federal budget 2012-13

PREFACE

TARIQ MIAN RAMZAN ARSHAD & CO. Cost & Management Accountants |Islamabad Office:

| Office No.1, 3rd

Floor Executive Center, Markaz I-8, Islamabad, Pakistan | |Tel: +92-51-4938395, 4938396 | Cell: +92 321 522 44 88 | Email: [email protected]

| Lahore Office: | 4-C, Sherwani House, Model Town Lahore, Pakistan | | Tel: +92-42-35857745-8| F: +92-42-35857745 |Cell (Arshad Bashir): +92 321 9504472 | Email: [email protected]

FEDERAL BUDGET 2018-19

& PROPOSED AMENDMENTS IN

THE TAX LAWS THROUGH FINANCE BILL 2018

mailto:[email protected]


PREFACE

PREFACE

This document has been prepared as a general guide for the benefit of our clients and is also

available to other interested persons upon request.

The sources of information to prepare this memorandum are; Economic Survey of Pakistan,

Budget in Brief 2017-18 and The Finance Bill 2018 as were available on the websites of

Ministry of Finance and Federal Board of Revenue, Government of Pakistan.

This memorandum is correct to the best of our knowledge and belief. However, this should not

be taken as legal text as it sets out interpretation of the significant amendments proposed by the

Finance Bill 2017 in the taxation laws etc. in a brief manner to assist the readers in understanding

important changes.

We hope that this memorandum will be beneficial for the readers in understanding the budgetary

changes. It is suggested that the text of the Bill and the relevant notifications, where applicable,

be referred to in considering the interpretation of any provision of the law. Since these are only

general comments, no final decision on any issue may be arrived at without further

consideration. Specific professional advice should be sought before any action is taken. TMRAC

will not accept any responsibility in this regard.

We value your suggestions. Please e-mail us your questions and comments at [email protected]

Following Members of TMRAC Team members has made the contribution to compile this document;

Sikandar Zulkarnain, Supervisor Mgt. Trainees

Abdul Wahab, Executive Taxation

Syed Badar Ali Shah Gilani, Sr. Executive Taxation

Syeda Talha, Manger QCR

Naeem Sabir, Manager Audit and Accounts

Sadaf Humayun, Manager Tax and Corporate

Muhammad Imran Malik, FCMA, Sr. Manager/Partner

Muhammad Arshad Bashir, FCMA, FPFA, Partner

Mian Muhammad Ramzan, FCMA, FPFA, Partner

Date: May 4, 2018 Place: Islamabad, Pakistan -


TABLE OF CONTENTS

PREFACE ....................................................................................................................................................................................... 2

ECONOMIC REVIEW ................................................................................................................................................................... 4

BUDGET AT A GLANCE ............................................................................................................................................................. 6

BUDGET HIGHLIGHTS .............................................................................................................................................................. 8

AMENDMENTS IN SALES TAX LAWS ................................................................................................................................. 22

AMENDMENTS IN FEDERAL EXCISE ACT, 2005 ............................................................................................................ 34

AMENDMENTS IN THE CUSTOMS ACT, 1969................................................................................................................. 37

AMENDMENTS IN INCOME TAX ORDINANCE, 2001 .................................................................................................... 43

OTHER LAWS & LEVIES ......................................................................................................................................................... 76

ECONOMIC REVIEW

ECONOMIC REVIEW The economy of Pakistan is facing an uncomfortable ride having main cause of trade deficit since last five

years and devaluation of Pak rupee. The GDP growth has been estimated at 5.79% for the year 2017-18 as

compared to 5.36% during 2016-17. The Growth of agricultural sector is 3.81%, industrial sector shows

growth of 5.80% and services sector 6.43%.

Sector wise overview of economy is as under;

The agriculture sector of Pakistan shows the growth 3.81% during 2017-18. The growth in

production of three major crops namely rice, sugarcane and cotton is estimated at 8.7%, 7.4%

and 11.8% respectively, while decline has been estimated in wheat and maize at 4.4% and 7.1%

respectively.

The Industrial Sector showed an increase of 5.80. The mining and quarrying sector grew by

3.04%. The large scale manufacturing sector showed as increase of 6.24%. Major

contributors to this growth were cement (12%), tractors (10.26%), trucks (24.41%) and

petroleum products (10.26%). Electricity and gas sub sector showed growth of 1.84% while

the construction activity increased by 9.13%. (Source: PBS)

Services Sector showed a growth of 6.43%. Wholesale and retail trade sector grew at a rate of

7.51% which is dependent on the output of agriculture and manufacturing imports. Imports

increased by 17%. Transport, storage and communication sector grew at the rate of 3.58%.

Finance and insurance sector showed the overall increase of 6.13%, General Govt. services

grew by the increase in salaries and the inflation. Overall private sector also contributed

positively.

Fiscal Policy predicts containment of fiscal deficit, mobilization of more revenue/funds,

controlling current spending and switching to targeted subsidies while prioritizing

development spending.

Inflation for 2017-18 targeted at 6%, was contained at 3.8% for July-March 2017-18

compared to 4% in July-March 2016-17. Average SPI was also lower in July-March 2017-18

at 0.9% as against 1.4% in July-March 2016-17. Similarly average WPI stood at 2.7% in the

same period compared to 3.8% last year.

ECONOMIC REVIEW

Foreign Exchange Reserves, as on 13

th April 2018 were down to $ 17.5 billion (18.6%) as

compared to last years‘ $ 21.6 billion. However, private banking reserves seen a raised by

20.6% from the last year, whereas government reserves showed decline of 30.9%.

Current Account Deficit for July-Feb 2017-18 stood at $ 10.8 billion compared to $ 7.2

billion in July-Feb 2016-17 indicating a decline in current account deficit which stood 4.8$ of

GDP as compared to 3.6% of last year.

Regional Currency Comparison, USD parity with Pakistani rupee took a hike of 10.8% and

4.5% as compared to its values in December 2016 and December 2017, respectively.

CPEC impact, the success of China Pakistan Economic Corridor (CPEC) will have three

major benefits, i-e Resolution of energy crises, Development of infrastructure and Regional

connectivity. Resolution of energy crises and development of infrastructure will contribute

towards the incremental growth to GDP of 2% and 1.5% respectively, a combined additional

growth of 3.5% which after accounting for existing growth rate, will expectedly result in

GDP growth of 9.5%.

We expect that due to recent amnesty scheme and positive SPEC growth and development

coupled with immovable property revaluation, Pakistan cans see a magical GDP growth of

double digits within three years provided political stability prevails.

BUDGET AT A GLANCE

BUDGET AT A GLANCE Budget 2018-19

Comparative Analysis with Previous Budget (Rupees in million)

Budget

Estimates Revised

Estimates Budget

Estimates % age

Variance

2017-18 2017-18 2018-19

A. TOTAL RESOURSES

Tax Revenue Receipts *

4,330,463 4,147,305 4,888,645 17.88

Non-Tax Revenue Receipts 979,853 845,182 771,860 (8.68)

Capital Receipts

552,520 594,554 443,096 (25.47)

External Receipts

837,824 1,211,980 1,068,024 (11.88)

Privatization Proceeds

50,000 17,774 50,000 181.31

Gross Federal Resources 6,750,660 6,816,795 7,221,625 5.94

Less: Provincial share in federal taxes 2,384,243 2,316,080 2,590,066 11.83

Net Federal Resources

4,366,417 4,500,715 4,631,559 2.91

Cash balance built up by provinces 347,269 273,852 285,604 4.29

TOTAL RESOURCES 4,713,686 4,774,568 4,917,163 2.99

B. TOTAL EXPENDITURES

Current Expenditure

3,763,710 4,298,280 4,780,358 11.22

Development Expenditures (PSDP) 1,340,071 1,062,759 1,152,105 8.41

TOTAL EXPENDITURES 5,103,781 5,361,038 5,932,463 10.66

Bank Borrowings (A-B) 390,095 586,470 1,015,300 73.12

Difference

- - -

*Tax Revenue Receipts Direct Taxes

1,594,910 1,563,000 1,735,000 11.00

Indirect Taxes

2,418,090 2,372,000 2,700,000 13.83

FBR Taxes

4,013,000 3,935,000 4,435,000 12.71

Other Taxes

317,463 212,305 453,645 113.68

4,330,463 4,147,305 4,888,645 17.88

BUDGET AT A GLANCE

BREAKUP OF FEDERAL TAX REVENUE RECEIPTS

Rs.in million

Budget 2017-18

Revised 2017-18

%age of T.Rev.

Budget 2018-19

%age of T.Rev.

%age Vs. Last

Yr.

Direct Taxes

Income Tax 1,577,557

1,540,423 37.14%

1,709,939 34.98% 11.00%

WWF 14,622

16,789 0.40%

18,636 0.38% 11.00%

Capital Value Tax 2,731

5,788 0.14%

6,425 0.13% 11.01%

1,594,910 1,563,000 37.69% 1,735,000 35.49% 11.00%

Indirect Taxes

Customs 581,371

600,000 14.47%

735,000 15.03% 22.50%

Sales Tax 1,605,200

1,547,000 37.30%

1,700,000 34.77% 9.89%

Federal Excise 231,519

225,000 5.43%

265,000 5.42% 17.78%

2,418,090

2,372,000 57.19%

2,700,000 55.23% 13.83%

FBR TAXES 4,013,000

3,935,000 94.88%

4,435,000 90.72% 12.71%

Other Indirect Taxes

Petroleum Levy 160,000

170,000 4.10%

300,000 6.14% 76.47%

ICT Taxes 4,373

4,235 0.10%

37,555 0.77% 786.78%

Gas Infrastructure Develop.Cess 110,000

15,000 0.36%

100,000 2.05% 566.67%

Natural Gas develop.surcharge 43,000

23,000 0.55%

16,000 0.33% -30.43%

Airport Tax 90

70 0.00%

90 0.00% 28.57%

317,463 212,305 5.12% 453,645 9.28% 113.68%

Total Tax Revenue Receipts 4,330,463 4,147,305 100.00% 4,888,645 100.00% 17.88%

BUDGET HIGHLIGHTS

BUDGET HIGHLIGHTS BUDGET LAYOUT The budget 2018-19 has the following salient features:

The total outlay of budget 2018-19 is Rs 5,932.5 billion. This size is 16.2% higher than the size of

budget estimates 2017-18.

The resource availability during 2018-19 has been estimated at Rs 4,917.2 billion against Rs

4,713.7 billion in the budget estimates of 2017-18.

The net revenue receipts for 2018-19 have been estimated at Rs 3,070.4 billion indicating an

increase of 4.9% over the budget estimates of 2017-18.

The provincial share in federal taxes is estimated at Rs 2,590.1 billion during2018-19, which is

8.6% higher than the budget estimates for 2017-18.

The net capital receipts for 2018-19 have been estimated at Rs 443.1 billion against the budget

estimates of Rs 552.5 billion in 2017-18 i.e. a decrease of 19.8%.

The external receipts in 2018-19 are estimated at Rs 1,118 billion. This shows an increase of

33.4% over the budget estimates for 2017-18.

The overall expenditure during 2018-19 has been estimated at Rs 5,932.5 billion, out of which the

current expenditure is Rs 4,780.4 billion and development expenditure is Rs 1,152.1 billion.

The share of current and development expenditure respectively in total budgetary outlay

for 2018-19 is 80.6% and 19.4%.

The expenditure on General Public Services is estimated at Rs 3,340.4 billion, which is 69.9% of

the current expenditure.

The development expenditure outside PSDP has been estimated at Rs 180.2 billion in the

budget 2018-19, which is higher by 18.4% than budget estimates 2017-18.

The size of Public Sector Development Programme (PSDP) for 2018-19 is Rs 1,650 billion. Out

of this, Rs 850 billion has been allocated to provinces. Federal PSDP has been estimated at Rs

800 billion, out of which Rs 420.4 billion for Federal Ministries/Divisions, Rs 246.1 billion for

Corporations, Rs 5 billion for Pakistan Sustainable Development Goals (SDGs) and Community

Development Programme, Rs 8.5 billion for Earthquake Reconstruction and Rehabilitation

Authority (ERRA), Rs 5 billion for Special Provision for Competition of CEPEC Projects, Rs 10

billion for FATA 10 year Plan, Rs 45 billion for Relief and Rehabilitation of IDPs, Rs 45 billion

for Security Enhancement, Rs 10 billion for Prime Minister's Youth Programme and Rs 5 billion

for Gas Infrastructure Development Cess.

To meet expenditures bank borrowings has been estimated for 2018-19 at Rs. 1015.3 billion,

which is significant higher than revised estimates of 2017-18.

BUDGET HIGHLIGHTS

SALES TAX & FEDERAL EXCISE

The budgetary measures pertaining to Sales Tax & Federal Excise are;:

The amount of tax to qualify for automatic stay till disposal of appeal by the Commissioner

(Appeals) is being reduced from 25% to 10%.

Provisions for giving appeal effect under the Sales Tax Act, 1990 and the Federal Excise Act,

2005 are being introduced to facilitate the taxpayers by removing unnecessary disputes in

quantification of tax liability pursuant to appeal order passed by Commissioner-IR (Appeals),

Appellate Tribunal-IR, High Court or Supreme Court of Pakistan.

The rate of further tax under section 3(1A) of Sales Tax Act, 1990 is enhanced from 2% to 3%.

Input tax paid on import of scrap of compressors is being disallowed by making necessary

insertions in section 8 of the Sales Tax Act, 1990.

Currently default surcharge is calculated @ KIBOR plus 3% per annum. The rate of default

surcharge is being introduced at 12% per annum in the Sales Tax Act, 1990 and Federal Excise

Act, 2005.

Federal Excise Duty on cement is being increased from 1.25 per kg to Rs. 1.50 per kg. Last year

it was increased from Rs.1 to 1.25.

Zero rating is being restored on Stationery items under the Fifth Schedule to the Sales Tax Act,

1990..

Exemption from sales tax on import of paper weighing 60 g/m2 by Federal or Provincial

Governments and Nashiran-e-Quran registered with the Government for printing of Holy Quran

as per quota determined by IOCO.

Reduced rate of sales tax from 17% to 12% on import of LNG by M/s PSO and M/s PLL and on

supply of RLNG by these companies to M/s SNGPL.

Reduced rate of sales tax @ 3% on all fertilizers across the board and to provide for reduced rate

from 10% to 5% on supply of natural gas to fertilizer plants for use as feed stock. Moreover, rate

of sales tax on LNG imported by fertilizer manufacturers for use as feed stock is also being

exempted

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%.

Exemption is being granted to Karachi Shipyard Engineering Works Limited on import of

machinery, equipment, raw materials, components etc.

BUDGET HIGHLIGHTS

Exemption is being granted on import of 21 types of computer parts imported by manufacturers

registered with and certified by Engineering Development Board for assembling and

manufacturing of personal computers and laptops in accordance with quota determined by IOCO.

Exemption is being granted on import of promotional and advertising materials for display at

exhibitions.

Exemption of sales tax on import is being granted to plant and machinery on one time basis for

setting up of Special Economic Zone and for installation in that zone by zone enterprises to align

exemption from sales tax with the provisions of SEZ Act, 2012.

Exemption from sales tax on import of hearing aids at all types and kinds is being granted.

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.

Restriction is being imposed that sales tax and federal excise audit of a registered person can be

conducted only once in three years.

Sales tax on agriculture machinery reduced from 7% to 5%.

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.

Rate of sales tax is being reduced from 17% to 12% on import of lithium iron phosphate batteries

(Li-Fe-PO4).

Non-adjustable/non-refundable sales tax @ 5% on import of capital goods, whether or not locally

manufactured, for transmission line projects under Standard Implementation Agreement under

Policy Framework for Private Sector Transmission Line Projects, 2015 and Projects Specific

Transmission Services Agreement is being introduced.

Rate of sales tax for steel sector is being increased to Rs. 13 per unit of electricity consumed.

Moreover, the rate of sales tax for other allied steel industries i.e. ship breakers and re-rollers is

also being rationalized. To be enforced through amendment of the Sales Tax Special Procedures

Rules, 2007 with effect from 01.07.2018

The rate of duty on locally produced cigarettes has been enhanced effective from 30th April 2018

enforced through SRO 561(I)/2018, dated 30.04.2018

Waiver of the value addition tax @ 3% chargeable on import of LNG under Rule-58B of Sales

Tax Special Procedure Rules, 2007. To be enforced through SRO ____(I)/2018, dated ____/2018,

effective from 01.07.2018.

Zero rating on import of potato is being granted retrospectively on 200,000 metric tonnes

imported during the period 5th May, 2014 to 31st July, 2014. To be enforced through SRO

____(I)/2018, dated ____/2018, effective from 01.07.2018.

BUDGET HIGHLIGHTS

Leather products ready for use are enjoying reduced rate of 6% of sales tax at import stage.

Identical rate is also being provided on import of ready to use articles of artificial leather by

specifying description and PCT headings of items of leather and artificial leather generally used

by public. To be Enforced through SRO ____(I)/2018, dated ____/2018, effective from

01.07.2018.

SRO 1125(I)/2011, dated 31.12.2011 is being amended to provide rate of further

tax @1% on local supply of finished fabric. To be enforced through SRO ____(I)/2018, dated

____/2018, effective from 01.07.2018.

Exemption of extra tax and further tax @ 2% is being granted to Pakistani foam manufacturers. T

be enforced through SRO ____(I)/2018, dated ____/2018, effective from 01.07.2018.

Exclusion from value addition tax on import of second hand worn clothing and footwear is being

provided to grant relief to the general masses. To be enforced through SRO ____(I)/2018, dated

____/2018, effective from 01.07.2018.

SRO 962(I)/2015, dated 30.09.2015 is being rescinded to provide for standard rate of sales tax on

import and supplies of furnace oil. To be enforced through SRO ____(I)/2018, dated ____/2018,

effective from 01.07.2018.

Input tax adjustment is being allowed on packing materials to five export oriented sectors covered

under SRO 1125(I)/2011, dated 31.12.2011. To be enforced through SRO ____(I)/2018, dated

____/2018, effective from 01.07.2018.

The rate of sales tax on import and supply of finished articles of leather and textile sector is being

increased to 9%. However, all those branded outlets which will be integrated through electronic

fiscal devices with FBR online system shall be charged sales tax @6%. To be enforced through

SRO ____(I)/2018, dated ____/2018, effective from 01.07.2018

Scope of services under Islamabad Capital Territory (Tax on Services) Ordinance, 2001 is being

increased owing to the fact that services which are chargeable to sales tax in provinces are not

chargeable to sales tax in Islamabad Capital Territory (Tax on Services) Ordinance, 2001. To be

enforced through amendment SRO ____(I)/2018, dated 01.07.2018, effective from 01.07.2018

CUSTOMS ACT The budgetary measures proposed in the Customs Act are as under;

Import of duty free paper weighing 60 g/m2 is allowed besides extending this facility to Nashir-e-

Quran registered with the government.

CD on raw materials / inputs (104 PCTs) withdrawn and (28 PCTs) reduced.

Reduction of CD on Multi-ply and Aluminum foil from 20% to 18% for Liquid Food Packaging

Industry.

Reduction of CD on finished rooms (Pre-fabricated structures) from 20% to 10% for setting up of

new hotels/motels.

mailto:@6%25.

BUDGET HIGHLIGHTS

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%.

CD on input materials i.e, 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 from 20% to 10%.

CD on specified equipment used in cinema industry reduced to 3%.

Withdrawal of 11% CD on acrylic tow.

Exemption of 3% CD on Micro Feeder Equipment used for food fortification.

Exemption of 5% CD on Tasigna (an anti-cancer medicines).

Reduction of CD on Acetic Acid from 20% to 16%.

Exemption of 16% CD on charging stations for electric vehicles.

Reduction of CD on plasters from 16% to 11%.

Reduction of CD on film of ethylene from 20% to 16% for Liquid Food Packaging Industry.

Reduction of CD on Carbon Black (rubber grade) from 20% to 16%.

Reduction of concessionary rate of CD from 10% to 5% on silicon electrical steel sheets for

manufacturing transformers.

Exemption of 5% CD on specified LED parts and components for manufacturers of LED lights

and Levy of 2% RD on LED bulb & Tubes, Energy Saving Bulbs & Tube to protect local

industry.

Exemption of 3% CD on tanned hides in wet state.

Withdrawal of CD on two catalysts for use by PTA industry i.e. Hydrogen Bromide (11%) and

Palladium-on-carbon (3%)

Reduction of CD from 16% to 8% on Coils of aluminium alloys used in manufacturing of

Aluminium beverage cans

Reduction of CD on import of coal, across the Board, from 5% to 3%.

Reduction of CD on import of Fire fighting vehicles from 30% to 10%

Concessionary import of vintage or classic cars and jeeps at fix duty/taxes of US$ 5,000.

BUDGET HIGHLIGHTS

Reduction of CD from 50% to 25% and Exemption of 15% RD on Electric Vehicles and CD on

kits of electric vehicle reduced from 50% to 10%.

Import of solar panels were exempted from the condition of ‗local manufacturing‘ till 30th June

2018 which is extended till 30th June, 2019.

Increase of CD on double-sided tape from 3% to 11%.

To protect domestic manufacturers, increase of CD on rickshaw tyres from 11% to 20%.

Increase of CD on Soya bean oil from Rs.9050/MT & Rs.10200/MT to Rs.12000/MT and Rs.

13,200/MT respectively.

Increase of CD on aluminum auto parts scrap from 30% to 35%.

Increase of CD on Di-octyl Terephthalate (DOTP) from 3% to 20%.

Reduction of CD from 16% to 11% and levy of 5% RD on Medium Density Fiber.

Reduction of CD on corrective glasses from 11% to 3%.

Reduction of CD on Lithium iron phosphate battery (LiFePO4) from 11% to 8%.

New PCT codes created for Radial tyres, CKD/SKD kits for home appliances, CKD / SKD

of Mobile Phone, Semi-automatic washing machines, Petrol Generating sets, Kerosene based

mineral oils, Relays, Fuses, Gear pumps and Turbo chargers for vehicles, Electric conductors,

Light fittings with fixed/fitted LED/SMD, , Refrigerated out door cabinet designed for insertion

of electric and electronic apparatus, Digital/Processed Printing Inks, DOTP

(Di-Octyl Terephthalate) and Pigments and preparations based thereon.

Levy of 30% RD on export of waste & scrap of copper

Review of RD on non-essential and luxury items

10% RD levied on CKD/SKD kits of specified Home Appliance

Levy of RD @ Rs.175/set on CKD/SKD kits of mobile phone

Increase of additional customs duty from 1% to 2%

BUDGET HIGHLIGHTS

INCOME TAX The highlights of proposed amendments in the income tax law are as under;

The threshold of taxable income would be enhanced from Rs.400,000/- to Rs.1,200,000/-. with

effect from 1st July, 2018 and 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/- upto Rs.800,000/-and another

nominal income tax slab of Rs.2000/- for persons earning income exceeding Rs.800,000/- upto

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

upto Tax Year 2023.

The highest tax rate for AOP‘s has been reduced from 35% to 30% and the existing seven slabs

have been reduced to six slabs-

For the real estate sector following measures have been proposed:

Property transactions shall be recorded at the value declared by the buyer and the seller.

Property rates notified by FBR and DC rates are to be abolished.

At the Federal level , a one percent adjustable advance tax from the purchaser on the

declared value shall be collected and this tax shall replace the existing withholding tax on

sellers and purchasers of property.

Non-filers shall not be permitted to purchase property having declared value exceeding

four million rupees.

In order to deter under-declaration and consequent loss of revenue, FBR shall have the

right to purchase any property within six months of registration by paying a certain

amount over and above the declared value which may be 100 percent in the fiscal year

2018-19, 75 percent in the fiscal year 2019-20 and 50 percent in the fiscal year 2020-21

and thereafter.

In order to implement the above measures, enabling provisions shall be incorporated in

the Income Tax Ordinance, 2001. Detailed procedure(s) and the date of coming into force

of the above measures shall be notified later.

The rate of super tax under section 4B of the Income Tax Ordinance, 2001 is 4% for banking

companies and 3% for persons other than banking companies having income of Rs.500 Million

and above. 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.

Presently under section 5A of the Income Tax Ordinance, 2001 public companies are obliged to

distribute at least 40% of their after tax profits through cash or issuance of bonus shares within

six months of the end of the financial year, failing which such companies are subjected to tax @

7.5% of their accounting profit (before tax). Now the condition of distributing 40% of after tax

profits is being reduced to 20% and the applicable tax rate on accounting profit in case of failure

to distribute such dividend is being reduced from 7.5% to 5%.

Tax credit under section 65B is available to companies for the purpose of extension, expansion,

balancing, modernization and replacement of plant & machinery at the rate of 10% of the amount

BUDGET HIGHLIGHTS

invested. Further, tax credit under section 65D is available to companies setting up a new

industrial undertaking for a period of five years. Tax credit under section 65E is available to

companies for the purchase and installation of plant & machinery through at least 70% new

equity. The above tax credits can be availed by companies making investments upto 30.6.2019.

Such tax credits are being extended for two more years upto 30th June, 2021.

The concept of alternative dispute resolution was introduced to provide an avenue for the

expeditious settlement of disputes between FBR and taxpayers and to reduce the high pendency

of cases at various appellate forums. Presently, the recommendation of the Alternative Dispute

resolution committee is not binding upon the taxpayer or FBR, therefore it has not been effective

in mitigating the hardship of taxpayers who are still compelled to go through a protracted

litigation process. Now it is being amended to make the mechanism of 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.

Presently, a person is automatically selected for audit under section 214D of the Ordinance if

return of income is filed after the due date specified under the law or after the extended time

allowed by the Board or the Commissioner. Section 214D relating to automatic selection for audit

is being omitted. Simultaneously, a penalty has been introduced whereby late filers of income tax

returns shall not be entitled to have their names placed on the active taxpayers list nor will such

late filers be entitled to claim brought forward losses for the tax year for which return is filed late.

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 facilitate taxpayers who have been subjected to audit repeatedly the powers of

a Commissioner to select a case for audit under section 177 of the Ordinance have been curtailed

to once in three years except with the prior approval of the Board in exceptional circumstances.

Under section 236P of the 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.

Presently, the receipt of bonus shares is included in the definition of income and withholding tax

under section 236M and 236N of the Income Tax Ordinance, 2001 is charged @ 5% on the

issuance of bonus shares to shareholders. Now the withholding tax on issuance of bonus shares

has been withdrawn and receipt of bonus shares has been ousted from the definition of income

under the Income Tax Ordinance, 2001.

BUDGET HIGHLIGHTS

A resident person, other than a company, is allowed a tax credit for acquiring new shares offered

by a public company listed on the stock exchange, sukuks offered by a listed company or upon

payment of life insurance premium to a life insurance company. Such tax credit is limited to the

extent of 20% of taxable income for the year, total cost of acquiring shares/sukuks or 1.5 Million

Rupees whichever is less. Now the limit of 1.5 Million Rupees has been increased to 2 Million

Rupees.

Presently under section 140 of the Income Tax Ordinance, 2001 taxpayers have the option of

preventing recovery of tax through attachment of bank accounts etc, if 25% of the tax due is paid

by the taxpayer during the pendency of appeal before the Commissioner (Appeals). Now the

minimum threshold of payment of tax to preclude recovery of tax during pendency of first appeal

has been reduced from 25% to 10% of the tax payable.

At present tax is deducted by withholding agents under section 153 of the Income Tax Ordinance,

2001 if payments for services exceeds Rs.10,000 and if payments for supply of goods exceeds

Rs.25,000/-. 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.

Individuals and AOP‘s become liable to act as withholding agents under section 153 of the

Income Tax Ordinance, 2001 if their annual turnover exceeds Rs.50 Million per annum. Such

persons are not prepared to discharge their obligations as a withholding tax agent immediately

upon crossing the 50 Million threshold for turnover during the currency of a tax year. Now the

persons crossing the threshold of turnover of Rs. 50 Million during a Tax Year shall be obliged to

discharge their obligations as a withholding tax agent in the succeeding tax year.

The existing penalty, under section 182 of the Ordinance for failure to file withholding tax

statements within the due date is Rs. 2,500 per day subject to a minimum penalty of Rs.10,000/-.

Now the withholding tax agents who have deposited tax within the due date but have failed to file

their withholding tax statements, the minimum penalty for failure to file such withholding tax

statements has been reduced from Rs.10,000/- to Rs.5000/- and only the proposed minimum

penalty of Rs.5000/- may be imposed if withholding tax statement is filed within three months of

the due date. However existing penalty of Rs. 2,500/- per day (from the due date of filing of

withholding tax statement) would apply if the statement is filed after a period of three months

from the due date.

Companies qualifying as large trading houses upon fulfillment of certain conditions specified in

clause (57) of Part-IV of the Second Schedule have the facility of reduced rate of minimum tax @

0.5% up to the tax Year 2019. The facility of reduced rate of minimum tax is being extended for

another two years i.e upto 30th June, 2021.

Persons conducting various businesses/transactions within the territory of Pakistan and filing their

income tax returns in the territories of AJ&K and Gilgit–Baltistan are subjected to higher

withholding tax rates applicable to non-filers as their names do not appear in the Active

Taxpayers list being maintained by FBR. Now the persons appearing on the Active Taxpayers

BUDGET HIGHLIGHTS

List maintained by the Inland Revenue Department in AJ&K and the Gilgit–Baltistan Council

Board of Revenue shall be treated as filers under the Income Tax Ordinance, 2001.

Advance tax under section 236K of the Ordinance is collected from the purchaser of property at

the time of transfer of such property. In cases where payments for purchase of property are made

in installments the purchaser has to bear the entire burden of collection of such advance tax at the

time of transfer or property. Now advance tax on purchase of property shall be collected in

piecemeal with each installment.

Tax is required to be deducted at the rate of 12.5% from a filer upon payment of dividend by a

REIT Scheme. In order to promote REIT schemes in Pakistan the rate of withholding tax on

payment of dividend by a rental REIT Scheme to a filer has been reduced from 12.5% to 7.5%.

Income derived from mutual funds is exempt from income tax if not less than ninety percent of

the accounting income of that year is distributed amongst shareholders. However, mutual funds

are subjected to withholding tax @ 5% on issuance of bonus shares. Such funds have now been

exempted from withholding tax on issuance of bonus shares.

Non-profit organizations, trusts and welfare institutions are entitled to 100% tax credit on their

income from certain specified heads under section 100C of the Income Tax Ordinance, 2001. One

of the incomes that qualifies for credit under section 100C is profit on debt from scheduled banks.

Resultantly, non-profit organizations are incentivized to keep their investments in scheduled

banks instead of opting for microfinance banks. In order to promote microfinance banks, profit on

debt derived by non-profit organizations from micro-finance banks shall also qualify as income

eligible for 100% credit under section 100C of the Income Tax Ordinance, 2001.

The tax collected by the Stock Exchange from its members @ 0.02% on the purchase and sale of

shares under section 233A of the Ordinance is currently treated as final tax. The tax on

commission earned by members of the stock exchange has now been made adjustable.

In order to encourage and promote film-making in Pakistan, 50% tax rebate shall be allowed to

foreign film makers making films in Pakistan and a 50% tax reduction in income tax liability

shall be allowed to companies deriving income from film making for a period of five years.

Various allowances being given to Armed Forces Personnel i.e 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.

Pakistan Mortgage Refinance Company Limited (PMRC) is a key initiative of the State Bank of

Pakistan and has been established for promoting affordable housing finance for the middle and

low income groups. It aims at expansion of the primary residential mortgage market by issuing

bonds and sukuks to raise funds. In order to encourage this initiative aimed towards provision of

affordable housing finance for middle and low income groups the income of Pakistan Mortgage

Refinance Company is being exempted under clause (66) of Part-I of the Second Schedule to the

Income Tax Ordinance, 2001. Exemption has also been accorded to income and gains derived by

investors from PMRC bonds issued to refinance the residential mortgage market. Exemption has

also been accorded to capital gains tax on the resale of PMRC bonds by the investors to

encourage its marketing/increase its attractiveness

BUDGET HIGHLIGHTS

Tax collected @ 5.5% (from companies) and 6% (from persons other than companies) on coal

imported by commercial importers/large trading houses constitutes final tax. In order to reduce

the direct cost of manufacturing businesses utilizing coal, the tax rate on import of coal by

manufacturers as well as commercial importers has been reduced to 4% for filers and 6% for non-

filers.

Presently unabsorbed depreciation losses can be carried forward indefinitely until they are

completely absorbed /adjusted against business income. This tax regime leads to payment of less

or nil tax liability for many years. The set off of brought forward depreciation losses have now

been limited to the extent of fifty per cent of the business income for a Tax Year except in

instances where the taxable income is upto Rs. 10 million. Hence taxpayers will still be entitled to

carry forward unabsorbed depreciation losses indefinitely, however, such carry forward will be

staggered over a greater number of years.

Banks issuing credit /debit cards will 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.

At present the tax collected under section 148 of the Income Tax Ordinance, 2001 from

commercial importers at the import stage is final tax, therefore, commercial importers are not

required compute their taxable income. This leads to under-invoicing, domestic transfer pricing

and evasion of tax. Tax collected from commercial importers at the import stage shall now

constitute minimum tax instead of final tax, therefore, commercial importers shall be required to

file their normal returns of income depicting their taxable income(s).

Withholding tax rates have been increased for non-filers in the case of supplies/sale of goods and

contracts under section 153 of the Ordinance. 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.

Marriage halls, banquet halls, commercial lawns etc are mandated to collect 5% of the bill in

respect of functions under section 236D of the Ordinance. Marriage halls are now 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.

No gain or loss is taken to arise on the disposal of an asset by reason of a gift of the asset under

sections 37 and 79 of the Ordinance i.e. it is treated as a non-recognition event, therefore, no

liability for capital gains tax arises. 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.

Tax deducted on payments to resident persons for rendering or providing of services under

section 153(1)(b) of the Ordinance constitutes minimum tax whereas tax deducted on similar

payments being made to permanent establishments of non-resident persons does not constitute

minimum tax. Now the tax deductible on services rendered /provided by permanent

establishments of non-resident persons shall also be treated as minimum tax.

BUDGET HIGHLIGHTS

At present, 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.

Cognizance of concealed income earned/arising in Pakistan can be taken within five years from

the end of the financial year in which the return of income is filed in terms of the time limit

delineated under section 122 of the Income Tax Ordinance, 2001. An amendment has been made

in section 111(2) of the Income Tax Ordinance, 2001 whereby concealed income earned/arising

from outside Pakistan may be taxed in the tax year prior to the year of discovery of such

unexplained income or asset.

Prior to the promulgation of the Income Tax (Amendment) Ordinance, 2008 a person was not

required to explain the nature as well as the source of any amount of foreign exchange which is

remitted from outside Pakistan through normal banking channels and subsequently encashed into

Pakistani Rupees by any scheduled bank . An amendment has been made in section 111(4) of the

Ordinance whereby persons would be required to explain the source of investment if the amount

of foreign remittances in a year exceeds Rs.10 million.

A new section 116A has been inserted whereby it has been made mandatory for resident

individuals to furnish a foreign income and assets statement alongwith return of income if such

individual earns foreign income equivalent to or exceeding USD 10,000/- or is the owner of

foreign assets having a value equivalent to or exceeding USD 100,000-. The foreign income and

assets statement shall contain particulars/details regarding total foreign assets and liabilities (as on

the last day of the Tax Year) as well as details of foreign assets transferred to another person

during the tax year and consideration received in lieu of such transfer. Complete particulars of

foreign income earned and the expenditures incurred for earning such income shall also be

furnished through this statement.

If an individual meets the conditions stipulated in section 116A of the Income Tax

Ordinance,2001 with respect to earning of foreign income or ownership of foreign assets, such

individual shall mandatorily be required to file return of Income Tax alongwith foreign income

and assets statement in terms of section 114(2)(f) of the Ordinance.

Through the Income Tax (Amendment) Ordinance, 2018 a proviso has been added in sub-section

(5) of section 114 whereby the time limit for issuance of a notice calling for return shall not apply

if the Commissioner is satisfied on the basis of reasons to be recorded in writing that a person

who failed to furnish his return has foreign income or owns foreign assets.

A person who fails to furnish Foreign Income and Assets statement within the due date shall also

,be subject to levy of penalty of 2% of the foreign income or value of the foreign assets for each

year of default under section 182 of the Income Tax Ordinance, 2001.

Non-filers shall be prohibited from purchasing property having declared value exceeding Rs.4

million.

BUDGET HIGHLIGHTS

Non-filers shall not be permitted to purchase new motor vehicles manufactured in Pakistan or

new imported vehicles.

Notice to furnish a return of income under section 114(4) of the Income Tax Ordinance, 2001 can

be issued for one or more of the last ten completed tax years to a person who has not filed return

of income for any of the last five tax years. However, presently best judgement assessment under

section 121 of the Ordinance can only be made for the last five years .Necessary amendment has

been made whereby best judgement assessment under section 121, in the aforementioned instance

can be made within two years from the end of the tax year in which notice to file return of income

has been issued.

Necessary amendment has been made in section 218 of the Income Tax Ordinance, 2001 to grant

legal sanctity to service of notices through electronic mode.

Individuals and AOP‘s having turnover of Rs. 50 Million or above in a Tax Year are obliged to

act as withholding agents whilst making payments for goods, services and contracts under section

153 of the Income Tax Ordinance,2001. Builders and Developers have now specifically been

included in the ambit of withholding tax agents for the purpose of section 153 of the Ordinance

regardless of the quantum of their turnover.

In cases where a company is a member of an association of persons, the company has to file a

separate return in respect of its share of income in the AOP. However, tax is deducted in the name

of the AOP and the company is unable to take credit of tax deducted against income declared by

the company. Amendment has been made to enable companies to take credit of tax deducted in

the name of the AOP in the same proportion as the share of the company in the profits of the

AOP.

Capital gains on sale of immovable property by a dependent of a Shaheed belonging to Pakistan

Armed Forces as well as dependent of a person who dies in service of Pakistan Armed Forces or

Federal or Provincial Government is taxed at the rate of 0% irrespective of the holding period.

However, zero percent rate is applicable to persons mentioned in sub-section (4) of section 236C

which was omitted through the Presidential Order dated 31.08.2016. Necessary amendment has

been made to ensure grant of exemption to dependents of the above persons as originally

intended.

At present, a taxpayer can file a lower estimate of advance tax without furnishing any basis of

such lower estimate. Provisions of law have been streamlined so that a lower estimate is

accompanied by an estimate of the turnover of the remaining quarters, reasons for any projected

decline in turnover, documentary evidence of any claim of expenses resulting in lowering of

estimate and computation of estimated taxable income. In case the estimate is not supported with

adequate basis, the Commissioner shall have the mandate to reject the lower estimate and the

taxpayer shall be required to pay advance tax on the basis of his turnover for the quarter.

In order to streamline computation of advance tax where the taxpayer has not paid advance tax

and his turnover for the quarter is not known, turnover for the quarter shall be taken to be 10%

higher than one-fourth of the turnover for the year.

BUDGET HIGHLIGHTS

Banking companies are required to pay advance tax in 12 monthly installments but lower estimate

is not allowable as per the Seventh Schedule. The existing provision of law has been clarified by

technical amendments in the Seventh Schedule. Furthermore, banks are required to pay advance

tax in 12 ―equal‖ installments , however, banks interpret the term ―equal‖ to imply that the

amount of advance tax paid in the first month shall also be paid in all subsequent months.An

enabling provision has been provided in law for collection of advance tax from banks on the basis

of their actual income.

As per section 104, a foreign-source loss of a person shall be carried forward and adjusted only

against foreign income of the person. Resident banks having foreign branches adjust their foreign-

source loss against their Pakistan-source income. Banks are allowed provisions for advances and

off balance sheet items but where such deductions in respect of foreign branches results in loss,

such loss can only be adjusted against foreign source income. Necessary amendment in line with

section 104 has been introduced in Rule 1(c) of the Seventh Schedule to the Ordinance so that

provisions for advances and off balance sheet items of foreign branches of resident banks cannot

be claimed as a deduction against their income.

During the last three to four years Pakistan has become signatory to various international tax

agreements. The primary purpose of these agreements is to prevent profit shifting from Pakistan

and safeguard our tax base. Through these agreements data would be exchanged between various

tax jurisdictions. International tax organizations such as OECD, UN and CATA would facilitate

jurisdictions in plugging anti-abuse measures in the domestic tax laws through their

recommendations. Obligations on part of the signatories to adopt these measures are commonly

known as BEPS Action Points (Base Erosion and Profit Shifting). Out of a total of 15 actions

proposed by OECD, five have already been implemented by Pakistan. Four actions are required

to be implemented through administrative measures and assistance by international tax auditors in

audit. The following six anti-abuse provisions shall now be implemented:-

Splitting of contracts (Avoiding tax by splitting the composite contracts into number of

contracts).

Offshore indirect transfers (Taxation of gain arising on transfer of assets located in

Pakistan and transferred to non-residents outside Pakistan through sale of shares

indirectly).

Taxation of Offshore digital services (Availing current loopholes in tax legislation to

avoid payment of tax in Pakistan by non-residents whereas residents are taxable).

Abuse of treaty provisions (Designing a tax avoidance scheme by introducing a new

entity with no economic substance in jurisdictions with which Pakistan has favourable

treaties).

Re-characterization of income (The provision of law is already in the Ordinance and is to

be streamlined in accordance with international best practices to plug tax avoidance

loopholes).

Controlled Foreign Companies Rules (Taxing passive income parked outside Pakistan by

domestic multinational companies for tax deferral).

AMENDMENTS IN SALES TAX LAWS


Through Finance Bill, 2018, following amendments have been proposed in the Sales Tax Act,

1990.

Scope of tax Section 3 (1A) Amendment

It is amended to enhance the rate of further tax to 3% from 2%. Further tax is to be charged over

& above of the standard sales tax rate. Further tax is to be charged to the unregistered persons

except some certain exclusions as per SRO. Initially, further tax was levied vide Finance Act

2013 at the rate of 1 %. Later it was enhanced through Finance Act 2015 to 2 %. Through this

amendment Government intends to enhance its revenue by further burdening the unregistered

persons.

Powers of Board Section, 3(2)(b), 3(3A), 3(5) 4, 7, 7A, 8, 60, 65 & 71, Amendment

Powers have been vested to ―Board with the approval of Minister in Charge of the Federal

Government‖ to levy, collection, exemption/zero rating of certain goods et. through Finance Act,

2017. Previously these powers were vested to the ―Federal Government‖. Now, it is amended to

again shift the powers to the ―Federal Government‖ in the following section.

Section 3, Sub-section 2(b): Tax to be paid at such higher or lower rate.

Section 3, Sub-section (3A): To specify the goods in respect of which the liability to pay

tax shall be of the person receiving the supply.

Section 3, Sub-section (5): To levy & collect tax at such extra rate or amount.

Section 4(C): Power to specify the zero-rated goods.

Section 7, subsection (3) & (4): Power to allow input tax against output tax to registered

persons or class of persons.

Section 7A, subsection (1) & (2): power to levy & collection of tax on specified goods on

value addition.

Section 8, sub-section (1) (b): Power to specify the goods or services where input tax

credit is not allowed.

Section 60: Power to authorize import of certain goods without payment of tax.

Section 65: Power to grant exemption of tax not levied or short levied as a result of

general practice.

Section 71: Power to issue special procedure for scope and payment of tax, registration,

book keeping and invoicing requirements and returns etc.

Tax credit not allowed Section 8(m), New insertion

Section 8 specifies the certain goods or services on which sales tax paid is not allowed as input

tax. Now it is amended to include import of scrap of compressors falling under PCT heading

7204.4940 in the list of inadmissible items as per section 8.


Assessment giving effect to an order Section 11B, New Insertion

New section is inserted, empowering the Commissioner or the Officer Inland Revenue to issue

order of assessment of tax to any registered person, giving effect to any finding or direction in

order made by the Commissioner Appeals, Appellate Tribunal, High Court or Supreme Court.

Furthermore, if an order is made by Appellate Tribunal, High Court or Supreme Court where an

order of assessment is set aside wholly or partially, the Commissioner, the Commissioner

(Appeals) or Officer of Inland Revenue is directed to pass new order of assessment within one

year of the financial year in which the order is served.

Exemption Section 13, 2(a), Amendment

This section amended to give the powers to the Board pursuant to the approval of the Economic

Coordination Committee of Cabinet for allowing exemption on supply of goods or import of

goods specified in the sixth schedule, subject to certain circumstances exists to take immediate

action. Currently such approval is vested with the Board with the approval of the Federal

Minister-in-charge pursuant to the approval of the Economic Coordination Committee of Cabinet

Access to record, documents, etc. Section 25, Amendment

It is amended that audit under section 25 can be conducted only once in every three years. This is

a good relief measure for the taxpayer as it has been practice that a taxpayer is audited for the

consecutive years. On the other hand; although it seems that intent of the legislator is to audit for

only one year in every three years. But, the Officers of IR may take it as audit of more than one

years in every three years. Therefore, this clause needs to be further amended that ―audit under

this section shall be conducted only once for one year in every three years‖ for more clarity & to

avoid litigation & latter clarifications by Board or superior courts.

Directorate General (Intelligence and Investigation), Inland Revenue

Section 30A, Substituted

Section 30A has been substituted to enhance the scope & to give the legal cover to the actions of

Director General (Intelligence and Investigation), Inland Revenue.

Default Surcharge Section 34, Amendment

It is amended to fix the rate of default surcharge at the rate of twelve plus three percent per

annum. Currently the rate of default surcharge is KIBOR plus three percent per annum.

Although the amended rate is quite high. However, it will bring simplicity for the taxpayer to

work out the value of default surcharge in comparison of the current method of working on

KIBOR rate of daily basis.


Posting of Inland Revenue Officer Section 40B, Amendment

It is amended to restrict the powers only to the Board who may appoint any Officer, IR to the

premises of registered person or class of such persons to monitor production, sale of taxable

goods and the stock position.

Previously, Chief Commissioner have also such powers. It is a good relief measure as powers

granted through this section have been misused by the Chief Commissioner in number of cases.

Alternate Dispute Resolution Section 47A, Substituted

It is amended to revamp whole structure of ADRC. The option of seeking remedy in ADRC shall

only be available if the applicant withdraws his appeal from the appellate authorities. The

committee will be required to decide the matter within 120 days failing which the appeal will be

reinstated. Further, the recommendations of ADRC will now consequently be binding on both

the parties i.e. aggrieved person & the Board.

Recovery of arrears of tax Section 48, Amendment

Through Finance Act, 2017; it has been provided that the Commissioner IR shall not enforce for

recovery of sales tax amount against any order, if the appeal is filed before the Commissioner

(appeals) IR under section 45B & appeal is not decided, subject to the condition that twenty five

percent (25%) of the amount of tax due has been paid by the taxpayer. Now, the condition of

payment of 25% amount of tax has been reduced to 10%.

This is a good relief measure to further reduce the tax amount for automatic stay against the

recovery when appeal is pending before Commissioner (appeals). It will reduce some hardships

of the taxpayers.

Validation Section 74A, Amendment

It is amended to extend the legal cover to un-rescinded notifications under Sales Tax Act, 1990

upto July 1, 2018. Further, it is amended to confer powers of Directorate General (Intelligence

and Investigation) and all notices and actions before commencement of Finance Act 2018 under

the Sales Tax Act, 1990.


ZERO RATED GOODS Fifth Schedule

Following stationery items newly inserted in serial no. 12 after clause (xix) in The Fifth Schedule which

were previously exempted in The Sixth Schedule through serial nos.86 to 90 and 96 to 98.

Clauses No. Description Heading Nos.

(xx) Colors in sets PCT heading 3213.1000

(xxi) Writing, drawing and marking inks

PCT heading. 3215.9010 and

3215.9090

(xxii) Erasers PCT heading 4016.9210 and

4016.9290

(xxiii) Exercise books PCT heading 4820.2000

(xxiv) Pencil sharpeners PCT heading 8214.1000

(xxv) Geometry boxes PCT heading 9017.2000

(xxvi) Pens, ball pens, markers and porous tipped pens PCT heading 96.08

(xxvii) Pencils including color pencils PCT heading 96.09

EXEMPTION OF GOODS Sixth Schedule

Exemption granted on following some serials which are newly inserted after serial no. 136.

Serial

no.

Description Heading Nos.

137. Paper weighing 60 g/m2 for printing of Holy Quran imported

by Federal or Provincial Governments and Nashiran-e-Quran

as per quota determined by IOCO

4802.5510

138. Fish Feed Respective heading

139. Fans for dairy farms 8414.5990

140. Bovine semen 0511.1000

141. Preparations for making animal feed 2309.9000

142. Promotional and advertising material including technical

literature, pamphlets, brochures and other give-aways of no

commercial value, distributed free of cost by the exhibitors

9920(3)

143. (i) Hearing aids (all types and kinds) (ii) Hearing assessment

equipment;

(a) Audiometers

(b) Tympanometer

(c) ABR

(d) Oto Acoustic Omission

9937

144. Liquefied Natural Gas imported by fertilizer manufacturers for

use as feed stock 2711.1100.;

145. Plant, machinery, equipment including dumpers and special

purpose motor vehicles, if not manufactured locally, imported

by M/s China State Construction Engineering Corporation

Limited (M/s CSCECL) for the construction of Karachi–

Respective heading


Peshawar Motorway (Sukkur – Multan Section) and M/s China

Communication Construction Company (M/s CCCC) for the

construction of Karakorum Highway (KKH) Phase-II (Thakot–

Havellian Section) subject to the following conditions:

(i) that the exemption under this Notification shall only

be available to contractors named above;

(ii) that the equipment and construction machinery

imported under this Notification shall only be used for

the construction of the respective allocated projects;

(iii) that the importer shall furnish an indemnity bond, in

the prescribed manner and format as set out in Annex-

A, at the time of import to the extent of customs-

duties exempted under this Notification on

consignment to consignment basis;

(iv) that the Ministry of Communications shall certify in

the prescribed manner and format as set out in Annex-

B that the imported equipment and construction

machinery are bonafide requirement for

construction of Sukkur – Multan Section (392.0 km) of

Karachi – Peshawar Motorway or for the construction

of Karakorum Highway(KKH) Phase-II – Thakot to

Havellian Section (118.057 km) as the case may be;

(v) for the clearance of imported goods through Pakistan

Customs Computerized System the authorized officer

of the Ministry shall furnish all relevant information,

as set out in Annex-B, online against a specific user ID

and password obtained under section 155D of the

Customs Act, 1969 (IV of 1969). In Collectorates or

Customs stations where the Pakistan Customs

Computerized System is not operational, the Director

Reforms and Automation or any other person

authorized by the Collector in this behalf shall enter

the requisite information in the Pakistan Customs

Computerized System on daily basis, whereas entry of

the data obtained from the customs stations which

have not yet been computerized shall be made on

weekly basis;

(vi) that the equipment and construction

machinery, imported under this Notification, shall not

be re-exported, sold or otherwise disposed of without

prior approval of the FBR. In case goods are sold or

otherwise disposed of with prior approval of FBR the


same shall be subject to payment of duties as may be

prescribed by the FBR;

(vii) in case the equipment and construction

machinery, imported under this Notification, is sold or

otherwise disposed of without prior approval of the

FBR in terms of para (vi) above, the same shall be

subject to payment of statutory rates of customs duties

as were applicable at the time of import;

(viii) notwithstanding the condition at para (vi) and

(vii) above, equipment and construction

machinery, imported under this Notification, may be

surrendered at any time to the Collector of Customs

having jurisdiction, without payment of any customs-

duties, for further disposal as may be prescribed by

the FBR;

(ix) the indemnity bond submitted in terms of para (iii)

above by the importer shall be discharged on the

fulfillment of conditions stipulated at para (vi) or

(vii) or (viii) above, as the case may be; and

(x) that violation of any of the above mentioned

conditions shall render the goods liable to payable of

statutory rate of customs duties leviable on the date of

clearance of goods in addition to any other penal

action under relevant provisions of the law.

146. Equipment, whether or not locally manufactured, imported by

M/s China Railway Corporation to be furnished and installed in

Lahore Orange Line Metro Train Project subject to the

following conditions:

(a) that the equipment imported under this Notification

shall only be used in the aforesaid Project;

(b) that the importer shall furnish an indemnity bond, in the

prescribed manner and format as set out in Annex-C to

this Notification, at the time of import to the extent of

sales tax exempted under this Notification on

consignment to consignment basis;

(c) that the Punjab Mass Transit Authority, established

under the Punjab Mass Transit Authority Act, 2015

(ACT XXXIII of 2015), hereinafter referred as the

Regulatory Authority, shall certify in the prescribed

manner and format as set out in Annex-D to this

Notification that the imported equipment is bona fide

Respective heading


requirement of the Project under the Contract No.

PMA-CR- NORINCO-OL, dated 20.04.2015, hereafter

referred as the contract, signed between the Regulatory

Authority and CR-NORINCO;

(d) in the event a dispute arises whether any item is entitled

to exemption under this Notification, the item shall be

immediately released by the Customs Department

against a corporate guarantee, valid for a period of six

months, submitted by the importer. A certificate from

the Regulatory Authority duly verified by the Transport

and Communication Section of the Ministry of

Planning, Development and Reform, that the item

is covered under this Notification shall be given due

consideration by the Customs Department

towards finally resolving the dispute. Disputes

regarding the local manufacturing only shall be

resolved through the Engineering Development Board

of the Federal Government;

(e) for the clearance of imported equipment through

Pakistan Customs Computerized System the authorized

officer of the Regulatory Authority shall furnish all

relevant information, as set out in Annex-D to this

Notification, online against a specific user ID and

password obtained under section 155D of the Customs

Act, 1969 (IV of 1969). In Collectorates or Customs

stations where the Pakistan Customs Computerized

System is not operational, the Director Reforms and

Automation or any other person authorized by the

Collector in this behalf shall enter the requisite

information in the Pakistan Customs Computerized

System on daily basis, whereas entry of the data

obtained from the customs stations which have not

yet been computerized shall be made on weekly basis;

(f) that the equipment, imported under this Notification,

shall not be re-exported, sold or otherwise disposed of

without prior approval of the Federal Board of Revenue

(FBR). In case goods are sold or otherwise disposed of

with prior approval of FBR the same shall be subject to

payment of sales tax as may be prescribed by the FBR;

(g) in case the equipment, imported under this Notification,

is sold or otherwise disposed of without prior approval

of the FBR in terms of condition (f), the same shall be

subject to payment of statutory rates of sales tax as

were applicable at the time of import;


(h) notwithstanding the condition (f) and (g), equipment

imported under this Notification may be surrendered at

any time to the Collector of Customs having

jurisdiction, without payment of any sales tax, for

further disposal as may be prescribed by the FBR;

(i) the indemnity bond submitted in terms of condition (b)

above shall stand discharged on submission of a

certificate from the Regulatory Authority to the effect

that the equipment has been installed or consumed in

the said Project. In case the equipment is not

consumed or installed in the project the indemnity bond

shall be discharged on fulfillment of conditions

stipulated at (f) or (g) or (h), as the case may be; and (j)

that violation of any of the above conditions shall

render the goods liable to payment of statutory rate of

sales tax leviable on the date of clearance of goods in

addition to any other penal action under relevant

provisions of the law.

Explanation. For the purpose of this provision, ―equipment‖

shall mean machinery, apparatus, materials and all things to be

provided under the contract for incorporation in the works

relating to Lahore Orange Line Metro Train Project.‖;

147. Goods supplied to German Development Agency (Deutsche

Gesellschaft für Internationale Zusammenarbeit) GIZ

Respective heading

148. Imported construction materials and goods imported by M/s

China State Construction Engineering Corporation Limited

(M/s CSCECL), whether or not locally manufactured, for

construction of Karachi-Peshawar Motorway (Sukkur-Multan

Section) subject to fulfillment of same conditions, limitations

and restrictions as are specified under S. No. 145 of this table,

provided that total incidence of exemptions of all duties and

taxes in respect of construction materials and goods imported

for the project shall not exceed ten thousand eight hundred

ninety-eight million rupees.

Respective heading‖;

After Table-1, some ―INDEMNITY BONDS‖ for exemption of leviable duties on importers are

newly added through following annexures:

Annex-A

This indemnity bond is available for those importers who will import the equipment and construction

Machinery for the purpose of;

i. Construction of Sukkur-Multan Section (392.0 km) of Karachi-Peshawar Motorway or

ii. For the construction of Karakorum Highway (KKH) Phase-II-Thakot to Havellian Section

(118.057 Km)


Annex-B

In this annex, importer will declare about the annex-A mentioned machinery and equipment that, this is

specifically for the commensuration with the project requirement and are bonafide requirement of the

project.

Annex-C

This indemnity bond is available for those importers who will import the equipment and construction

Machinery for the purpose of ―LAHORE ORANGE LINE METRO TRAIN PROJECT‖

Annex-D

In this annexure, importer will declare about the annex-C mentioned machinery and equipment that, this

is specifically for the commensuration with the project requirement and are bonafide requirement of the

project.

After omitting the serial number 16 in Table-3, following new serials are inserted to provide

exemptions subject to the conditions mentioned herein as follows:

Serial

No.

Description PCT

Heading

Conditions

17. Machinery, equipment, raw materials,

components and other capital goods for use in

building, fittings, repairing or refitting of ships,

boats or floating structures imported by Karachi

Shipyard and Engineering Works Limited.

Respective

Heading

Nil

18. The following parts for assembling and

manufacturing of personal computers and

laptops:

(i) Bare PCBs

(ii) Power Amplifier

(iii) Microprocessor/Controllers

(iv) Equipment for SMT Manufacturing

(v) Laptop batteries

(vi) Adopters

(vii) Cooling fans

(viii) Heat sink

(ix) Hard Disk SSD

(x) RAM/ROMS

(xi) System on

Chip/FPGA-IC

(xii) LCD / LED Screen

(xiii) Motherboards

(xiv) power supply

(xv) Optical Drives

(xvi) External Ports

(xvii) Network cards

8534.0000

8542.3300

85.42 8486.2000

8506.5000

8504.4020

8414.5190

7616.9920

8471.7020

8471.7060

and

8471.7090

85.42

8528.7211

8534.0000

84.73

8471.7040

8536.2090

8517.6990

If imported by manufacturers

and assemblers of computers

and laptops, registered

with and certified by

Engineering Development

Board in accordance with

quota determined by IOCO


(xviii) Graphic cards

(xix) wireless cards

(xx) micro phone

(xxi) Trackpad

8471.5000

8517.6970

8518.3000

8471.6020

19. Plant and machinery, except the items listed

under Chapter 87 of the Pakistan Customs

Tariff, imported for setting up of a Special

Economic Zone (SEZ) by zone developers and

for installation in that zone by zone enterprises,

on one time basis as prescribed in the SEZ Act,

2012 and rules thereunder subject to such

condition, limitations and restriction as a

Federal Board of Revenue may impose from

time to time.

9917(2) Nil‘‘;and

REDUCE RATED GOODS Eighth Schedule

(A) In the Eight Schedule table no. 1, following amendments are made:

PCT heading of serial no. 25 relating to agriculture tractors amended from 8701.9020 to 8701.9220 and

8701.9320

Sales tax rates on agriculture related machinery are reduced of serial nos. in The Eight Schedule:

Sr. No. Previous sales

tax rates

New sales tax

rates

26. 7% 5%

27. 7% 5% 28. 7% 5% 29. 7% 5% 30. 7% 5%

Serial numbers 33, 35, 36, 37, 38, 39, 40, 41, 42, 48 and 49 related to reduce rate of 5% and some fixed

rates on different types of fertilizers are being omitted and new Sr.No.52 inserted providing reduce rate

of 3% on all types of fertilizers..

At Sr.43 Sales tax rate on Natural Gas supplied to fertilizer plants reduced from 10% to 5%

After serial no. 49, following serials are newly inserted.

Sr.

No.

Description Heading Nos. of the First

Schedule to the Customs

Act, 1969 (IV of 1969)

Rate of

Sales

Tax

Condition

50. LNG 2711.1100 12% If imported by M/s

Pakistan State Oil

and M/s Pakistan

LNG Limited


51. RLNG 2711.2100 12% If supplied by M/s

Pakistan State Oil

and M/s Pakistan

LNG Limited to

M/s SNGPL

52. Fertilizers (all types) Respective heading 3% Nil

53. The following cinematographic

equipment imported during the

period commencing on the 1st day

of July, 2018 and ending on the

30th day of June, 2023.

5% Subject to same

limitations and

conditions as are

specified in Part- 1

of Fifth Schedule

to the Customs

Act, 1969 for

availing 3%

concessionary rate

of customs duty on

the import of these

equipment.‖;

(i) Projector 9007.2000

(ii) Parts and accessories for

projector

9007.9200

(iii) Other instruments and

apparatus for cinema

9032.8990

(iv) Screen 9010.6000

(v) Cinematographic parts and

accessories

9010.9000

(vi) 3D Glasses 9004.9000

(vii) Digital Loud Speakers 8518.2200

(viii) Digital Processor 8519.8190

(ix) Sub-woofer and Surround

Speakers

8518.2990

(x) Amplifiers 8518.5000

(xi) Audio rack and termination

board

7326.9090

8537.1090

(xii) Music Distribution

System

8519.8990

(xiii) Seats 9401.7100

(xiv) Recliners 9401.7900

(xv) Wall Panels and metal

profiles

7308.9090

(xvi) Step Lights 9405.4090

(xvii) Illuminated Signs 9405.6000

(xviii) Dry Walls 6809.1100

(xix) Ready Gips 3214.9090

54. lithium iron phosphate battery

(Li-Fe-PO4)

8506.5000 12% Nil‖; and

(B) In Table-2, following serial no. 9 newly inserted after serial no. 8:

S.

No.

Description PCT Heading Conditions

―9 Capital goods otherwise not exempted, for

Transmission Line Projects. Respective

heading The concession will be

available in respect of those

Transmission Line Projects

which are being executed

under Standard

Implementation Agreement

under Policy Framework for

Private Sector

Transmission Line Projects,

2015 and Projects

Specific Transmission

Services Agreement.

Provided that sales tax

charged under this

provision shall be

Non-adjustable and

non-refundable. ―.

Federal Excise Act

AMENDMENTS IN FEDERAL EXCISE ACT, 2005

Following amendments have been proposed in the Federal Excise Act, 2005 through the Finance

Bill, 2018.

Powers of Board Section 3(1c) & 3(4), Amendment

Similar to the other Laws, following sections have been amended; where by powers have been

again vested to the ―Federal Government‖ which have been vested to the ―Board with the

approval of Minister in Charge of the Federal Government‖ through Finance Act, 2017.

Section 3: amended in sub-section (1), clause (c) & sub-section (4): Duties specified in

the First Schedule to be levied.

Default Surcharge Section 8, Amendment

Like other laws; it is amended to fix the rate of default surcharge at the rate of twelve plus three

percent per annum. Currently the rate of default surcharge is KIBOR plus three percent per

annum. Although the amended rate is quite high. However, it will bring simplicity for the

taxpayer to work out the value of default surcharge in comparison of the current method of

working on KIBOR rate of daily basis.

Assessment giving effect to an order Section 14B, New insertion

New section is inserted, empowering the Commissioner or the Officer Inland Revenue to issue

an order of assessment of tax to any registered person, giving effect to any finding or direction in

order made by the Commissioner Appeals, Appellate Tribunal, High Court or Supreme Court.

Furthermore, if an order is made by Appellate Tribunal, High Court or Supreme Court where an

order of assessment is set aside wholly or partially, the Commissioner, the Commissioner

(Appeals) or Officer of Inland Revenue is directed to pass new order of assessment within one

year of the financial year in which the order is served.

Exemptions Section 16, Amendment This section amended to give the powers to the Board with the approval of the ―Federal

Government‖ pursuant to the approval of the Economic Coordination Committee of Cabinet for

allowing exemption from excise duties on supply, import or manufacture of goods, subject to

certain circumstances exists to take immediate action. Currently such approval is vested with the

Board with the approval of the Federal Minister-in-charge pursuant to the approval of the

Economic Coordination Committee of Cabinet.

Appointment of Federal excise officers and delegation of powers

Section 29, Amendment

Section 29 is amended to enhance the scope & to give the legal cover to the actions of Director

General (Intelligence and Investigation), Inland Revenue.

Federal Excise Act

Deposit, Pending Appeal, of Duty Demanded or Penalty Levied


Through Finance Act, 2017; it has been amended that the Commissioner IR shall not enforce for

recovery of any duty as demanded through any order, if the appeal is filed before the

Commissioner (appeals) IR under section 33 & appeal is not decided, subject to the condition

that twenty five percent (25%) of the amount of tax due has been paid by the taxpayer. Now, the

condition of payment of 25% amount of tax has been reduced to 10%.

This is a good relief measure to further reduce the tax amount for automatic stay against the

recovery when appeal is pending before Commissioner (appeals). It will reduce some hardships

of the taxpayers.

Alternate Dispute Resolution Section 38, Substituted It is amended to revamp whole structure of ADRC. The option of seeking remedy in ADRC shall

only be available if the applicant withdraws his appeal from the appellate authorities. The

committee will be required to decide the matter within 120 days failing which the appeal will be

reinstated. Further, the recommendations of ADRC will now consequently be binding on both

the parties i.e. aggrieved person & the Board.

Access to records and posting of excise staff, etc Section 45, Amendment It is amended to restrict the powers only to the Board who may appoint any excise staff to the

premises of registered person or class of such persons to monitor production, removal or sale of

goods and the stock position or the maintenance of records.

Currently, the Chief Commissioner have also such powers. It is a good relief measure as it has

been reported that powers granted through this section have been misused by the Chief

Commissioner in number of cases.

Audit Section 46, Amendment Likewise, the other statutes; it is amended that audit under section 46 can be conducted only

once in every three years. This is a good relief measure for the taxpayer as it has been practice

that a taxpayer is audited for the consecutive years. On the other hand; although it seems that

intent of the legislator is to audit for only one year in every three years. But, the Officers of IR

may take it as audit for more than one year in every three years. Therefore, this clause needs to

be further amended that ―audit under this section shall be conducted only once for one year in

every three years‖ for more clarity & to avoid litigation & latter clarifications by Board or

superior courts.

Validation Section 47C, Amendment

It is amended to amend Section 29 where the powers are conferred to Directorate General

Investigation. In consequence of the above amendment, the Finance bill has provided legal cover

to the actions of Directorate General (Intelligence and investigation) through amendment in

section47C.

Federal Excise Act

Excisable Goods & Rate of Duty 1st Schedule- Table I

Duty on Excisable Goods on has been amended as follows.. Sr.No. Description Existing Rates New Rates 2017

9

Locally produced cigarettes if their on-pack

printed retail price exceeds Rs. 4500/- per

1000 cigarettes.

Rs.3,740/- per 1000

cigarettes

Rs.3,964/- per 1000

cigarettes

10

10a


printed retail price does not exceed Rs.

2,925/- per 1000 cigarettes.


printed retail price does not exceed Rs.

2,925/- per 1000 cigarettes.

Rs.1,670/- per 1000

cigarettes

Rs. 800/- per thousand

cigarettes

Rs.1,770/- per 1000

cigarettes

Rs. 848/- per thousand

cigarettes

13 Portland cement, aluminous cement, slag

cement, super sulphate cement and similar

hydraulic cements, whether or not coloured or

in the form of clinkers.

One rupee and twenty

five paisa per kilogram

one rupee and fifty paisa

per kilogram

The increase of duty on Cigarettes at Sr.9, 10 and 10a shall be effective from 30th April, 2018 enforced

through SRO 561(I)/2018, dated 30.04.2018

Conditional Exemptions on Goods from Federal Excise 3rd

Schedule- Table I

In Table-1, after serial number 21 in first column and the entries relating thereto in second and third

columns, the following new serial numbers and the entries relating thereto shall be added, namely:–

22. Equipment, whether or not locally manufactured, imported by M/s China Railway Corporation to

be furnished and installed exclusively in Lahore Orange Line Metro Train Project.

23. Imported construction materials and goods imported by M/s China State Construction

Engineering Corporation Limited (M/s CSCECL), whether or not locally manufactured, for

construction of Karachi-Peshawar Motorway (Sukkur-Multan Section) has been exempted from

Federal Excise Duty subject to fulfillment of same conditions, limitations and restrictions as are

specified under S. No. 145 of Table-1 of Sixth Schedule to the Sales Tax Act, 1990, provided that

total incidence of exemptions of all duties and taxes in respect of construction materials and

goods imported for the project shall not exceed 10,898/- million rupees.

Conditional Exemptions on Services from Federal Excise 3rd

Schedule- Table II

in Table-2,after serial number 13 in column (1) and the entries relating thereto in columns (2) and (3), the

following new serial number and the entries relating thereto shall be added, namely:–

―14. Commission paid by State Bank of Pakistan and its

subsidiaries to National Bank of Pakistan or any other

banking company for handling banking services of

Federal Or Provincial Governments as State Bank of

Pakistan‘s agents

Respective heading‖.

Customs Act

AMENDMENTS IN THE CUSTOMS ACT, 1969

Following have been proposed to be amended in the Customs Act, 1969 through Finance Bill,

2018.

Definition Section 2, Clause (p) & (pa), Amendment

Following definitions have been amended/updated

Clause p “Pakistan customs-waters” means the waters extending into the sea to twenty-four nautical miles measured from the appropriate base line on the coast of Pakistan.

Clause pa” person” includes a local manufacture, a company, an association, a body of individuals whether incorporated or not.

Goods dutiable Section 18, Amendment

Powers have been vested to the ―Board with the approval of Minister in Charge of the Federal

Government‖ to levy custom duty as provided in the First Schedule through Finance Act, 2017.

Previously these powers were vested to the ―Federal Government‖. Now, it is amended to again

shift the powers to the ―Federal Government‖.

The above amendment shall have effect on the next day of assent given to the Act by the

President of the Islamic Republic of Pakistan

General power to exempt from customs-duties


This section amended to give the powers to the Board with the approval of the ―Federal

Government‖ pursuant to the approval of the Economic Coordination Committee of Cabinet for

allowing exemption from custom duties, subject to certain circumstances exists to take

immediate action. Currently such approval is vested with the Board with the approval of the

Federal Minister-in-charge pursuant to the approval of the Economic Coordination Committee of

Cabinet. The above amendment shall have effect on the next day of assent given to the Act by the


Power to take over the imported goods Section 25C, Amendment

It is amended to empower Chief collector instead of ―Board‖ to allow Collector to take over the

imported goods for whom a person give an offer in writing to buy the imported goods sought to

Customs Act

be cleared at value declared by an importer in the goods declaration, and the Collector of

Customs is satisfied that the declared value is not the actual transactional value.

False statement, error, etc Section 32, Amendment Where, by reason of any inadvertence, error or misconstruction, any duty, taxes or charge has not

been levied or has been short-levied or has been erroneously refunded, the person liable to pay

any amount on that account shall be served with a notice within three years of the relevant date

requiring him to show cause why he should not pay the amount specified in the notice.

Now, it is amended that the aforesaid action shall not be initiated in case full amount of short

paid duty, taxes or other charges are paid voluntarily prior to initiation of audit or inquiry or

investigation.

Refund to be claimed within one year Section 33, Amendment It is amended to time limit the process of refund claim with in one hundred & eighty (180) days

of filing of refund claim. However, the said period may for reasons to be recorded, can be

extended by the Collector of Customs for a period not exceeding ninety (90) days.

Arrival of conveyance Section 42, Amendment It is amended to provide accurate and complete information of passengers & its crew in advance

to prevent attempts of money laundering and currency smuggling, to be provided by the person-

in-charge of the conveyance to en-route to Pakistan.

Power to refuse port clearance to vessels or permission for departure to other conveyance


It is amended to make the shipping agents also responsible for the dues charged and collected by

them in connection with the discharge and delivery of goods.

Provisional release of imported goods Section 83B, New insertion A new section 83B in compliance with requirements under Trade Facilitation Agreement is

inserted, which provides for release of imported goods on furnishing of bank guarantee or pay

order against the amount of any penalty or fine which may be imposed on such goods, where any

offence is detected in respect of imported goods which are not liable to confiscation or needed

for evidence at later stage.

Frustrated cargo how dealt with Section 138, Amendment

Customs Act

This section deals with the export of any goods which are brought into a customs-station by

reason of inadvertence, misdirection or untraceability of the consignee. Now, it amended that

such goods can also be exported where the ―Consignee has dishonored his commitments.‖

Punishment for offences Section 156, Amendment

It is amended in section 156 to bring non-compliance of electronic notices under 155M at par

with section 26 which is that such person shall be liable to a penalty not exceeding one million

rupees and on conviction by a Special Judge shall be liable to imprisonment for a term not

exceeding one year or with both.

It is also amended to insert the following new clause as under:

S.No. Offences Penalties Section of

this Act

to Which

Offence

has

Reference

(1) (2) (3)

63 (i) If any goods which are loaded

for transshipment, are pilfered,

replaced en-route or failed to

reach the port of destination, or

any person transships goods not

allowed to be transshipped:

such goods and the conveyance illegally

carrying these goods shall be liable to

confiscation and any person including the

custodian and the bonded carrier shall be

liable to a penalty not exceeding ten

times the value of the goods and he shall

further be liable, upon conviction by a

Special Judge, to imprisonment for a

term not exceeding seven years;

121

(ii) If any person contravenes any

rule relating to transshipment

other than mentioned in clause

(i),

such person including the custodian and

the inland carrier shall be liable to

penalty not exceeding five hundred

thousand rupees or three times the

amount of duties and taxes involved.

121

Procedure in appeal Section 193A, Amendment It is amended to empower Collector (Appeals) to grant stay from recovery of duty and taxes for

maximum period of 30 days, after affording opportunity of being heard to the concerned

Collectorate or Directorate.

It is a good measure, also made it to parallel with other laws, where the Commissioner (appeals)

are empowered to grant stay against recovery, when the appeal is pending before him.

Customs Act

Customs-house agents to be licensed Section 207, Amendment It is amended to provide legal cover to the shipping agents to act on behalf of any principal for

the transaction of any business relating to the entrance or departure of any conveyance or any

customs clearance related activity or the import or export of goods or baggage. For this purpose,

rules have already been issued.

Authorized economic operator programme Section 212A, New insertion

It is introduced that the Federal Government may, by notification in the official Gazette, devise

authorized economic operator programme to provide facilitations relating to secure supply chains

of imported and exported goods through simplified procedures with regard to regulatory controls

applicable thereon. The Board with approval of the Federal Government may prescribe rules

there in.

Power to make rules Section 219, Amendment

It is amended that opportunity to the public for offering comments before entry into force of any

rules to comply with the requirements of Trade Facilitation Agreement will be provided.

Power to make rules Section 221A, Amendment

The bill proposed to insert a new sub section to validate the levy and collection of regulatory

duty, already collected before the decision of the Honorable Sindh High Court.

The above amendment shall have effect on the next day of assent given to the Act by the


First schedule Substitution

It is amended to substitute the First Schedule to the Custom Act, 1969 (IV of 1969). However

proposed substitutions are not yet released. The above amendment shall have effect on the next day of assent given to the Act by the President of the Islamic Republic of Pakistan

Third Schedule Item 22C, Substitution It is amended to insert a new entry 22C in the Third Schedule of Customs Act, 1969 that matters

pertaining to Authorized Economic Operator (AEO) programme, including criteria for granting

status of AEO to an applicant, suspension and revocation of the AEO status; and the extent of

benefits under AEO programme

Customs Act

Fifth Schedule Substitution It is amended to substitute Fifth Schedule to the Custom Act, 1969 in the manner provided for in

the Second Schedule to this Act.

The amendment in duties shall have effect on the next day of assent given to the Act by the

President of the Islamic Republic of Pakistan.

The duties on the following items proposed to be changed; Import of duty free paper weighing 60 g/m2 is allowed besides extending this facility to Nashir-e-

Quran registered with the government.

CD on raw materials / inputs (104 PCTs) withdrawn and (28 PCTs) reduced.

Reduction of CD on Multi-ply and Aluminum foil from 20% to 18% for Liquid Food Packaging

Industry.

Reduction of CD on 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%.

CD on input materials i.e, 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 from 20% to 10%.

CD on specified equipment used in cinema industry reduced to 3%.

Withdrawal of 11% CD on acrylic tow.

Exemption of 3% CD on Micro Feeder Equipment used for food fortification.

Exemption of 5% CD on Tasigna (an anti-cancer medicines).

Reduction of CD on Acetic Acid from 20% to 16%.

Exemption of 16% CD on charging stations for electric vehicles.

Reduction of CD on plasters from 16% to 11%.

Reduction of CD on film of ethylene from 20% to 16% for Liquid Food Packaging Industry.

Reduction of CD on Carbon Black (rubber grade) from 20% to 16%.

Reduction of concessionary rate of CD from 10% to 5% on silicon electrical steel sheets for

manufacturing transformers.

Exemption of 5% CD on specified LED parts and components for manufacturers of LED lights

and Levy of 2% RD on LED bulb & Tubes, Energy Saving Bulbs & Tube to protect local

industry.

Exemption of 3% CD on tanned hides in wet state.

Withdrawal of CD on two catalysts for use by PTA industry i.e. Hydrogen Bromide (11%) and

Palladium-on-carbon (3%)

Reduction of CD from 16% to 8% on Coils of aluminium alloys used in manufacturing of

Aluminium beverage cans

Reduction of CD on import of coal, across the Board, from 5% to 3%.

Reduction of CD on import of Fire fighting vehicles from 30% to 10%

Concessionary import of vintage or classic cars and jeeps at fix duty/taxes of US$ 5,000.

Reduction of CD from 50% to 25% and Exemption of 15% RD on Electric Vehicles and CD on

kits of electric vehicle reduced from 50% to 10%.

Customs Act

Import of solar panels were exempted from the condition of ‗local manufacturing‘ till 30th June

2018 which is extended till 30th June, 2019.

Increase of CD on double-sided tape from 3% to 11%.

To protect domestic manufacturers, increase of CD on rickshaw tyres from 11% to 20%.

Increase of CD on Soya bean oil from Rs.9050/MT & Rs.10200/MT to Rs.12000/MT and Rs.

13,200/MT respectively.

Increase of CD on aluminum auto parts scrap from 30% to 35%.

Increase of CD on Di-octyl Terephthalate (DOTP) from 3% to 20%.

Reduction of CD from 16% to 11% and levy of 5% RD on Medium Density Fiber.

Reduction of CD on corrective glasses from 11% to 3%.

Reduction of CD on Lithium iron phosphate battery (LiFePO4) from 11% to 8%.

New PCT codes created for Radial tyres, CKD/SKD kits for home appliances, CKD / SKD

of Mobile Phone, Semi-automatic washing machines, Petrol Generating sets, Kerosene based

mineral oils, Relays, Fuses, Gear pumps and Turbo chargers for vehicles, Electric conductors,

Light fittings with fixed/fitted LED/SMD, , Refrigerated out door cabinet designed for insertion

of electric and electronic apparatus, Digital/Processed Printing Inks, DOTP

(Di-Octyl Terephthalate) and Pigments and preparations based thereon.

Levy of 30% RD on export of waste & scrap of copper

Review of RD on non-essential and luxury items

10% RD levied on CKD/SKD kits of specified Home Appliance

Levy of RD @ Rs.175/set on CKD/SKD kits of mobile phone

Increase of additional customs duty from 1% to 2%

Income Tax Ordinance

AMENDMENTS IN INCOME TAX ORDINANCE, 2001

Through Finance Bill 2018, following amendments have been proposed in the Income Tax

Ordinance, 2001.

Fee of Offshore Digital Services

Section 2(22B), 6, 101(12A), 152 , Division IV, Part 1 , First Schedule

Through this insertion ―fee for offshore digital services‖ in the hands of a non-resident person

has been brought into the tax net and income tax on Pakistan-source is proposed at the rate of

5% of the gross amount of such fee.

The definition of ―fee for offshore digital services‖ has been proposed through insertion of sub-

section 22B in section 2 of the Ordinance as consideration for providing or rendering services by

a non-resident person for online advertising including digital advertising space, designing,

creating, hosting or maintenance of websites, digital or cyber space for websites, advertising, e-

mails, online computing, blogs, online content and online data, providing any facility or service

for uploading, storing or distribution of digital content including digital text, digital audio or

digital video, online collection or processing of data related to users in Pakistan, any facility for

online sale of goods or services or any other online facility.

―Fee for offshore digital services‖ will be Pakistan-source if it is:

(a) paid by a resident person, except where the fee is payable in respect of services utilized in a

business carried on by the resident person outside Pakistan through a permanent establishment

;or

(b) borne by a permanent establishment in Pakistan of a non-resident person.

The banking company or a financial institution remitting the said fee, on behalf of resident or

permanent establishment of a non-resident person in Pakistan, will deduct tax at the rate of 5%

of the gross fee. This withholding tax shall be final tax in respect of the said fee.

Azad Jammu & Kashmir and Gilgit-Baltistan taxpayers included in the definition of “filer”

Section 2(23A)

Taxpayers of AJ&K and Gilgit-Baltistan are not included in the current definition of ―filer‖ as

per Income Tax Ordinance, 2001. It has been proposes to include the taxpayers included in the

―active taxpayers‘ list‖ issued by the AJ&K Council Board of Revenue and Gilgit-Baltistan

Council Board of Revenue in the definition of ―filer‖ as per FBR.


This is good step for the taxpayers who are required to file tax return in AJ&K Council Board of

Revenue and Gilgit-Baltistan Council Board of Revenue but not required to file tax return in

FBR. Presently they were treated as non-filer in FBR. Now they will be treated as filer in FBR if

they have filed the tax return in AJ&K Council Board of Revenue and Gilgit-Baltistan Council

Board of Revenue and appearing the ATL issued by them.

Tax on Bonus Shares Section 2(29), 39, 236M & 236N

The Finance Act 2014 introduced tax on bonus shares issued by listed and non-listed companies

as ―income from other sources‖ with effect from tax year 2015 at the rate of 5% of the value of

bonus shares.

Now the tax on bonus shares has been proposed to abolish.

While introducing the tax on bonus shares vide Finance Act 2014, the definition of ―income‖

under section 2(29) was amended. Before introduction of tax on bonus shares, the definition of

―income‖ specifically excluded ―the face value of any bonus shares or the amount of any bonus

declared, issued or paid by the company to the shareholders with a view to increasing its paid-up

share capital‖. Now since the Finance Bill is proposing to withdraw tax on bonus shares

intending to restore the pre Finance Act 2014 position, therefore, there is a need to reinstate the

aforesaid exclusion from the definition of income to avoid misinterpretation regarding

classification of bonus shares as income under any other head of income

Permanent Establishment Section 2(41)

Through Finance Bill amendment is proposed in the definition of ―permanent establishment‖

(PE) of a non-resident person in Pakistan to enlarge the scope of dependent agent of a permanent

establishment of the non-resident to include a person habitually exercising the authority to

conclude contracts or plays principal role leading to conclusion of such contracts and these

contract are ;

(a) in the name of the person

(b) for the transfer of the ownership of or for the granting of the right to use property owned by

that enterprise or that the enterprise has the right to use; or

(c) for the provision of services by that person.

Further, it has been clarified that an agent of independent status acting in the ordinary course of

business does not include a person acting exclusively or almost exclusively behalf of the person

to which it is an associate.

Current definition of PE is in the context of one non-resident person and provides a room to

associated non-resident persons to obtain tax advantage by splitting-up of business activities

between them so that every associated person can claim its activity as mere preparatory or

auxiliary in nature.


The proposed amendment is intended to address the avoidance of PE status by fragmenting a

cohesive operating business into several small operations.

For this purpose, a new clause (g) in the definition of PE has been inserted to include a fixed

place of business that is used or maintained by a person if the person or an associate of a person

carries on business at that place or at another place in Pakistan and:

(i) that place or other place constitutes a permanent establishment of the person or an associate of

the person; or

(ii) business carried on by the person or an associate of the person at the same place or at more

than one place constitute complementary functions that are part of a cohesive business operation.

For this purpose, the inclusive definitions of the terms ―cohesive business operation‖ and ―supply

of goods‖ have been proposed as follows:

- ―Cohesive business operation‖ includes an overall arrangement for the supply of goods,

installation, construction, assembly, commission, guarantees or supervisory activities and all or

principal activities are undertaken or performed either by the person or the associates of the

person.

- ―Supply of goods‖ include the goods imported in the name of the associate or any other person,

whether or not the title to the goods passes outside Pakistan.

Super Tax for Rehabilitation of temporarily displaced persons

Section 4B, Division IIA Part 1 of First Schedule

One-time super tax for tax year 2015 on (i) banking companies; and (ii) all other taxpayers

having income of Rs 500 million or above was imposed vide Finance Act, 2015 for Tax Year

2015 and vide Finance Act, 2016 it was extended for tax year 2016 .The rate of super tax for

banking companies is 4% of the income while the rate of tax for other taxpayers shall be 3% of

the income and as specifically stated in the relevant provision, this ‗tax‘ is for the rehabilitation

of temporary displaced persons. Vide Finance Act, 2017 the application of this tax was extended

till tax year 2017.

This tax is amended to apply till tax year 2020 as follows.

Person TY 2018 TY 2019 TY 2020 TY 2021

Banking Company 4% 3% 2% 0%

Other than Banking Company having income

equal to or exceeding Rs.500.million

3% 2% 1% 0%


Tax on Undistributed Reserves Section 5A

The concept of tax on undistributed reserves was introduced vide Finance Act, 2015 and the

same substituted by a new concept of tax on undistributed profits vide Finance Act, 2017 and

this is applicable on every public company other than scheduled bank and modaraba.

Presently income tax at the rate of 7.5% is chargeable on undistributed profits of a public

company, other than a scheduled bank or a modaraba, that derives profit for a tax year but does

not distribute at least forty percent of its after tax profits within six months of the end of the tax

year through cash or bonus shares.

Now it has been proposed to reduce the limit of profit distribution from forty percent to twenty

percent and the rate of tax from 7.5% to 5%. .

It has also been proposed to exclude bonus shares from the distribution of profits for this purpose

meaning thereby that the public company will have to distribute at least twenty percent cash

dividend to avoid levy of this tax. TAX

Capital Gain and Non –Recognition Rules Section 37(4A) and 79(1)(C)

According to section 79 , no gain or loss is taken to arise on gifts and the cost of the gifted asset

in the hands of the transferee is considered as equal to the cost of the transferor. However, if the

gifted asset is a ―capital asset‖ then, as per section 37(4A), the cost of the asset in the hands of

the transferee is the fair market value of the asset, on the date of its transfer or acquisition by the

person.

It has been proposed to restrict the scope of gift only to gifts to a relative as defined in section

85(5) i.e.

(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 in clause (a).

Consequently, gift of assets to non-relatives will be taxable.

It has also been proposed that cost of the gifted ―capital asset‖ will be fair market value only in

case where such gift is to a relative as defined above.

Powers of Federal Government to issue Exemptions and Concession

Section 53

Federal Government has been empowered to grant exemption and concession from tax in second

schedule of the Ordinance in a manner specified in the relevant provision of law.


As per Finance Act, 2017 process of exemptions and tax concessions can be initiated by the

Federal Board of Revenue with the approval of the Minister Incharge subject to approval of

Economic Coordination Committee.

There are some recent judgment passed by the honorable Supreme Court of Pakistan that only

the Federal Government i.e. the Cabinet is empowered to allow exemptions etc.

Now Finance Bill proposes that FBR will have to obtain approval of the Federal Government for

the exemptions and reductions instead of Federal Minister-in-charge.

Set-off of unabsorbed depreciation, initial allowance and amortization

Section 57(4) &59A(5)

Presently depreciation, initial allowance, first year allowance of eligible depreciable assets and

amortization of intangibles not fully set-off against current year‘s business income become part

of these deductions of next tax years and set-off against business income of subsequent tax years

until completely set-off.

Now it has been proposed to restrict the set-off of carried forward unabsorbed depreciation and

amortization etc. against fifty percent of the person's balance income chargeable under the head

"income from business" after setting off normal business loss in the following tax year and so on

until completely set off. However, if the taxable income for the year is less than Rs. 10 million,

hundred percent of the income can be set off against unabsorbed depreciation and amortization

etc.

This is harsh amendment because taxpayer has to pay taxes despite having unabsorbed

depreciation losses.

Tax credit for investment in shares and insurance

Section 62

Through proposed amendment the threshold of eligibility to avail tax credit on investment in

shares/sukuks or insurance premium has been enhanced from one and half million rupees to two

million rupees.

Period of investment in industrial undertakings to claim tax credits

Section 65B, 65D, 65E

Currently following tax credits are available upto 30 June 2019:

(i) 10% tax credit for investment in extension, expansion, balancing, modernization and

replacement of plant & machinery already installed in an industrial set up;

(ii) 100% tax credit for investment in new industrial undertaking; and

(iii) 100% tax credit for investment in existing industrial undertakings.


The period of such investments to avail these tax credits have been proposed to be extended

upto 30 June 2021.

Special Provisions relating to banking business

Section 100A

The income, profits and gains of banking companies and tax payable thereon are computed under

the special provisions of the Seventh Schedule to the Ordinance. Rule (1) of the Seventh

Schedule provides that income, profits and gains of banking company shall be taken as the

balance of income from all sources disclosed in the audited accounts subject to specified

adjustments provided in the said rule. Accordingly, it was generally considered that other

substantive provisions contained in the Ordinance for determination of tax liability shall not

apply to banking company.

The Finance Bill proposes to amend section 100A to provide that the provisions dealing with

international taxation, geographical source of income, double tax treaties and anti-avoidance

rules including adjustment for transaction between associates and re-characterization of income

and deductions shall now apply to banking companies as per provisions of chapter VII &

Chapter VIII.

Tax Credit to Non Profit Organizations

Section 100C

Income derived for religious and charitable purposes from various sources including profit on

debt from scheduled banks is subject to 100% tax credit. It has been proposed that profit on debt

earned from microfinance bank will also be eligible for this tax credit.

Geographical source of income and Offshore supplies etc.

Section 101(3)( e ) and section 152(7) (a)

Currently, the income of a non-resident person from sale of goods where title to the goods passes

outside Pakistan is not considered as Pakistan-source income and the payment thereof is also not

subjected to withholding tax other than in specified situations.

The Finance Bill proposes to treat income from supply of goods from outside Pakistan in

connection with construction, assembly, installation or similar contracts as Pakistan-source

income and to make the related payments subject to withholding tax.

It has been proposed to treat income of non-resident person from supply of goods irrespective

whether title to the goods passes outside Pakistan or not, if the import is part of an overall

arrangement for the supply of goods, installation, construction, assembly, commission,


guarantees or supervisory activities and all or principal activities are undertaken or performed

either by the:

(i) Associates of the person supplying the goods

(ii) Its permanent establishment whether or not the goods are imported in the name of the

person, associate of the person; or

(iii) Any other person.

Section 152(7) currently provides exemption from withholding tax to payment on account of

import of goods where title to the goods passes outside Pakistan. This exemption excludes

payment in given situations where the import of goods is part of an overall arrangement for the

supply of goods, their installation, and any commission and guarantees in respect of the supply.

The Finance Bill proposes to redefine the exclusions from exemption from withholding tax on

payments for import of goods in the following situations:

(a) The supply of goods where the supply is made in connection with the overall arrangement for

the supply of goods, installation, construction, assembly, commission, guarantees or supervisory

activities and all or principal activities are undertaken or performed either by the:

(i) associates of the person supplying the goods; or

(ii) its permanent establishment whether or not the goods are imported in the name of the person,

associate of the person; or

(iii) any other person.

(b) The supply is made by a resident person or a Pakistan permanent establishment of a

nonresident person in connection with the overall arrangement.

These proposed amendments to make income from offshore supplies, in connection with overall

construction or like contract, as Pakistan source income and making the same as subject to

withholding tax appear to be in line with the amendments proposed in the definition of

―permanent establishment‖ whereby complementary function is treated as part of a cohesive

business operation.

Gain on disposal of assets outside Pakistan Section 101A

Under the existing provisions, gain on sale of resident company is only considered as Pakistan-

source income. The Finance Bill seeks to treat the shares or interest in a non-resident company

as Pakistan-source income chargeable to income tax if:

(a) the share or interest derives, directly or indirectly, its value wholly or principally from the

assets located in Pakistan; and

(b) shares or interest representing ten per cent or more of the share capital of the non-resident

company are disposed or alienated.

For this purpose:

(i) The share or interest shall be treated to derive its value principally from the assets located in

Pakistan, if:

a). on the last day of the tax year preceding the date of transfer of a share or an interest, the fair

market value (without reduction of liabilities) of such assets exceeds Rs. 100 million; and

b). represents at least fifty per cent of the value of all the assets owned by the non-resident

company.


(ii) Where the entire assets owned by the non-resident company are not located in Pakistan, the

income of the non-resident company, from disposal or alienation outside Pakistan of a share of,

or interest in, such non-resident company shall be treated to be located in Pakistan, to the extent

it is reasonably attributable to assets located in Pakistan and determined as may be prescribed.

It has also been proposed that where the asset of a non-resident company derives, directly or

indirectly, its value wholly or principally from the assets located in Pakistan and the non-resident

company holds, directly or indirectly, such assets through a resident company, such resident

company shall, for the purposes of determination of gain and tax thereon shall furnish to the

Commissioner within sixty days of the transaction of disposal or alienation of the asset by the

non-resident company, the prescribed information or documents in a statement as may be

prescribed. The Commissioner may also require through a notice in writing to furnish

information, documents and statement within a period of less than sixty days as specified in the

notice.

The aforesaid deemed Pakistan-source income from sale of shares or interest in a non-resident

company shall be taxed at the higher of:

(a) 20% of fair market value less cost of acquisition of the asset; or

(b) 10% of the fair market value of the asset.

The above tax is required to be withheld as follows:

(a) The person acquiring the asset from the non-resident person shall deduct tax from the

gross amount paid as consideration for the asset at the rate of 15% and shall be paid to the

Commissioner by way of credit to the Federal Government through remittance to the

Government Treasury or deposit in an authorized branch of the State Bank of Pakistan or

the National Bank of Pakistan, within fifteen days of the payment to the non-resident.

(b) Where the assets in Pakistan are held directly or indirectly through a Pakistani company, such

Pakistani company shall collect advance tax (higher of 20% of gain or 10% of fair market value

of shares) from the non-resident company within thirty days of the transaction of disposal or

alienation of the asset by such non-resident company.

Provided that where the tax has been deducted and paid by the person acquiring the asset from

the non-resident person, the said tax of 15% shall be treated as tax collected and paid and shall

be allowed a tax credit for that tax in computing the tax at higher of 20% of gain or 10% of fair

market value of shares.

The gain on sale of such shares or interest as taxed above shall not be taxable as business income

under section 22(8) or capital gains under section 37 or 37A.


Agreement for avoidance of double taxation and prevention of fiscal evasion and re-characterization of income & deductions

Section 107 , 109

It has been proposed to amend the provisions of section 107 dealing with double tax treaties and

section 109 dealing with powers of the Commissioner to re-characterize income and deductions.

These amendments are to adopt the suggestions of the OECD‘s reports on Action Plans of Base

Erosion and Profit Shifting dealing with abuse of treaty provisions.

Section 107 provides protection to the provisions of double tax treaty interalia for taxation of

non-resident persons‘ Pakistan-source income. Such provisions are inherently subject to anti-

avoidance provisions including ―re-characterization of income and deductions‖ to address the tax

avoidance schemes.

The Finance Bill proposes to specifically provide that the provisions of double tax treaty are

subject to powers of the Commissioner to re-characterization of income and deductions whereby

the Commissioner has specifically been empowered to disregard an entity or a corporate

structure that does not have an economic or commercial substance or was created as part of the

tax avoidance scheme.

Under section 109 the Commissioner is empowered to re-characterize a transaction or element of

a transaction that was entered into as part of ―tax avoidance scheme‖.

The phrase ―tax avoidance scheme‖ has been defined as any transaction where one of the main

purposes of a person in entering into the transaction is the avoidance or reduction of any person‗s

liability to tax under this Ordinance.

In this context, the Finance Bill proposes to explain that a reduction of person‘s tax liability

means a reduction, avoidance or deferral of tax or increase in a refund of tax and includes a

reduction, avoidance or deferral of tax that would have been payable under this Ordinance, but

are not payable due to a tax treaty for the avoidance of double taxation as referred to in section

107.

Transaction between associates Section 108

Section 108 requires certain taxpayers to keep and maintain prescribed country-by-country

report. For this purpose, FBR enacted rules under Chapter VIA of the Income Tax Rules, 2002

vide SRO. 1191(I)/2017, dated November 16, 2017 that requires furnishing of the said report to

FBR within specified timelines. The Finance Bill now proposes to amend section 108 to bring it

in line with the rules thereby requiring to furnish the report besides keeping and maintaining the

same.

Controlled Foreign Company Section 109A

The bill proposes to bring within its ambit taxability of the income of a resident person as

attributable to controlled foreign company.


Controlled foreign company‖ means a non-resident company if:

a). more than fifty percent of the capital or voting rights are held, directly or indirectly, by one

or more persons resident in Pakistan or more than forty percent of the capital or voting rights are

held, directly or indirectly, by a single resident person in Pakistan;

b). tax paid, after taking into account any foreign tax credits available, on the income derived or

accrued during a foreign tax year, to any tax authority outside Pakistan is less than sixty percent

of the tax payable on the said income under this Ordinance;

c) non-resident company does not derive active business income;

d) the shares of the company are not traded on any stock exchange recognized by law of the

country or jurisdiction of which the non-resident company is resident for tax purposes.

A company shall be treated to have derived ‗active income‘ if:

i) more than eighty percent of income of the company does not include income from

dividend, interest, property, capital gains, royalty, annuity payment, supply of goods or

services to an associate, sale or licensing of intangibles and management, holding or

investment in securities and financial assets; and

ii) principally derives income under the head ―income from business‖ in the country or

jurisdiction of which it is a resident.

Income of a controlled foreign company is an amount equal to the taxable income of that

company determined in accordance with the provisions of this Ordinance as if that controlled

foreign company is a resident taxpayer. The amount of attributable income for a tax year shall be

computed according to the formula:

A x (B/100)

where

A‘ is the amount of income of a controlled foreign company under sub section (2); and

‗B‘ is the percentage of capital or voting rights, whichever is higher, held by the person,

directly or indirectly, in the controlled foreign company.

The amount of attributable income shall be treated as zero, if the capital or voting rights of the

resident person is less than ten percent or Income of a controlled foreign company shall be

treated as zero, if it is less than ten million Rupees.

Foreign tax year, in relation to a non-resident company, means any year or period for income tax

purposes by that non-resident company in the country or jurisdiction of residence or, if that

company is not subject to income tax, any annual period of financial reporting by that company.


The income attributable to controlled foreign company and taxed in Pakistan under this section

shall not be taxed again when the same income is received in Pakistan by the resident taxpayer.

Unexplained Income and Assets Section 111(2) and 111(4)

Section 111(2) provides that unexplained income or assets etc. shall be included in the person‘s

income chargeable to tax in the tax year to which such amount relates.

Now, the concept of differentiating between Pakistan-sourced and foreign-sourced income is

introduced whereby:

a). if amount represents investment, money, valuable article or expenditure situated or incurred

in Pakistan or concealed income is Pakistan sourced then the same shall be included in the

person‘s income chargeable to tax in the tax year to which such amount relates.

b). However, if investment, money, valuable article or expenditure is situated or incurred outside

Pakistan and concealed income is foreign-sourced then such asset, income or expenditure shall

be included in the person‘s income chargeable to tax in the tax year immediately preceding the

tax year in which it is discovered by Commissioner.

An explanation is also proposed to be introduced to provide cover to the effect that in case of

asset situated outside Pakistan or expenditure incurred outside Pakistan, explanation offered,

regarding acquisition of such asset or expenditure from sources relating to tax year in which such

asset was acquired or expenditure was incurred, shall not be rejected on the basis that the source

does not relate to the tax year immediately preceding tax year in which the asset or expenditure

was discovered by the Commissioner.

Presently, any amount of foreign exchange brought into Pakistan through normal banking

channel and a certificate produced to that effect from the bank is immune from any sort of

inquiry from tax authorities.

The bill proposes to restrict this immunity to Rs. 10 million in a tax year. This move will help in

curbing money laundering but on other hand may reduce inflow of foreign remittances. Any

how this is good step towards documentation of economy as well.

Income Tax return, Statement of Foreign Income and Assets

Section 114, 116A, 118 & 182

It has been proposed that every resident individual who is required to file foreign income and

assets statement under section 116A shall also file return of income alongwith the prescribed

foreign income and assets statement.


Bill proposes new section 116A by virtue of which every resident individual having foreign

income of not less than US$ 10,000 or having foreign assets with a value of not less than US$

100,000 shall furnish a foreign income and assets statement in prescribed form and manner

specifying:

(a) the person‘s total foreign assets and liabilities as on the last day of the tax year;

(b) any foreign assets transferred by the person to any other person during the tax year and

the consideration for the said transfer; and

(c) complete particulars of foreign income, the expenditure derived during the tax year and

the expenditure wholly and necessarily for the purposes of deriving the said income.

Section 116A also empowers Commissioner to issue a notice requiring filing, to an individual

who in his view (with reasons to be recorded) is required to furnish this statement, on the date

specified in the notice but has failed to do so.

Section 118 of the Ordinance has also been amended to provide that foreign income and assets

statement shall be furnished in the prescribed manner. Furthermore, foreign income and assets

statement shall be accompanied with return filed by salaried person, if so applicable.

Penalty of 2% of the foreign income or foreign assets for each year of default has also been

introduced in section 182 for not filing of foreign income and assets statement as required under

section 116A within the due date.

Best Judgment Assessment Section 121

Notice to furnish a return of income under section 114(4) of the Income Tax Ordinance, 2001

can be issued for one or more of the last ten completed tax years to a person who has not filed

return of income for any of the last five tax years.

However, presently best judgment assessment under section 121 of the Ordinance can only be

made for the last five years.

Amendment has been proposed whereby best judgment assessment under section 121, in the

aforementioned cases can be made within two years from the end of the tax year in which notice

to file return of income has been issued.

Stay against Recovery by Appellate Tribunal Section 131

Presently the Appellate Tribunal may stay the recovery of tax levied under the Ordinance for a

period not exceeding 180 days in aggregate.

In practice, the Appellate Tribunal grants stay beyond this period of 180 days depending upon

merits of each case based on the decisions of higher courts that it is an inherent power of the

court which cannot be restricted.


Now it has been proposed to insert a new proviso whereby the stay order shall cease to have

effect on the expiration of 180 days from the date of stay order and the Commissioner shall

proceed to recover the tax. This will be hardship to the taxpayer whose appeal is pending before

Appellate Tribunal.

Alternative Dispute Resolution Section 134A

The concept of alternative dispute resolution was introduced to provide an avenue for the

expeditious settlement of disputes between the Federal Board of Revenue and taxpayers and to

reduce the pendency of cases at various appellate forums.

Presently, role of the Alternative Dispute Resolution Committee (ADRC) is only

recommendatory in nature and the Board may pass any order even against the recommendations.

Therefore it has not been effective in mitigating the hardship of taxpayers who are still

compelled to go through a protracted litigation process.

In order to make the mechanism of ADRC more effective, it has been proposed that instead of

the recommendations the ADRC will decide the matter and such decision will be binding on

taxpayer and the department. This mechanism will progress only pursuant to withdrawal of

appeals by the taxpayer as well as the department.

The composition of the members of ADRC is also changed to enable retired High Court Judges

to be included in ADRC in addition to tax professionals and representatives of the Board.

Under the proposed amendments, the aggrieved person and the Board will withdraw the appeals

pending before the appellate authority and an order to this effect will be communicated to the

Board. If said withdrawal order is not communicated within seventy five days of the appointment

of ADRC, the ADRC shall be dissolved and this section shall not apply.

The proposed amendments further seek to reduce the period for deciding the matter from 180

days to 120 days.

However, if the ADRC fails to decide the matter within the prescribed time limit then the

appeal(s) withdrawn shall stand reinstated as if these have never been withdrawn and the

appellate authority will decide the appeal within 6 months of dissolution of the ADRC.

This is good step and hopefully it will reduce the burden on the appellate courts and matters will

be steeled within short span of time.

Advance Income Tax and Its Recovery Section 137(2) and 147 (4), 147(4A) and 147(6)

It has been proposed to amend section 137(2) that due date for payment of advance tax under

section 147 shall be the same as provided in relevant provisions of section 147 ‗Advance tax‘.

This amendment is introduced to recover unpaid advance tax immediately which is presently

recoverable only after passing of order and after expiry of prescribed 30 days from the date of

service of order.


It is also proposed that for estimation purposes if taxpayer is unable to estimate its turnover or

turnover is not known for the quarter then it shall be taken to be one-fourth of one hundred and

ten percent of the turnover of the latest tax year for which a return has been filed.

At present, a taxpayer can file a lower estimate of advance tax without furnishing any basis of

such lower estimate. Provisions of law are proposed to be amended so that a lower estimate is

required to be accompanied by the following:

a). Turnover for the completed quarters;

b). Estimated turnover for the remaining quarters along with reasons for any decline in turnover;

c). Documentary evidence of estimated expenses or deductions which may result in lower

advance tax payment; and

d). Computation of estimated taxable income for the relevant tax year.

The Commissioner shall have the powers to reject the lower estimate in case the above details

are not provided and the taxpayer shall be required to pay advance tax on the basis of formula as

provided in sub section (4).

Currently, banking companies are required to pay advance tax in 12 monthly installments. In

order to enable collection of advance tax from banks on the basis of higher of their actual

income or last assessed income, it is proposed that banks would also file estimate of tax payable

under sub-section (4A) but they are not allowed to file estimate of lower income under sub-

section (6).

Recovery of tax from persons holding money on behalf of a taxpayer

Section 140(1)

The concept of automatic stay against recovery proceedings under section 140 was introduced

vide Finance Act, 2016. According to provisions of the section Commissioner can not issue

notice of recovery under section 140 if taxpayer has filed the appeal before Commissioner Inland

Revenue (Appeals) and 25% of the tax due has been deposited by the taxpayer.

Now through Finance Bill it has been proposed to reduce the existing limit of 25% payment of

tax due to 10% of the tax due for automatic stay of recovery till the decision of the appeal by

Commissioner Inland Revenue (Appeals) .

Tax on Commercial Imports Section 148 (8)

At present the tax collected under section 148 of the Income Tax Ordinance,2001 from

commercial importers at the import stage is final tax with the option to avail normal tax regime.

Therefore, commercial importers are not required to file their return of income and compute their

taxable income.

It has been proposed to change the taxation of such commercial importers from final taxation to

Minimum taxation.


Tax collected from commercial importers at the import stage shall now constitute minimum tax

instead of final tax, therefore, commercial importers shall be required to file their returns of

income depicting their taxable income.

Now if tax liability under normal taxation regime is higher than the tax collected at import stage,

then tax liability computed under normal taxation regime will become due otherwise tax

collected at import stage will be their minimum tax.

Withholding of Income Tax from sale of goods, provision of services and execution of contracts

Section 153

Supply of goods, provision or rendering of services or execution of contracts is subject to

withholding taxes by prescribed person under this section. Presently as per SRO. 586(I)/1991

supply of goods amounting to Rs. 25,000/- in a year and provision or rendering of services

valuing Rs 10,000/- in year are exempt from withholding taxes.

Through Finance bill limit for exemption of withholding taxes for supply of goods and provision

or rendering of services has been enhanced to Rs. 75,000/- and Rs. 30,000/- in a year

respectively.

Further the scope of prescribed person has been enhanced by including the builders and

developers in category of prescribed person for withholding taxes under section 153 .

Currently AOP‘s and Individuals are prescribed to act as withholding agents in case they have

turnover of 50 million or above in tax year 2007 and 2009 respectively or in any subsequent tax

year.

Now it has been proposed to extend the scope of withholding agent on AOP‘s and Individual‘s

by applying prescribed turnover limits to all prior tax years.

Furnishing of information by banks Section 165A

As per Section 165A every banking company is required to make arrangements to provide

prescribed information to the Board.

This section currently requires the bank to provide online access to its central database

containing details of its account holders and all transactions made in their accounts.

It has been proposed to omit this requirement with substitution of new requirement to provide a

list of persons containing particulars of cash withdrawals exceeding Rupees fifty thousands in a

day and aggregating to Rupees one million or more during each preceding calendar month

including tax deductions thereon for filer and non-filer;


a). The requirement to provide list containing particulars of deposits is currently applicable in

respect of deposits of rupees one million or more during preceding calendar month. The

monetary limit is proposed to be increased to rupees ten million in aggregate;

b). The requirement to provide list of payments against bills raised in respect of credit card

issued to that person is currently applicable on payments of rupees one hundred thousand or

more during preceding calendar month. The monetary limit is proposed to be increased to

rupees two hundred thousand ;

Credit for tax collected or deducted Section 168

According to Section 92 AOPs shall be taxed separately from its members and accordingly

share of income of members from AOPs shall be exempt from tax in the hands of member. This

principle of taxation is not applicable in case a company is a member of AOP. Hence companies

are taxed separately in respect of their share of income from AOP which share is excluded from

income of AOPs.

It has been proposed to allow credit of taxes collected or deducted in the hands of

AOP to the companies proportionate to their share of income accordingly and limiting AOPs

from claiming credit for such tax which has been allowed to the companies.

Special Audit panels & Limit of audits Section 177 (11) and Clause 105 of part-IV of second schedule

It has been proposed that a foreign expert or specialist and a tax audit expert can be included in

the list of members from which the board can appoint special audit panel.

Further, it has been proposed that if a member appointed for special audit panel is not an officer

of Inland Revenue in that case agreement of confidentiality must be entered into between the

Board and the person.

Further the amendment in second schedule is proposed to exclude a person , whose tax affairs

has been audited in any of the preceding three tax years, from selection and conduction of audit

under Section 177 and 214C . However, Commissioner can select a person for audit u/s 177

with the approval of Board.

Offences and Penalties Section 182 (IA)

Presently the law has prescribed penalty at Rs 2,500/- per day subject to minimum of Rs

10,000/- for non-filing of withholding statement under section 165, non filing of information to

be furnished by banks under section165A & 165B, non furnishing of statement in lieu of return

under section 115.

It has been proposed to reduce this penalty as follows:


a). Rs 5,000/- in case the tax has been duly deducted and collected and the statement has been

filed within ninety days from the due date;

b). Rs 10,000/- in other cases

Return not filed within due date and Automatic Selection of cases for audit

Section 182A and 214D

Section 214D, relating to automatic selection of person for tax audit in case of delayed return

filing is proposed to be omitted and a new section 182A has been inserted introducing certain

restrictions whereby non-filing of return of income within the due date prescribed by the law or

as extended by the Board or the Commissioner shall be subject to following consequences in

addition to penal provisions;

i). The name of the person shall not be included in the Active Taxpayers List for that year; and

ii). Such person shall not be allowed to carry forward any loss for that tax year.

Service of Notices and Documents Section 218

It has been proposed to include the electronic servicing of notice, order or requisitions in the

prescribed mode of servicing.

Restriction on purchase of certain assets

Section 227C

It is proposed to restrict non-filers for purchase and registration of vehicle and immovable

property.

Directorate General of Immovable Property

Section 230F

It has been proposed that the Director General of Immovable Property may be appointed by the

board through notifying in the official Gazette and the Board may also prescribe the function and

Jurisdiction of the Directorate General and its officers.

The Director General will have the power to initiate the proceedings where he has a reason to

believe that the consideration agreed between the transferor and the transferee to acquire the

immovable property is less than fair market value of the property for the purpose of evasion of

tax, concealment of unexplained amount or reduction in capital gain tax.

The Directorate General will have the power to appoint any expert for determining fair value of

the immovable property.

The proceedings shall be initiated by the Director within 6 months of the date of registration,

recording or attestation of the immovable property after providing an opportunity of being heard

to the transferee.


It has been proposes to provide the right to approach appellate authorities in case of

disagreement between transferee and Directorate General.

The afore-mentioned provision shall become applicable after being notified in the Official

Gazette by the Federal Government and upon appointment of such official:

a). Withholding tax rate applicable at the time of purchase shall be reduced to 1% from 2% and

4% for filer and non-filer respectively.

b). The provision of withholding taxes on the sale and purchase of immovable property shall no

more be applicable.

Collection of tax by stock exchange registered in Pakistan changed to adjustable

Section 233A

Currently advance tax collected by Stock Exchange from its Members on commission earned by

them from purchase and sale of shares is subject to final taxation regime.

The Finance Bill proposes to change the taxation regime in the hands of member of stock

exchange from final tax to adjustable tax.

Tax on sale of certain petroleum products

Section 236HA

Currently under section 156A, every person selling petroleum products to petrol pump operators

are required to deduct tax on commission or discount. The taxes required to be collected at the

rates of 12% and 17.5% in case of filer and non-filer petrol pump operators respectively and

these are final.

It has been proposed to broaden the scope of withholding taxes on petrol pump operators as well

as distributors who are not allowed commission or discount. The proposed rates of deductible

taxes are 0.5% and 1% of ex-depot sale price of specified products in case of filer and non- filer

respectively and the tax so deducted will to be final tax on such transactions.

Advance tax on purchase or transfer of immovable property

Section 236K

A new sub-section has been proposed to insert for collection of tax on installment basis where

payment is received on installment basis in case of purchase of immovable property.


Advance tax on persons remitting amounts abroad through credit or debit or prepaid card

Section 236Y, Division XXVII of Part-IV of First Schedule

It has been proposed that every banking company will collect advance tax at the time of transfer

of any sum remitted outside Pakistan on behalf of any person who has completed a credit/ debit/

prepaid cards transaction with a person outside Pakistan.

Prescribed rates are 1% or 3% of gross amount in case of filer or non-filer respectively.

The tax so collected under this section shall be adjustable in nature.

Validation Section 241

It has been proposed to add a new subsection validating the actions of Directorate General or

Commissioner or other authority even if there has been any flaw in procedural requirements for

establishment.


AMENDMENTS IN THE SCHEDULES TO THE INCOME TAX ORDINANCE, 2001

Following are significant amendments made in the schedules of the Income Tax Ordinance,

2001.

INCOME TAX RATES First Schedule

Following rates/rate tables are proposed to be amended /changed;

Proposed Rate for AOP for Tax Year 2019

Sr. No. Taxable income Tax Rate

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

2 Where the taxable income exceeds Rs. 400,000 but does not

exceed Rs. 1,200,000

5% of the amount exceeding Rs.

400,000

3 Where the taxable income exceeds Rs. 1,200,000 but does

not exceed Rs. 2,400,000

Rs. 40,000 + 10% of the amount

exceeding Rs. 1,200,000













7 Where the taxable income exceeds Rs. 6,000,000



Proposed Rate for Individuals for Tax Year 2019

Sr. No. Taxable income Tax Rate

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


exceed Rs. 800,000 Rs. 1,000/-


exceed Rs. 1,200,000 Rs. 2,000/-



5% of the amount exceeding Rs.

1,200,000





6 Where the taxable income exceeds Rs. 4,800,000



Rates of Tax for Companies 1st Schedule Part 1, Division II

Nature of Company Current Rates Proposed Rates

Companies other than banking

companies

For TY 2017 31%

For TY 2018 and onwards

30%

For TY2019 29%

For TY2020 28%

For TY2021 27%

For TY2022 26%

For TY2023 and onwards 25%


Banking Companies 35% No change

Small Company 25% No change

Rates of Super Tax Part 1, Division IIA (Section 4B)

Inserted through Finance Act 2015 and proposed Tax Rates for coming years are tabulated below

Person Current Proposed Rate (%age of Income)

TY 2018 TY 2019 TY 2020 TY 2021

Banking company 4% 4% 3% 2% 0%

Person, other than a banking, having income

equal to or Exceeding Rs.500 million

3% 3% 2% 1% 0%

Royalty or Fee for Technical services To Non-

Resident

Part 1, Division IV (Section 6)

The rate of tax imposed under section 6 on payment to non-residents shall be 15% of the gross amount of the royalty

or fee for technical services and 5% of the gross amount of the fee for offshore digital Services.

Advance tax on Imports Part II, Division II, (Section 148)

S. #. Person(s) Rates

(1) (2) Filers

(3)

Non-Filers

(4)

1 (i) Industrial undertaking importing remeltable steel

(PCT Heading 72.04) and directly reduced iron for

its own use;

1% of import value as

increased by customs-

duty, sales tax and federal

excise duty

1.5% of import value

as increased by

customs-duty, sales

tax and federal excise

duty

(ii) Persons importing potassic fertilizers in

pursuance of Economic Coordination Committee of

the cabinet's decision No. ECC-155/12/2004 dated

the 9th December, 2004;

(iii) Persons importing urea; and

(iv) Manufacturers covered under Notification No.

S.R.O 1125(I)/2011 dated the 31st December, 2011

and importing items covered under SRO

1125(I)/2011, dated the 31st December, 2011

(v) Persons importing gold and

(vi) Persons importing cottons

(vii) Designated buyer of LNG on behalf of Govt. of

Pakistan to import LNG

2 Persons importing pulses 2% of import value as


duty, sales tax and federal

excise duty

3% of import value

as increased by

customs-duty, sales


duty

3 Commercial importers covered under Notification

No. S.R.O. 1125(I)/2011 dated the 31st December,

3% of import value as


4.5% of import value

as increased by


2011. duty, sales tax and federal

excise duty

customs-duty, sales


duty

3A Persons importing coal 4% 6%

4 Ship breakers on import of ships 4.50% 6.50%

5 Industrial undertakings not covered under S. Nos. 1

to 4

5.50% 8%

6 Companies not covered under S. Nos. 1 to 5 5.50% 8%

7 Persons not covered under S. Nos. 1 to 6 6% 9%

Advance Tax on dividend & Dividend in Specie Part III, Division I (Section 150 &

236S) The rate of tax under section 150 and 236S shall be

Rate

S.

No. Person(s) Rate

a) In the case of dividends declared or distributed by purchaser of a power project privatized

by WAPDA or on shares of a company set up for power generation or on shares of a

company, supplying coal exclusively to power generation projects;

7.50%

b) Filers other than mentioned in (a) above; 15%

c) Non-filers other than mentioned in (a) above: 20%

Rate of Tax on Collective Investment Scheme, RIET Scheme or a Mutual Fund amended as follows

Stock Fund Money market Fund, Income Fund or any other

fund

Rate Rate for Filer Rate for Non-Filer

Individual 12.5% 12.5% 15%

Company 12.5% 25% 25%

AOP 12.5% 12.5% 15%

Provided further that in case of stock fund if dividend receipts of the fund are less than capital gains, the rate of

tax deduction shall be 12.5%

Provided also that the rate of tax on dividend received by an individual, from a Rental REIT Scheme shall be

7.5%

Provided that if Development of RIET Scheme with the objective of development of residential building is setup

by 30th

June 2018, Tax on dividend received from such scheme shall be reduced by 50% for three years from 30th

June 2018.

Rate of Tax on Collective Investment Scheme, RIET Scheme or a Mutual Fund for tax year 2018

Stock Fund Money market Fund, Income

Fund or any other fund

Filer Non-Filer

Individual 10% 10% 15%

Company 10% 25% 25%

AOP 10% 10% 15%

Provided further that in case of stock fund if dividend receipts of the fund are less than capital gains, the rate of


tax deduction shall be 12.5%

Provided that if Development of RIET Scheme with the objective of development and construction of residential

building is setup by 30th

June 2018, Tax on dividend received from such scheme shall be reduced by 50% for

three years from 30th

June 2018.

Tax deduction at source tax on payments for

goods , services and contracts

Part III, Division III (Section 153)

Nature of

Payment Nature of Income

Current Proposed

Filers Non-

Filers Filers

Non-

Filers

Su

pp

lies

(S

ecti

on

15

3(1

)(a)

In case of sale of rice, cotton seed oil or edible oil 1.5% 1.5% 1.5% 1.5% In case of sale of goods on amount by payable to

companies. 4%. 7% 4%. 8%

In case of supplies made by distributors of fast

moving consumer goods-for companies 2% 2% 2% 2%

In case of supplies made by distributors of fast

moving consumer goods-other than companies 2.5% 2.5% 2.5% 2.5%

In case of sale of goods -on payments to other

taxpayers i.e other than companies 4.5% 7.75% 4.5% 9%

Ser

vic

es (

Sec

tio

n 1

53(1

)(b

)

In the case of transport services 2% 2% 2% 2%

In case of other services on amount payable to

Companies

8% 14.5% 8% 14.5%

In case of other services on payments to other tax

payers i.e other than companies 10% 17.5% 10% 17.5%

In Case of persons making payments to electronic

and print media for advertising services (in case

payment to a Company)

1.5% 12% 1.5% 12%

In Case of persons making payments to electronic

and print media for advertising services (in case

payment to other that a company)

1.5% 15% 1.5% 15%

In case of contracts on payments to companies

7% 12% 7% 14%

Co

ntr

acts

(Sec

tio

n

15

3(1

) (c

) In case of contracts on payments to other tax payers

i.e other than companies

7.5% 12.5% 7.5% 15%

In case of contracts on payments to sportspersons

10% 10% 10% 10%

Advance tax on functions and gatherings Part IV, Division XI, Section 236 D

Current Rate is 5% of the amount of Fee/Charges.

Newly table inserted

Sr.

No

Rate of Tax

(1) (2) (3)

1. 5% of the bill ad valorem or Rs. For Islamabad, Lahore, Multan, Faislabad, Rawalpindi,


20,000/- per Function, whichever is

higher

Gujranwala, Bahwalpur, Sargodha, Sahiwal, Shekhupura,

Dera Ghazi Kahn, Karachi, Hyderabad, Sukkur, Thatta,

Larkana, Mirpur Khas, Nawabshah, Peshawar, Mardan,

Abbottabad, Kohat, Dera Ismail Khan, Quetta, Sibi,

Loralai, Khuzdar, Dera Murad Jamali and Turbat.

2. 5% of the bill ad valorem or Rs.

10,000/- per Function, whichever is

higher

For Cities other than those mentioned above‖;

Advance tax on sale of Certain Petroleum

Products

Part IV, Division XVA (Section 236HA)

Inserted through Fiance bill 2018

0.5% of ex-depot sale price for Filers

1% of ex-depot sale price for Non-Filers

Advance Tax on Banking Transactions

Otherwise Than Through Cash

Part IV, Division XXI (Section 236P)

The rate of tax to be collected under section 236P shall be 0.4% of the transaction for the non-filers and

0.3% for the period it deems appropriate

Advance Tax on Amount Remitted abroad

through credit, debit or prepaid cards

Part IV, Division XXVII (Section 236Y)

Inserted through Fiance bill 2018

1% of the gross amount remitted abroad for Filers

3% of the gross amount remitted abroad for Non-Filers


EXEMPTIONS AND TAX

CONCESSIONS

Second Schedule

Exemptions Granted/Amended in Part I of Second Schedule.

Clause (39A)

Part I

(Insertion)

Exemption is granted, by inserting a new clause (39A) to Part I, to the Armed

Forces Personnel for any amount paid as kit allowance, ration allowance,

special messing allowance, SSG allowance, Northern Areas compensatory

allowance, special pay for Northern Areas and height allowance.

Clause (57)

sub clause (3)

sub clauses

(xv),

(xvi)(xvii),

Part I

(Insertion)

Exemption from any income is granted to ―Khyber Pakhtunkhwa Retirement

Benefits and Death Compensation Fund‖ ―Khyber Pakhtunkhwa General

Provident Investment Fund‖ and ―Khyber Pakhtunkhwa Pension Fund‖, by

inserting new sub clauses in sub clause (3) namely (xv), (xvi) and (xvii) in

clause 57, Part I.

Clause (61)

sub clause

(xlvi),

((xlvii),

(xlviii),

(xlix), (l),

(li), (lii), Part

I (Insertion)

Exemption is granted to the ―Pakistan Sweet Home, Angels and Fairies Place‖

―Al-Shifa Trust Eye Hospital‖ ―Aziz Tabba Foundation‖ ―Sindh Institute of

Urology and Transplantation‖, ―SIUT Trust and Society for the Welfare of

SIUT‖, ―Sharif Trust‖, ―The Kidney Centre Post Graduate Institute‖ and

―Pakistan Disabled Foundation‖, by inserting new sub clauses namely (xlvi),

((xlvii), (xlviii), (xlix), (l), (li), (lii) in clause 61, Part I.

Clause(66)

sub clause

(xxxv), Part I,

(Insertion)

Exemption is granted to the ―Third Pakistan International Sukuk Company

Limited‖ by inserting new sub clause namely (xxxv) after clause (xxxiv) in

clause 66, Part I.

Clause (66)

sub clause

(xlii), (xliii),

(xliv), (xlv),

(xlvi), (l),

(li), (lii),

(liii), (liv),

(lv) & (lvi)

Part I,

(Insertion)

Exemption is granted to the ―SAARC Energy Centre‖, ―Pakistan Bar Council‖,

―Pakistan Centre for Philanthropy‖, ―Pakistan Mortgage Refinance Company

Limited‖, ―Aziz Tabba Foundation‖, ―Al-Shifa Trust Eye Hospital‖, ―Saylani

Welfare International Trust‖, ―Shaukat Khanum Memorial Trust‖, ―Layton

Rahmatullah Benevolent Trust (LRBT)‖, ―The Kidney Centre Post

Graduate Training Institute‖, ―Pakistan Disabled Foundation‖ and ―Forman

Christian College‖ by inserting new sub clause namely (xlii), (xliii), (xliv),

(xlv), (xlvi), (l), (li), (lii), (liii), (liv), (lv) & (lvi) after sub clause (xli) in clause

66, Part I.

Exemption from total income- PART I - Second Schedule


Clause(72A),

Part I

(Amendment)

Exemption is granted for any income derived by Sukuk holder in relation to the

―Third Pakistan International Sukuk Company Limited‖ by amending the

clause 72A, Part I.

This amendment was earlier notified through SRO 924(I)/2016 dated

September 30, 2017. Now included in the Bill to regularize/continue as per

provisions of section 53 of ITO, 2001, wherein it is provided that all

amendments made to the Second Schedule in a financial year shall be placed

before National Assembly otherwise shall stand rescinded.

Clause (90A)

Part I

(Insertion)

Exemption is granted to any profit on debt derived by any person on bonds

issued by Pakistan Mortgage Refinance Company to refinance the residential

housing mortgage market, for a period of five years with effect from the 1st day

of July, 2018, by inserting a new clause namely 90A after clause 90 in Part I.

Clause (100)

Part I

(Amendment)

Exemption is withdrawn by amending the clause 100 as earlier any income,

except income from trading activity, of a modaraba registered under the

Modarba Companies and Modarba (Floatation and Control) is exempted for any

assessment year commencing on or after the first day of July, 1999. This

exception to the exemption has been stretched for any manufacturing activity as

well. Now the income generated by a Modarba from manufacturing activity will

not be exempted.

Clause

(110C)

Part I

(Insertion)

Exemption is granted to any gain by a person on transfer of a capital asset,

being a bond issued by Pakistan Mortgage Refinance Company to

refinance the residential housing mortgage market, during the period

from the 1st day of July, 2018 till the 30

th day of June, 2023, by inserting a new

clause namely 110C after clause 110B in Part I.

Clause

(126BA)

Part I

(Insertion)

Exemption is granted by inserting a new clause namely 126BA after clause

126B in Part I for Profits and gains derived by a refinery set up between the

1st day of July, 2018 and the 30

th day of June, 2023 with minimum 100,000

barrels per day production capacity for a period of twenty years beginning

in the month in which the refinery is set up or commercial production is

commenced, whichever is later. Further exemption under this clause shall

also be available to existing refineries, if,

(a) existing production capacity is enhanced by at least 100,000 barrels per

day;

(b) the refinery maintains separate accounts for income arising from

aforesaid additional production capacity; and

(c) the refinery is a deep conversion refinery

Clause The rate of tax, in respect of payment to non-residents, under section 152 in the

Reduction in Tax Rates- PART II - Second Schedule


(24AA) of

Part II

(Insertion)

case of M/S CR-NORINCO JV (Chinese Contractor) as recipient, on

payments arising out of commercial contract agreement signed with the

Government of Punjab for installation of electrical and mechanical (E&M)

equipment for construction of the Lahore Orange Line Metro Train Project, shall

be 6% of the gross amount of payment. This reduction in tax rate has been

provided by inserting a new clause 24AA after 24A in Part II.

This amendment was earlier notified through SRO 44(I)/2017 dated January, 27

2017. Now included in the Bill to regularize/continue as per provisions of section

53 of ITO, 2001, wherein it is provided that all amendments made to the Second

Schedule in a financial year shall be placed before National Assembly otherwise

shall stand rescinded.

Clause (6) of

Part III

(Amendment)

The tax payable under clause (c) of sub-section (1) of section 39, in respect of any amount paid as yield or profit on investment in Bahbood Savings Certificate or Pensioners Benefit Account shall not exceed 10% of such profit. This reduction in

tax liability has also been enhanced on investment in ―Shuhada Family Welfare

Account‖ by amending clause 6 in Part III.

This amendment was earlier notified through SRO 1280(I)/2017 dated

December, 22 2017. Now included in the Bill to regularize/continue as per

provisions of section 53 of ITO, 2001, wherein it is provided that all

amendments made to the Second Schedule in a financial year shall be placed

before National Assembly otherwise shall stands rescinded.

Clause (7) of

Part III

(Insertion)

The amount of tax payable by foreign film-makers from making films in

Pakistan shall be reduced by fifty percent on income from film-making in

Pakistan. This reduction in tax liability has been provided by inserting new

clause namely clause 7 after clause 6 in Part III.

Clause (8) of

Part III

(Insertion)

The amount of tax payable by resident companies deriving income from

film-making shall be reduced by fifty percent on income from film-making.

This reduction in tax liability has been provided by inserting new clause namely

clause 8 after clause 7 in Part III.

Reduction in Tax Liability- PART III - Second Schedule


Exemption from Specific Provisions PART IV –Second Schedule

The Finance Act 2018-19 provided to amend/withdraw the following in Part IV.

Clause (1A),

Part IV

(Amendment)

Exemption from provision of clause (d) of section 46, that any profit received by a non-resident person on a security issued by a resident person shall be exempt from tax where the security is approved by the Board for the purposes of this section, shall now also be available to Sukuk issued by the Third Pakistan International Sukuk Company Limited which earlier was available to The Second Pakistan International Sukuk Company Limited. This exemption from specific provision is made available by amending clause 1A of Part IV.

Clause (11A),

Sub clause-

(xxviii) Part IV

(Insertion)

Exemption from provision of minimum tax under section 113 been provided to “Third Pakistan International Sukuk Company Limited” by inserting new sub clause namely (xxviii) after clause (xxvii) in clause 11A of Part IV.

Clause (11A),

Sub clause-

(xxix) Part IV

(Amendment)

Exemption from provision of minimum tax under section 113 been provided to,

taxpayers qualifying for exemption under clause (126) of Part-I of 2nd

Schedule

with effect from the tax year 2014, by inserting new sub clause namely (xxviii)

after clause (xxvii) in clause 11A of Part IV.

This amendment was earlier notified through SRO 29(I)/2018 dated January 12,





Clause (11E),

Part IV

(Insertion)

Exemption from provision of clause (b) of sub-section (1) of section 153, for

deduction of tax on payment for rendering or providing of services, has been

provided to payments received by Sui Southern Gas Company Limited

and Pakistan LNG Terminal Limited from Sui Northern Gas Pipelines

Limited on account of re-gasification charges been provided by inserting new sub

clause namely 11E after clause 11D of Part IV.

Clause (12A),

Part IV

(Insertion)

Exemption from withholding of tax as per provision of section 150 has been

provided, to dividend paid to Transmission Line Projects under

Transmission Line Policy 2015, by inserting new sub clause namely 12A after

clause 12 of Part IV.

Clause 36A Part

IV(Amendment)

Exemption from withholding of tax as per provisions of clause (a) of sub-section (1) of section 151, available to a person pays yield on an account, deposit or a certificate under the National Savings Scheme or Post Office Savings Account;, has been extended on yield on “Shuhada Family Welfare Account” by amending clause 36A of Part IV. This amendment was earlier notified through SRO 1280(I)/2017 dated December

22, 2017. Now included in the Bill to regularize/continue as per provisions of

section 53 of ITO, 2001, wherein it is provided that all amendments made to the

Second Schedule in a financial year shall be placed before National Assembly

otherwise shall stand rescinded.


Clause (56),

Sub clause (ia)

Part

IV(Amendment)

Exemption from withholding of tax as per provision of section 148, regarding tax

on imports which earlier was available to Bakri Trading Company Pakistan

(Pvt.) Ltd. and Overseas Oil Trading Company (Pvt.) Ltd." has now been

provided to "Bakri Energy (Private) Limited". This substitution has been made

by amending sub-clause (ia) of clause 56 of Part IV.

Clause (56B),

Part IV

(Omission)

Exemption from provision of sub-section (7) of section 148, and clause (a) of subsection (1) of section 169 available to a person being a commercial importer if the person opts to file return of total income along with accounts and documents as may be prescribed, subject to the condition that minimum tax liability under normal tax regime shall not be less than 5.5%, of the imports, if the person is a company and 6% otherwise, has been withdrawn by omitting clause 56B of Part IV.

Clause (57),

Part

IV(Amendment)

Exemption from applicability of the provisions of section 153 available to the

companies operating Trading Houses with the condition of payment of minimum tax

under section 113@ 0.5% shall continue to be taxed @ 0.5% upto the tax year 2021 and

1% thereafter.

Clause (60A),

Part IV

(Insertion)

Exemption from provision of section 148, regarding tax on imports, has been

provided by inserting new clause namely 60A of Part IV for import of plant,

machinery and equipment including dumpers and special purposes motor

vehicles imported by the following for construction of Sukkur-Multan

section of Karachi-Peshawar Motorway project and Karakorum Highway

(KKH) Phase-II (Thakot to Havellian Section) of CPEC project respectively,

namely:-

(a) M/s China State Construction Engineering Corporation Ltd. (M/s CSCEC);

and

(b) M/s China Communication Construction Company (M/s CCCC).

This amendment was earlier notified through SRO 735(I)/2016 dated August 09,





Clause (60AA),

Part IV

(Insertion)

Exemption, from provision of section 148, regarding tax on imports, has been

provided by inserting new clause namely 60AA of Part IV, for import of

construction materials or goods up to a maximum of 10,898.000 million

rupees imported by China State Construction Engineering Corporation (M/s

CSCEC) for construction of Sukkur-Multan section of Karachi-Peshawar

Motorway project of National Highway Authority under CPEC.

Clause (60B),

Part IV

(Insertion)


provided by inserting new clause namely 60B of Part IV, on import of thirty-

five armoured and security vehicles imported by or for Ministry of

Foreign Affairs, Government of Pakistan meant for security of visiting

foreign dignitaries, subject to the following conditions, namely: -


(a) that the vehicles imported under this clause shall only be used for the

security purpose of foreign dignitaries and will be parked in Central Pool

of Cars (CPC) in the Cabinet Division for further use as and when needed; and

(b) that the importing Ministry at the time of import shall furnish an

undertaking to the concerned Collector of Customs to the extent of customs-

dues exempted under this clause on consignment to consignment basis binding

themselves that the vehicles imported under this clause shall not be re-

exported, sold or otherwise disposed of without prior approval of the Board

and in the manner prescribed therefor.

This amendment was earlier notified through SRO 899(I)/2016 dated September





Clause (60C),

Part IV

(Insertion)


provided by inserting new clause namely 60C of Part IV, on import of equipment

to be furnished or installed for Rail Based Mass Transit Projects in Lahore,

Karachi, Peshawar and Quetta under CPEC.






Clause (63),

Part IV

(Amendment)

Exemption from provision of sub-section (36) of section 2 has been granted to

Lahore University of Management Sciences, Lahore by amending clause 63 of

Part IV. Now Lahore University of Management Sciences, Lahore shall be

deemed to have been approved by the Commissioner for the purpose of sub-

section (36) of section 2 notwithstanding the provisions of clause (c) of sub-

section (36) of section 2.

Clause (86)

(a)(b)(c)(d) &

(e) Part IV

(Substitution)

Exemption, from provision of section 111(Unexplained income or assets) has been

provided by substituting the current clause 86 with new clause namely

(a) The provisions of section 111 shall not apply to-

(i) investment made by an individual in a greenfield industrial undertaking

directly or as an original allottee in the purchase of shares of a company

establishing an industrial undertaking or capital contribution in an

association of persons establishing an industrial undertaking;

(ii) investment made by an association of persons in an industrial


undertaking; and

(iii) investment made by a company in an industrial undertaking—

if the said investment is made on or after the 1st day of January, 2014

and commercial production commences on or before the 30th

day of June,

2019.

(b) The concessions given in this clause shall also apply to investment made in

(i)construction industry in corporate sector;

(ii)low cost housing construction in the corporate sector;

(iii) livestock development projects in the corporate sector;

(iv) new captive power plants; and

(v) mining and quarrying in Thar coal, Balochistan and Khyber

Pakhtunkhawa.

(c) The concessions given in sub-clause (a) shall not apply to investment made

in-

(i) arms and ammunitions;

(ii) explosives;

(iii)fertilizers;

(iv)sugar;

(v)cigarettes;

(vi)aerated beverages;

(vii)cement;

(viii)textile spinning units;

(ix)flour mills

(x)vegetable ghee; and

(xi)cooking oil manufacturing;

(d) The term green field industrial undertaking shall include expansion

projects for the purposes of this clause;

(e) Immunity under this clause shall not be available to proceeds of

crime relating to offences under the following laws, namely:-

(i) Control of Narcotics Substances Act, 1997;

(ii) Anti Terrorism Act, 1997; and

(iii) Anti-Money Laundering Act, 2010.

This amendment was earlier notified through SRO 1065(I)/2013 dated December






Clause (94) of

Part IV

(Amendment)

Exemption from the applicability of clause (b) of the proviso to sub section (3) of

section 153 available to a company being a filer, subject to payment of minimum

2% income tax on turnover and engaged in providing or rendering freight

forwarding services, air cargo services, courier services, manpower outsourcing

services, hotel services, security guard services, software development services, IT

services and IT enabled services, tracking services, advertising services(other than

by print or electronic media), share registrar services, engineering services or car

rental services, tracking services, advertising services (other than by print or

electronic media), share registrar services, engineering services, car rental

services, building maintenance services, services rendered by Pakistan Stock

Exchange Limited and Pakistan Mercantile Exchange Limited shall continue to be

available for tax year 2019 to the companies providing the earlier mentioned

services and through current amendment also available to the companies services

rendered by inspection, certification, testing and training services. Provided

further that for tax year 2019, the company shall furnish irrevocable undertaking

by November, 2018, to present its accounts for audit to the Commissioner.

This clause was introduced first time through Income Tax (second amendment)

Ordinance 2015 to give relief to service sector from applicability of higher rate of

WHT as minimum tax and then continued and extended year by year.

Clause (95) of

Part IV

(Substitution)

Exemption, from provision of sections 147, 150A, 151, 152, 231A,231AA,

236A and 236K has been provided by substituting the current clause 95 to ―The

second Pakistan international Sukuk Company Limited‖ and ― T he Third

Pakistan International Sukuk Company Limited‖, as a payer.

Clause 96 of

Part IV

(Substitution)

Exemption, from the provisions of sections 147, 150A, 151, 155 and 236K

has been provided by substituting the current clause 96 to ―The second Pakistan

international Sukuk Company Limited‖ and the Third Pakistan International

Sukuk Company Limited, as a recipient.

This amendment was earlier notified through different SROs namely SRO

933(l)/2016 dated October 03, 2016, SRO 969(l)/2016 dated October 13, 2016 and

SRO 924(l)/2016 dated September 30, 2016 . Now included in the Bill to

regularize/continue as per provisions of section 53 of ITO, 2001, wherein it is

provided that all amendments made to the Second Schedule in a financial year

shall be placed before National Assembly otherwise shall stand rescinded.

Clause (100) of

Part IV

(Insertion)

Exemption, from the provisions of sections 236U (Advance tax on insurance premium) has been provided by inserting a new clause 100 to an insurance company

collecting premium under-

(a) Crop Loan Insurance Scheme (CLIS); and

(b) Livestock Insurance Scheme (LIS).







Clause (103) of

Part IV

(Insertion)

Exemption, from the provisions of section 7B (Tax on profit on debt) has been

provided by inserting a new clause 103 to yield or profit on investment in Bahbood

Savings Certificate or Pensioner‘s Benefit Account, provided that tax on the said

yield or profit on debt is paid at the rates specified in Division I of Part

I of the First Schedule subject to clause (6) of Part III.

This amendment was earlier notified through SRO 1217(I)/2017 dated November





Clause (104) of

Part IV

(Insertion)

Exemption, from the provisions of section 5A (Tax on undistributed profits) has

been provided by inserting a new clause 104 to a company where a restriction has

been imposed on distribution of dividend on account of an agreement with the

Government of Pakistan.

Clause (105) of

Part IV

(Insertion)

Exemption, from the provisions of section 177 (Audit) & 214C (Selection for

audit by the Board) has been provided by inserting a new clause 105 to a person

whose income tax affairs have been audited in any of the preceding three tax

years:

Provided that the Commissioner may select a person under section 177 for

audit, with approval of the Board.

RULES FOR THE COMPUTATION OF THE PROFITS AND GAINS

OF A BANKING COMPANY AND TAX PAYABLE THEREON

SEVENTH

SCHEDULE

Rule 1 is being amended to remove the technical anomaly where it has been provided that

provisions of Chapter VII and Chapter VIII i.e international taxation provisions and ant

avoidance provisions shall have superseding effect while computing the income of a

banking company as per Seventh Schedule to the ITO, 2001.

Rule 7C relating to charging of Super Tax on the income of banking companies is being

amended to charge the super tax from TY 2015 to TY2020 consequent to the amendment

in Section 4B and rates of super tax under Division IIA of Part I of First Schedule where

it has been amended that rate shall be reduced from current rate of 4% by 1% each year

i.e from TY2018 and no tax after TY 2020.

Other Laws & Levies

OTHER LAWS & LEVIES

1. Petroleum Products (Petroleum Levy) Ordinance, 1961 (XXV of 1961.— In the Petroleum Products (Petroleum Levy) Ordinance, 1961 (XXV of 1961), for the Fifth Schedule, the following shall be substituted, namely:-

―The Fifth Schedule

[See sections 3(1) and 7]

S.No. Petroleum Products Unit Maximum petroleum

Levy Rate (Rupees

per Unit)

Previous

Rates

(1) (2) (3) (4)

1. High Speed Diesel Oil (HSDO) Litre 30 8

2. Motor Gasoline Litre 30 10

3. Superior Kerosene Oil (SKO) Litre 30 6

4. Light Diesel Oil (LDO) Litre 30 3

5. High Octane Blending

Component (HOBC)

Litre 30 14

6. E-10 Gasoline Litre 30 9

7. Liquefied Petroleum Gas

(produced/extracted in Pakistan)

Metric

Ton

20,000 11,486

2. Health Levy on tobacco.- Pakistan Tobacco Board or its contractors, at the time of collecting

cess on tobacco, directly or indirectly, shall collect Health Levy at the rate of ten rupees per

kilogram of tobacco from every person purchasing tobacco including manufacturers of cigarettes.

3. Mobile handset levy.- (1) There shall be levied a Mobile handset levy, at the rates specified in

column (3) of the Table below, on smart phones of different categories as specified in column (2)

of the said Table, namely:-

TABLE S. No. Category of smart phone Rate of levy per

Set in rupees

(1) (2) (3)

1. Where Import value of handset (including duties and taxes) does not

exceed Rs.10,000/-

Nil

2. Where Import value of handset (including duties and taxes) exceeds

Rs.10,000 but does not exceed Rs.40,000 /-

1000


Rs.40,000 but does not exceed Rs.80,000 /-

3000


Rs.80,000

5000