Finance Act, 2015 in respect of Income Tax, Federal Sales Tax and Islamabad Capital Territory Sales Tax



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PART II

REDUCTION IN TAX RATES



(13C), (14),(14A)

(14B) and (21)



These clauses dealing with taxation rate for cooking or vegetable oil, goods and passengers transport and shipping business by a resident person have been omitted due to their having lost significance or providing therefor in the main body of the Ordinance.



(28B)

Cash withdrawal from bank by a licenced and authorized exchange Company has been subjected to collection of tax under section 231A at the rate of 0.15%. This reduced rate of 0.15% will be applicable in respect of bank account Certified by the Commissioner.



PART IV

EXEMPTION FROM SPECIFIC PROVISIONS





11(A) Sub-clauses (xviii) to

(xxv)


Provisions of minimum tax u/s 113 will not be applicable to the following:





Companies enjoying exemption u/c (132B) of Part-I of this Schedule, in respect of receipts from coal mining project in Sind, supplying coal exclusively to power generation projects.





LNG Terminal operators and LNG Terminal owners.




Taxpayers located in Khyber Pakhtunkhwa, FATA and PATA for the Tax Years 2010, 2011 and 2012 other than manufacturers and suppliers of cement, sugar, beverages and cigarettes.

Rice mills for the Tax Year 2015.

Taxpayers enjoying exemption u/c (126I) of Part-1 of this Schedule in respect of income from manufacturer of renewable energy.

Taxpayer enjoying exemption u/c (126J) of Part-1 of this Schedule in respect of income from operating warehousing or cold chain facilities for storage of agricultural produce.

Taxpayer qualifying for exemption u/c (126K) of Part-1 of this Schedule in respect of income from operating Halal meat production for the period stated therein.

Taxpayer qualifying for exemption u/c (126L) of Part-1 of this Schedule in respect of income from manufacturing unit set-up in Khyber Pakhtunkhwa Province.




(11D)

Provisions of section 113C – Alternative Corporate Tax will not apply to LNG Terminal Operators and Owners.


(16A)

This clause providing exemption from deduction of tax u/s 153(1)(b) from payments made electronic and print media for advertisement has been deleted.


(46)

This clause is amended to state correct section 152(2A) for non-deduction of tax from Permanent Establishment of Non-resident Petroleum Exploration and Production Companies for supply of its petroleum products.


(56)

Amended clause now exempts more petroleum products from collection of advance tax on import by oil marketing Companies and oil refineries.


(57)

In house preparation and processing of food and allied items for sale to customers shall not disqualify a Company from being treated as a Trading House if other conditions of the clause are fulfilled and sale of such items does not exceed 2% of total sales.


(72A)

Provision providing for basis of taxation of Haj Operators has been extended upto Tax Year 2015.



(77)

Import and further supply of “Tubular day lighting devices such as solatube” have also been exempted from collection of tax under section 148 and 153.


(86)

Period of investment in specified industries for exemption from probe u/s 111 has been extended from upto June 30, 2016 to June 30, 2017.


(91)

Exemption from collection of tax u/s 148 at import stage has been allowed to import of specified machinery and equipment for agricultural use.


(92)

Collection of advance tax u/s 148 has been exempted on import of aircrafts, spare parts of aircrafts, machinery, equipment and tools for maintenance etc. of aircrafts and other machinery etc. recognized and authorized by Aviation Division.


(93)

Exemption from deduction of tax u/s 154(1) from export proceeds has been allowed in respect of export of Halal meat by taxpayers enjoying exemption from tax u/c (126K) of Part-I of this Schedule.






THE FOURTH SCHEDULE

RULES FOR THE COMPUTATION OF THE PROFITS

AND GAINS OF INSURANCE BUSINESS


Rule




(6B)

Table of taxation of capital gains arising from disposal of shares of prescribed entities has been provided for the Tax Years 2015 and 2016.



(6D)

Super tax provided for in section 4B will also be applicable to taxpayers covered by this Schedule.




THE FIFTH SCHEDULE

PART - I

RULES FOR THE COMPUTATION OF THE PROFITS

AND GAINS FROM THE EXPLORATION AND

PRODUCTION OF PETROLEUM




Rule

Description

4AA

Super tax provided for in section 4B will also apply to taxpayers covered by this Part.




PART – II




RULES FOR THE COMPUTATION OF THE PROFITS

AND GAINS FROM THE EXPLORATION AND

EXTRACTION OF MINERAL DEPOSITS

(OTHER THAN PETROLEUM)




Rule




2A

Super tax provided for in section 4B will also apply to taxpayers covered by this Part.





THE SEVENTH SCHEDULE

RULE FOR THE COMPUTATION OF THE PROFITS AND GAIN OF A BANKING COMPANY AND TAX PAYABLE THEREON




Rule




6

Provisions regarding taxation of net income from dividend and capital gains arising in different situations and taxable at different rates of tax have been omitted.


6A, 6B

Rules dealing with computation of dividend and capital gains have been omitted.



7B

From the tax year 2015 and onwards, income from dividend and capital gains will be taxed at normal rate of taxation i.e. 35%.


(7C)

Super tax chargeable u/s 4B will also apply to taxpayers of this Schedule.





THE EIGHTH SCHEDULE

RULE FOR THE COMPUTATION OF THE PROFITS

AND GAIN ON LISTED SECURITIES


Rule




8

Super tax chargeable u/s 4B will also be applicable to taxpayers of this Schedule.











SALES TAX ACT, 1990

IMPORTANT CHANGES INTRODUCED BY THE

FINANCE ACT, 2015


2

Definitions


(1)

Term “active taxpayer” is now defined to mean a registered person who:

is not black listed or whose registration is not suspended or blocked u/s 21;

does not fail to file monthly sales tax returns u/s 26 by due dates for two consecutive tax periods;

does not fail to file income tax return u/s 114 or statement u/s 115 of the Income Tax Ordinance, 2001 by the due date;

does not fail to file two consecutive monthly or an annual withholding statements u/s 165 of the Income Tax Ordinance, 2001.


(5AB)

Upper limit of utility bills to meet one of the conditions to be “cottage industry” has been increased from Rupees seven hundred thousand to Rupees eight hundred thousand.


(28)

Now for the purposes of registration of a retailer, annual turnover will be of no consequence.


(33)(d)

Scope of the definition of “supply” has been enlarged to include transfer or delivery of goods manufactured (by toll manufacturers – on charges basis) to the owners or any other person on their behalf.



3

Scope of tax


(1A)

Rate of further tax on supply of goods to unregistered persons (not being end consumers) increased from 1% to 2% of the value.


6

Time and manner of payment


(1)

Powers of Customs Authorities extended to recover the Sales Tax from the Importer that was not or short recovered at import stage.


7

Determination of tax liability


(2)(ii)

Now the sales tax paid on provisional basis would be admissible input tax against the output tax.


8

Tax credit not allowed


(1)(j)(k)

&(L)



Credit for input tax will also be not admissible on:

services, input tax adjustment on which is not admissible under the Provincial sales tax laws;

import or purchase of agricultural machinery or equipment subject to reduced rate of 7% of sales tax under this Act;

from the date to be notified by the Board, such goods and services which, at the time of filing of return by the buyer, have not been declared by the supplier in his return.




8A

Joint and several liability of registered persons in supply chain where tax unpaid

Now the Tax Department will have to prove that purchaser of goods had the knowledge that the supplier will not pay output tax on supply made by him.




13

Exemption


(2)(a),(b)

Powers of the Federal Government to exempt imports / goods from tax have been checked and subjected to approval of Economic Coordination Committee of Cabinet. Notification issued will expire on the expiry of financial year if not rescinded earlier. Board’s powers to exempt imports / goods from whole or part of sales tax have been withdrawn.



14

Registration

Persons and categories now provided who are required to be registered under this Act.




32A

Audit by special audit panel

The Board has been empowered to appoint as many special audit panels as it deems fit to audit the registered person including audit of refund claims etc. Provisions of this section will regulate the matters relating to the appointment of panels, scope of audit etc. and prescribe rules in this respect.







THE FIFTH SCHEDULE

[Zero rated supplies-section 4]





S. No.




6A

Supply of locally manufactured plant and machinery to manufacturers in Export Processing zone has been separately provided with details of specifications and conditions.


9

Zero rate will now be applicable to manufacturers who export exempt goods even if no local supplies of exempt and taxable goods are made.


12

Imports and local purchase for manufacture of flavoured milk, Yogurt, Cheese, Butter, Cream, Desi Ghee, Whey, milk and cream concentrated and added sugar or other sweetening matter have been excluded from the scope of zero rating and placed in Eighth Schedule levying sales tax at reduced rates.




THE SIXTH SCHEDULE

Table-1 [Exempt Imports or Supplies - Section 13(1)]




S. No.




28, 39, 56

Exemption to goods stated against these S.Nos. has been withdrawn. These goods are:

“Poultry and cattle feeds, oil cake of cotton seed, incinerators of disposal of waste management, motorized sweepers and snow ploughs, re-importation of foreign origin goods which were temporarily exported out of Pakistan.

These goods are now subjected to reduced rate of sales tax under the Eight Schedule.


117 to 128

New serial Nos have been included in respect of medical related kits, appliances, materials etc., aircrafts, aviation related machinery, tools, kits etc for exemption from tax.





TABLE - 2 (Local Supplies only)


13, 14

Exemption to supply of reclaimed lead and waste paper has been withdrawn.


17,18,19

20,21


Further goods added in this Table which are, raw and pickled hides etc, supplies made by manufacturers of marble and granite even if annual utility bills is more than Rs eight hundred thousand, bricks and crushed stone upto June 30, 2018 and poultry feed, cattle feed etc.





TABLE – 3


10,16

Machinery, equipment, raw materials etc imported by Karachi Shipyard and Engineering Works Ltd for building, fitting, repairing etc of ships, boats or floating structures and other items approved by the Alternative Energy Development Board have been excluded from this Table.





THE EIGHTH SCHEDULE

[Reduced rate of tax – section 31(2)(aa)]

TABLE-1


S. No.




1,6

Rate of Sales Tax enhanced from 5% to 10% on soyabean meal, and plant and machinery not manufactured locally and having no compatible local substitute.







7 to 30

S. No.

Description

Rate of sales Tax

Condition

7.


Flavoured milk

10%

Sold in retail

packing under

a brand name


8.

Yogurt

10%

Sold in retail

packing under

a brand name


9.

Cheese

10%

Sold in retail

packing under

a brand name


10.

Butter

10%

Sold in retail

packing under

a brand name


11.

Cream

10%

Sold in retail

packing under

a brand name


12.

Desi ghee

10%

Sold in retail

packing under

a brand name


13.

Whey

10%

Sold in retail

packing under

a brand name


14.

Milk and cream,

concentrated and

added sugar or other

sweetening matter



10%

Sold in retail

packing under

a brand name


15.

Poultry feed, cattle

feed, and their

ingredients except

soya bean meal of

PCT heading

2304.0000 and oilcake

of cottonseed

falling under PCT

heading 2306.1000


5%




16.

Incinerators of disposal of waste management,

motorized sweepers and snow ploughs



5%




17.

Re-importation of

foreign origin goods

which were

temporarily exported

out of Pakistan


5%

Subject to

similar conditions as are envisaged

for the purposes of

customs duty under the Customs

Act,1969, and

taxable value shall be the value determined under PCT heading 99.18 of the said Act increased by

customs duty

payable


18.

Reclaimed lead

5%

If supplied to

recognized manufacturers

of lead and

lead batteries



19.

Waste paper

5%




20.

Plant, machinery,

equipment and

specific items used

in production of biodiesel



5%

The Alternative

Energy Development

Board (AEDB),

Islamabad shall certify in the prescribed manner and format as per

Annex-B, as given in the Sixth Schedule, that the imported goods are bonafide project requirement.

The goods shall not be sold or

otherwise disposed of within a period of five years of their import except with

the prior approval of the FBR and

payment of customs duties and taxes leviable

at the time of

import


21.

Rapeseed,

sunflower seed and

canola seed


16%

On import by

solvent extraction

industries


22.

Soya bean seed

6%

On import by

solvent extraction

industries, subject to the condition that no refund of

input tax shall

be admissible”;


23.

Second-hand and

worn clothing or

footwear


5%




25.

Agricultural tractors

10%




26.

Tillage and seed

bed preparation

equipment:


  1. Rotavator

Cultivator

Ridger


Sub soiler

Rotary slasher

Chisel plow

Ditcher


Border disc

Disc harrow

Bar harrow

Mould board plow

Tractor rear or front

blade


Land leveler or land

planer


Rotary tiller

Disc plow

Soil-scrapper

K.R.Karundi

Tractor mounted

trancher


Land leveler


7%




27.

Seeding or planting

equipment:



  1. Seed-cum fertilizer drill (wheat, rice barley, etc.)

  1. Cotton or maize planter with fertilizer attachment

  2. Potato planter

  3. Fertilizer or manure spreader or broadcaster

  4. Rice transplanter

  5. Canola or sunflower drill

  6. Sugarcane planter




7%




28.

Irrigation, drainage

and agro-chemical

application

equipment:



  1. Tubewells filters or strainers

  1. Knapsack sprayers

  2. Granular applicator

  3. Boom or field sprayers

  4. Self propelled sprayers

  5. Orchard sprayer




7%




29.

  1. Harvesting, threshing and storage equipment:

  1. Wheat thresher

  2. Maize or groundnut thresher or sheller

  3. Groundnut digger

  4. Potato digger or harvester

  5. Sunflower thresher

  6. Post hole digger

  7. Straw balers

  8. Fodder rake

  9. Wheat or rice reaper

  10. Chaff or fodder cutter

  11. Cotton picker

  12. Onion or garlic

  13. harvester

  14. Sugar harvester

  15. Tractor trolley or forage

  16. wagon

  17. Reaping machines

  18. Combined harvesters

  19. Pruner/shears




7%




30.

Post-harvest handling and

processing & miscellaneous

machinery:


  1. Vegetables and fruits cleaning and sorting or grading equipment

  1. Fodder and feed cube maker equipment




7%




31.

Pesticides and their active ingredients registered by the Department of Plant Protection under the Agricultural Pesticides Ordinance, 1971 (II of 1971), stabilizers, emulsifiers and solvents.

For list of ingredients, please refer to the detail in provision.

















TABLE – 2

1, 5, 6

Rate of sales tax will now be 10% instead of 5% on:

Machinery and equipment for development of grain handling and storage facilities.

Complete plants for relocated industries.

Machinery, equipment and other capital goods meant for initial installation, balancing, modernization, replacement or expansion of oil refining, petrochemical products etc and heavy chemical industry etc.



3, 7

Items imported by Call Centers, Business Processing Outsourcing facilities and Proprietary Framework System for building / structures of a hight of 100 ft and above and its items and components etc has been excluded from this Table and will be subject to Sales Tax at 17%.



NINTH SCHEDULE



Amounts of sales tax on import, at the time of registration of Low / Medium priced and Smart Cellular Mobile Phones or Satellite Phones have been doubled i.e. Rs 150 to Rs 300; Rs 250 to Rs 500 and Rs 500 to Rs 1,000.


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