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TABLE OF CONTENTS

S. No Page No

1 Income Support Levy (Wealth Tax) 1

INCOME TAX

2 Minimum Tax Regime 2

3 Filing of Return of Income 3

4 Wealth Statements 4

5 Income From Property 5

6 Changes in rate of Withholding Taxes Regime 6

7 Exemption & Tax credit withdrawn 7

8 Salary Income cannot be set off against loss under other head of

income9

9 credit of source of investment from agricultural income to be allowed

to the extent of income on which tax has been paid9

10 Retailers to be taxed under normal tax regime 9

11 power of federal board of revenue to make a scheme for declarationof undisclosed income withdrawn

9

12 period of finality of provisional assessment passed u/s. 122c reduced 10

13 A person registered under the sales tax act to be prescribed person 10

14 collection of information from banks 10

15 Dividend income received by a company shall cover under the final

tax regime11

16 compensation to be calculated from the date of refund order 11

17 Business connection in context of representative of nonresidentdefined 11

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18 Commissioner empowered to select case of a taxpayer for audit 12

19 Computerized national identity card allowed to be used in place of

NTN Certificates

12

20 Increase in rate of penalties 12

21 Advance Tax on functions & gatherings 14

22 Advance Tax on foreign produced films, TV plays and serials 14

23 Advance Tax on cable operators and other electronic media 14

24 Advance Tax on sale to distributors, dealers and wholesalers 16

25 Advance Tax on sale to retailers 16

26 Collection of Advance Tax by educational institution 16

27 First schedule 17

28 Rate of tax on purchase of motor cars & jeeps enhanced 19

29 Rate of Advance Tax at the time of sale by auction enhanced 19

SALES TAX ACT, 1990

30 Definitions 20

31 Scope of Tax 2032 Tax Credit not allowed 21

33 De-Registration, Blacklisting And Suspension of Registration 21

34 Records 21

35 Access to record, documents etc. 21

36 Monitoring or tracking by electronics or other means. 22

37 Appeals 22

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38 Rectification of Mistake 22

39 Reward to Inland Revenue Officers and Officials 22

40 Certain Transaction Not Admissible 22

41 Third Schedule 23

42 Sixth Schedule 24

43 Notifications / SRO’s 24

FEDERAL EXCISE ACT, 2005

44 Duties 29

45Records

2946 Appeals 29

47 Powers of Board or Collector To Pass Certain Orders 29

48 Reward To Inland Revenue Officers and Officials 30

49 Monitoring or tracking by electronics or other means. 30

50 First Schedule 30

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NOTES ON FINANCE BILLS 2013

INCOME SUPPORT LEVY

At last Wealth Tax is proposed to be re -promulgated but with a new brand name i.e. Income

Support Levy.

Salient features of the levy are as under:

1- It is to be levied with effect from tax year 2013

2- Levy is to be charged on net movable assets of the individual on the basis of wealth

statement filed.

3- Net movable assets mean; movable assets net of liability if any, thereon.

4- Any liability against immovable assets shall not be allowed as deduction in computing

net movable assets.

5- Levy @0.5% is to be charged on net movable assets exceeding Rs.1.000M.

6- Default Surcharge @16% per annum will be charged in case of nonpayment of levy.

7-

The Levy is to be paid at the time of filing of wealth statement.

8- Appeal against incorrect assessment of levy can be filed as per the provisions of Appeal,

Revision or Rectification as provided in the Income Tax Ordinance 2001.

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INCOME TAX

Finance Bill 2013 proposes the following amendments in the Income Tax Ordinance, 2001.

MINIMUM TAX REGIME

The following amendment has been proposed under the minimum tax regime.

Rate of Turn over Tax enhanced to 1%

Section 113

The rate of minimum tax on turnover was 0.5% till tax year 2010.The same was enhanced to

1% for tax year 2011 & 2012. Subsequently through Finance Bill 2012 the same was reduced

to 0.5%. Now, the rate of tax has again been enhanced to 1% of the turnover.

Minimum tax on Builders & Land Developers

Sections 113A & 113B

The existing provisions of sections 113A & 113B of the Income Tax Ord. 2001 deal with the

taxation of retailers under the minimum tax regime. Now, through the Finance Bill 2013 the

provisions of these sections have been substituted with new provision for incidence of

taxation on Builders & Land developers.

• BuildersSection 113A

Builders who derive income from the business of construction & sale of residential, commercial

or other buildings are proposed to be taxed in the following manner.

i- Minimum tax to be paid @ Rs.25 per square foot as per the construction or site plan

approved by the relevant regulatory authority.

ii- Tax has to be computed on the basis of total no. of square feet sold or booked for sale

during the tax year.

iii- The tax so deducted shall be the minimum tax on income of builders

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• Land Developers

Section 113B

Land developers who derive income from the business of development & sale of residential,

commercial or other plots are proposed to be taxed in the following manner.

i- Minimum tax to be paid @ Rs.50/- per square yard as per the layout or site plan

approved by the relevant regulatory authority.

ii- Tax has to be computed on the basis of total no. of square yards sold or booked for sale

during the tax year.

iii- The tax so deducted shall be the minimum tax on income of land developers

FILING OF RETURN OF INCOME

The following amendment has been proposed under section 114 of the Income Tax Ordinance,

2001 relating to filing of return of income:

Ceiling of commercial & industrial meter bill for filing of return of income reduced

Section 114(1)(b)(viii)

All the existing industrial & commercial consumers making payment of electrical bills

exceeding Rs.1.000M per annum are liable for filing of return of income. Now this ceilinghas been reduced from Rs.1.000M to Rs.0.500M. Hence, from now onwards all the industrial

& commercial consumers whose annual electric charges exceeds Rs.0.500M will be liable to

file return of income.

Limit of minimum tax exemption enhanced

Section 114(1A)

At present minimum limit for exemption from tax for individuals deriving income from

salaries is Rs.350,000 and for individuals deriving income from business is Rs.300,000.

Through the Finance Bill 2013 both of the limits have been enhanced to uniform ceiling of

Rs.400,000, therefore now all those individuals who derive income from any source will

have to file return of income if their annual income exceeds Rs.400,000.

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Commissioner’s power to allow time for filing of return curtailed

Section 114(4)

The Commissioner Inland Revenue has the power to allow time for filing of return to the

taxpayers for thirty days or any longer period. Now, the word longer has been replaced with

the word lesser. Therefore, now the Commissioner cannot allow extension for filing of return

of income for more than thirty days.

Written approval of Commissioner mandatory for filing revised return of income

Section 114(6) (ba)

Written approval of the Commissioner Inland Revenue has been made mandatory for filing

of revised return of income. This is an entirely new provision. No such provision was

available in the existing law.

Persons having only salary income not exceeding Rs.500,000 per annum required to file

return of income

Section 115(1)

Currently the employees having only salary income not exceeding Rs.500,000 per annum are

exempt from filing of return of income. Through the finance bill 2013 this concession is

proposed to be withdrawn. From now onwards every salaried employee deriving taxable

salaries has to file return of income.

Salaried employees to file wealth statement and evidence of deduction of tax from

salaries

Section 118(2A)

A new sub section 2A has been inserted in section 118 according to which every salaried

individual filing return of income has to file wealth statement with reconciliation and

evidence for deduction of tax from salaries along with the return of income.

WEALTH STATEMENTS

Filing of Wealth Statement made mandatory

Section 116(2) & (4)

Requirement for filing of wealth statement by an individual has always been linked to the

quantum of total income returned by an individual. Through the Finance Bill 2012 the said

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income limit was fixed at Rs.1.000M. Now, the Finance Bill 2013 sought to make filing of

wealth statement mandatory for every person filing return of income irrespective of the

income declared as per return of income for income under Normal Tax Regime or statement

filed for income covered under Final Tax Regime.

Reason to be given for filing revised wealth statement

Section 116(3)

Section 116(3) of the Income Tax Ord. 2001 allowed revision of wealth statement filed by an

individual. Now through the Finance Bill 2013 an amendment has been proposed according

to which the individual has to give reason for such revision.

INCOME FROM PROPERTY

Prescribed Person for deduction of tax on Income from property widened

Section 155(3)

Following sectors has been included in the list of persons liable for deduction of tax at the

time of making payment of rent irrespective of their status:

i) a private educational institution,

ii) a boutique or a beauty parlor,

iii) a hospital, a clinic or a maternity home;

iv) individuals or association of persons paying gross rent of rupees one and a half millionand above in a year.

Rate of Tax on Property Income enhanced

Rate of tax on income from property alongwith return and for withholding has been increased

for individuals, AOP & Companies. In all of these cases the highest rate of tax has been

increased from 10% to 17.50%. The proposed rate of tax are as under:

a) The rate of tax to be paid withhold in case of individuals and AOP is proposed as under:

S.No. Gross amount of rent Rate of tax

(1) Where the gross amount of rent does not exceedRs.150,000.

Nil

(2) Where the gross amount of rent exceeds Rs.150,000 butdoes not exceed Rs.400,000.

5 per cent of the gross amountexceeding Rs.150,000.

(3) Where the gross amount of rent exceeds Rs.400,000 but

does not exceed Rs.1,000,000.

Rs.12,500 plus 7.5 per cent of

the gross amount exceeding

Rs.400,000.

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(4) Where the gross amount of rent exceeds Rs.1,000,000

but does not exceed Rs. 2,000,000

Rs.57,500 plus 10 per cent of

the gross amount exceeding

Rs.1,000,000.

(5) Where the gross amount of rent exceeds Rs.2,000,000 but


Rs.157, 500 plus 12.5 per cent of

the gross amount of rent

exceeding Rs.2, 000,000.(6) Where the gross amount of rent exceeds Rs.3,000,000 but


Rs.282, 500 plus 15 per cent of


exceeding Rs.3, 000,000.

(7) Where the gross amount of rent exceeds Rs.4,000,000. Rs.432, 500 plus 17.5 per cent of


exceeding Rs.4, 000,000.”;

b) The rate of tax to be paid/ withhold in the case of company, shall be-

CHANGES IN RATE OF WITHHOLDING TAXE REGIME

[Sections 148, 153(1)(a)(b)(c)]

The existing rates of withholding taxes on import, supplies, services, contract & prize on wining

have been replaced with the following:

S.No. Gross amount of rent Rate of tax

(1) Where the gross amount of rent does not exceed

Rs.400,000.

5 per cent of the gross amount of rent.

(2) Where the gross amount of rent exceeds

Rs.400,000 but does not exceed Rs.1,000,000.

Rs.20,500 plus 7.5 per cent of the gross

amount of rent exceeding Rs.400,000.


Rs.1,000,000 but does not exceeds Rs. 2,000,000

Rs.65,000 plus 10 per cent of the gross

amount of rent exceeding Rs.1,000,000.”;

(4) Where the gross amount of rent exceedsRs.2,000,000 but does not exceed

Rs.3, 000,000.

Rs.165,000 plus 12.5 per cent of the grossamount of rent exceeding Rs.2, 000,000.


Rs.3,000,000 but does not exceed

Rs.4, 000,000.

Rs.290,000 plus 15 per cent of the gross

amount of rent exceeding Rs.3,000,000.


Rs.4,000,000.

Rs.440,000 plus 17.5 per cent of the gross

amount of rent exceeding Rs.4,000,000.”;

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Tax at Import Stage Existing Proposed

Industrial undertaking 5.00 5.0%

Companies 5.00 5.0%

Other than industrialundertaking and company 5.00 5.50%

Tax on Supplies

Companies 3.50 3.50%

Other than Companies 3.50 4.0%

Tax on Services

Companies 6.00 6.0%

Other than Companies 6.00 7.0%

Tax on Contract

Companies 6.00 6.0%Other than Companies 6.00 6.50%

Tax on Winning 10% 15.0%

EXEMPTION & TAX CREDIT WITHDRAWN

Exemption allowed to Universities & educational institutions withdrawn

Clause 92 Part I of Second Schedule

The exemption allowed to Universities & educational institutions established solely for the

education purpose and not for the purpose of not for profit has been withdrawn.

Credit of tax allowed to full time teacher or a researcher employed in a non profit

education institution withdrawn

Clause 2 Part III of Second Schedule

Simultaneous to the withdrawal of exemption of universities & educational institutions not

for profit the tax credit @75% available to the full time teacher & researcher of such

institution has also been propose to be withdrawn.

Exemption limit on Profit on investment in National Saving Schemes, Term Finance

Certificates withdrawn

Sub Clause (iv)(a) of clause 59 of Part IV of Second Schedule

Currently, the profit on Investment in Defence Saving Certificates, Special Saving

Certificates, Saving Account or Term Finance Certificates are exempt from tax if the amount

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invested in such investments does not exceed Rs.150,000. This exemption is proposed to be

withdrawn. Hence from now onwards profit on these investments will be subjected to tax

irrespective of the amount invested.

Hajj Group Operators to be exempt from operation of certain provisions of theOrdinance

Clause 72A of Part IV of Second Schedule

This new clause has been proposed to be added in Part IV of the Second Schedule according

to which the Hajj Group operators will be exempt from the operation of the following

provisions of the Income Tax Ordinance for tax years 2013 &2014:

Section Exempt from

21(l) Taxation of Payment exceeding Rs.50,000 otherwise than banking channel113 Payment of minimum tax

152 Deduction of tax from payment to non residents.

However, these exemptions are subject to the condition that the Hajj Group Operators made

payment @ Rs.3,500 per hajji for tax year 2013 & Rs. 5,000 per hajji for tax year 2014.

Industrial undertakings can obtain certificate for exemption from deduction of tax at

import stage

Section 148 & Clause 72B of Part IV of Second Schedule

The industrial undertakings can avoid payment of income tax at import stage by applying to

the Commissioner Inland Revenue concerned for issue of certificate for exemption from

deduction of tax. For obtaining such certificate the tax payer has to make the payment of the

higher of the determined tax liability for preceding two years.

Rate of initial depreciation on Plant & Machinery reduced

Clause of Part II Third Schedule

The rate of initial depreciation on Plant & Machinery is proposed to be reduced from 50% to25%.

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SALARY INCOME CANNOT BE SET OFF AGAINST LOSS UNDER OTHER HEAD

OF INCOME

Section 56 (1)

The Finance bill 2013 has proposed to withdraw the facility available to a person to set off hissalary income against loss during the tax year from any other head of income. Hence, from now

onwards a person who despite of loss under a head of income has to pay tax on his salary income

for that tax year.

CREDIT OF SOURCE OF INVESTMENT FROM AGRICULTURAL INCOME TO BE

ALLOWED TO THE EXTENT OF INCOME ON WHICH PROVINCIAL TAX HAS

BEEN PAID

Section 111

If a person claims agricultural income as a source while explaining the following:

i) any investment,

ii) any amount credited,

iii) ownership of any money or valuable article,

iv) funds for making expenditure

then the credit of the said source will be allowed to the extent of agricultural income worked

back on the basis of tax paid on agricultural income at the provincial level.

RETAILERS TO BE TAXED UNDER NORMAL TAX REGIME

Sections 113A & 113B

Retailers with turnover less than or more than Rs.5.000M were liable to be taxed under

Minimum Tax Regime of the IT Ord. 2001. Now the Finance Bill 2001 has proposed to

withdraw this concession from retailers. Hence from now onwards the retailers are liable to be

taxed under normal tax regime at normal rate of tax.

POWER OF FEDERAL BOARD OF REVENUE TO MAKE A SCHEME FOR

DECLARATION OF UNDISCLOSED INCOME WITHDRAWN

(Section 120A)

Currently, the FBR has been empowered to make any scheme for declaration of undisclosed

income. The Finance Bill has proposed to withdraw this power from FBR.

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PERIOD OF FINALITY OF PROVISIONAL ASSESSMENT PASSED U/S. 122C

REDUCED

(Section 122C(2) & Proviso)

As per the existing provisions of section 122C of the Income Tax Ordinance 2001a provisional

assessment order passed u/s. 122C attained finality after the expiry of sixty days from the date of

service of the order. Further, as per the provisos, the person against whom the order is passed

under this section if filed his return of income within the given sixty days then the order passed

u/s. 122C will not be treated as final. Now it has been proposed to reduce the said period from

sixty days to forty five days.

A PERSON REGISTERED UNDER THE SALES TAX ACT TO BE PRESCRIBEDPERSON

Section 153(7)(j)

Sub section 7 of section 153 specifies the list of persons who are liable to deduct tax at the time

of making the payments covered under section 153. The Finance Bill 2013 has now proposed to

add a new category of Person Registered under the Sales Tax Act in this list. Thus every person

who is registered under the Sales Tax Act 1990 has to deduct tax from the payments covered u/s.

153 of the Income Tax Ord. 2001 irrespective of its legal status & annual turnover.

COLLECTION OF INFORMATION FROM BANKS

Section 165A

This is a very significant amendment proposed through the Finance Bill 2013. This proposal if

approved will result in tremendous increase in powers to the Revenue Officers. According to the

proposed amendment every banking company is required to make necessary arrangements to

provide to the Board:

a) online access to its central database containing details of its account holders and all

transactions made in their accounts;

b) a list containing particulars of deposits aggregating rupees one million or more made

during the preceding calendar month;

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c) a list of payments made by any person against bills raised in respect of a credit card

issued to that person, aggregating to rupees one hundred thousand or more during the

preceding calendar month;

d) a consolidated list of loans written off exceeding rupees one million during a calendar

year; and

e) a copy of each Currency Transactions Report and Suspicious Transactions Report

generated and submitted by it to the Financial Monitoring Unit under the Anti-Money

Laundering Act, 2010 (VII of 2010).

These powers to FBR will override the provisions of Banking Companies Ordinance,1962 (LVII of 1962), the Protection of Economic Reforms Act, 1992 (XII of 1992), the

Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under

the State Bank of Pakistan Act, 1956 (XXXIII of 1956).

DIVIDEND INCOME RECEIVED BY A COMPANY TO BE COVERED UNDER THE

FINAL TAX REGIME

Section 169(3)

Presently, dividend received by companies is taxed under Normal Tax Regime. Now, it is

proposed to cover the same under Final Tax Regime. Hence, the tax deducted at the time of

payment on Dividend to the Company will be the full & final discharge of tax in the hand of the

recipient company.

COMPENSATION TO BE CALCULATED FROM THE DATE OF REFUND ORDER

Section 171(2)

Compensation for late payment of refund to the taxpayer has to be computed with effect from the

date refund order is passed u/s. 170(4) of the Income Tax Ord. 2001.

BUSINESS CONNECTION IN CONTEXT OF REPRESENTATIVE OF NONRESIDENT

DEFINED

Section 172(3)(b)

Section 172(3)(b) of the Income Tax Ord. 2001provides that a person who has any business

connection with the nonresident person will be treated as representative of the said nonresident

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person. Due to absence of any clarity on the term business connection there was always a dispute

regarding status of the resident person as a representative. Now in order to resolve this

controversy an explanation has been inserted in clause (b) of sub section 3 of section 172

according to which business connection includes transfer of an asset or business in Pakistan by a

non resident.

COMMISSIONER EMPOWERED TO SELECT CASE OF A TAXPAYER FOR AUDIT

Section 177

Section 177 of the Income Tax Ord. 2001always remains in the legal controversy amongst the

Revenue & the Tax Payer. After insertion of section 214C the Judicial Authorities through

various judgments held that Commissioner has no power to select the case for audit and that only

FBR can select a person’s case for audit. Now in order to clarify the issue an amendment inshape of explanation has been inserted according to which the powers of Commissioner for

selection of case u/s. 177 is independent of powers vested with the FBR provided in section

214C. Therefore a Commissioner Inland Revenue can select a case of a taxpayer for audit.

Simultaneous, amendment has been made in section 214C in this regard.

COMPUTERIZED NATIONAL IDENTITY CARD ALLOWED TO BE USED IN PLACE

OF NTN CERTIFICATES

Section 181(3)

Individuals have been allowed by FBR to use Computerized National Identity Card issued by

NADRA in place of National Tax Number Certificate.

INCREASE IN RATE OF PENALTIES

Section 182

The Finance Bill 2013 has proposed the following increase in the rates of penalties provided in

section 182:

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Offence Existing Proposed penalty

Where any person fails to

furnish a return of income as

required under section 114

within the due date.

0.1% of the tax payable for

each day of default subject to

a minimum penalty of

Rs 5,000 and a maximumpenalty of 25% of the tax

payable in respect of that taxyear.




Rs 20,000 and a maximumpenalty of 50% of the tax

payable in respect of that taxyear.

Where any person fails to

furnish a statement as required

under section 115, 165 or165A within the due date



a minimum penalty of Rs5,000 and a maximum penalty

of 25% of the tax payable in

respect of that tax year.

Rs 2,500 for each day of

default subject to a minimum

penalty of Rs 50,000.

Where a person fails to furnishwealth statement or wealth

reconciliation statement.

0.1% of the tax payable foreach day of default subject to


Rs 5,000 and a maximum

penalty of 25% of the taxpayable in respect of that tax

year.

Rs 100 for each day of default.

Where a taxpayer who,

without any reasonable cause,

in non compliance with the

provisions of section 177:

(a) fails to produce the record

or documents on receipt of

first notice;

Rs 5,000 Rs 25,000.

(b) fails to produce the

records or documents on

receipt of second notice;

Rs 10,000 Rs 50,000

(c) fails to produce the record

or documents on receipt of third notice.

(d)

Rs 50,000 Rs 100,000.

Any person who fails to

furnish the information

required or to comply withany other term of the notice

served under section 176.

Rs 5,000 for first default and

Rs 10,000 for each subsequent

default.

Rs 25,000 for first default and

Rs 50,000 for each subsequent

default.

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ADVANCE TAX ON FUNCTIONS & GATHERINGS

Section 236D

A new type of advance tax has been proposed, according to which every prescribed person i.e.

the owner, a lease-holder, an operator or a manager of a marriage hall, marquee, hotel,

restaurant, commercial lawn, club, a community place or any other place used for the purpose of

any function including any wedding related event, a seminar, a workshop, a session, an

exhibition, a concert, a show, a party or any other gathering shall collect tax @10% of the

amount billed from the person arranging or holding the function.

The said prescribed person shall also be liable to collect tax on the bill for food, services or any

other facility provided in the said premises for the function by any other person.

The person from whom tax is collected under the provision of this section and u/s.148 at the

import stage of the said film or drama shall be adjustable.

ADVANCE TAX ON FOREIGN PRODUCED FILMS, TV PLAYS AND SERIALS

Section 236E

According to this proposed insertion any person responsible for censoring or certifying a foreign-

produced film, a TV drama serial or a play, for screening and viewing, shall, at the time of

censoring or certifying, collect advance tax at the following rates:

(a) Foreign-produced film Rs. 1,000,000/-

(b) Foreign-produced TV drama serial Rs.100,000/-per episode

(c) Foreign-produced TV play (single episode) Rs. 100,000

The person from whom said tax is collected can claim adjustment of the said tax.

ADVANCE TAX ON CABLE OPERATORS AND OTHER ELECTRONIC MEDIASection 236F

Pakistan Electronic Media Regulatory Authority, at the time of issuance of license for

distribution services or renewal of the license to a licensee, shall collect advance tax at the

following rates:

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(1) The rate of tax to be collected under section 236F in the case of Cable Television Operator shall

be as follows:-

Type of Channel as provided

in PEMRA Rules 2009

Tax on Issuance

of license

Tax on Renewal

IPTV Rs.100,000 Rs.1,000,000

FM Radio Rs.100,000 Rs.100,000

MMDS Rs.200,000 Rs.100,000

Mobile TV Rs.100,000 Rs.50,000

Satellite TV station

News or Current Rs.1,000,000 Rs.2,000,000

Sports Rs.1,000,000 Rs.1,000,000

Regional

Language

Rs.700,000 Rs.700,000

Health or Agro Rs.300,000 Rs.300,000

Education Rs.300,000 Rs.300,000

Entertainment Rs.1,000,000 Rs.1,000,000

Specialized

subject station

Rs.500,000 Rs.200,000

Landing Rights per channel

News/Current Affairs Rs.1,000,000 Rs.5,000,000

Sports Rs.500,000 Rs.2,500,000

Educational Rs.200,000 Rs.1,000,000

Entertainment Rs.200,000 Rs.2,000,000

Children Rs.350,000 Rs.1,500,000;

License Category as

provided in PEMRA Rules 2009 Tax on License Fee Tax on Renewal

H Rs.7,500 Rs.10,000

H-1 Rs.10,000 Rs.15,000

H-II Rs.25,000 Rs.30,000

R Rs.5,000 Rs.30,000

B Rs.5,000 Rs.40,000

B-1 Rs.30,000 Rs.50,000

B-2 Rs.40,000 Rs.60,000

B-3 Rs.50,000 Rs.75,000

B-4 Rs.75,000 Rs.100,000

B-5 Rs.87,500 Rs.150,000

B-6 Rs.175,000 Rs.200,000

B-7 Rs.262,500 Rs.300,000

B-8 Rs.437,500 Rs.500,000

B-9 Rs.700,000 Rs.800,000

B-10 Rs.875,500 Rs.900,000

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ADVANCE TAX ON SALE TO DISTRIBUTORS, DEALERS AND WHOLESALERS

Section 236G

Every manufacturer or commercial importer of electronics, sugar, cement, iron and steel

products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam

sector, at the time of sale to distributors, dealers and wholesalers, shall collect advance tax

@0.1% of the gross amount of sales.

The tax so deducted shall be adjustable.

ADVANCE TAX ON SALE TO RETAILERS

Section 236H

Every manufacturer, distributor, dealer, wholesaler or commercial importer of electronics, sugar,cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile,

beverages, paint or foam sector, at the time of sale to retailers, shall collect advance tax 0.5% of

the gross amount of sales.

The tax so deducted shall be adjustable.

COLLECTION OF ADVANCE TAX BY EDUCATIONAL INSTITUTION

Section 236G

Every educational institution, where annual fees exceeds Rs.200,000 per annum at the time of

preparing fees voucher shall collect tax @ 5% of the amount of fees in the manner the fees is

collected.

The tax so collected shall be adjustable against the tax liability of either of the parents or

guardian making payment of the fees.

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FIRST SCHEDULE

RATE OF TAX FOR INDIVIDUALS

Business & Other Individuals

i) The taxable limit for income from business & profession has been enhanced from

Rs.300,000 per annum to Rs.400,000 per annum.ii) Slab rates have been increased from existing 5 to 7.

iii) Maximum rate of tax enhanced from 25% to 35%

Proposed rate of tax are as under:

S. No. Taxable Income. Rate of Tax

1. Where taxable income does not exceed 400,000 0%

2. Where the taxable income exceeds Rs.400,000 but

does not exceed Rs.750,000

10% of the amount exceeding

Rs.400,000/-

3. Where the taxable income exceeds Rs.750,000 butdoes not exceed Rs.1,500,000

Rs. 35,000 + 15% of theamount exceeding Rs.

750,000/-

4. Where the taxable income exceeds Rs.1,500,000 butdoes not exceed Rs.2,500,000

Rs. 147,500 +20% of theamount exceeding Rs.

1,500,000.

5. Where the taxable income exceeds Rs.2,500,000 butdoes not exceed Rs.4,000,000/-

Rs. 347,500 + 25% of theamount exceeding Rs.

2,500,000/-

6 Where the taxable income exceeds Rs.4,000,000 but

does not exceed Rs.6,000,000/-

Rs. 722,500 + 30% of the

amount exceeding Rs.4,000,000/-

7 Where the taxable income exceeds Rs.6,000,000/- Rs. 1,322,500 + 35% of the

amount exceedingRs.6,000,000

Salaried Individual

i) The taxable limit for income from Salaries has been enhanced from Rs.350,000 perannum to Rs.400,000 per annum.

ii) A slab rate has been increased from existing 6 to 12.

iii) Maximum rate of tax enhanced from 20% to 30%

Proposed rate of tax are as under:

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S.No. Taxable Income. Rate of tax.

1. Where the taxable income does not exceed Rs.400,000, 0%


does not exceed Rs.500,000

5% of the amount exceeding

Rs. 400,000


does not exceed Rs.800,000,

Rs.5,000 + 7.5% of the

amount exceeding

Rs.500,000/-

4. Where the taxable income exceeds Rs.800,000 butdoes not exceed Rs.1,300,000,

Rs.27,500 + 10% of theamount exceeding

Rs.800,000/-


does not exceed Rs.1,800,000,

Rs.77,500 + 12.5% of the

amount exceeding

Rs.1,300,000/-

6. Where the taxable income exceeds Rs.1,800,000 but


Rs.140,000/- + 15% of the

amount exceedingRs.1,800,000



Rs.200,000/- + 17.5% of the

amount exceedingRs.2,200,000/-

8 Where the taxable income exceeds Rs.2,600,000 butdoes not exceed Rs.3,000,000/- Rs.270,000/- + 20% of theamount exceeding

Rs.2,600,000/-

9 Where the taxable income exceeds Rs.3,000,000 butdoes not exceed Rs.3,500,000/-

Rs.350,000/- + 22.5% of theamount exceeding

Rs.3,000,000/-



Rs.462,500/- + 25% of the

amount exceeding

Rs.3,500,000/-

11 Where the taxable income exceeds Rs.4,000,000 butdoes not exceed Rs.7,000,000/-

Rs.587,500 + 27.5% of theamount exceeding

Rs.4,000,000/-

12 Where the taxable income exceeds Rs.7,000,000/- Rs.1,412,500/- + 130% of

the amount exceedingRs.7,000,000/-

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RATE OF TAX ON COMPANIES REDUCED BY 1%

First Schedule Part I Div. II

Rate of tax for Companies other than Banking Companies has been reduced by 1% from 35% to

34% for the tax year 2014.

RATE OF WITHHOLDING TAX ON CASH WITHDRAWAL INCREASED

(Section 231A & Division VI of Part IV of First Schedule)

The rate of tax on cash withdrawal increased from 0.2% to 0.3%.

RATE OF TAX ON PURCHASE OF MOTOR CARS & JEEPS ENHANCED

Section 231B

The rate of tax on payment of advance tax at the time of purchase of Motor Cars & Jeeps hasbeen enhanced. The proposed new rate of tax are as under:

“DIVISION VII

PURCHASE OF MOTOR CARS AND JEEPS

The rate of payment of tax under section 231B shall be as follows:– Engine

capacity

Amount of tax

upto 850cc Rs.10,000

851cc to 1000cc Rs.20,000

1001cc to 1300cc Rs.30,000

1301cc to 1600cc Rs.50,000

1601cc to 1800cc Rs.75,000

1801cc to 2000cc Rs.100,000

Above 2000cc Rs.150,000”;

RATE OF ADVANCE TAX AT THE TIME OF SALE BY AUCTION ENHANCED

Section236A

The rate of advance tax at the time of sale by auction has been proposed to be enhanced from

5% to 10% of the gross sale price of any property or goods.

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SALES TAX ACT, 1990

Following amendments have been proposed in the Sales Tax Act, 1990 with effect from 1 st July,

2013 or as date mentioned in the provisions or schedule as below;

DEFINITIONS

Section 2

CREST

Section 2(5AC)

The sub section in definition is introduced to give effect of computerized risk based evaluation of

sales.

PROVINCIAL SALES TAX

Section 2(22A)

The sub section in definition section is introduced to define Islamabad Capital Territory.

SUPPLY CHAIN

Section 2(33A)

This definition introduced to give legal cover of investigation and disallowance of input tax of

supply chain.

SALES TAX TO BE CHARGED ON PAYMENT RECEIVED AS ADVANCE AGAINST

SALES

Section 2(44)

After the aforesaid amendment any payment received in advance has to be taxed in the month

such advance is received.

SCOPE OF TAX

Section. 3 w.e.f June 13, 2013

It is proposed that the rate of sales tax shall increased from existing 16% to 17% with effect from

June 13, 2013.

The concept of “further tax” has been reintroduced according to which every taxpayer has to

charge additional sales tax at the rate of two percent on supplies to un-registered persons.

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It further proposed in amendment of the section that board may levy and collect tax on the basis

of production capacity or on fixed basis.

TAX CREDIT NOT ALLOWED

Section 8

It is proposed to amend this section and after amendment taxpayer will not be allowed to take

input tax of purchases which is not verifiable from CREST or in the supply chain. After

proposed amendment all the buyers in said supply chain will not be entitled of input tax if any

one of the supplier’s input is not verifiable.

DE-REGISTRATION, BLACKLISTING AND SUSPENSION OF REGISTRATION

Section 21

After proposed amendment, buyer will not get input tax credit even if payment is made through

banking channel if the supplier de-registered, blacklisted or suspended.

Further proposed amendment in this section that the Board, Commissioner or officer authorized

by the Board has the discretionary powers to block refunds or disallow input tax adjustments and

further investigation and legal action against the registered person who, in belief of

Commissioner or Officer, may involve in issuing fake or flying invoices, claiming fraudulent

input tax or refunds, does not physically exist or does not conduct actual business or has

committed any fraudulent activity.

RECORDS

Section 22

After proposed amendment, taxpayer has to keep gate passes, inward or outward and transport

receipts as part of the record in addition to other documents as described in said section and

taxation officer can call for the same while auditing or otherwise.

ACCESS TO RECORD, DOCUMENTS ETC.

Section 25, 38, 38A,38B

It proposed to insert explanation in this section and remove doubt that the Board, Commissioner

or officer of Inland Revenue has inherent power of audit, access record and documents, access to

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premises, stocks, accounts, call for information and this power is not restricted by section 72B

which empower Board to select the cases for audit.

MONITORING OR TRACKING BY ELECTRONICS OR OTHER MEANS.

Section 40C

It is proposed to insert new section which empower Board to authorize any officer for

monitoring or tracking of production sales, clearances, stocks or any other related activity of the

registered person or class of registered persons or any goods or calls of goods through electronic

or other mans as prescribed by the Board. Furthermore, board also may prescribe to affix tax

stamp, banderole, sticker’s labels on taxable goods.

APPEALS

Section 45B

It is proposed to give power to Commissioner Appeal to grant stay of maximum 30 days in

hardship cases.

RECTIFICATION OF MISTAKE

Section 57

There was no provision of rectification of mistake in the order, after proposed amendment the

Commissioner, The Commissioner Appeals or the Appellate Tribunal through an order in writing

may amend any order made by him to rectify any mistake apparent from the record but no

adverse effect on taxpayer. This amendment is in line with the corresponding provisions of

Income Tax Ordinance, 2001.

REWARD TO INLAND REVENUE OFFICERS AND OFFICIALS

Section 72C

It is proposed to introduce Reward to Inland Revenue Officers who involve in detection of

concealment or evasion of Sales Tax and other taxes.

CERTAIN TRANSACTION NOT ADMISSIBLE

Section 73

This proposed amendment is to give legal cover of requiring bank information with sales tax

registration form and any change at later stage.

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THIRD SCHEDULE

Section 3(2)(a)

Following further goods are included on which sales tax is to be charged on retail price;

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

bed ware, sold in retail packing

• Household electrical goods, including air conditioners, refrigerators, deep freezers,

televisions, recorders and players, electric bulbs, tube-lights, fans, electric irons,

washing machines and telephone sets

• Household 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 fluids and

maintenance products in retail packing

• Tyres and tubes

• Storage batteries

• Arms and ammunition

• Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, 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

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• Other goods and products sold in retail packing (other goods means all such product

which are packed in retail pack whether specifically included in list of this schedule or

not)

SIXTH SCHEDULESection 13(2)(a)

Following supplies are excluded from exemption of Sales Tax;

• Milk preparations obtained by replacing one or more of the constituents of milk by

another substance, whether or not packed for retail sale.

• Supplies against international tender.

NOTIFICATIONS

Following Notifications have been rescind with effect from June 12, 2013;

SRO 863(I)/2007 issued on dated 24th

August 2007:-

Zero rated sales tax on raw material, components, sub-components, sub-assemblies and

assemblies on imported and purchase locally for manufacture of goods of various goods as

mentioned in this SRO has been withdrawn.

SRO 117(I)/2011 issued on dated 10th

February, 2011:-

Facility of reduce rate of sales tax to Khyber Paktunkhwa, FATA, PATA is withdrawn.

Following Notifications issued and applicable from June 13, 2013;

SRO 501(I)/2013 dated 12th

June, 2013:-

Under this SRO following goods exempt from whole of sales tax on the import and supplies;

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S. No. Description

(1) (2)1. Uncooked poultry meat (PCT Heading 02.07).

2. Milk and cream (PCT headings 04.01 and 04.02).

3. Flavored Milk (PCT Headings 0402.9900 and 22.02).4. Yogurt (PCT Heading 0403.1000).

5. Whey (PCT Heading 04.04).

6. Butter (PCT Heading 0405.1000).7. Desi ghee (PCT Heading 0405.9000).

8. Cheese (PCT Heading 0406.1010).

9. Processed cheese not grated or powdered (PCT Heading 0406.3000).

10. Cotton seed (PCT heading 1207.2000).11. Frozen, prepared or preserved sausages and similar products of poultry meat or meat

offal (PCT Heading 1601.0000).

12. Meat and similar products of prepared frozen or preserved meat or meat offal of all

types including poultry meat and fish (PCT Headings 1602.3200, 1602.3900,1602.5000, 1604.1100, 1604.1200, 1604.1300, 1604.1400, 1604.1500, 1604.1600,

1604.1900, 1604.2010, 1604.2020, 1604.2090, 1604.3000).13. Preparations for infant use, put up for retail sale (PCT Heading 1901.1000).

14. Fat filled milk (PCT Heading 1901.9090).

15. Soyabean meal (PCT Heading 2304.0000).16. Oil cake and other solid residues, whether or not ground or in the form of pellets (PCT

heading 2306.1000)

17. Colours in sets (Poster colours) (PCT Heading 3213.1000).

18. Writing, drawing and marking inks (PCT Headings 3215.9010 and 3215.9090).19. Erasers (PCT Headings 4016.9210 and 4016.9290).

20. Exercise books (PCT Heading 4820.2000).21. Directly reduced iron (PCT heading 72.03).22. Pencil sharpeners (PCT Heading 8214.1000).

23. Energy saver lamps (PCT heading 8539.3910).

24. Sewing machines of the household type (PCT Headings 8452.1010 and 8452.1090).

25. Purpose built taxis, whether in CBU or CKD condition (PCT Headings 8703.3226 and8703.3227) which are built on girder chassis and having following features, namely:-

(a) Attack resistance central division along with payment tray;

(b) Wheelchair compartment with folding ramp; and(c) Taximeter and two-way radio system.

26. Bicycles (PCT Heading 87.12).27. Wheelchairs (PCT headings 8713.1000 and 8713.9000).

28. Vessels for breaking up (PCT heading 89.08)

29. Other drawing, marking out or mathematical calculating instruments (geometry box)

(PCT Heading 9017.2000).30. Pens and ball pens (PCT Heading 96.08).

31. Pencils including colour pencils (PCT Heading 96.09).

32. Compost (non-chemical fertilizer) produced and supplied locally33. Construction materials to Gawadar Export Processing Zone’s investors and to Export

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Processing Zone Gawadar for development of Zone’s infrastructure.


June, 2013 with effect from June 13, 2013:-

Under this SRO following goods were charged sales tax at zero rate, however, after amendment

these goods are not exempted;

• Cotton seeds (PCT Heading 1207.2000);

• Oil cake and other solid residues, whether or not ground or in the form of pellets (PCTHeading 2306.1000)

• Compost (non-chemical fertilizer)

• Energy Saver lamps PCT Heading8539.3910

• Construction materials to Gawadar Export Processing Zone's investors and to ExportProcessing Zone Gawadar for development of zone's infrastructure.

• Wheel chair

• Cotton seed oil


June, 2013 with effect from June 12, 2013 Amendment in SRO

993(I)/2006:-

This notification withdrawn the composite repayment-cum-drawback of sales tax and federal

excise duty to the registered person on the export from Pakistan of vegetable ghee, cooking oil

and margarine.

FINISHED CONSUMER GOODS OF FIVE EXPORT-ORIENTED SECTORS SRO 504(I)/2013 Amendment in SRO 1125(I)/2011 dated December 31, 2011

[Effective June 12, 2013] -

In terms of SRO 1125(I)/2011 dated December 31, 2011 [as amended from time to time] areduced rate of 2 per cent / 5 per cent is applicable inter alia on local sales of articles covered by

five export-oriented sectors i.e. textile, carpets, leather, sports and surgical goods. Through the

subject notification, with effect from June 12, 2013, the concession has been restricted to goods

other than ‘finished’ articles. Consequently, the local sale of these ‘finished articles’ such as

‘garments’ now attracts sales tax at the rate of 17 per cent.

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List of items excluded from SRO 1125(I) of 2011:

Entry of Table

in SRO 1125(I)/2011 Description PCT

Heading

01 Finished articles of leather and

artificial leather

Chapter 41 andheading 64.06

02 Following items relating to textile and

articles thereof:

(a) finished articles of textiles and

textile made-ups

(b) mono-filament of more than 67decitex

(c) sun shading

(d) fishing net of nylon or othermaterial

(e) rope of polyethylene or nylon

(f) tyre cord fabric

Chapters 50, 51, 52, 53, 54

(excluding 5407.2000), 55, 56

(excluding 56.08 and 56.09),57 (excluding made ups), 58,

59 (excluding 59.05, 59.10)

and 60

3 Carpets in finished condition Chapter 57 excluding madeups)

6 Sports goods in finished condition Respective headings excluding

finished goods.

7 Surgical goods in finished condition Respective headings excluding

finished goods

56 Master batches relating to othercolouring matter and other

preparations

3206.4900

68 Shoe adhesives 3506.9110


June, 2013 with effect from June 13, 2013 Amendment in Sales

Tax Special Procedure (Withholding) Rules, 2007, SRO 660(I)/2007:-

Previously withholding agent such as Companies and persons registered as exporter were not

required to deduct withholding sales tax from the payment of supplies from un-registered

persons. After this notification, Companies and persons registered as exporter are also required

to withhold whole of sales tax at prevailing sales rate from payment of purchases from un-

registered persons. The amount of sale tax for the purpose of this rule shall be worked out on the

basis of gross value of taxable supply.

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June, 2013 with effect from June 13, 2013 Amendment in Sales

Tax Rules, 2006:-

After this notification, corporate or non-corporate persons’ jurisdiction will be the placed where

manufacturing unit or business premises is located. In case of multiple manufacturing units orbusiness premises, the Board may decide the place of registration of such persons.

Chapter VIIA in respect supplies against International Tender is omitted as such these supplies

are no more exempted supplies.

SRO 509(I)/2013 and SRO 510(I)/2013 dated 12th

June, 2013 with effect from June 13, 2013

Amendment in Sales Tax Rules, 2006:-

After notification, every consumer of electricity having an industrial or commercial connection

and the bill for a month in excess of rupees fifteen thousand and consumer not providing his

sales tax registration or not shown as active on Active Taxpayers List then he will be charged

extra 5% Sales Tax in addition to current rate of sales tax. Taxpayer has to declare his all places

of business and also provide same to Electricity Company to incorporate sales tax registration

number in billing system.

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FEDERAL EXCISE ACT, 2005

APPLICABILITY DATE?

Following amendment has been proposed in the Federal Excise Act, 2005 with effect from 1st

July, 2013 or as date mentioned in the provisions or schedule as below;

DUTIES

Section. 3

Further tax reintroduced and now taxpayer has to be charged additional FED at the rate of two

percent on supplies to un-registered persons.

RECORDS

Section 17

After proposed amendment, taxpayer has to keep gate pass, inward or outward and transport

receipts as record in addition to other documents as described in said section and taxation officer

can check such record while audit and otherwise.

APPEALS

Section 33

It is proposed to give power to Commissioner Appeal to grand stay of maximum 30 days in

hardship cases.

POWERS OF BOARD OR COLLECTOR TO PASS CERTAIN ORDERS

Section 35,45 and 56

It proposed to insert explanation in this section and remove doubt that the Board, Commissioner

or Officer of Inland Revenue has inherent power of audit, access record and documents, access

to premises, stocks, accounts, call for information and this power is not restricted by section 42B

which empower Board to select the cases for audit.

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REWARD TO INLAND REVENUE OFFICERS AND OFFICIALS

Section 42C

It is proposed to introduce reward to Inland Revenue Officers who are involve in detection of

concealment or evasion of FED and other taxes.

MONITORING OR TRACKING BY ELECTRONICS OR OTHER MEANS.

Section 45A

It proposed to insert new section which empower Board to authorize any officer for monitoring

or tracking of production sales, clearances, stocks or any other related activity of the registered

person or class of registered persons or any goods or calls of goods through electronic or other

mans as prescribed by the Board. Furthermore, board also may prescribe to affix tax stamp,

banderole, stickers labels on taxable goods.

FIRST SCHEDULE

In table I of the first schedule following amendment;

i. Aerated waters Raised rate of FED to 9%

ii. Aerated waters, containing added sugar or othersweetening matter or flavored Raised rate of FED to 9%

iii. Aerated waters if manufactured wholly from juices or pulp of vegetables, food grains or

fruits and which do not contain any other

ingredient, indigenous or imported, other thansugar, coloring materials, preservatives or

additives in quantities prescribed under the

West Pakistan Pure Food Rules, 1965.

Raised rate of FED to 9%

iv. Locally produced cigarettes if their on pack

printed retail price exceeds rupees two

thousand two hundred and eighty six perthousand cigarettes

Rupees two thousand three

hundred and twenty five per

thousand cigarettes

v. Locally produced cigarettes if their on pack

printed retail price does not exceed rupees two

thousand two hundred and eighty six perthousand cigarettes

Rupees eight hundred and

eighty per thousand

cigarettes”

vi. Locally produced cigarettes if their retail pricedoes not exceed ten rupees per tencigrettes

Deleted from the schedule,hence, no more FED or

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Franchise services

vii. Oilseeds Forty paisa per kg

viii. Motor cars, SUVs and other motor vehicles

of cylinder capacity of 1800 cc or above,principally designed for the transport of

persons (other than those of headings 87.02),including station wagons and racing cars of cylinder capacity of 1800 cc or above.

Ten per cent ad.val.”; and

Table II

i. Services provided or rendered in respect of

insurance to a policy holder by an insurer,

including a re-insurer [in case where directinsurance service has been provided.]

Deleted from the schedule,

hence, no more FED on

Insurance.

ii. Services provided or rendered by banking

companies, insurance companies, cooperativefinancing societies, modarabas, musharikas,

leasing companies, foreign exchange dealers,non-banking financial institutions, Assets

Management Companies and other persons

dealing in any such services.

Sixteen per cent of the

charges

Third Schedule – Exemption from FED

Proposed withdrawn exemption on following items;

i. Hydraulic cement imported or purchased locally by

petroleum or energy sector companies or projects

subject to the same conditions and procedures as areapplicable for the purposes of exemption of customsduty.

ii. Lubricating oil if supplied to Pakistan Navy for

consumption in its vessels

iii. Transformer oil if used in the manufacture of

transformers supplied against international tenders

to a project financed out of funds provided by theinternational loan or aid giving agencies.

Table II

i. Services provided by Asset Management

Companies with effect from 1stof July, 2007.

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