SOHAIL SARFRAZ
ISLAMABAD: The government has announced a new incentive package for film making industry, tax relief to dairy sector, exemption for allowances of armed forces personnel, reduced rate of 0.4 percent advance tax on non-cash banking transactions by non-filers and exemption from federal excise duty on commission paid by State Bank of Pakistan (SBP) and its subsidiaries to banking companies for handling banking services of federal/provincial governments.
According to the Finance Bill 2018, in order to encourage and promote film-making in Pakistan, 50 percent tax rebate shall be allowed to foreign film makers making films in Pakistan and a 50 percent tax reduction in income tax liability shall be allowed to companies deriving income from film making for a period of five years.
Under the package for film industry, the reduced rate of sales tax @ 5% is being introduced on import of 19 items of cinematographic equipment for revival of film industry for five years subject to limitations and conditions imposed under the Customs Act, 1969.
The exemption for allowances of Armed Forces Personnel has been announced. Various allowances being given to Armed Forces Personnel, ie, Kit allowance, Ration Allowance, Special Messing Allowance, SSG Allowance, Northern Areas Compensatory Allowance, Special pay for Northern Areas and Height Allowance are being exempted from tax.
Under the package for dairy industry, exemption from sales tax is being granted to Fans for Dairy Farms, Preparations for Making Animal Feed and Bovine Semen which are currently chargeable to sales tax at standard rate of 17% is being granted. Likewise, exemption from sales tax is also being provided to Fish Feed which is presently chargeable to sales tax @ 10%. Moreover, sales tax on agriculture machinery is also reduced from 7% to 5%.
Exemption from federal excise duty is being granted on commission paid by State Bank of Pakistan and its subsidiaries to banking companies for handling banking services of Federal or Provincial Governments.
A major relief has been provided to the stationery industry as
Zero rating is being restored on Stationery items under the Fifth Schedule to the Sales Tax Act, 1990.
Under section 236P of the Income Tax Ordinance, banks are obliged to collect advance tax at the rate of 0.6% from non-filers on non-cash banking transactions (such as transfer of funds through demand draft, pay order, cash deposit receipt cheques/clearing, online transfers, direct debit, telegraphic transfers etc) which are in excess of Rs.50,000 per day. This rate has temporarily been reduced to 0.4% and is extended periodically pursuant to the recommendation of the ECC of the Cabinet. In order to provide certainty and to allay concerns regarding likelihood of restoration of 0.6% tax, such rate of tax for non-filers has been reduced to 0.4% on a permanent basis.
The rate of sales tax for steel sector is being increased to Rs. 13 per unit of electricity consumed from earlier rate of Rs 10.50 per unit.
Banks issuing credit/debit cards will now be obliged to collect 1% advance tax from filers and 3% advance tax from non-filers in respect of credit/debit card transactions resulting in outward flow of remittances from Pakistan.
On relief side, the government has reduced sales tax on fertilizer from maximum 11 percent to 2 percent, feed gas from 10 to 5 percent and RLNG for fertilizer from 5 to zero percent, restore zero rating for stationary, announced incentive package for film and cinema industry by reducing tax rates and above all reduced income tax rates significantly.
The government has abolished 3 percent value added tax on secondhand clothing and shoe in the budget.
In a bid to provide relief to individuals (including salaried individuals) the maximum tax rate for all individuals has been reduced to 15% and five taxable slabs for all individuals have been introduced including a nominal tax slab of Rs.1000/- for persons earning income exceeding Rs.400, 000/- up to Rs.800,000/- and another nominal income tax slab of Rs.2000/- for persons earning income exceeding Rs.800,000/- up to Rs. 1,200,000/-.
The corporate tax rates shall be reduced from 30% in Tax Year 2018 to 25% in Tax Year 2023.The corporate tax rate will be 29% in Tax Year 2019 and will be reduced by 1% each year up to Tax Year 2023, ie, the corporate tax rate shall be 29% for Tax Year 2019, 28% for Tax Year 2020, 27% for Tax Year 2021, 26% for Tax Year 2022 and 25% for Tax Year 2023. In order to ensure fair and equitable treatment and to encourage businesses formed as AoPs the highest tax rate for AoPs has been reduced to 30%.
The rate of super tax for both banking as well as non-banking persons shall be reduced by 1% for each successive year starting from the financial year 2018-19.
In order to incentivise investment and setting up of industrial undertakings/manufacturing concerns such tax credits are being extended for two more years up to 30th June, 2021.
In a bid to make the mechanism of Alternate Dispute Resolution (ADRC) effective, the decision of the ADRC committee has been made binding upon both the taxpayer as well as the department pursuant to withdrawal of appeals by the taxpayer as well as the department. The composition of the members of ADRC shall also be changed to enable retired High Court Justices and tax professionals to be included in the Committee in addition to representatives of FBR. Remuneration for the members of the ADRC shall be as prescribed under the Income Tax Rules, 2002.
In order to facilitate taxpayers who may be subjected to audit repetitively, FBR in its audit policy has announced that a taxpayer shall not be selected for audit by the Board more than once in three years through computer ballot. However, under section 177 of the Ordinance the Commissioner may also select a case for audit in successive tax years on the basis of reasons to be recorded in writing.
In order to provide relief to withholding agents the minimum threshold of tax deduction on goods and services has been enhanced three-fold from Rs.10,000/- to Rs.30,000/- in the case of payments for provision of services and from Rs.25,000/- to Rs.75,000/- in the case of payments for supply of goods.
For sales/supplies, the rate of tax for non-filers has been increased from 7% to 8% in the case of companies and from 7.75% to 9% in the case of persons not being companies. For contracts, the rate of tax for non-filers has been increased from 12% to 14% in the case of companies and from 12.5% to 15% in the case of persons not being companies.
In order to improve and streamline the collection of this tax, marriage halls are now 23 required to collect either 5% of the bill or Rs.20,000/- per function in major cities and Rs.10,000/- per function in the remaining cities , whichever is higher. The FBR has restricted capital gain on gift from relatives and such non-recognition shall now be restricted to gifts given to “relatives” of an individual as defined in section 85(5) of the Income Tax Ordinance, 2001.
At present, Oil Marketing Companies (OMC’s) selling petroleum products to a petrol pump operator deduct tax @ 12% from filers and 17.5% from non-filers on commission or discount allowed to a petrol pump operator. As the prices of high speed diesel are to be deregulated tax on dealers margin shall now be collected on ex-depot sale price of HSD (excluding dealers margin) at the rate of 0.5% from a filer and 1% from a non-filer.
To standardize printing and preservation of Holy Quran, import of duty free paper weighing 60 g/m2 is allowed besides extending this facility to Nashir-e-Quran registered with the government The government reduced Custom Duty (CD) on Multi-ply and Aluminum foil from 20% to 18% for Liquid Food Packaging Industry, finished rooms (Pre-fabricated structures) from 20% to 10% for setting up of new hotels/motels, CD exempted on bovine semen, and preparations for making animal feed reduced from 10% to 5% and import of fans for corporate dairy farmers allowed at concessionary rate of 3%, reduction of CD on growth promoters premix, vitamin premix, Vitamin B12 and Vitamin H2 for poultry sector from 10% to 5%.
To encourage local manufacturing of Optical Fiber Cables, CD on input materials, ie, Optical fiber (20%), Cable filing compound (11%), Polybutylene (20%), Fiber reinforced plastic (20%) and Water blocking/ swellable tape (11%) reduced to 5% besides reduction of RD on Optical Fiber Cables was reduced from 20% to 10%.
The CD on specified equipment used in cinema industry reduced to 3% and withdrawal of 11% CD on acrylic tow. The FBR enhanced CD on double-sided tape from 3% to 11%, increase of CD on rickshaw tyres from 11% to 20%, Soya bean oil from Rs.9050/MT & Rs.10200/MT to Rs.12000/MT and Rs. 13,200/MT respectively, increase duty on aluminum auto parts scrap from 30% to 35%.
