NAVEED BUTT

ISLAMABAD: The Opposition Wednesday staged token walkout from the National Assembly in protest against the government for laying “Tax Laws (Amendment) Ordinance, 2016” in the House and said that the Parliament should not be made ordinance factory.

Parliamentary Secretary for Finance, Revenue and Economic Affairs Rana Muhammad Afzal laid the Ordinance before the House as required by clause (2) of Article 89 of the Constitution.

While opposing the ordinance, Syed Naveed Qamar of Pakistan People’s Party (PPP) said that although the Constitution of Pakistan allows promulgation ordinance but the National Assembly session was in schedule and it should be brought in the House as it is related to tax.

“The government is not giving importance to the Parliament. We strongly protest against this action of the government,” he said.

Naveed Qamar said that Statutory Regulatory Orders (SROs) culture should be abandoned and ordinance should only be promulgated in case of utmost emergency.

Aftab Sherpao while endorsing view point of Naveed Qamar said laying of ordinance was not a good precedent and all such things should be routed out through the parliament.

He said number of days of both the Houses was increased in the 18th amendment for this purpose. We should not make the Parliament as ordinance factory.

Former National Assembly Speaker Fehmida Mirza also endorsed the views of opposition members and said that ordinances should be promulgated and we should strengthen the Parliament. Parliament is supreme and the government should stop the ordinance factory, she said.

Responding to points raised by the opposition members, Rana Muhammad Afzal said this was being done after full agreement among the federal government and the provinces. He said that it was a matter of minor tax adjustment among the centre and the provinces. We are neither increasing nor imposing new tax, he said.

The objective of the Ordinance is to provide adjustment of provincial sales tax paid on services as an input tax against output tax liability under the Sales Tax Act, 1990 so as to reduce cost of doing business in the country. Moreover, allowing input tax on services will reduce prices of commodities and inflation which at present is in single digit.

To remove the ambiguity and clarify section 236C of Income Tax Ordinance, 2001, regarding exemption from withholding tax at the time of sale of immovable property by the dependents of Shaheeds belonging to Pakistan Armed Forces and those who die while in the service of the Pakistan Armed Forces or the Federal and Provincial Governments, so as to restrict the provision to the intended scope.

To promote Shariah compliant products and to bring parity between conventional Term Finance Certificates (TFCs) issued against securitization of receivables in Special Purpose Vehicle (SPV) structure and Shariah compliant companies issuing Sukuks against fixed assets under Sukuk Regulations, 2015. Similar tax treatment is intended to be given to the Shariah compliant companies issuing sukuks through special purpose vehicles as is given to the companies issuing TFCs through special purpose vehicle.

According to clause 2 (b) of “Tax Laws (Amendment) Ordinance, 2016” “ (b) after sub-clause (c), amended as aforesaid, the following new clause shall, be inserted, namely:— “(d) provincial sales tax levied on services rendered or provided to the person; and”

The clause 3 of the ordinance described as “(I) after section SA, the following new section shall be inserted, namely:— “5AA. Tax on return on investments in sukuks.—(1) Subject to this Ordinance, a tax shall be imposed, at the rate specified in Division IIIB of Part I of the First Schedule, on every person who receives a return on investment in sukuks from a special purpose vehicle.

The clause 4, 6 and 7 and of the ordinance described as “after section 150, the following new section shall be inserted, namely:—

(4) “150A. Deduction of tax by special purpose vehicle.—Every special purpose vehicle making payment of a return on investment in sukuks to a sukuk holder shall deduct tax from the gross amount of return on investment at the rate specified in Division IB of Part III of the First Schedule.”;

(6) in section 236C,— (a) in sub-section (1), for the full stop at the end a colon shall be substituted and thereafter the following proviso shall be added, namely:— “Provided that this sub-section shall not apply to a seller, being the dependant of a Shaheed belonging to’ Pakistan Armed Forces or a person who dies while in the service of the Pakistan Armed Forces or the service of Federal or Provincial Government, in respect of first sale of immovable property acquired from or allotted by the Federal Government or Provincial Government or any authority duly certified by the official allotment authority, and the property acquired or allotted is in recognition of or for services rendered by the Shaheed or the person who dies in service.”; and (b) sub-section (4) shall be omitted;

(7) in the First Schedule,— in Part I, after Division IIIA, the following new Division shall be inserted,, namely:— “Division IHB

Rate of Tax on Return on investment in sukuks received from a special purpose vehicle

The rate of tax imposed under section 5AA on return on investment in sukuks received from a special purpose vehicle shall be— (a) 25 % in the case the sukuk-holder is a company;

(b) 12.5% in case the sukuk-holder is an individual or an association of person, if the return on investment is more than one million; and (c) 10% in case the sukuk-holder is an individual and an association of person, if the return on investment is less than one million.”; and (b) in Part Ill, after Division IA, the following new Division shall be inserted, namely:—

“Division IB

Return on Investment in Sukuks

The rate of tax to be deducted under section 150A shall be— (a) 15% in case the sukuk-holder is a company;’(b) 12.5% in case the sukuk-holder is an individual or an association of person, if the return on investment is more than one million; (c) 10% in case the sukuk-holder is an individual and an association of person, if the return on investment is less than one million; and (d) 17.5% in case the sukuk-holder is a non-filer.”