PREFACE
INCOME TAX..
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SALES TAX
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PREFACE
Finance Acts 2016
This document gives a brief insight of significant amendments made through Finance Acts 2016
and SROs relating toSales Tax. This document also presents significant changes made in fiscal
laws through respective Provincial Finance Acts except for Sindh and Balochistan. Changes
made in Custom laws are also not included in this document.
In order to understand the impact of a particular change, reference should be made to the specific
wordings in the relevant statutes. Expert opinion on specific change should also be sought before
taking decision having major economic significance.
This document can also be accessed on our website www.pkf.com.pk
INCOME
TAX
Section 4B
Section 53(2)
Section 64AB
Section 59B(1A)
The Group Relief where loss of a subsidiary
company is surrendered to holding company for
set off against its profit shall now be computed
as percentage of shareholding held by the
holding company. Previously total loss available
can be surrendered to another group company.
Section 62A
A new tax credit has been introduced for
investment in health insurance for
individual and AOP being filer deriving income
from salary or business; provided the insurance
premium is paid to any insurance company
registered with SECP. The maximum ceiling of
tax credit is 5% of taxable income or Rs.100,000
whichever is less.
Section 63(2)
An amendment has been made in computation
of tax credit for investment in pension fund
whereby the additional contribution of 2% for
each year of age exceeding 40 years shall be
allowed upto 30th June 2019 provided that total
contribution shall not exceed 30% of taxable
income.
Section 64A(2)
An amendment has been made in computation
of deductible allowance for profit on debt
for house acquired through loan from banks,
NBFIs and listed companies. Now the maximum
expansion or BMR;
Tax credit for newly established
industrial undertakings; and
Section 67
Section 113
Section 68
The fair market value of any property, rent,
asset, service, benefit or perquisite shall be
determined by the Commissioner without
regard to any restriction on transfer. Now the
department can disregard the value of registered
sales deed executed on the basis of value fixed
or notified by the provincial authority for stamp
duty. The courts have disregarded departments
valuation in the presence of registered deed and
this amendment is an attempt to undo such
decisions.
Notwithstanding anything above, fair market
value of immovable property will be determined
on the basis of valuation made by a panel of
approved valuers of the State Bank of Pakistan.
Section 107
Federal Government has been empowered to
enter into international tax treaty, automatic
Section 169(3)
An incentive has been offered to non-filer to
file the tax return, where the tax collected or
deducted is final tax and higher rate of
withholding has been prescribed for non-filer.
The excess tax collected from non-filer shall be
adjustable and can be claimed as refund by filing
of tax return.
Section 236A
Tax collected on auction of lease right to
collect tolls shall be final tax.
Section 236C
Section 170(2)
Section 236U
Section 182
The banks and financial institutions are obliged
to file certain information as prescribed by the
Board for non-residents for the purpose of
automatic exchange of information under
Section 231B
Advance tax on registration of private motor
vehicles shall not be applicable to purchase of
Income Tax
Schedules
Taxable income
from
1,400,001
1,500,001
1,800,000
1,800,001
2,500,001
3,000,000
3,000,001
3,500,001
4,000,000
4,000,001
7,000,001
1st Schedule
Tax Rates for Business Individual and
AOPs
Taxable income
from
0
400,001
upto
400,000
500,000
Rate
0%
500,001
750,000
750,001
1,500,000
1,500,001
2,500,001
4,000,001
6,000,001
from
upto
400,000
Rate
upto
Rate
0%
400,001
500,000
500,001
750,000
750,001
1,400,000
and above
Rate
Banking company
35%
32%
31%
30%
Rate
Banking company
4%
3%
upto
Rate
25,000,000
10%
25,000,001
50,000,000
50,000,001
and above
Sec.
Category
Filer
Non
Filer
Rate
from
upto
200,000
0%
200,001
600,000
600,001
1,000,000
Rs.20,000 + 10 % of the
gross amount exceeding
Rs.600,000
1,000,001
2,000,000
Rs.60,000 + 15 % of the
gross amount exceeding
Rs.1,000,000
2,000,001
and above
1%
1.5%
Import of pulses
2%
3%
3%
4.5%
4.5%
6.5%
5.5%
8%
Sec.
37A
Category
Filer
Non
Filer
Stock Funds
10%
25%
covered
25%
25%
10%
18%
12.5%
16%
7.5%
11%
0%
b)
5.5%
8%
c)
6%
9%
148
above
150
Dividend income
12.5%
20%
151
Profit on Debit
10 %
17.5%
152
Payments to Permanent
Establishment of Non- Residents
4%
6%
4.5%
6.5%
8%
12%
10%
15%
2%
2%
7%
12%
7%
12%
10%
10%
supply of goods
- Others
supply of services
5%
transport services
execution of
contract
- Company
- Others
- Company
- Others
0%
5%
- Company
Sport persons
Sec.
153
Category
Filer
Non
Filer
231B
Payments to Residents
supply of goodssupply of goodsFMCG distributors
Company
Others
Company
Others
supply of services
Company
Others
transport services
execution of
contract
Sec.
Company
4%
6%
4.5%
6.5
3%
3%
3.5%
3.5%
8%
12%
10%
15%
2%
2%
7%
10%
7.5%
10%
10%
10%
Company
1.5%
12%
Others
Others
Sport Persons
231B
1.5%
15%
15%
20%
20%
20%
156A
Commission on Petroleum
products
12%
15%
231A
0.3%
0.6%
156
234
0.6%
10%
15%
8%
16%
12%
15%
Rs. 2.5
10
0.3%
236A
236B
Category
Filer
Non
Filer
10,000
20,000
30,000
50,000
75,000
100,000
150,000
200,000
above 3000
250,000 450,000
5,000
7,500
12.500
18,750
25,000
37,500
50,000
62,500
10%
5%
5,000
15,000
25,000
65,000
100,000
135,000
200,000
270,000
300,000
10%
5%
10,000
25,000
40,000
100,000
150,000
200,000
300,000
400,000
236C
Sale/transfer of immovable
property
1%
2%
236D
5%
5%
236G
0.7%
1.4%
0.1%
0.2%
0%
2%
0%
4%
Nil
0.6%
236K
Rs. 4
236P
50
100
300
100
200
500
236Q
10%
10%
5%
5%
800
1,500
1,750
2,500
3,750
4,500
10,000
1,200
4,000
5,000
7,500
12,000
15,000
30,000
General
Life insurance exceeding
0.2 million/annum
4%
4%
1%
1%
Others
0%
0%
0%
5%
236R
Insurance premium
236U
236V
Extraction of minerals
Builders
Location
For
Commercial
Buildings
Rate/Sq.ft
Karachi, Lahore
and Islamabad
Hyderabad,
Sukkur, Multan,
Faisalabad,
Rawalpindi,
Gujranwala,
Sahiwal,
Peshawar,
Mardan,
Abbottabad,
Quetta
Urban areas not
specified as
above
Rs.210
Rs.210
Rs.210
For Residential
Buildings
Area in
Sq.ft
Upto 750
7511500
1501 &
above
Rate/
Sq.ft
Rs.20
Rs.40
Rs.70
Upto 750
Rs.15
7511500
Rs.35
1501 &
above
Rs.55
Upto 750
7511500
1501 &
above
Rs.10
Rs.25
Rs.35
Land Developers
Location
For
Commercial
Plots
Rate/Sq.ft
Karachi, Lahore
and Islamabad
Hyderabad,
Sukkur, Multan,
Faisalabad,
Rawalpindi,
Gujranwala,
Sahiwal,
Peshawar,
Mardan,
Abbottabad,
Quetta
Urban areas not
specified as
above
Rs.210
Rs.210
Rs.210
For Residential
Plots
Area in
Sq.ft
Rate/
Sq.ft
Upto 750
7511500
1501 &
above
Rs.20
Upto 750
Rs.15
7511500
Rs.35
1501 &
above
Rs.55
Upto 750
7511500
1501 &
above
Rs.40
Rs.70
Rs.10
Rs.25
Rs.35
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2nd Schedule
Exemptions/Concessions
Introduced:
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Exemptions/ConcessionsWithdrawn/Restricted:
7th Schedule
Super tax chargeability has been extended to
banks in Tax Year 2016 although they were
imposed for 1 year in Finance Act 2015.
8th Schedule
Various provisions regarding withholding taxes
and submission of information to NCCPL and
tax Department have been introduced.
4th Schedule
The Income of Insurance companies from
Capital Gains on shares of listed companies,
PTCL vouchers and other products is to be taxed
at the rates applicable for the companies instead
of concessional rates.
6th Schedule
The maximum limit of contribution of
employer exempt from tax for employee has
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Sales Tax
Section 2(5AB)
Annual turnover limit for Cottage Industry for
registration under Sales Tax has been increased
from five (5) million to ten (10) million. Now
every manufacturer whose annual turnover
exceeds Ten million or its annual utility bills
exceeds Eight Hundred Thousand Rupees
shall be required to be registered for sales tax.
Sections 2(9), 6 & 7
FBR recently devised system for self-processing
of sales tax declarations to avoid subsequent
CREST related issues. In this regard certain
amendments vis-a-vis different dates for
different parts and/or annexures of the return
and payment of taxes etc. have been made in
the Act. To make it effective the buyer would not
be able claim input if the supplier has not
declared or paid the amount of tax due in his
return from July 2016. A detailed SRO
493(I)/2016 dated July 01, 2016 has been
issued by the Board.
Section 2(14)
Provincial Sales tax levied on services has been
excluded from the definition of Input Tax.
Section 11(4A)
Provision to recover withholding sales
tax from the person who failed to withhold and/or
deposit the same in the required manner has
now been introduced in law.In a number of
cases, the Tribunal has quashed the orders to
treat the registered person as assesse in default
for non-deduction of withholding tax and to
recover the same from the registered person
liable for withholding on the plea that there is no
express provision in Sales Tax Act empowering
the tax officer to treat him assesse in default.
This lacuna has been rectified.
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Section 26(2)
Provision with respect to separate return on
account of change in rate is deleted as being
redundant.
Section 30DDD
Mechanism for establishment of Directorate
3rd Schedule
5th Schedule
8th Schedule
6th Schedule
9th Schedule
Sales tax on medium priced and smart cellular
mobile phones or satellite phones has been
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S. No.
Description of goods
and
point of taxation
1.
2.
Commercial imports
0%
0% + 0%
value
addition tax
3%
3%+1%
value
addition
tax
Supplies to registered or
unregistered persons of
the said five sectors
0%
3%
Supplies to persons
outside the said five
sectors
17%
17%
0%
3%
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Rate of
Sales Tax Previous
w.e.f.July 1,
rate
2016
S. No.
Description of goods
and
point of taxation
Rate of
Sales Tax Previous
w.e.f.July 1,
rate
2016
5%
3%
5%
5%
addition
addition
tax
tax
17%
17%
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FEDERAL
EXCISE
DUTY
Section 2(8a) and 4
Certain amendments vis-a-vis different dates for
different parts and/or annexures of the return
and payment of taxes etc. have been introduced
with the objective to facilitate implementation of
self processing of FED returns data to ensure its
authenticity. FBR has been given power to set
separate date for different annexures of the FED
return.
Section 4
Provision with respect to separate return on
account of change in rate is deleted as being
redundant.
Section 19
Penalty for violation of rules made under
Federal Excise Act, 2005 previously missing has
now been introduced at Rs.5,000 or 3% of the
duty whichever is higher.
Section 38
With a view to improve the Alternate Dispute
Resolution Mechanism, following
amendments have been introduced:
Commissioner Inland Revenue is included in
committee instead of Additional Commissioner
Inland Revenue;
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1st Schedule
The rate of Federal Excise Duty (FED) on
3rd Schedule
Conditional Exemption of FED on White
Cement has been withdrawn.
Mechanism of exemptions for local and imported
supplies of materials and equipment for
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Islamabad
Capital Territory
Tax on Services
Ordinance 2001
Certain powers of Federal
Government are made applicable through
ICTO, such as:
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Construction services
Beauty parlour, clinics slimming
centres, body massage centres,
cosmetic and plastic surgery services
etc.
Freight forwarding and packers and
movers services
Services provided by specialized
workshops or undertakings
Services provided by health, fitness
centers/clubs/gyms etc.
Laundry and dry cleaning services
Services provided by property dealers
and realtors
Services provided by car and
automobile dealers
PUNJAB
FINANCE
ACT
Stamp Act 1889
Clarification is given to remove the ambiguity
regarding persons responsible for the payment
of stamp duties on contracts, beneficiaries of
court orders, gifts and interests in immovable
property. Now the duty shall be paid by the
person in whose favour contract, decree or
gift/interest in immovable property is executed.
Calculation basis for stamp duty on Power of
Attorney to sell any immovable property has
been changed to be 3% of the amount
calculated according to the value notified by the
District Collector instead of the amount of the
consideration.
Stamp duty on Power of Attorney given without
consideration to sell any immovable property
shall be Rs.1,200 in case executed between
spouses, wives or widows of the same husband
or between father, mother, children,
grandparents or grandchildren. In other cases,
duty shall be paid @2% of the amount calculated
according to the value notified by the District
Collector.
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Section 35
A Statement filed by a person in the prescribed
form shall be treated as a return if he is only
obliged to withhold/deduct tax.
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Second Schedule
Scope of following services enhanced as under
a. Hotels, clubs etc. to include services
provided on membership basis.
b. Advertisement on radio/television - to
include services showcasing of any
product or service in video programs, tv
programs, motion pictures or music
albums.
c. Advertisement services - to include
brand activation in any mode,
advertisement on moving vehicles, cell
phones, ATMs etc.
d. Construction services- to include
services for water/gas supply, roads and
bridges, electrical and mechanical
works, horticultural works, turnkey
projects etc.
e. Business support services- to include
business auxiliary services
f. Cleaning services- to include collection
and processing of domestic waste and
street cleaning services
g. Transportation services- to include
transmission lines
Construction Services provided to
Government civil works, including those of
Cantonment Boards, have now been made
taxable at prevailing rate of 16%.
Following services are made taxable with effect
from July 01, 2016:
Section 48
ENGINE CAPACITY
TAX RATES
1300 cc 1500 cc
Rs.70,000
1500 cc 2000 cc
Rs.150,000
2000 cc 2500 cc
Rs.200,000
Rs.300,000
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KPK
FINANCE
ACT
Stamp Act, 1899
Stamp fee for following has been increased in
following manner:
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Section 56
The Finance Act 2016 substituted the
requirement for the Authority to frame
regulations to define powers and pecuniary &
territorial jurisdiction of officers. Officers are to
exercise powers and discharge duties in the
manner conferred upon them under the Act and
regulations made thereunder. According to
Section 56 (2), the Authority is empowered to
impose limitations, restrictions or conditions to
discharge powers and duties by the officers
through passing of a general or a special order.
Section 56A
A new section has been inserted, after section
56 (Appointment of Officers) which prescribes
that powers of a senior officer could be
exercised or performed by a junior officer,
subject to specified conditions and limitations
imposed by the Authority. Purpose of this
amendment is to cater for shortage of officers
available with the Authority by providing legal
cover for delegation of authority.
Section 84
The Finance Act 2016 has clarified that an order
passed by the Collector or Authority under any
of the provisions of the Act as an appealable
order before the Appellant Tribunal. It means
that the taxpayer or the officer (not below the
rank of an Additional Collector) can challenge in
appeal the order of the Collector or the Authority
passed under any provision of the Act directly
before the Appellant Tribunal.
Section 114
The Finance Act has removed requirement for
the Authority to seek approval from the Council
to make regulations or specify procedures, not
inconsistent with the rules, to give effect to the
purposes of the Act except where the relevant
provisions of the Act specifically provides for
such approval to be obtained.
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