @ Rs. 50 per square yards as per layout or approved site plan on the income of person deriving from development and sale of residential, commercial or other plots.

TAX ON DISTRIBUTORS, DEALERS AND WHOLSELERS


All manufacturers were made liable to collect adjustable withholding tax from distributors, dealers and wholesalers through Finance Act, 2012. The bill seeks to restrict such withholding tax to every manufacturer or commercial importer of Electronics, sugar, cement, Fertilizers, Iron, & Steel Products, Motorcycles, Pesticides, Cigarettes, Glass, Textile, Beverages, Paints & Foam sectors and the rate is being reduced to 0.1% which shall be collected at the time of sale to distributors, dealers and wholesalers.

TAX ON MOTOR VEHICLE REGISTRATION

The bill seeks to enhance tax rates on registration of motor vehicles as below:

Engine Capacity Upto 850cc 851cc to 1000cc 1001cc to 1300cc 1301cc to 1600cc 1601cc to 1800cc 1801cc to 2000cc Above 2000cc

Amount of Tax (in Rs.) Rs. 10,000 20,000 30,000 50,000 75,000 100,000 150,000

Further the bill seeks to make the tax adjustable collected from any person being the owner of goods transport vehicle on the income of such person from plying or hiring out of such vehicle.

WITHHOLDING TAX DISPARITY FOR CORPORATE & NON CORPORATE TAXPAYERS


The bill seeks to propose different rates of withholding tax for corporate and non corporate sectors as: (i). The rate of withholding tax in case of sale of goods by persons other than companies is proposed to be increased to 4% of the gross amount payable . However, the rate will remain @ 3.5% of the gross amount payable in case of companies. (ii). The rate of withholding tax in case of rendering of services by persons other than companies is proposed to be increased to 7% of the gross amount payable. However, the rate will remain @ 6% of the gross amount payable in case of companies. (iii). The rate of withholding tax in case of execution of contracts by persons other than companies is proposed to be increased to 6.5% of the gross amount payable . However, the rate will remain @ 6% of the gross amount payable in case of companies.

TAX ON COMMISSION AGENTS AND ARHATIS


The bill proposes to add a new section through which adjustable advance tax shall be collected by every market committee from dealers, commission agents or arhatis etc at the rates given below: Group Group or Class A Group or Class B Group or Class C Any other category Amount of Tax (per annum) Rs. 10,000 Rs. 7,500 Rs. 5,000 Rs. 5,000

TAX ON FOREIGN PRODUCTION


The bill proposes to add a new section through which adjustable advance tax shall be collected by any person responsible for censoring or certifying a foreign produced film, a TV drama serial or a play, for screening and viewing, at the time of censoring or certifying, at the rates given below: Category Foreign Produced Film Foreign Produced TV drama serial Foreign produced TV play (single episode) Amount of Tax (in Rs.) 1,000,000 100,000 per episode 100,000

TAX ON PUBLIC AUCTION


The bill seeks to increase the current rate of advance tax collected by any person making sale by public auction or auction by tender of any property or goods at the time of sale of any property or goods by auction from 5% to 10%.

TAX ON EDUCATIONAL INSTITUTIONS FEES


The bill proposes to add a new section through which adjustable advance tax @ 5% shall be collected by the person preparing fee voucher or challans on the amount of fee paid, if annually in excess of Rs.200,000, to an educational institution.

TAX ON PRIZES
The bill seeks to increase the current rate from 10% to 15% of advance tax collected by every person paying prize on a prize bond from the gross amount paid.

REDUCTION IN RATE OF INITIAL ALLOWANCE


The bill has proposed reduction in the percentage of initial depreciation on plant & machinery from 50% to 25%. This will discourage investment in plant & machinery as it will reduce the expenditure claimed during the year of purchase by the companies.

WITHDRAWAL OF EXEMPTION
The bill seeks to withdraw the current limit of exemption from withholding tax on account of income or profit paid to a resident individual on DSCs, SSCs, Saving Accounts or Post Office Saving Accounts or TFCs when such deposit does not exceed Rs. 150,000. The bill also seeks to withdraw the following clauses of second schedule of the Income Tax Ordinance, 2001:

Any exemption to dividend in specie derived in the form of shares in a company.

II.

Any exemption available to free or concessional passage provided by transporters including air lines to its employees by virtue of their employment. Taxation at reduced rate of 2.5 % on flying allowance and submarine allowance. 75 % reduction in the tax payable by a full time teacher or a researcher being misused by high income earners and administrators. Exemption available to any income of any university or other educational institution established solely for educational purposes and not for purposes of profit.

III.
IV.

V.

3 SALES TAX ACT, 1990


DEFINITIONS
CREST DEFINED The bill seeks to introduce definition of CREST as under: CREST means the computerized program for analyzing and cross-matching of sales tax returns, also referred to as Computerized Risk-based Evaluation of Sales Tax. Provincial Sales Tax on Services Referred The bill seeks to re-define Provincial Sales Tax in line with recently enacted laws with respect sales tax on services in the provinces of Sindh and Punjab. SUPPLY CHAIN DEFINED The bill seeks to introduce definition of supply chain as under: Supply Chain means the series of transactions between buyers and sellers from the stage of first purchase or import to the stage of final supply. TIME OF SUPPLY RE-DEFINED The bill seeks to re-define time of supply in relation to supply of goods as the time at which goods are delivered or made available to the recipient of supply or the time when any payments is received by the supplier, whichever is earlier.
After a long process of litigation, the law was amended by Finance Act, 2007 to restrict the definition of time of supply to the delivery of goods or rendering of services. Once again, the definition has been proposed to be amended to include advance payment / part payment as event of determination of time of supply. Under the proposed amendment time of supply would be earlier of delivery of goods or time when payment is received.

RATE OF TAX
GENERAL RATE OF TAX The bill seeks to enhance the standard rate of sales tax to 17% as compared to the existing rate of 16%. FURTHER TAX The bill seeks to levy further tax at the rate of 2% of value, where taxable supplies are made to a person who has not obtained registration number.

Earlier this further tax was being collected @ 3% and was abolished through Finance Act, 2004. Now, the further tax has been re-introduced with outsourcing power to Federal Government to announce any exclusion through notification in official Gazette. FIXED TAX The bill seeks to empower the Board to levy and collect sales tax on the production capacity of plants or on fixed basis from any prescribed person.

TAX CREDIT NOT ALLOWED


The bill seeks to disallow input tax adjustment on the basis of discrepancies indicated by CREST or where input tax is not verifiable in the supply chain.

DE-REGISTRATION, BLACKLISTING AND SUSPENSION OF REGISTRATION


The bill seeks to provide for that during the period of blacklisting of any registered person, the invoices issued by it shall no longer be considered genuine for claiming input sales tax and shall be rejected, even if the provisions of section 73 are followed. Further the powers of investigation into the affairs of persons believed to be engaged in issuance of fake or flying invoices, claiming fraudulent input tax or refunds or does not physically exist or conduct business or any other fraudulent activity, have been given to the Commissioner having jurisdiction.

RECORDS
The bill seeks to insert a new clause to maintain and keep inward and outward gate passes and transport receipts as records required under this section.

ACCESS TO RECORD, DOCUMENTS, ETC.


The bill seeks to insert explanation for the purpose of sections 25, 38, 38A, 38B and 45A and for removal of doubt, that powers of the Board, Commissioner or Officer of Inland Revenue under these sections are independent of the powers of the Board under section 72B regarding selection for audit by the Board. Once again, this bill proposes to empower the Commissioner himself to enjoy the powers of selecting a case for audit and call for any records. Historically, by introduction of section 72B by Finance Act, 2010 the power of selection of cases on parametric balloting was vested to the Board and the Courts ruled that Commissioner does not have independent power of selection of cases after introduction of section 72B.

POSTING OF INLAND REVENUE OFFICER


The bill seeks to equate powers of Board and Chief Commissioner regarding posting of officers or officials of Inland Revenue to business premises for monitoring.

MONITORING OR TRACKING BY ELECTRONIC OR OTHER MEANS


The bill seeks to provide for powers and legal backing to the authorities for maintaining a monitoring or tracking system by electronic or other means on production, sales, clearances, stocks, etc.

APPEALS

The bill seeks to provide for powers to the Commissioner Appeals to stay the recovery of any tax levied under this Act for a period of 30 days, which according to his opinion, may cause undue hardship to the taxpayer in line with powers of the Commissioner Appeals to grant stay under the Income Tax Ordinance, 2001 conferred vide Finance Act, 2012

RECTIFICATION OF MISTAKE
By substituting this section, the bill seeks to harmonize the concept of rectification of mistake in line with the Income Tax Ordinance, 2001.

REWARD TO INLAND REVENUE OFFICERS AND OFFICIALS


The bill seeks to allow for provision of cash reward to officers and officials of Inland Revenue on detection of cases of concealment and evasion of sales tax.

THIRD SCHEDULE TAX TO BE COLLECTED ON RETAIL PRICES


By the proposed amendments to the Third Schedule, the bill seeks to include taxable supplies of the following items in this Schedule to charge sales tax on retail price basis.

Finished or made-up articles of textile and leather Household electrical goods Household gas appliances Foam or spring mattresses Auto parts and accessories Lubricating oils, fluids and maintenance products Tyres and tubes Storage batteries Arms and ammunition Paints, varnishes, gums, polishes, etc., sold in retail packing Fertilizers Cement sold in retail packing Tiles sold in retail packing Biscuits, confectionary, chocolates, toffees and candies Other goods and products sold in retail packing

SIXTH SCHEDULE WITHDRAWAL OF EXEMPTIONS


By the proposed amendments to the Sixth Schedule, the bill seeks to withdraw exemption on the following items as mentioned in this Schedule. Table I (Imports or supplies)

Milk preparations obtained by replacing one or more of the


constituents of milk by another substance

Table II (Local supplies only) Supplies against international tender

NOTIFICATIONS
SRO 500(I)/2013

Through this SRO, following SROs have been rescinded: SRO No. & Date SRO 646(I)/2005 dated 30th June, 2005 Subject of SRO Zero per cent rate of sales tax on supply of Hydrogen, Nitrogen & Helium to M/s Pakistan PTA Limited, Port Qasim, Karachi by M/s BOC Pakistan Limited, Karachi Exemption from sales tax on certain goods imported by a member of Pakistan Film Producers Association (PFPA) for exclusive use in the production and/or display of film Zero per cent rate of sales tax on raw materials, sub-components, components, sub-assemblies and assemblies imported or purchased locally for the manufacture of certain goods, subject to certain conditions Exemption from whole amount of default surcharge and penalties payable by a registered person located in certain districts of provided outstanding KPK principal amount of sales tax or federal excise duty is paid by 30th June, 2010 Exemption from sales tax leviable on supply of electricity by Peshawar Electric Supply Company to manufacturing units located in certain districts of KPK Reduced rate of sales on goods produced or manufactured in areas where Sales Tax Act, 1990 is not applicable but included in the Prime Ministers Fiscal Relief to rehabilitate the economic life in KPK, FATA & PATA, if supplied to a person in any area where the Sales Tax Act, 1990 is applicable Reduced rate of sales on the supplies made

SRO 172(I)/2006 dated 24th February, 2006

SRO 863(I)/2007 dated 24th August, 2007

SRO 160 (I)/2010 dated 10th March, 2010

SRO 164 (I)/2010 dated 10th March, 2010

SRO 117 (I)/2011 dated 10th February, 2011

SRO 180(I)/2011 dated 5th March, 2011

of goods, other than cement, sugar, beverages and cigarettes, by the registered persons located in certain districts of PK 501(I)/2013 Through this SRO, following items have been brought to exemption regime from zero rating regime:

Uncooked poultry meat Milk and cream Flavored Milk Yogurt Whey Butter

Desi ghee Cheese Processed cheese Cotton seed Frozen, prepared or preserves sausages Meat and similar products Preparations for infant use Fat filled milk Soyabean meal Oil cake and other solid residues Colours in sets Writing, drawing and marking inks Erasers Exercise books Directly reduced iron Pencil sharpeners Energy Saver Lamps Sewing machines of household types Purpose built taxis Bicycles Wheelchairs Vessels for breaking up Other drawing, marking or mathematical instruments Pens and ball pens Pencils including color pencils Compost produced and supplied locally

Construction material to Gawadar SRO 502(I)/2013 Through this SRO, zero rating on the items mentioned above under SRO 501(I)/2013 has been withdrawn. SRO 504(I)/2013 Through this SRO, changes have made in description of goods and PCT Heading Nos in the Table to the earlier issued SRO 1125(I)/2011 dated 31st December, 2011 to exclude finished articles of leather and artificial leather, finished articles of textiles and textile made ups, carpets in finished condition, sports goods in finished condition, surgical goods in finished condition, color master batches and shoe adhesives which were chargeable to sales tax at the rate of 2% under SRO 1125(I)/2011. SRO 505(I)/2013 Through this SRO, the Federal Govt. has expanded the scope of withholding tax regime by making all withholding agents responsible to withhold whole amount of sales tax on purchase of taxable goods from unregistered persons. Earlier, federal and provincial government departments, autonomous bodies and public sector organizations only were required to withhold whole amount of sales tax on purchases made from unregistered persons. SRO 509(I)/2013 Through this SRO, the Federal Govt. has levied extra tax at the rate of 5% of total billed amount on supplies of electric power and natural gas to persons having industrial or commercial connections and whose bill in any month exceeds Rs. 15,000 but who have not obtained sales tax registration number or are not on the Active Taxpayers List maintained by the FBR. SRO 510(I)/2013 Through this SRO a new Chapter has been incorporated in Sales Tax Special Procedure Rules, 2007 regarding collection and payment of extra tax on supplies of electric power and natural gas consumed by unregistered and inactive persons in line with levy of extra tax at the rate of 5% vide S RO 509(I)/2013 stated above. SRO 505(I)/2013 Through this SRO, the Federal Govt. has expanded the scope of withholding tax regime by making all withholding agents responsible to withhold whole amount of sales tax on purchase of taxable goods from unregistered persons. Earlier, federal and provincial government departments, autonomous bodies and public sector organizations only were required to withhold whole amount of sales tax on purchases made from unregistered persons. SRO 509(I)/2013 Through this SRO, the Federal Govt. has levied extra tax at the rate of 5% of total billed amount on supplies of electric power and natural gas to persons having industrial or commercial connections and whose bill in any month exceeds Rs. 15,000 but who have not obtained sales tax registration number or are not on the Active Taxpayers List maintained by the FBR.

4 FEDERAL EXCISE ACT, 2005

SRO 510(I)/2013 Through this SRO a new Chapter has been incorporated in Sales Tax Special Procedure Rules, 2007 regarding collection and payment of extra tax on supplies of electric power and natural gas consumed by unregistered and inactive persons in line with levy of extra tax at the rate of 5% vide SRO 509(I)/2013 stated above.

DUTIES SPECIFIED IN THE FIRST SCHEDULE TO BE LEVIED

The bill seeks to empower the Federal Government to levy further duty at the rate of 2% of value, where excisable goods and services are provided to a person who has not obtained registration number in line with the rate of 2% further tax introduced in Sales Tax Act, 1990.

RECORDS
The bill seeks to insert a new clause to maintain and keep inward and outward gate passes and transport receipts as records required under this section in line with insertion of a similar clause in the Sales Tax Act, 1990.

APPEALS TO COMMISSIONER APPEALS


The bill seeks to provide for powers to the Commissioner Appeals to stay the recovery of any tax levied under this Act for a period of 30 days, which according to his opinion, may cause undue hardship to the taxpayer in line with powers of the Commissioner Appeals to grant stay under the Income Tax Ordinance, 2001 conferred vide Finance Act, 2012

POWERS OF BOARD OR COMMISSIONER TO PASS CERTAIN ORDERS


The bill seeks to insert explanation for the purpose of section 35, 45 and 46 and for removal of doubt, that powers of the Board, Commissioner or Officer of Inland Revenue under these sections are independent of the powers of the Board under section 42B regarding selection for audit by the Board. Once again, this bill proposes to empower the Commissioner himself to enjoy the powers of selecting a case for audit and call for any records. Historically, by introduction of section 42B by Finance Act, 2010 the power of selection of cases on parametric balloting was vested to the Board and the Courts ruled that Commissioner does not have independent power of selection of cases after introduction of section 42B.

REWARD TO INLAND REVENUE OFFICERS AND OFFICIALS


The bill seeks to allow for provision of cash reward to officers and officials of Inland Revenue on detection of cases of concealment and evasion of duty.

ACCESS TO RECORDS AND POSTING OF EXCISE STAFF, ETC.


The bill seeks to equate powers of Board and Chief Commissioner regarding posting of officers or officials of Inland Revenue to business premises for monitoring.

MONITORING OR TRACKING BY ELECTRONIC OR OTHER MEANS


The bill seeks to provide for powers and legal backing to the authorities for maintaining a monitoring or tracking system by electronic or other means on production, sales, clearances, stocks, etc.

FIRST SCHEDULE RATE OF DUTY


By the proposed amendments to the First Schedule, the bill seeks to:

1. Enhance the rate of duty on aerated waters from 6% to 9%. 2. Change the value and duty on per thousand cigarettes as follows:
Locally produced cigarettes if their on- Rupees two thousand three hundred pack printed retail price exceeds rupees and twenty five per thousand cigarettes two thousand two hundred and eighty six per thousand cigarettes Locally produced cigarettes if their on- Rupees eight hundred and eighty per pack printed retail price does not exceed thousand cigarettes rupees two thousand two hundred

and eighty cigarettes

six

per

thousand

3. Levy of duty on Oilseeds at the rate of 40 paisa per kg. 4. Levy of duty on Motor cars, SUVs and other motor vehicles of cylinder
capacity of 1800 cc or above at the rate of 10% ad valorem.

5. Levy of duty on services provided or rendered by cooperative financing


societies, modarabas, musharikas, leasing companies, foreign exchange dealers, assets management companies and other persons dealing in any such services at the rate of 16% of the charges.

THIRD SCHEDULE WITHDRAWAL OF EXEMPTION


By the proposed amendments to the Third Schedule, the bill seeks to withdraw exemption of duty on hydraulic cement, lubricating oil, transformer oil and on services provided or rendered by Asset Management Companies.

NOTIFICATIONS
SRO 500(I)/2013 Through this SRO, following SROs have been rescinded: SRO No. & Date SRO 160 (I)/2010 dated 10 2010
th

Subject of SRO March, Exempti from whole amount of on default surchar and penalties payable ge by a registered person located in certain districts provided outstanding of KPK principal amount of sales tax or federal excise duty is paid by 30th June, 2010

SRO 161 (I)/2010 dated 10th March, 2010

SRO 162 (I)/2010 dated 10th March, 2010

Exempti from whole amount of on default Surchar and penalties payable ge by a registered person located in tribal areas provided outstanding principal amount of sales tax or federal excise duty is paid by 30th June, 2010 Exemption from federal excise duty on goods produced or services rendered in tribal areas from 1st January, 2010 to 30th June, 2010 Exemption from federal excise duty on goods produced or services rendered in certain districts of KPK from 1st January, 2010 to 30th June, 2010 Exemption from federal excise

SRO 163 (I)/2010 dated 10th March, 2010

SRO 200(I)/2011 dated 14th

March, 2011

duty on the goods produced or manufactured in certain non-tariff areas if brought to the tariff areas.

SRO 503(I)/2013
Through this SRO earlier issued SRO 993(I)/2006 dated September 21, 2006 has been amended to withdraw facility of repayment-cum-drawback of federal excise duty on the export of vegetable ghee to Afghanistan by the units located in the violence affected areas.

SRO 507(I)/2013 Through this SRO rate of duty has been fixed at the rate of Rs. 1 per kg on locally produced oil purchased by a manufacturer of vegetable gee and cooking oil, in lieu of duty payable @ 16%. SRO 508(I)/2013 Through this SRO rate of duty has been fixed at the rate of 40 paisa per kg on oilseeds, at the import stage, in lieu of duty payable at production or manufacturing stage of vegetable ghee or cooking oil.

5 INCOME SUPPORT LEVY ACT, 2013


The bill seeks to enact a law namely Income Support Levy Act 2013 to provide for financial resources for running an income support fund for the economically distressed persons and their families by imposing a levy to be called Income Support Levy on net moveable wealth.

Net moveable wealth has been defined as the amount by which the aggregate value of moveable assets belonging to a person as declared in the wealth statement for the relevant tax year, is in excess of the aggregate value of all the liabilities owed by that person on the closing date of the tax year.
Income support levy shall be charged for every tax year commencing on and from tax year 2013, at the rate of 0.5% of net moveable wealth exceeding one million rupees held by a person on the last date of the tax year. A person liable to pay Levy under this Act shall pay the Levy along with wealth statement. The provisions of the Income Tax Ordinance, 2001 shall, so far as may be practicable, apply to the collection of Levy under this Act.

6 PUNJAB CAPITAL VALUE TAX AMENDMENT IN PUNJAB FINANCE ACT, 2010


The Punjab Finance bill 2013 seeks to substitute the existing rate table in Punjab Finance Act, 2010 for imposition of capital value tax. Following para has been substituted for the existing: (a) immoveable property other than commercial or industrial property, a plaza or a multi storyed building, situated in urban area and the value of which exceeds one million rupees:

S. No.

Description

Rate of Tax

(i)

Where the value of immovable property is recorded

2% of the recorded value of the landed area

(ii)

Where the value of immovable property is not recorded

One hundred rupees per square feet of the landed area

iii)

Where the immovable property is constructed property

Ten ruppes per square feet of the constructed area in addition to the value worked out above

7 PUNJAB CAPITAL GAINS TAX PUNJAB FINANCE BILL, 2013


The Punjab finance bill 2013 in section 9 has proposed to levy capital gains tax on sale of immoveable property in addition to the capital gain tax levied on sale of immovable property through Finance Act, 2012 in Income Tax Ordinance, 2001. According to the proposal a gain occurring from sale of immovable property by a person in a tax year shall be chargeable to tax in that year at the following rate:

S.No. 1.

Description Sale within one year of acquisition

Rate 5% of the capital gain or 2% of the recorded value at the time of sale, whichever is higher 4% of the capital gain

2.

3.

4.

5.

6.

Sale between more than one but within two year of acquisition Sale between more than two but within three year of acquisition Sale between more than three but within four year of acquisition Sale between more than four but within five year of acquisition Sale after five years of acquisition

3% of the capital gain

2% of the capital gain

1% of the capital gain

No tax

The Collector under the above proposed provisions shall have the powers to assess the value on the basis of valuation table notified under section 27-A of the Stamp Act, 1899. The Collector shall also have the power to assess and collect the tax using powers of the Collector to collect CVT under section 6 of Punjab Finance Act, 2010. The regulatory body in this respect shall be Board of Revenue formed under the Punjab Board of Revenue Act, 1957. This gain tax has been proposed to be levied on all kind of persons including individual, association of person, company, body corporate, foreign government, political subdivision of foreign government and a public international organization.

8 PUNJAB LUXURY TAX ON HOUSES - PUNJAB FINANCE BILL, 2013


Through Punjab Finance Bill 2013 luxury tax on houses having more than two kanals size have been imposed luxury tax ranging from Rs.500,000 to Rs.1,500,000. This luxury tax shall be collected and regulated as if it is a property tax and relevant law shall apply. Luxury tax shall be payable in four equal instalments.

9 SALES TAX ON SERVICES ACT, 2011 - SINDH FINANCE BILL, 2013


DEFINITIONS
The Sindh Finance Bill 2013 has proposed the substitution of entire definition section 2 with the new one containing 99 definitions instead of 44 existing definitions. The definitions are being reproduced hereunder for perusal.
ACCO UNTA NT mean s:(i) a chartered accountant as defined in the Chartered Accountants Ordinance, 1961 (Ordinance No. X of 1961), and includes the Associate and Fellow members thereof; (ii) a cost and management accountant as defined in the Cost and Management Accountants Act, 1966 (Act No. XIV of 1966), and includes the Associate and Fellow members thereof; (iii) a firm or an association of chartered accountants or cost and management accounts; and (iv) other accountants or association of accountants notified in this behalf by the Board;

ADVERTISEMENT includes a notice, circular, label, wrapper, document, banner, hoarding, billboard, or any other audio or visual representation made or displayed by any means including print media, electronic media, telecommunication media, light, paint, coloration, sound, smoke or gas, or otherwise; ADVERTISING AGENT means a person engaged in providing any service connected with the making, preparation, display, demonstration or exhibition of advertisement in any manner and includes an advertising agency or media agent or advertising or media consultant, by whatever name called; AGENT means a person who is authorized to act on behalf of another person (called the principal) to create a legal relationship with a third party, and includes a person specified as an agent under section 67;

AIRPORT GROUND SERVICE PROVIDER AND AIRPORT SERVICE PROVIDER mean and include any service provider, operator and airline providing or rendering ground or ramp services, including passenger and cargo handling services, to other airlines or to aircraft operators of scheduled or non-scheduled flights, and also include the handling agents authorized by the Civil Aviation Authority or other airport operators; AIRCRAFT OPERATOR

means and includes any person who provides the services of transportation or carriage of passengers, goods, cargo, baggage or mail by aircraftAIRPORT OPERATOR means and includes the Civil Aviation Authority and any other authority or organization or office managing or operating a customs airport, as notified under section 9 of the Customs Act, 1969 (Act No. IV of 1969); APPELLATE TRIBUNAL means the Appellate Tribunal of the Sindh Revenue Board established under section 60; ARCHITECT means and includes an architect or a town planner as defined in section 2 of the Pakistan Council of Architects and Town Planners Ordinance, 1983 (Ordinance IX of 1983), and also includes an association of persons or a commercial concern engaged in any manner, whether directly or indirectly, in the field of architecture or town planning; ARREARS in relation to a person, means the tax due and payable by the person on a day under this Act, which has not been paid by that day in the prescribed manner; ASSISTANT COMMISSIONER means a person appointed as an Assistant Commissioner of the Sindh Revenue Board under section 34; ASSOCIATES OR ASSOCIATED PERSONS refers to (i) two persons, where the relationship between them is such that one may reasonably be expected to act in accordance with the intentions of the other, or both persons may reasonably be expected to act in accordance with the intentions of a third person; Provided that two persons shall not be associates solely by reason of the fact that one person is an employee of the other or both persons are employees of a third person; (ii)without prejudice to the generality of paragraph (i) and subject to paragraph (iii) of this clause, the following persons shall always be treated as associates, namely: (a) an individual and a relative of that individual; (b) members of an association of persons; a member of an association of persons and the where (c) association, the member, either alone or together with an associate or associates under another application of this clause, controls fifty per cent or more of the rights to income or capital of the association; a shareholder in a company and the company, sharehol (d) where the der, either alone or together with an associates under another associate or application of either directly or through one or more interposed this clause, controls persons (i) fifty per cent or more of the voting power in the company; (ii) fifty per cent or more of the rights to dividends; or (iii) fifty per cent or more of the rights to capital; and (e) two companies, where a person, either alone or together with an associate or associates under another application of this clause, controls either directly or through one or more interposed persons

(i) fifty per cent or more of the voting power in both companies; (ii)fifty per cent or more of the rights to dividends in both companies;
or fifty per cent or more of the rights to capital in both companies; and (iii) two persons shall not be associates under subparagraphs (a) or (b) of paragraph (ii) of this clause where the Commissioner SRB is satisfied that neither person may reasonably be expected to act in accordance with the intentions of the other; Explanation: The expression relative in relation to an individual, means (a) an ancestor, a descendant of any of the grandparents, or an adopted child, of the individual, or of a spouse of the individual; or (b) a spouse of the individual or of any person specified at (a) this explanation. ASSOCIATION OF PERSONS includes a firm, any artificial juridical person and anybody of persons formed under a foreign law, but does not include a company; AUTHORIZED SERVICE STATION means a service station or service center, authorized by a motor vehicle manufacturer, whether local or foreign, to carry out any service or repair or reconditioning or restoration or decoration of motor vehicles, classified under Chapter 87 of the Customs Act, 1969 (Act No. IV of 1969), manufactured by such manufacturer; Explanation: The services by authorized service stations include (1) the services provided during the warranty period as well as after the expiry of the warranty period; (2) the services provided even for the vehicles and machinery not manufactured by the manufacturer appointing or authorizing such service station; and (3) the services provided against charges billed by way of reimbursement, whether from the manufacturer or insurance companies or leasing companies or other such persons; AUTOMATED TELLER MACHINE means an interactive automatic machine, whether owned or outsourced by banks and other financial institutions, designed to dispense cash, accept deposit of cash, transfer money between bank accounts and facilitate other financial transactions including payments of bills; AUTOMATED TELLER MACHINE OPERATIONS, MAINTENANCE, AND MANAGEMENT means a service provided in relation to automated teller machines and includes site selection, contracting of location, acquisition, financing, installation, certification, connection, maintenance, transaction processing, cash forecasting, replenishment, reconciliation and value added services; BEAUTY PARLOUR OR BEAUTY CLINIC means a person or an establishment providing beauty treatment services including hair cutting, hair dyeing, hair dressing, face care, face treatment, cosmetic treatment, manicure, pedicure, make-up including bridal make-up, and counseling services on beauty care, face care or make-up or other such identical or similar services; BOARD means the Sindh Revenue Board established under section 3 of the Sindh Revenue Board Act, 2010 (Sindh Act No. XI of 2010); BUSINESS SUPPORT SERVICE

means services provided in relation to business or commerce and includes evaluation of prospective buyers, telemarketing, call centre facilities, accounting and processing of transactions, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation. For the purposes of this clause, the expression infrastructural support services includes providing office alongwith utilities, lounge, reception with personnel to handle messages, secretarial services, telecommunication facilities, pantry and security; CABLE TV OPERATOR includes local loop holder and means a person who owns, controls, manages or runs any cable television system and is engaged in reception of broadcast pre-recorded or live signals from different channels for distribution to subscribers through a set of closed transmission path or wireless, and is liable to license as a cable TV operator under the Pakistan Electronic Media Regulatory Authority Ordinance, 2002 (Ordinance No. XIII of 2002); CATERER by whatever name called, means a person who in ordinary course of business and in relation to events, functions, ceremonies, parties, get-together, occasions, etc., provides or supplies, either directly or indirectly, various services including food, edible preparations, beverages, entertainment, furniture or fixture, crockery or cutlery, pandal or shamiana, ornamental or decorative accessories or lighting for illumination; CLUB includes a membership club and a proprietary club and means a person, a body of persons, an establishment, an organization or a place, the membership of which is restricted to a particular class of people or which is run on the basis of mutuality or otherwise and provides various services, facilities, utilities or advantages for an amount of fee, consideration, subscription or charges, including those for initial membership, whether or not it provides food or drinks or has any arrangement for boarding or lodging or games; COMMISSIONER means a person appointed as a Commissioner of the Sindh Revenue Board under section 34; COMMISSIONER (APPEALS) means a person appointed as a Commissioner (Appeals) of the Sindh Revenue Board under section 34; COMMISSIONARTE means the office of the Commissioner or the Commissioner (Appeals) having jurisdiction specified under this Act and the rules made thereunder; COMMON TAXPAYER IDENTIFICATION NUMBER means the registration number or any other number or identification number allocated to a person for the purposes of this Act; COMMODITY BROKER

means a broker as defined in clause (b) of sub-rule (1) of rule 2 of the Commodity Exchange and Future Contracts Rules, 2005, made under section 33 of the Securities and Exchange Ordinance, 1969 (Ordinance No. XVII of 1969);
CO MP AN Y me an s

(a) (b)

(c)

(d) (e) (f)

(g) (h) (i)

a company as defined in the Companies Ordinance, 1984 (Ordinance No. XLVII of 1984); a banking company and foreign banking company as defined in the Banking Companies Ordinance, 1962 (Ordinance No. LVII of 1962), and includes any body corporate which transacts the business of banking in Pakistan; a non-banking finance company (NBFC) and the notified entities as specified in section 282A of the Companies Ordinance, 1984 (Ordinance No. XLVII of 1984), read with the Non-Banking Finance Company (Establishment and Regulation) Rules, 2003; a body corporate formed by or under any law in force in Pakistan; a modaraba company as defined in the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (Ordinance No. XXXI of 1980); a financial institution as defined in the Financial Institutions (Recovery of Finances) Ordinance, 2001 (Ordinance No. XLVI OF 2001), including a microfinance institution licensed under the Microfinance Institutions Ordinance, 2001 (Ordinance No. LV of 2001) and a Islamic financial institution; a body incorporated by or under the law of a country outside Pakistan relating to incorporation of companies; a trust, a co-operative society or a finance society or any other society established or constituted by or under any law for the time being in force; or a foreign association, whether incorporated or not, which the Board has, by general or special order, declared to be a company for the purposes of this Act.

COMPUTERIZED SYSTEM means any comprehensive information technology system used by the Board or any other office as may be notified by the Board, for carrying out the purposes of this Act; COURIER SERVICES includes the services provided or rendered by any person engaged in the transportation, carriage or delivery of timesensitive documents, goods or articles, whether or not utilizing the services of a person, directly or indirectly, to collect, carry or deliver such documents, goods or articles; CUSTOMS AGENT means a person licensed under section 207 of the Customs Act, 1969, and the rules made thereunder;

DEFAULT SURCHARGE means the default surcharge levied under section 44; DEFAULTER means a person or an association of persons and includes every member of such association, every director of such company and every partner of such firm and further includes guarantors or successors thereof, who fail to pay the arrears; DEPUTY COMMISSIONER means a person appointed as a Deputy Commissioner of the Sindh Revenue Board under section 34; DOCUMENT includes, but is not limited to, any electronic data, computer programmes, computer tapes, computer disks, micro-films or any other medium or mode for the storage of such data; DUE DATE in relation to the furnishing of a return or a statement or for payment of tax under the Act, means the 15th day of the month following the end of the tax period to which it relates, or such other date as the Board may, by notification in the official Gazette, specify; ECONOMIC ACTIVITY shall have the meaning given in section 4; E-INTERMEDIARY means a person appointed as electronic-intermediary under section 71; EVENT MANAGEMENT SERVICES means a service provided in relation to planning, promotion, organizing or presentation of any arts, business, sports, marital functions, social functions or any other function or event, and includes any consultation or any ancillary service such as catering, decoration, photography, videography, sound recording, lighting & illumination, DJ, valet parking, etc., provided in this regard; EXEMPT SERVICE means a service which is exempt from tax under section 10; EXHIBITION SERVICE means the service provided or rendered in relation to an exhibition held (a) to market; or (b) to promote; or (c) to advertise; or (d) to showcase, any product, goods or services intended for the growth in the business of the manufacturer, producer, importer, supplier, distributor or provider of such product, goods or services;

FBR means the Federal Board of Revenue established under the Federal Board of Revenue Act, 2007 (Act No. IV 2007); FINANCIAL YEAR means a year commencing on the first day of July and ending on the thirtieth day of June in the following year; FIRM means the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all; FOREIGN EXCHANGE DEALER includes an exchange company or a foreign exchange company or a money changer authorized or licensed by the State Bank of Pakistan; FRANCHISE means an authority given by a franchiser, including an associate of the franchiser, under which the franchisee is contractually or otherwise granted any right to produce, manufacture, distribute sell or trade or otherwise deal in or do any other business activity in respect of goods or to provide services or to undertake any process identified with the franchiser against a consideration or fee, including technical fee, management fee, or royalty or such other fee or charges, irrespective of the fact whether or not a trademark, service mark, trade name, logo, brand name or any such representation or symbol, as the case may be, is involved: FREIGHT FORWARDING AGENT means a person who provides or renders or makes arrangement for his principals or client, the services, for fee or charges or commission or remuneration, for some or all of the services being provided by the shipping agents, clearing agents, stevedores, ship chandlers, port operators, terminal operators, surveyors, persons providing ship management services, warehousing services or container provision services or cover or guarantee in respect of imports or exports of goods, independently or in partnership or in arrangement with any such service provider or renderer; GOODS includes every kind of movable property other than actionable claims, money, stocks, shares and securities and does not include a service or services described under this Act; GOVERNMENT means the Government of Sindh; HEALTHCARE CENTER, GYMS OR PHYSICAL FITNESS CENTER, ETC. includes a health club, gymnasium, reducing or slimming salon or clinic, or an establishment providing the facilities, utilities or advantages of sauna or steam bath, Turkish bath, solarium, spas, yoga, meditation, massage (excluding therapeutic massage under medical prescription or advice) or such other services;

HOTEL includes motels and guesthouses and means a person, establishment, organization or place, by whatever name called, where rooms or suites are let out on rent, whether or not it has any arrangement for catering or function halls as a part of the hotel or provides any other services, facilities or utilities, but does not include a home or hostel which is exclusively used for the aged or invalid persons or students and is run by or under the control of such a

charitable or educational institution as are exempt from the application of the Income Tax Ordinance, 2001 (Ordinance No. XLIX of 2001); INPUT TAX in relation to a registered person, means,-(a) tax levied under this Act on the services received by the person; (b) tax levied under the Sales Tax Act, 1990, on the goods imported by the person; (c) tax levied under the Sales Tax Act, 1990, on the goods or services received by the person; and (d) Provincial sales tax or Islamabad Capital Territory sales tax levied on the services received by the person: Provided that the Board may, by notification in the official Gazette, specify that any or all of the aforesaid tax shall not be treated as input tax for the purposes of this Act subject to such conditions and limitations as the Board may specify in the notification; INSURANCE has the same meaning as defined in clause (xxvii) of section 2 of the Insurance Ordinance, 2000 (Ordinance No. XXXIX of 2000); INSURER means a person as defined in clause (xxxi) of section 2 of the Insurance Ordinance, 2000 (Ordinance No. XXXIX of 2000); INTER-BANK RATE means the Karachi Inter-Bank Offered Rate (KIBOR) prevalent on the first day of each quarter of the financial year; LEGAL PRACTITIONERS AND CONSULTANTS by whatever name called, means a legal practitioner as defined in section 2 of the Legal Practitioners and Bar Councils Act, 1973 (Act No. XXXV of 1973), and includes a person engaged in providing of services in relation to advice, consultancy or assistance in any branch of law or providing representational services before any court, tribunal or other such judicial or quasi-judicial authority; MANAGEMENT CONSULTANT means a person engaged, either directly or indirectly, in providing of services in connection with the management of any business, organization or institution in any manner and includes a person who renders advice, consultancy or technical assistance relating to conceptualizing, devising, development, modification, rectification, or upgradation of any working system of such business, organization or institution;

MARKET RESEARCH AGENCY means a person engaged, directly or indirectly, in providing of services relating to the study or survey, or both, of any situation in the market for any purpose other than personal, academic or educational requirements; MARRIAGE HALL AND LAWN by whatever name called, includes a hall or lawn or a banquet hall or a function hall or an exhibition hall or lawn, or any building, place, premises or marquee where parties, receptions, events or functions, more particularly relating to matrimonial ceremonies, are held, whether or not it has its own arrangement of event management or provision of food, beverages, crockeries, cutleries, furniture, fixtures, etc.; OFFICER OF THE SRB means an officer of the Sindh Revenue Board appointed under section 34; OPEN MARKET PRICE shall have the meaning given in section 6; OUTPUT TAX in relation to a registered person, means the tax levied under this Act on the services provided or rendered by the person; PERSON means (a) an individual; (b) a company, an agency or an association of persons incorporated, formed, organized or established in Pakistan or elsewhere; (c) the Federal Government; (d) a Provincial Government; (e) a Local Authority or Local Government in Pakistan; or (f) a foreign Government, a political sub-division of a foreign Government, or a public international organization; Explanation: The use of the word he in this Act shall be taken to refer to any or all of the persons mentioned in sub-clauses (a) to (f) above. PLACE OF BUSINESS IN SINDH means that a person (a) owns, rents, shares or in any other manner occupies a space in Sindh from where it carries on an economic activity whether wholly or partially; or carries on an economic activity through any other person such (b) as an agent, associate franchisee, branch, office, or Sindh but not including otherwise in a liaison office. PORT OPERATOR includes Karachi Port Trust, Port Qasim Authority or any other person or organization managing the operations of any customs port as declared under section 9 of the Customs Act, 1969 (Act No. IV of 1969);

PRESCRIBED means prescribed by rules made under this Act; PRAL means the Pakistan Revenue Automation (Private) Limited; PROVISION OF SERVICE OR PROVIDING OF SERVICE includes the rendering, supply, initiation, origination, reception, consumption, termination or execution of service, whether in whole or part, including e-services where the context so requires; PUBLIC BONDED WAREHOUSE means a warehouse licensed under section 12 of the Customs Act, 1969; REGISTRATION NUMBER means the number allocated to a registered person for the purpose of this Act; REGISTERED PERSON means a person who is registered or is liable to be registered under this Act or any other person or class of persons notified by the Board in the official Gazette: Provided that a person liable to be registered but not registered under this Act shall not be entitled to any benefit available to a registered person under any of the provisions of this Act or the rules made thereunder; REINSURANCE includes retrocession, and has the same meaning as defined in clauses (lii) and (lv) of section 2 of the Insurance Ordinance, 2000 (Ordinance No. XXXIX of 2000);
RESIDEN T means (a) an individual who, in a financial year, has -

(i) a place of business, whether whole or part thereof, in Sindh in

(b)

any mode, style or manner; or (ii)his permanent address, as listed in the individuals national identity card, in Sindh; or (iii)a permanent representative to act on his behalf or to provide service on his behalf in Sindh; an association of persons or a company which, in a financial year, has -(i) its registered office is in Sindh; or (ii)its place of business, whether whole or part thereof, in Sindh in any mode, style or manner; or (iii)a permanent representative to act on its behalf or to provide service on its behalf in Sindh; or (iv)the control or management of the association of persons or the company, whether whole or part thereof, situated in Sindh at any time during the financial year;

RESTAURANT by whatever name called, includes a person, establishment, organization, place, cafe, coffee houses or ice cream parlors where food, beverages or other edible preparations are sold or served to the customers, including the customers availing of the take-away service or delivery service or room service or catering service, whether or not the restaurant provides any other services, facilities, utilities or advantages;

RETURN means a return required to be furnished under Chapter-VI of this Act; RULES means the rules made under this Act; SCHEDULE means a Schedule appended to this Act; SECURITY AGENCY means a person engaged in the business of providing of services relating to security of any person or property, whether moveable or immovable, including the services of provision of security personnel, guard or vehicle; SERVICE OR SERVICES means anything which is not goods or providing of which is not a supply of goods and shall include but not limited to the services listed in the First Schedule of this Act. Explanation: A service shall remain and continue to be treated as service regardless whether or not the providing thereof involves any use, supply or consumption of any goods either as an essential or as an incidental aspect of such providing of service; SHIPPING AGENT means a person licensed as a shipping agent under the Customs Act, 1969 (Act No. IV of 1969), or the rules made thereunder, who provides or renders any service in relation to entrance or clearance of a conveyance at a customs port and a customs station, as defined in clauses (j) and (k) of section 2 of the Customs Act, 1969, and files import or export manifest and issues line or carrier bill of lading, for or on behalf of an airline or shipping line or any other conveyance, and includes non-vessel operating common carriers, slot carriers, charterers, international freight forwarders and consolidators, rendering services in relation to import and export of cargo, independently or as subsidiary of an airline, shipping line, slot carrier, charterer, and non-vessel operating common carrier; SHIP CHANDLER means a person licensed as a ship chandler under the Customs Act, 1969 (Act No. IV of 1969) or the rules made thereunder; SHIP MANAGEMENT SERVICES includes -(a) supervision or negotiation for the maintenance, survey and repair of ship; (b) engagement or providing of crew; (c) receiving the hire and freight charges on behalf of the owner; (d) negotiating contracts for bunker fuel and lubricating oils; (e) arranging or negotiating arrangements for loading and unloading (f) payment, on behalf of the owners, of the expenses incurred in providing services or in relation to the management of the ship; (g) entry of the ship on protection or indemnity association; (h) providing or negotiating for victualing or storing of ship; (i) dealing with insurance, salvage or other claims in relation to ship; (j) arranging of insurance in relation to ship; and (k) any other ship management service; SHORT-PAID means, where a registered person pays an amount of tax less than the tax due as indicated in the persons return filed under section 30, the amount so involved and also includes the amount of tax due but not paid owing to miscalculation or incorrect or inadmissible input tax credit or adjustment or incorrect assessment of the tax due for a tax period; SIMILAR SERVICE means any other service which is the same as, or closely resembles, the other service in character, quality, quantity, functionality, materials, or reputation;

SPECIAL AUDIT means an audit conducted under section 29; SPECIAL JUDGE means a Special Judge appointed under section 37; SPONSORSHIP includes naming an event after the sponsor, displaying the sponsors logo, trade name, brand name or product name, giving the sponsor exclusive or priority booking rights, sponsoring prizes or trophies for competition or game or sports; but does not include financial or other support in the form of donations and gifts, given by a donor, subject to the condition that the service provider is under no obligation to provide anything in return to such donor; STATEMENT means a statement prescribed under the rules or notifications made under this Act; STEVEDORE includes a person engaged in handling and loading or unloading of cargo including containers, pallets and bulk cargo, from ships, vessels, steamers and country crafts in any manner and also includes a person who hires long shore, dock or harbor workers to load or unload ships, vessels, steamers and country crafts. A person providing or rendering any services related to or ancillary to the handling of or otherwise dealing with such or other cargo at a port or in any area or terminal at the port in any manner or style shall be included in the terminology stevedores; STOCKBROKER means a broker as defined in clause (c) of sub-section (1) of section 2 of the Securities and Exchange Ordinance, 1969 (Ordinance No. XVII of 1969) providing services in relation to a Stock Exchange as defined in clause (xxiv) of sub-section (1) of section 2 of the Stock

Exchange (Corporatization, Demutualization and Integration) Act, 2012 (Act No. XV of 2012) ; SURVEYOR means a person engaged in the services of insurance survey, market survey, statistical survey, opinion poll survey and survey relating to risk assessment, loss or damage assessment or claim settlement but does not include the services conducted by the Federal or Provincial or Local Governments for its own purposes and by the recognized educational institutions for the purposes of education and academic research in such institutions; TAX means (a) the tax, additional tax, or default surcharge levied under this Act; (b) a fine, penalty or fee imposed or charged under this Act; and (c) any other sum payable or recoverable under the provisions of this Act or the rules made thereunder; TAX CONSULTANT by whatever name called, includes a person engaged in providing of services of advice, consultancy or assistance in the matters of any federal, provincial or local government laws in relation to any tax, rate, cess or providing representational services before any court, tribunal or other such judicial or quasi judicial authority or the authority administering such tax laws. TAX FRAUD means knowingly, dishonestly or fraudulently and without any lawful excuse (a) doing of any act or causing to do any act; or omitting to take any action or causing the action, (b) omission of any including providing of taxable services without being registered under this Act; or (c) falsifying or causing falsification of tax invoices; or (d) issuance of invoice or bill of taxable services without the provision of that taxable service; or (e) failure to pay an amount of tax collected under section16, and failure to pay the amount of tax withheld under the provisions of the rules made under this Act, in contravention of the duties or obligations imposed under this Act or rules or instructions issued thereunder with the intention of understating the tax liability or underpaying the tax liability for two consecutive periods or more or overstating the entitlement of tax credit or tax refund to cause loss of tax revenue; TAX PERIOD means a period of one month or such other period as the Board may, by notification in the official Gazette, specify; TAXABLE SERVICE shall have the meaning given under section 3;

TELECOMMUNICATION SERVICE shall have the meaning given in clause (v) of section 2 of the Pakistan Telecommunication (Re-organization) Act, 1996 (Act No. XVII of 1996), and includes the telecommunication system as defined in clause (u) thereof and further includes the wireless communication as defined in clause (1) of section 2 of the Wireless Telegraphy Act, 1933 (Act No. XVII of 1933) and also includes transfer, assignment or sharing of the right to

use capacity for transmission, emission or reception of signals and provision of access to global or local information network; TERMINAL OPERATOR includes Karachi International Container Terminal, Pakistan International Container Terminal and Qasim International Container Terminal or any on-dock or off-dock terminal or any other person doing similar activities and also includes the cargo or baggage shed operators licensed or appointed by the customs authorities at any customs port or customs airport or customs station; VALUE OF A TAXABLE SERVICE shall have the meaning given under section 5;

PENALTY
Where any person fails to provide the document or record or information or data or refuses to allow the officer of the SRB to take extracts or make copies of the document or record or information or data or fails to appear before an officer of SRB or fails to answer any questions put to him, a penalty of Rs.100,000 has been proposed through insertion of clause 15 in section 43. Such person shall further be liable to imprisonment up to one year term or additional fine Rs.100,000 or both, if convicted by Special Judge. TAX LEVY Sales tax on services has been extended @ 16% on services rendered by:

Marriage halls and lawns falling under heading 9801.3000; Advertising agents, sponsorship services and business support services falling under heading 9805.7000, 9805.9100 and 9805.9200 respectively; Architects and town planners falling under heading 9814.1000; Professionals and consultants including legal practitioners and consultants, accountants and auditors, management consultants, software or IT based system development consultant, tax consultants falling under heading 9815.2000, 9815.3000, 9815.4000, 9815.6000 and 9815.9000 respectively; Security agency and market research agency falling under heading 9818.1000 and 9818.3000 respectively; Commodity brokers falling under heading 9819.1000;

Surveyors, outdoor photographers and videographers and management consultants falling under headings 9819.5000, 9819.7000 and 9819.9300 respectively; Specialized workshops or undertakings including auto workshops, workshops for industrial machinery, construction and earth moving machinery falling under heading 9820.1000 and 9820.2000 respectively; Specified fields including healthcare centers, gyms or physical fitness center etc, body massage center and pedicure center falling under heading 9821.1000, 9821.4000, 9821.5000 respectively;
Event management services, exhibition services, public bonded warehouses, Labour and manpower supply services; toll services in manufacturing for others falling under heading 9824.000, 9828.000, 9829.000 and 9830.000 respectively;

Race events entry services @ Rs.200 all other services at race club @ 16% falling under heading 9831.000.

APPELLATE BENCH
The bill seek to provide for a appellate bench till formation of the appellate tribunal. This is proposed to be comprising of two members and in case of any difference of opinion the matter shall be referred to the Chairman of the Board who shall act as referee member of the bench.

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