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Tax Handbook

2010

Tax Handbook 2010


An Information Guide
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Tax Handbook
2010

Preface

This handbook attempts to cater the needs of the various post budget queries forthcoming by our clients. We have attempted to apprise them
with a comprehensive explanation of the implications and effect that this Finance Bill has brought about. The handbook encompasses the
amendments in the Income Tax Ordinance, Sales Tax Act, Customs Act, Federal Excise Act and Petrolum Products (Surchage) Ordinance.
The applicable amendments in the laws after enactment are effective from July 1, 2010 unless otherwise specified.

The commentary should be read in conjunction with the applicable sections of respective Ordinances, Acts and Rules along with the text of
the Finance Bill 2010. This commentary attempts to provide a general guideline and thus should not be considered as a conclusive and
enforceable document. Professional advice should be sought before acting on any amendment in the Finance Bill or on our comments.

We hope that this Handbook enhances your perception of Budget 2010. For better understanding and convenience, we have also drafted a
Tax Planning Guide appended to this handbook.

This Handbook is the property of Horwath Hussain Chaudhury & Co. and is compiled for the exclusive use of its clients and employees.
No part of this Handbook may be reproduced except with prior permission of Horwath Hussain Chaudhury & Co.

Although best efforts have been made to ensure accuracy of the information in this Handbook, any errors and omissions are regretted.

Lahore
June 07, 2010
www.horwath.com.pk
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Tax Handbook
2010

Contents

Chapter Page
General
Budget ‘10-11 1-4

Commentary on the Finance Bill 2010


Highlights 5-8

Income Tax
Ordinance, 2001 9-17
Schedules
First 18-20
Second 20-21
Third 22
Fifth 22
Seventh 22

Sales Tax
Act, 1990 23-26
Notable Notifications 26

Federal Excise
Act, 2005 27-29
Schedules
First 29-30

Customs
Act, 1969 31-32
Schedules
First 33
Notable Notifications 34-35

Petroleum Products (Surcharge) Ordinance, 1961


Ordinance, 1961 36
Schedules
Fifth 36

Tax Planning Guide 2010


Income Tax 37-47
Sales Tax 48-49
Capital Value Tax 50
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Tax Handbook
2010

Budget, 2010-2011
Budget, 2010-2011

Salient Features of the Budget 2010-2011

The salient features of the budget 2010-11 are as follows:

Total outlay of the budget 2010-11 is Rs. 3.259 trillion (including provinces) and is about 10.7% higher than the size of budget
estimates for 2009-10

Federal budgetary outlay is proposed at Rs. 2.229 trillion which is 13.9% of the GDP

The resource availability during 2010-11 has been estimated at Rs. 2.764 trillion against Rs. 2.462 trillion in the budget estimates
of 2009-10

Net revenue receipts for 2010-11 have been estimated at Rs.1.377 trillion while the estimate for 2009-10 was Rs. 1.371 trillion

FBR collection (including Direct and Indirect taxes) is projected at Rs. 1.667 trillion during 2010-11 which is 22% higher than the
budget estimates for 2009-10 of Rs. 141.87 billion

Capital receipts (net) for 2010-11 have been estimated at Rs. 325 billion against the budget estimates of Rs. 109.5 billion in 2009-10

External receipts in 2010-11 are estimated at Rs. 386.62 billion which is lower by Rs. 123.78 billion against budget estimate of
2009-10 which was Rs. 510.40 billion

The overall expenditure during 2010-11 has been estimated at Rs. 1.998 trillion against the estimate for 2009-10 of Rs. 1.699
trillion, up about 17.6%.This includes expected defense expenditure of Rs. 442 billion which is 17% higher than the estimate of
2009-10 of Rs. 378 billion

The share of current expenditure in total budgetary outlay for 2010-11 is 72.3% as compared to 74.3% in revised estimates for
2009-10

The expenditure on General Public Services (inclusive of debt servicing, transfer payments and superannuation allowance) is estimated
at Rs. 1,387.7 billion which is 50% of the overall expenditure

The size of Public Sector Development Programme for 2010-11 is Rs. 663 billion including Federal component of Rs. 280 billion
plus Rs. 10 billion for Earthquake Reconstruction & Rehabilitation Authority (ERRA). While for “Other Development Expenditure” an
amount of Rs. 123.5 billion has been allocated

Provinces have been allocated an amount of Rs.1.033 trillion under the 7th NFC award showing a substantial increase of about 58%
compared to Rs. 655 billion estimated during 2009-10

An amount of Rs. 131 billion has been allocated for hydel, thermal and nuclear energy projects

01
Budget, 2010-2011

Comparative Budgetary Position 2010-2011 & 2009-20010

Receipts
2010-2011 2009-2010
(Rs. in Billion) (Rs. in Billion)
Net Federal Revenue Receipts (A)

Tax Revenue (FBR) 1,778.70 1,513.10

Tax Revenue (Other than FBR) - -

Non Tax Revenue 632.30 513.60

Gross Revenue Receipts 2,411.00 2026.70

Less: Provincial Share in Taxes 1,033.60 655.20

1371.50
1,377.40

Net Capital Receipts (B) 325.40 190.50

External Resources (C) 386.60 510.40

Self Financing of PSDP by Provinces (D) 341.60 173.00

Change in Provincial Cash Balance (E) 166.90 72.90

Privatization Proceeds (F) - 19.40

Bank Borrowings (G) 166.50 144.60

TOTAL RESOURCES (A+B+C+D+E+F+G) 2,764.40 2,482.30

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Tax Handbook
2010

Budget, 2010-2011

Expenditures
2010-2011 2009-2010
Current Expenditure (A) (Rs. in Billion) (Rs. in Billion)

General Public Services 1387.70 1189.10

Defence Affairs and Services 442.20 342.90

Public Order and Safety Affairs 51.30 34.60

Economic Affairs 66.90 84.90

Environment Protection 0.40 0.40

Housing and Community Amenities 1.80 1.50

Health Affairs and Services 7.30 6.50

Recreational, Culture Services 4.40 3.70

Education Affairs and Services 34.50 31.60

Social Protection 1.50 3.90

1,997.90 1,699.10
Development Expenditure (B)

Federal Government 290.00 446.00

Provincial Government 373.00 200.00

663.00 1,292.00

Other Development Expenditure (C) 123.50 157.10

Estimated Operational Shortfall (D) -20.00 -20.00

TOTAL EXPENDITURES (A+B+C-D) 2,764.40 2,482.30

03
Budget, 2010-2011

Breakup of Receipts

49.83%

11.77%

6.02% 13.98%

6.04%
12.36%

Net Revenue Receipts Net Capital Receipts External Resources Self Financing of PSDP by Provinces
Change in Provincial Cash Balance Bank Borrowings

Breakup of Expenditures

49.48% 0.26% 1.23%


0.16% 0.05%

10.34%

0.01% 13.30%
0.06%
2.39% 4.40%
1.83% 15.77% 0.71%

Defence Affairs and Services Public Order and Safety Affairs Economic Affairs Environment Protection
Housing and Community Amenities General Public Services Health Affairs and Services Recreational, Culture Services
Education Affairs and Services Social Protection Federal Government Provincial Government
Other Development Estimated Operational Shortfall

04
Tax Handbook
2010

Commentary
The Finance Bill, 2010
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Tax Handbook
2010

Finance Bill Highlights


Finance Bill Highlights
Income Tax Ordinance, 2001

Perquisite of interest-free loan to employee by the employer is no more taxable

Capital gain arising on sale of shares of a public company, vouchers of Pakistan Telecommunication Corporation, modaraba certificates
and instruments of redeemable capital is made subject to tax

10% tax credit is proposed to be introduced for balancing, modernization and replacement (BMR) and installation of plant & machinery
during Tax Year 2011 to 2015, in the tax year in which such cost is incurred

5% tax credit is proposed for companies that desire to be enlisted on registered stock exchange of Pakistan

The Bill seeks to create first charge upon the estate of the deceased individual against his tax liability

The Bill seeks to charge tax on unexplained income in the year to which such income relates

The Finance Bill seeks to levy minimum tax on those individuals and on AOPs whose annual turnover is Rs. 50 million or above; the
rate of minimum tax is proposed to be enhanced to 1%

Through the Finance Bill 2010 the parameters for revision of tax on return of total income, even during the initiation of audit
proceedings, is proposed

The Finance Bill proposes that only those taxpayers, falling under the Final Tax Regime (FTR), are required to file the wealth statement;
who have suffered tax of Rs. 35,000. Previously this limit was Rs. 25,000

The Bill proposes to restrict the deadline of filing returns for salaried individuals and non-corporate FTR cases from 30th day of
September to 31st day of August

The term “Default Surcharge” is proposed to be substituted with the term “Additional tax”

The Commissioner has been vested with the power to make provisional assessment based on facts available with the department

The Bill proposes that an Officer of Inland Revenue in the rank of Regional Commissioner or Commissioner having at least five years
experience, as Commissioner or Collector, may be appointed as Accountant Member of the Appellate Tribunal Inland Revenue

The Bill seeks to shift the tax liability of a bankrupt taxpayer to his estate in bankruptcy. The tax liability is proposed to be deemed
as current expenditure and proposed to be settled earlier than the claim of creditors

The date of payment of advance tax for a quarter, except June quarter, is proposed to be extended by 10 days

It is proposed that for the purpose of depositing advance tax the income limit shall be enhanced from Rs. 200,000 to Rs. 500,000

The Bill proposes to collect advance tax on capital gains @ 2% where shares and stocks are held for less than 6 months and @
1.5% where shares and stocks are held for more than six months

The Bill proposes to treat tax withheld on profit on debt received on Government securities as final tax

Individuals and AOPs, having turnover of Rs. 50 million or above are proposed to be made withholding agent effective from Tax Year
2009

The Bill proposes to alter the requirements of filing withholding tax statements. Certain statements are now required to be filed
quarterly instead of filing monthly and annualy

The Bill proposes to enhance the period of retention of record from 5 years to 6 years or later on finalization of legal proceedings

05
Finance Bill Highlights

The Bill proposes the Commissioner of Income Tax to be empowered to appoint the firm of Chartered Accountants to conduct tax
audit, delegate authority to collate information from taxpayers and call for the record for audit purposes without any selection criterion

The Bill proposes to keep record of active taxpayers to link up imports and exports facilitation

Penalties on certain defaults are proposed to be enhanced through the Finance Bill 2010

The Bill proposes that the Federal Government and the Federal Board of Revenue may exempt a person or class of persons from
payment of the whole or part of penalty and default surcharge

The Bill seeks to introduce authorities, functions and jurisdiction of the Directorate General of Training and Research and its hierarchical
jurisdiction

The Bill seeks to extend the scope of withholding tax @ 0.3% on banking services by specifying demand draft, payment order, online
transfer, telegraphic transfer, CDR, STDR, and RTC

The Bill seeks to declare the minimum tax collected by stock exchanges as adjustable tax

The Bill seeks to broaden the scope of withholding tax by including sale of telephone units through electronic or other medium

The Bill seeks to apply withholding tax on purchase of domestic air ticket @ 5% of gross amount of the air ticket

Threshold of basic exemption for all individuals enhanced to Rs. 300,000 whether salaried or non-salaried and regardless of gender

Bill proposes to enhance the limit of income of senior citizen from Rs.750,000 to Rs.1,000,000 to avail 50% reduction in tax liability

Rate of fixed tax for retailers is proposed to be enhanced from 0.5% to 1% for all taxpayers

Flat tax rate of 25% proposed for AOPs

Rate of small companies is proposed to be enhanced from 20% to 25%

Tax collected from members of stock exchange on commission on sale and purchase of shares and in respect of trading of shares
by such members made adjustable, instead of being treated as minimum tax

Advance withholding tax @ 5% to apply on sale by public auction of any property or goods including property or goods confiscated or attached

Withholding tax rate on imports is proposed to be increased from 4% to 5%

Rate of withholding tax on payments to non-residents not otherwise specified reduced from 30% to 20%

Withholding tax on prize on crossword puzzle is proposed to be reduced from 20% to 10%

Withholding tax @ Re.1 per kg of laden weight is proposed to be introduced for goods transport vehicles instead of slab rates

Maximum rate of advance tax on electricity bills for industrial and commercial consumers is proposed to be reduced from 10% to 5%

Provision for advances and off balance sheet items @ 5% of total advances for consumers and SMEs is proposed to be allowed to
banking companies

Individuals and AOPs are proposed to be prescribed as prescribed person

Various exemptions and concessions are proposed to rehabilitate the economy of Khyber Pakhtunkhwa, FATA and PATA

Reduced withholding tax rate facility of 1% on imports extended to large trading houses

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Tax Handbook
2010

Finance Bill Highlights

Sales Tax Act, 1990

The introduction of Value Added Tax (VAT) in place of the Sales Tax Act, 1990 is proposed to be deferred uptil October 1, 2010

Changes sought through Finance (Amendment) Ordinance, 2009 have been incorporated in the Finance Bill, 2010. These changes
primarily aim at harmonizing the nomenclature of the three domestic taxes of Pakistan

The rate of sales tax is proposed to be raised to 17% from 16%

The prescribed period of retaining relevant records has been enhanced from 5 years to the later of 6 years or finalization of any
pending proceeding before any authority including an Alternate Dispute Resolution Committee

Procedure of issuing audit report is proposed to be changed. It is proposed that audit observations for seeking explanations of the
registered person would not be issued; explanations from the registered person would be sought, if considered necessary

The concept of determining the transfer price of taxable supplies made between associates to reflect the fair market value of supplies
in an arm’s length transaction is proposed to be introduced

The Finance Bill, 2010 proposes to empower the Federal Board of Revenue to select persons or classes of persons for audit through
tax ballot and the Board is deemed to always have had this power vested in it

Specific powers of adjudication of various Inland Revenue Officers (previously the Sales Tax Officers) are proposed to be omitted

The Finance Bill, 2010 proposes comprehensive mode of serving orders, decision etc. for resident individuals, non-resident individuals,
an association of persons that is dissolved and a discontinued business through redrafting the existing legislation

The Finance Bill, 2010 proposes that the Commissioner may also appoint auditors, in addition to the Federal Board of Revenue, to
conduct special audit of records of registered persons without notifying in the official Gazette

The Commissioner is proposed to be empowered, besides the Federal Board of Revenue, to authorise officers to have free access
to business and manufacturing premises, records, stocks etc. during the course of an enquiry

Owing to the restructuring of the Inland Revenue, the Appellate Tribunal, established under Section 130 of the Income Tax Ordinance,
2001, is proposed to be referred to for all the appeals made under the Sales Tax Act, 1990

The Finance Bill, 2010 proposes to introduce the hierarchical position of “Chief Commissioner Inland Revenue” appointed under
Section 30 of the Sales Tax Act, 1990

The Finance Bill, 2010 proposes to change the nomenclature of the hierarchical structure of authorities thus streamlining it with
the other two domestic taxes of Pakistan

The Federal Board of Revenue is proposed to be empowered for selecting persons or classes of persons for audit through tax random
computerized balloting

Federal Excise Act, 2005


Domestic tax laws are harmonized to give uniform nomenclature under the jurisdiction of the Inland Revenue

The Bill seeks to withdraw restriction on adjustment of Federal Excise Duty paid on beverage concentrate

By virtue of the Finance Bill, rate of Federal Excise Duty on natural gas is increased from Rs. 5.09 per MMBTu to Rs. 10 per MMBTu

Levy of Federal Excise Duty @ Rs. 1/- per filter rod of cigarettes

07
Finance Bill Highlights

The Finance Bill proposes Federal Excise Duty on electricity intensive home appliances to be @ 10% i.e air conditioners and deep
freezers etc.

The Bill seeks to rationalize the scope of service of notice

The timeline for the retention of records and documents is enhanced for 6 years

The Board is proposed to be authorised to select cases for audit through computerized balloting

Customs Acts, 1969


The term “Appellate Tribunal” is redefined subsequent to the restructuring of the Inland Revenue

The limit of inbound or outbound precious metals and stones is proposed to be enhanced from Rs. 50,000 to Rs. 150,000 for the
sake of definition of smuggling

The regulatory duty is proposed to be included in the value of the export duty

Custom value determined is proposed to remain applicable unless revised or rescinded by the competent authority

Time to file review application against the customs value determined is proposed to be restricted to 30 days

Mis-declaration of payment of revenue through self-assessment is proposed to be treated in fiscal fraud

Legislation regarding mutilation of goods is proposed to be simplified

The Finance Bill, 2010 proposes to clarify the relevant date in connection with the date of detection on post clearance audit on
Customs Computerized System

The facility to file goods declaration after examining the imported goods is proposed to be restricted to used goods only

Time period for determining the correct amount of taxes from provisional determination is proposed to be reduced from 6 months
to 3 months

It is proposed that a person or an officer of Customs could file an appeal before the Appellate Tribunal for review of valuation
determined by the Collector or Customs or Director of Valuation

Customs duty on certain farm animals, medicines and other items is proposed to be slashed

Penalties for contravention of law are proposed to be enhanced

Petroleum Products (Surchage) Ordinance, 1961

The Bill seeks to propose that petroleum levy should be collected on rates specified in the amended 5th Schedule to the Ordinance

The Bill proposes that petroleum levy collected from March 1, 2010 to June 30, 2010 would be valid, uncollected amounts are
proposed to be collected under the provisions of this ordinance

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Tax Handbook
2010

Income Tax Ordinance, 2001


Income Tax Ordinance, 2001

Nomenclature of Inland Revenue Designated Section 2 (2)

In the wake of promulgation of Inland Revenue Ordinance, 2009, an effort is underway to integrate the domestic taxes and the Bill seeks to alter
the designation-nomenclature of taxing authorities as under:

Present Proposed

Appellate Tribunal Appellate Tribunal Inland Revenue


Chief Commissioner Chief Commissioner Inland Revenue

The proposed insertion also seeks to redefine Director General that means a person appointed as Director General of Regional Tax Office or Large
Taxpayers Unit and includes a Director General of Income Tax, Sales Tax, Federal Excise Duty (FED) and Regional Commissioner of Income Tax. In
the wake of transitional phase of integration of Inland Revenue the definition also encompasses the spheres of Sales Tax and Federal Excise Duty.

Perquisite of Interest-free Loan by Employer to Employee Excluded from Taxability Section 13(7)

Presently the loan advanced by an employer to an employee on soft terms is considered as perquisite for the employee and it is added to the taxable
income of the employee based on benchmark interest rate policy given under the provisions of the law. The Bill proposes to exclude such benefit
from the clutches of taxable income.

Capital Gains Tax on Sale of Securities Section 37A

The Bill seeks to tax the capital gain arising on sale of shares of a public company, vouchers of Pakistan Telecommunication Corporation, Modaraba
Certificates or instruments of redeemable capital in the following manner:

Proposed Rate of Tax

Holdings of stocks/shares/securities for six-months or less 10.00%


Holdings of stocks/shares/securities exceeding six-months 7.50%

However, no tax has been proposed on capital gains arising on sale of such securities held for a period exceeding 12 months. This is important to
mention here that this clause would not be applicable on banking companies.

Tax Credit for Investment on BMR Section 65B

The Finance Bill seeks to introduce some relief measures for recession stricken industry and a tax credit for BMR costs incurred by corporate sector
is proposed to be provided @ 10% in the tax year of its incurrence. This concession has been proposed to be available in between the Tax Years
2011 to 2015.

Tax Credit for Enlistment with Stock Exchange Section 65C

The Bill proposes tax credit of 5% on tax payable by the companies seeking enlistment with the registered stock exchanges of Pakistan to encourage
enlistment of corporate sector.

Tax as a First Charge Against Deceased Estate Section 87(2A)

The Bill seeks to create first charge upon the estate of the deceased individual against his tax liability.

09
Income Tax Ordinance, 2001

Taxability-Period of Unexplained Income Prescribed Section 111(2) & (4)

The income detected by the Commissioner on account of unexplained investment is treated as income in the year it is discovered; irrespective of
the year to which it actually relates. The Bill seeks to tax such income in the year to which such income, in actual terms, relates and it also implies
to empower tax authorities to weed out preceding years irrespective to any time limitation. This, however, might be contradictory with other provisions
of law.

Minimum Tax Scope Extended and Rate Enhanced Section 113

Minimum tax shows the trust deficit amongst the taxpayers and regulators and by virtue of Finance Act, 2008 a highly hailing move was taken and
this levy was abolished to encourage the taxpayers to get their version verified through proper documentation. Minimum tax was reintroduced vide
Finance, Act 2009 and presently the minimum tax is merely applicable for loss making resident companies; however, the Bill seeks to enlarge its
scope to the following categories of taxpayers:

Taxpayer Category Turnover Threshold

An individual Having turnover of Rs. 50 million or above in Tax Year


2009 or in any subsequent tax year

An AOP Having turnover of Rs. 50 million or above in Tax Year


2007 or in any subsequent tax year

Moreover, the rate of minimum tax has also been enhanced from 0.5% to 1%.

Rights of Revisions of Tax Return Elaborated Section 114(6)

The proposed substitution envisages the parameters for revision of tax on return of total income even during the initiation of audit proceedings.
The proposed amendment has been inserted vide Finance (Amendment) Ordinance, 2009, however, the sanctity of the substitution has been sought
to be reinforced vide Finance, Act 2010:

Revised Return Basis Requirement

Voluntarily revision on discovering omission or wrong statement Revised Audited Accounts/Reasons for revision

Voluntarily revision on evasion of tax Deposit of the amount of tax evaded or short paid
alongwith default surcharge

Pointed out by the Commissioner during audit proceedings Deposit of the amount of tax evaded alongwith default surcharge
and 25% of the penalties leviable

Pointed out by the Commissioner during amendment proceedings Deposit of the amount of tax evaded alongwith default surcharge
and 50% of the penalties leviable

The Bill seeks to substitute the subsection 6 of Section 114 and seeks to elaborate the procedure of revising the return of total income within the
timeframe of 5 years.

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Tax Handbook
2010

Income Tax Ordinance, 2001

Profiling of Wealth Statement Obligation for FTR Cases Section 115 (4B), 116(4)

By virtue of Finance, Act 2009 wealth statement filing was made mandatory for the taxpayers falling under final tax regime (FTR). This provision for
mandatory filing of wealth statement is capped on the criterion of tax paid under the FTR. The proposed amendment seeks to enhance the tax paid
amount from Rs. 25,000 to Rs. 35,000 whereby the taxpayer falls under Final Tax Regime (FTR).

Wealth Statement Requirement for Provisional Assessment Elaborated Section 116

The proposed amendment seeks that where a taxpayer files return in response to a provisional assessment, the wealth statement would be underpinned
with the following attachments:

Wealth reconciliation statement


An explanation of acquisition of assets specified therein

Return Filing Deadline for Salaried Individuals and Non-corporate FTR Cases Changed Section 118 (3)

The Bill proposes to change the deadline of filing of returns for salaried individuals and non-corporate FTR cases from 30th day of September to
31st day of August.

Nomenclature of Additional Tax Replaced with Default Surcharge Section 119(6)

By virtue of Finance Bill, 2010 the proposed amendment seeks to substitute the term “Default Surcharge” with the term “Additional tax”.

Best Judgement Assessment Section 121(1)

The Finance (Amendment) Ordinance, 2009 has sought omission of certain provisions of law as old concept of provisional assessment has been
revived. This Section envisages a situation where a person has not filed a return when he was required to file it or in response to a notice issued
by the Commissioner to file return, or is trying to avoid tax by not filing returns, or has failed to produce accounts, documents or evidence when
called for by the Commissioner or any person employed by a firm of Chartered Accountants.

The proposed insertion seeks to include the Cost and Management Accountants for the purpose of exercising the powers of outsource tax audits.

Amendment of Assessment Section 122 (3)(4)

The Finance (Amendment) Ordinance, 2009 inserted a new sub-section (6A) in section 114 and thus subsequent amendment is made in Section
122(3). The revised return has also been brought under the purview of amendment of the Universal assessment Scheme.

The original order whereby termed as prejudicial to the interest of revenue may also be sought to be re-amended by initiating the re-amendment
proceedings.

The proposed insertion seeks to re-amend the order whereby an appeal is pending or decided on any point that is termed as prejudicial to the
interest of revenue on the matter that has not taken at the appellate forum.

Procedure of Provisional Assessment Prescribed Section 122C, 137

The proposed amendment seeks to insert the new provision regarding provisional assessment whereby a person fails to file the return of total income.
The Commissioner has been vested with the power to make provisional assessment based on facts available with the department. This assessment
is proposed to remain provisional for 60 days and it would be termed as permanent assessment until the taxpayer files the return of total income
alongwith the copy of the wealth statement and an explanation of acquisition of assets.

The corresponding change has been sought whereby the provisional assessment takes into effect after the expiry of 60 days to recover the tax
imposed thereon.

11
Income Tax Ordinance, 2001

Criteria of Appointment of Accountant Member of Appellate Tribunal Relaxed Section 130

The Bill proposes to relax the criteria of appointment of Accountant Member of the Appellate Tribunal whereby an Officer of Inland Revenue in the
rank of Regional Commissioner or Commissioner having at least five years experience as Commissioner or Collector may be appointed as Accountant
Member of the Appellate Tribunal Inland Revenue.

Estate in Bankruptcy Section 138B

The Bill seeks to insert a new section whereby if a taxpayer becomes bankrupt, his tax liability would shift to the estate in bankruptcy and that tax
liability shall be deemed to be the current expenditure in the operations of the estate in bankruptcy and would be settled earlier than the claim of
creditors.

Advance Tax Payment Criteria of Tax vis-a-vis Turnover Introduced for AOPs Section 147(2)(4)(6A)

The Bill proposes to reintroduce the criteria of advance tax payment on the basis of turnover for an AOP in connection with a company and there is
no threshold for payment of advance tax.

Period Quarter Payment Date

1st of July to 30th September September quarter On or before the 25th of September

1st October to 31st December December quarter On or before the 25th of December

1st January to 31st March March quarter On or before the 25th March

1st April to 30th June June quarter On or before the 15th of June

Advance Tax Payment Threshold Enhanced for Individuals Section 147(2)

By virtue of the Finance Bill, 2010, the proposed amendment seeks to rationalize the advance tax payment criteria for business individuals by
enhancing the income limit from Rs. 200,000 to Rs. 500,000.

Advance Tax on Capital Gains Section 147(1), (5B)

The Bill proposes to collect advance tax on capital gains in the manner given as under:

Holding Period Proposed Rate of Tax

Holdings of stocks/shares/securities for six-months or less 2.0%


Holdings of stocks/shares/securities exceeding six-months 1.5%

Advance tax shall be payable by the taxpayer to the Commissioner within seven days after the close of each quarter.

Tax Collected on Edible Oil Imports Be Treated as Minimum Tax Section 148 (7)

The proposed amendment seeks to remove anomaly so as to treat the tax colleted at the port on import of edible oil and packing material as a
minimum tax meaning thereby the tax cases of such taxpayers would be processed under normal law and tax liability would be determined under
the clutches of normal law, however, it would not be less than the tax collected at source.

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Tax Handbook
2010

Income Tax Ordinance, 2001

Finality of Withholding Tax on Profit on Debt on Government Securities Section 151(4)

The Bill proposes to treat withholding tax on profit on debt received on Government securities as final tax liability inter-alia:

Debt instruments
Government Securities
Treasury Bills
Pakistan Investment Bonds

Individuals Prescribed as Prescribed Persons Section 153 (9)

The Bill proposes to make individuals and AOP liable, having turnover of Rs. 50 million or above in Tax Year 2009 or in any subsequent year, as
prescribed person to withhold tax at source on account of payments of supplies, services and contracts to take it as a measure to expand the tax
base. The Bill seeks to include non-corporate taxpayers in the definition of prescribed person to make them liable to deduct tax whilst making payment
on account of supply of goods, services and contracts based on the following criteria:

Timeframe for Filing of Withholding Tax Statements Rationalized Section 165

The Bill proposes to simplify the compliance procedure of filing of withholding tax statements and proposes to substitute monthly statements with
quarterly statements. It also proposes to eliminate the filing of annual withholding tax statement. The proposed timeline of filing of statements would
be as under:

Period Quarter Payment Date

1st of July to 30th September September quarter On or before the 20th day of October

1st October to 31st December December quarter On or before the 20th day of January

1st January to 31st March March quarter On or before the 20 th day April

1st April to 30th June June quarter On or before the 20th day of July

Assessment on Final Tax Regime Explained Section 169

The Bill proposes to insert explanation that an assessment shall be taken as original assessment when the Commissioner shall be taken to have
made an assessment of income for that tax year, and the tax due thereon equal to those respective amounts specified in the return or statement
to treat it as an assessment Order.

Timeframe for Retention of Record Extended Section 174(3)

The Bill proposes to enhance the period of retention of record from 5 years to 6 years; however, in case of legal proceedings the limitation on
retention of record would not be restricted for 6 years.

Commissioner Empowered to Appoint CA Firm as Tax Auditors Section 176(c)

By virtue of the proposed insertion the Commissioner of Income Tax has been sought to be empowered to appoint the firm of Chartered Accountants
to conduct the tax audit and to delegate the authority to collate information from taxpayers as required under the Income Tax Ordinance, 2001.

13
Income Tax Ordinance, 2001

Audit Initiation Mode Modified Section 177

The Finance Bill, 2010 proposes to extend the scope for the Commissioner to call for the record for audit purposes without any selection criterion.
The Bill seeks to substitute the prevailing provisions of initiating the audit proceedings under some criterion, however, the proposed substitutions
seeks to grant extensive powers to the Commissioner to pick the case for audit purposes on any unfounded reasons. In accordance with the scheme
of the Income Tax Ordinance, 2001 the provisions of law in relation to audit and amendment proceedings should be transparent for taxpayers.

By virtue of subsection (6) the Commissioner is empowered to amend the original order on obtaining explanations from taxpayers on all the issues
arising from the audit proceedings.

In case any taxpayer is unable to provide the record that is required to be maintained under the provisions of the Income Tax Ordinance, 2001,
the Commissioner is empowered to make best judgment assessment and the original assessment would be treated as null and void ab-initio.

Active Taxpayers Record to be Maintained Section 181A

The Bill proposes to keep record of active taxpayers to link up imports and exports facilitation.

Penalties on Defaults Enhanced Section 182

Penalties on certain defaults are proposed to be enhanced as under:

Section of the
Income Tax Default Rate / Extent of Penalty
Ordinance, 2001
114, 115, 116 and 165 Failure to furnish a return or statement of wealth or 0.1% of the tax payable for each day of default
quarterly statements Minimum penalty Rs. 5,000 & Maximum penalty
25% of the tax payable

Section 174 and Chapter VII Failure to issue cash memo or invoice or receipt Rs. 5,000 or 3% of the amount of tax,
of the Income Tax Rules, whichever is higher
2002 (i.e. Rule 34, 35, 36,
37, 38 and 39)

181 Failure to make application for registration & Rs. 5,000


Failure to notify changes of material nature in the
particulars of registration

137 Failure to deposit amount of tax due or any part thereof 5% of tax due
within stipulated time Additional penalty of 25% of tax in default
First default Additional penalty of 50% of tax in default
Second default
Third and subsequent defaults

137 Repeating erroneous calculations in returns for more Rs. 5,000 or 3% of the amount of tax,
than one year and tax paid is less than the actual whichever is higher
amount

174 Failure to maintain records other than during the course Rs. 10,000 or 5% of the amount of tax,
of tax audit whichever is higher

14
Tax Handbook
2010

Income Tax Ordinance, 2001

Section of the
Income Tax Default Rate / Extent of Penalty
Ordinance, 2001
177 Failure to maintain records during the course of tax
audit
First notice Rs. 5,000
Second notice Rs. 10,000
Third notice Rs. 50,000

176 Failure to furnish information when notice to provide


such information is served
First default Rs. 5,000
Subsequent default Rs. 10,000

114, 115, 116, 174, 176, Furnishing false, misleading or incomplete information Rs. 25,000 or 100% of the amount of tax
177 and general in any form for any purpose other than where an shortfall whichever is higher
assessment order is deemed under Section 120

175 and 177 Denying or obstructing the access of the Commissioner Rs. 25,000 or 100% of the amount of tax
or any authorized officer to the premises, place, accounts, shortfall whichever is higher
documents, computers or stocks

20, 111 and general Willful concealment of income, furnishing inaccurate Rs. 25,000 or amount equal to tax evaded
particulars of income, suppressing income, claiming whichever is higher
deduction of fictitious expense, or unexplained income

209, 210 and general Obstructing Income Tax Authority in the performance Rs. 25,000
of official duties

General Contravention of any provision of the Income Tax Rs. 5,000 or 3% of the amount of tax,
Ordinance, 2001 for which no penalty is mentioned whichever is higher

148, 149, 150, 151, 152, Failure to collect, deduct and pay tax in accordance Rs. 25,000 or 10% of the amount of tax,
153, 153A, 154, 155, 156, with the requirements of the Income Tax Ordinance, whichever is higher
156A, 156B, 158, 160, 2001
231A, 231B, 233, 233A,
234, 234A, 235, 236, 236A

These penalties are proposed to be paid upon order in writing passed by the Commissioner, Commissioner (Appeals) or the Appellate
Tribunal

A copy of order passed by the Commissioner (Appeals) or the Appellate Tribunal is proposed to be served on the Commissioner
and the recovery of penalty is proposed to apply as if the order was made by the Commissioner

Where the amount of tax payable is reduced, the amount of penalty is proposed to be reduced accordingly

Exemption from Penalty and Default Surcharge Section 183


The Finance Bill 2010 proposes that the Federal Government and the Federal Board of Revenue may exempt a person or class of persons from
payment of the whole or part of penalty and default surcharge payable under the Income Tax Ordinance, 2001. It is proposed that the reasons of
such an order shall be reduced to writing and certain conditions and limitations may be imposed. Such an order shall be notified in the Official Gazette.

15
Income Tax Ordinance, 2001

Trial by special judge Section 203


The Finance Bill 2010 proposes certain changes in the trial by and appointment of special judges as under:

The references to “Pakistan Criminal Law (Amendment) Act, 1958” is proposed to be removed

It is proposed that the Federal Government may, by notification in the Official Gazette, appoint one or more special judges and specify
the territorial limits, if more than one special judge is appointed

It is proposed that the special judge be a present or ex-Sessions judge and would have jurisdiction over all the offences covered in
Part XI of Chapter X except for “prosecution for unauthorised disclosure of information by a public servant” (i.e. Section 198)

It is proposed that the provisions of the “Code of Criminal Procedures, 1898”, except those of Chapter XXXVIII shall be applicable
to the court of the special judge

The court of the special judge shall be deemed to be a Court of Sessions and the person conducting prosecutions before the court
of a special judge be deemed to be a public prosecutor

It is proposed that the Federal Government may direct the transfer the case, at any stage of trial, from the court of one special judge
to the other

It is proposed that the special judge may or may not recall any witness who has given evidence in the case before transfer. The
special judge is proposed to have accepted the evidence already recorded by the court from where the case has been transferred

Hierarchical Jurisdiction of Income Tax Authorities Section 207

The Bill seeks to synchronize the nomenclature of tax authorities in the wake of integration of domestic tax laws with the concept of Inland Revenue
and the vertical hierarchical jurisdiction of the tax authorities as under:

The Federal Board of Revenue


Chief Commissioner Inland Revenue
Commissioner Inland Revenue
Commissioner Inland Revenue (Appeals)
Additional Commissioner Inland Revenue
Deputy Commissioner Inland Revenue
Assistant Commissioner Inland Revenue
Inland Revenue Officer
Inland Revenue Audit Officer
Superintendent Inland Revenue
Inspector Inland Revenue
Auditor Inland Revenue

It also reiterates that the reference made to the older nomenclature would be construed as reference made to the proposed nomenclature:

The Chief Commissioner Inland Revenue and the Commissioner Inland Revenue (Appeals) shall be subordinated to the Federal Board
of Revenue

The Commissioner Inland Revenue shall be subordinated to the Chief Commissioner Inland Revenue

The Additional Commissioner Inland Revenue shall be subordinated to the Commissioner Inland Revenue

Deputy Commissioners Inland Revenue, Assistant Commissioner Inland Revenue, Superintendent Inland Revenue, Inland Revenue
Audit Officer, Inland Revenue Officer and Officer of Inland Revenue with any other designation shall be subordinated to the Additional
Commissioner Inland Revenue

16
Tax Handbook
2010

Income Tax Ordinance, 2001

This proposed hierarchy shall harmonize the authorities of the three domestic taxes of Pakistan. The Bill also seeks to make corresponding changes
of the nomenclature wherever it is needed.

Board Empowered to Select the cases for Audit Purposes Section 235

The Bill proposes to insert a new section that seeks to empower the Board to select the cases for audit of income tax affairs through computerized
balloting randomly or parametrically as the Board may deem fit.

Directorate General of Training and Research Section 229

The Bill seeks to introduce the authorities, functions and jurisdiction of the Directorate General of Training and Research and its hierarchical jurisdiction
would be as under:

Director General
Additional Director General
Deputy Director General
Assistant Director General

The Bill seeks to empower the Board for specifying the functions, jurisdiction and powers of the Directorate of Training (DOT).

Scope of Withholding Tax on Bank Transactions Broadened Section 231AA, First Schedule
Part IV Division VIA

Currently the withholding tax is applicable on the cash withdrawals @ 0.3%. The Bill proposes to extend the scope of withholding tax @ 0.3% on
transaction in bank if the payment for withdrawal is made through certain modes of banking transactions including Demand Draft, Payment Order,
Online Transfer, Telegraphic Transfer, CDR, STDR, and RTC. The Bill seeks to put cap, if the sum of transaction in a day exceeds Rs. 25,000 for
applicability of withholding tax.

The Bill seeks to insert the following exceptions for inapplicability of withholding tax:

The Federal Government or a Provincial Government


A foreign diplomat or a diplomatic mission in Pakistan
On production of exemption certificate from the Commissioner

Minimum Tax to Be Treated as Adjustable Tax Collected by Stock Exchanges Section 233A

The Bill seeks to declare the minimum tax collected by Stock Exchanges as Adjustable Tax. This is a relieving step enabling the taxpayers to adjust
the tax deducted against their tax liability.

Withholding Tax on Telephone Usage Broadened Section 236A

The Bill seeks to broaden the scope of withholding tax on the sale of units through any electronic medium or whatever form in the net of withholding
tax.

Advance Tax on Purchase of Air Ticket Section 238B, First Schedule


Part IV Division IX

The Bill proposes to insert new section that seeks to apply withholding tax @ 5% on the purchase of gross amount of domestic air ticket.

17
Income Tax Ordinance, 2001

First Schedule
Part I (Rates of Tax)

Basic Exemption Limit for Salaried Tax Payers Enhanced Division I, Clause 1A

The Bill proposes to enhance the basic exemption limit for salaried taxpayers from Rs. 200,000 to Rs. 300,000. The applicable tax rates varying
from 0.75% to 20% according to the prescribed salary slabs have remained unchanged.

Taxability of Salary Income

Taxable Tax Liability for the Tax Year 2009 Average Tax Rate
Salary Pre-Budget Post-Budget Pre-Budget Post-Budget
Increase/(Decrease)
Rs. Rs. Rs. Rs. % %
300,000 - - - - -
350,000 2,625 2,625 - 0.75% 0.75%
400,000 6,000 6,000 - 1.50% 1.50%
450,000 11,250 11,250 - 2.50% 2.50%
550,000 19,250 19,250 - 3.50% 3.50%
650,000 29,250 29,250 - 4.50% 4.50%
750,000 45,000 45,000 - 6.00% 6.00%
900,000 67,500 67,500 - 7.50% 7.50%
1,050,000 94,500 94,500 - 9.00% 9.00%
12,000,000 120,000 120,000 - 10.00% 10.00%
1,450,000 159,500 159,500 - 11.00% 11.00%
1,700,000 212,500 212,500 12.50% 12.50%
1,950,000 273,000 273,000 - 14.00% 14.00%
2,250,000 337,500 337,500 - 15.00% 15.00%
2,850,000 456,000 456,000 - 16.00% 16.00%
3,550,000 621,250 621,250 - 17.50% 17.50%
4,550,000 841,750 841,750 - 18.50% 18.50%
8,650,000 1,643,500 1,730,000 86,500 19.00% 20.00%

Three changes have been made in the proposed rates of taxation for salaried individuals;

Exemption limit has been increased from Rs. 200,000 to Rs. 300,000.
Different exemption limits for male and female employees have been unified.
Salaries between Rs. 4,550,000 and Rs. 8,650,000 are proposed to be taxed at 20% which was 19 % last year.

Graphical Representation
2,000,000
Tax Liability (Rs.)

1,800,000

1,600,000

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0
0

0
0

0
0

0
0

0
0

00

00

00

00

00

00

00

00

00
00

00
00

00

00
00

00
00

00

0,

0,

0,

0,

0,

0,

0,

0,

0,
0,

0,
0,

0,

0,
0,

0,
0,

0,

05

45

70

95

25

85

55

55

65
55

0
65

75

90
30

45
35

40

,0
1,

1,

1,

1,

2,

2,

3,

4,

8,
12

Pre-Budget Tax Liabilty Post-Budget Liability


Taxable Salary (Rs.)
18
Tax Handbook
2010

Income Tax Ordinance, 2001

Basic Exemption Limit for Non-Salaried Taxpayers Enhanced Division I, Clause 1

The Bill proposes to enhance the basic exemption limit for non-salaried taxpayers from Rs. 100,000 to Rs. 300,000. The applicable tax rates are
varying from 7.5% to 25% according to the table in First Schedule Part I of Division-I to the Income Tax Ordinance, 2001.

Rate of Minimum Tax on Retailers Increased Division IA

The Finance Bill, 2010 proposes to increase minimum tax under the retail tax scheme from 0.50 % to 1 % of the turnover for the retailer whose
annual turnover is less than 5 million.

Flat Tax Rate on Association of Person (AOP) Division IB

The Bill proposes to implement the flat tax rate of 25% on association of persons retrospectively from the tax year 2010 and onwards.

Tax Rate for Small Company Increased Division II Clause (iii)

The Bill proposes to increase the tax rate of small company, having turnover upto Rs. 250 million or more, from 20.00% to 25.00 % from the tax
year 2011.

Rate of Tax on Capital Gain on Sale of Securities Division VII

The Bill seeks to levy the tax on sale of securities and shares in order to broaden the base of income tax at the following rates:

Holding period Upto 6 months From 6 to 12 months


Tax Year Tax Rates

2010 10.00% 7.50%


2011 10.00% 8.00%
2012 12.50% 8.50%
2013 15.00% 9.00%
2014 17.50% 9.50%
2015 - 10.00%

The rate for Tax Year 2015 under the category “upto 6 months” is missing and needs to be clarified.

Part II (Rates of Advance Tax)

Rate of Withholding Tax on Imports Increased

The Bill seeks to enhance the rate of advance tax from 4% to 5% on all imports under Section 148 of the Income Tax Ordinance 2001 that would
be treated as final tax.

19
Income Tax Ordinance, 2001

Part III (Deduction of Tax at Source)

Rate of Tax Payment to Non-Residents on Non-Specific Payments Curtailed Division II Clause 2

The Bill seeks to curtail the tax rate form 30% to 20% on non-specific payments made to non-resident persons.

Rate of Tax on Cross Word Puzzle Winnings Minimized Division VI

The Bill seeks to reduce the withholding tax rate on cross-word puzzle from 20% to 10%.

Part IV (Deduction or Collection of Advance Tax)

Flat Rate of Tax on Motor Vehicle Division III

The Bill seeks to introduce flat rate of Rs. 1 per kilogram of the laden weight of goods transport vehicle in place of existing slab rates.

Advance Tax on Electricity Bills for Industrial and Commercial Consumer Reduced Division IV

The Bill seeks to give relief to Industrial and commercial consumer by reducing the withholding tax rate from 10% to 5% percent under Section 235
of the Income Tax Ordinance, 2001.

Second Schedule
(Exemption & Tax Concessions)

Part I (Exemption from Total Income)

The Second Schedule relates to specific exemptions granted in respect of total income. This Bill proposes to exempt or extend the scope
of exemption in respect of the following sources of income:

Exemption of Educational Institution in FATA & PATA Clause 92A

The Bill seeks to provide exemption for income of educational institutions established in the Most Affected and Moderately Affected Areas of Khyber
Pakhtunkhwa, PATA and FATA for two years ending on 30th June 2011.

Withdrawal of Exemption Available to ICP Clause102

The Finance Bill seeks to withdraw the exemption available to Investment Corporation of Pakistan (ICP) on dividends received by it from any other
company since the ICP merged with Industrial Development Bank of Pakistan (IDBP).

Withdrawal of Exemption on Capital Gain Clause110

The Finance Bill seeks to withdraw exemption on capital gains arising from sale of Modaraba certificates, securities listed on Stock exchange and
Pakistan Telecommunication vouchers issued by Government of Pakistan subject to holding of such stocks under one year time.

20
Tax Handbook
2010

Income Tax Ordinance, 2001

Withdrawal of Exemption on Gain of Transfer of Capital Assets Clause110A

The Finance proposes to withdraw exemption on transfer of a capital asset from existing stock exchanges to newly corporatized stock exchange.

Part II (Reduction in Tax Rates)

Reduction in Tax Rate for Large Import Houses Clause 24A

The Finance Bill seeks to extend concession of 1% to large distribution houses on fulfilling conditions laid out for a large import house.

Part III (Reduction in Tax Liability)

Limit of Income of Senior Citizen Enhanced Clause 1A

The Finance Bill seeks to enhance the limit of taxable Income (other than that falling in final tax regime) of senior citizen from Rs.750, 000 to
1,000,000 with a view to reduce the tax liability by 50%.

Exemption to Affected Arrears of Khyber Pakhtunkhwa FATA/PATA Clause 10A

The Finance Bill seeks to provide;

Exemption from penal provisions and default surcharge to businesses located in Most and Moderated Areas of Khyber Pakhtunkhwa
FATA/PATA provided that principal amount tax due is paid by June 30, 2010.

Exemption on tax collection at source on electricity bills for commercial and industrial consumers till June 30, 2011.

Exemption of tax collection on export proceeds to exporter based in Most and Moderated Areas of Khyber Pakhtunkhwa FATA/PATA
till June 30, 2011.

Exemption on tax collection at source on import of plant and machinery for establishment of businesses in Most and Moderated Areas
of Khyber Pakhtunkhwa FATA/PATA has also been provided till 30.06.2011 but this concession will not available to manufacturers
of cement, sugar, cigarette and beverages.

For this purpose the Most Affected Areas means district Peshawar, Malakand Agency and district of Sawat, Buner, Shangla, Upper Dir, Lower Dir,
Hangu, Banny, Tank, Kohat and Chitral and most affected areas means districts of Charsadda, Nowshera, DI Khan Batagram, Lakki Marwat, Swabi
and Mardan.

Tax Exemption for Foreign Expert (Clause 73)

The Finance Bill 2010 propose to exempt income tax payable by foreign experts to mitigate part of the cost of obtaining foreign support to fill
productivity gap provided that such expert is engaged after approval of Ministry of Textile Industry.

21
Income Tax Ordinance, 2001

Third Schedule
(Depreciation, Initial Allowance & Pre-Commencement Expenditure)

Depreciation on Ramp Part I (Sub-Clause-IV)

The Finance Bill 2010 seeks to provide 100% depreciation for ramps of value not exceeding Rs. 250,000 each and built to provide access to disabled
persons.

Fifth Schedule
(Rules for the Computation of the Profits and Gains from the Exploration and Production of Petroleum)

Decommissioning Cost for the Purpose of Depreciation (Sub-Clause-IV)

The Finance Bill 2010 seeks to provide de-commissioning cost over a period of ten years or life of development and production or mining lease
whichever is less. The Bill proposes such provision w.e.f the year of commencement of commercial production or July 1, 2010 if commencement of
production took place earlier. Certification to this effect shall be acquired by a Chartered Accountant or a Cost Accountant.

Seventh Schedule
(Rules for Taxation of Banking Company)

Restriction for SMEs Regarding Provision for Bad Debts Against Advances (Clause 1Sub-Clause-c)

The Finance Bill 2010 seeks to introduce the provision for bad debts for advances and off balance sheet items at 5% of total advances for consumers
and SMEs (Small and medium enterprises) for restriction of claim of bad debts.

Transactional Provisions Prescribed (Rule 8A)

The Finance Bill 2010 seeks to provide for deduction for irrecoverable or doubtful advances, upto the tax year 2008 in the tax year
in which these advances were actually written off.
It is also proposed that all the write backs incorporated in the tax year 2009 shall not be accounted for in computing the taxable
income of that year.
The provisions of this schedule are not proposed to be applicable for assets acquired or given by a banking company under finance
lease upto he tax year 2008. It is proposed that unabsorbed depreciation of such asset would be allowed for setting off against
the lease rental income of such asset only.

22
Tax Handbook
2010

Sales Tax Act, 1990


Sales Tax Act, 1990

Nomenclature of “Appellate Tribunal” Re-designated Section 2(1), 46(2)

Owing to the structural changes in the Federal Board of Revenue and constitution of the Appellate Tribunal under Section 130 of the Income Tax
Ordinance, 2001, the Finance Bill, 2010 proposes to refer to the aforesaid Tribunal and Sections 131 and 132 of the Income Tax Ordinance, 2001
in place of the Customs, Excise and Sales Tax Appellate Tribunal constituted under Section 194 of the Customs Act, 1969 and Sections 194A, 194B
and 194C of the Customs Act, 1969.

Designation-Nomenclature of Authorities Integrated Section 4A, 25A, 26(3)

The Finance Bill, 2010 proposes to introduce the appointment of “Chief Commissioner Inland Revenue”. By virtue of the proposed substitutions the
Bill seeks to replace the designation-nomenclature of authorities in line with the Inland Revenue concept. The designation-nomenclature has been
sought to bring in uniformity with the authorities given in other domestic taxes and such substitution is also sought to be made wherever it is occurring
in this Act.

In order to seek harmony in nomenclature of authorities of all the three domestic taxes of Pakistan, the Finance Bill, 2010 proposes to change the
word “Collectorate” with “Large Taxpayer Unit or Regional Tax Office”. Likewise it is proposed to replace the words “Collector of Sales Taxes” with
the words “Commissioner Inland Revenue”.

Sales Tax Rate Enhanced Section 3

The Finance Bill, 2010 proposes to enhance the rate of sales tax from 16% to 17%.

Owing to the deferment of VAT uptil October 1, 2010, the Bill seeks to enhance GST rate by 1%. VAT aimed at increasing the tax base and
simultaneously increases the revenue of the FBR. In the absence of this move, the proposed increase in rate shall aide the Board to achieve its
target revenue. However, with the promulgation of VAT, the existing rate of 17% shall be dropped to 15%.

Timeline of Retaining Records Enhanced Section 24

The Finance Bill, 2010 proposes to enhance the period of retaining record and documents from 5 years to 6 years or finalization of any pending
proceeding before any authority including an Alternate Dispute Resolution Committee, if later than 6 years.

Procedure of Issuing Audit Report Amended Section 25, 26

The Finance Bill, 2010 proposes to amend the procedure of issuing audit report as under:

23
Sales Tax Act, 1990

Procedure of Issuing Audit Report

Prevailing Procedure Proposed Procedure

Section 25(3) The Assistant Commissioner (Audit) to issue the audit observations Audit observations shall not be issued

Section 25(3) Contraventions under the Sales Tax Act, 1990, its associated rules No reference made to this
and the amount of tax evaded to be included in the report

Section 25(3) The audit observations to be collected on the basis of the scrutiny Audit shall be conducted in accordance with
of records as prescribed under the Sales Tax Act, 1990, its the provisions of the Sales Tax Act, 1990
associated rules or directions given by the Federal Board of
Revenue

Section 25(3) The registered person is to submit his viewpoint in writing within Soliciting the explanation of the registered
15 days of the receipt of the audit observations person may not be considered necessary

Section 25(4) If the registered person does not submit his viewpoint in writing The Officer of the Inland Revenue shall issue
within 15 days of the receipt of the audit observations or his the audit report after the completion of the
response seems unsatisfactory, the Assistant Commissioner shall audit under Section 11 or Section 36 of
issue the audit report the Sales Tax Act, 1990

Section 25(4) The audit report shall specify the amount of tax, charge not levied, Amount of tax may be imposed including
charge that has been short levied, erroneous refunds or violation default surcharge, penalty and recovery of
of any provision of Sales Tax Act, 1990 and its associated rules erroneous refunds

Determination of Transfer Pricing With Respect to Associates Section 25AA

In line with the concept of determining transfer price of transactions between associates as given in the Income Tax Ordinance, 2001, the Finance
Bill, 2010 proposes to introduce the powers of Commissioner or an Officer of Inland Revenue to determine the transfer price of taxable supplies
made between associates to reflect the fair market value of supplies in an arm’s length transaction.

Hierarchical Restructuring of Authorities Section 30 & Section 72A

The Finance Bill, 2010 proposes to change the nomenclature of the hierarchical structure of authorities as under. It also reiterates that the reference
made to the older nomenclature would be construed as reference made to the proposed nomenclature:

The Chief Commissioner Inland Revenue and the Commissioner Inland Revenue (Appeals) shall be subordinated to the Federal Board
of Revenue

The Commissioner Inland Revenue shall be subordinated to the Chief Commissioner Inland Revenue

The Additional Commissioner Inland Revenue shall be subordinated to the Commissioner Inland Revenue

Deputy Commissioners Inland Revenue, Assistant Commissioner Inland Revenue, Superintendent Inland Revenue, Inland Revenue
Audit Officer, Inland Revenue Officer and Officer of Inland Revenue with any other designation shall be subordinated to the Additional
Commissioner Inland Revenue

This proposed hierarchy shall harmonise the authorities of the three domestic taxes of Pakistan

24
Tax Handbook
2010

Sales Tax Act, 1990

Commissioner Restricted to Delegate Power Section 32

The Finance Bill, 2010 proposes to restrict the Commissioner to authorise either of his subordinate officers to exercise any of his powers or the
powers of any other Officer of the Inland Revenue, within a specified area under the Sales Tax Act, 1990. The proposed amendment would mean
that the Federal Board of Revenue would be the only authority to delegate powers amongst different officers of the Inland Revenue.

Commissioner Authorized To Outsource Tax Audits Section 32A

The Finance Bill, 2010 proposes that the Commissioner may outsource audits to Chartered Accountants and Cost and Management Accountants to
conduct special audit of records of registered persons. It also proposes to waive the requirement of notifying this appointment in the Official Gazette.

Commissioner Authorized to Delegate Officers To Have


Access To Premises, Stocks, Accounts And Records Section 38

The Finance Bill, 2010 proposes to empower the Commissioner, besides the Federal Board of Revenue, to authorise officers to have free access to
business and manufacturing premises, records, stocks etc. during the course of an enquiry.

Powers of Adjudication Removed Section 45, 45B

The Finance Bill, 2010 proposes to omit the specific powers of adjudication of various Inland Revenue Officers. This shall not only streamline the
audit procedures and processes as given by the Sales Tax Act, 1990 with the other two domestic taxes of Pakistan but also enhance the adjudication
spectrum under the relevant provisions of the Sales Tax Act, 1990.

Mode of Service of Orders and Decisions Made More Comprehensive Section 56

The Finance Bill, 2010 proposes to comprehensively redraft the existing legislation contained in Section 56 regarding serving orders and decisions
etc. upon registered persons. An order, decision etc. is deemed to be validly served as under:

For Resident Individuals

Personally served on the individual

Served on the representative of the individual, where the individual is under a legal disability

Sent by registered post or courier service to the person’s registered office or address for service of notice or any office or place of
business in Pakistan or his usual or last known address in Pakistan

Served on the individual in the manner prescribed for service of summons under the Code of Civil Procedures, 1908

For Non-Resident Individuals

Served on the representative of the individual, where the individual is a non-resident individual

Sent by registered post or courier service to the person’s registered office or address for service of notice or any office or place of
business in Pakistan

Served on the individual in the manner prescribed for service of summons under the Code of Civil Procedures, 1908

25
Sales Tax Act, 1990

For an Association of Persons that is Dissolved

Served on any person who was the principal officer or member of the association immediately before dissolution

For a Discontinued Business

Served on the person personally or his representative at the time of discontinuance

The Finance Bill, 2010 proposes that the validity of a notice served under the above-mentioned modes shall not be brought in question.

FBR Empowered to Make Audit Selection through Computerized Balloting Section 72B

The Finance Bill, 2010 proposes to empower the Federal Board of Revenue to select persons or classes of persons for audit through computerized
balloting randomly or parametrically and such power is proposed to have always been vested in the Federal Board of Revenue.

Notable Notifications

Certain SROs have also been issued that enhance the Sales Tax rate as under:

SRO No. Goods Change of Rate

395(I)/2010 Various specified goods 18.5% to 19.5%


21% to 22%

396(I)/2010 Import of soya bean seed by solvent extraction industries 6% to 7%

397(I)/2010 Import of rapeseed, sunflower seed and canola seed by solvent 14% to 15%
extraction industries

398(I)/2010 Supply of natural gas to CNG stations by the gas transmission and 25% to 26%
distribution companies

26
Tax Handbook
2010

Federal Excise Act, 2005


Federal Excise Act, 2005

Nomenclature of “Appellate Tribunal” Re-designated Section 2(3)

In the wake of integration of domestic federal taxes, the Finance Bill 2010 seeks to rename the Appellate Tribunal as the Appellate Tribunal Inland
Revenue so as to streamline the nomenclature of the three domestic taxes of Pakistan.

Jurisdiction and Nomenclature of Authorities Re-designated Section 2(4A)

The Finance Bill 2010 proposes to introduce the hierarchical position of “Chief Commissioner Inland Revenue” and the Bill also seeks to replace
the nomenclature of “Collector” with the “Commissioner” wherever used in the Federal Excise Act, 2005.

The Finance Bill 2010 seeks to substitute sub-section 12 of the Federal Excise Act, 2005 by introducing “Officer of Inland Revenue” which would
mean any officer appointed by the FBR under Section 29 of the Act or any person (including an officer of the Provincial Government) entrusted by
the FBR with any of the powers of an Officer of Inland Revenue under Federal Excise Act or its associated rules.

Through Finance Bill 2010, the words “Federal Excise Officer”, wherever occurring, are proposed to be replaced with the words “Officer of inland Revenue”.

Timeline for Retention of Record Enhanced Section 17

The Finance Bill 2010 seek to extend the period of retaining the records of excisable goods purchased, manufactured and cleared from 5 years to
6 years or till the finalization of any proceedings for assessment, appeal, revision, reference, petition including any proceedings before an Alternative
Dispute Resolution Committee.

Appointment of Federal Excise Officers and Delegation of Powers Section 29. 42A

The Finance Bill 2010 seeks to rephrase the nomenclature of hierarchies and make certain hierarchical changes as under:

1. The Federal Board of Revenue is proposed to appoint the following officers in relation to any specific area, person or class of persons

Chief Commissioner Inland Revenue


Commissioner Inland Revenue
Commissioner Inland Revenue (Appeals)
Additional Commissioner Inland Revenue
Deputy Commissioner Inland Revenue
Assistant Commissioner Inland Revenue
Inland Revenue Officer
Superintendent Inland Revenue
Inspectors Inland Revenue
Inland Revenue Audit Officers
Officer of Inland Revenue with any other designation

2. The Finance Bill 2010 seeks to introduce the following hierarchical structure:

The Chief Commissioner Inland Revenue and the Commissioner Inland Revenue (Appeals) shall be subordinated to the Federal Board
of Revenue
The Commissioner Inland Revenue shall be subordinated to the Chief Commissioner Inland Revenue
The Additional Commissioner Inland Revenue shall be subordinated to the Commissioner Inland Revenue
Deputy Commissioners Inland Revenue, Assistant Commissioner Inland Revenue, Inland Revenue Officers, Superintendent Inland
Revenue, Inland Revenue Audit Officers, Inspectors Inland Revenue and Officer of Inland Revenue with any other designation shall
be subordinated to the Additional Commissioner Inland Revenue

This proposed hierarchy shall harmonize the authorities of the three domestic taxes of Pakistan

3. The Finance Bill 2010 proposes to empower the Chief Commissioner, besides the Federal Board of Revenue, to further empower its
subordinates, with the approval of the Board.
27
Federal Excise Act, 2005

4. The Finance Bill 2010 seeks to withdraw Section 29(4) which would restrict the Commissioner to authorize any of his subordinate officers
to exercise any of his powers or the powers of any other Officer of the Inland Revenue, within a specified area, under the Federal Excise
Act, 2005. The proposed amendment would mean that the Federal Board of Revenue would be the only authority to delegate powers
amongst different officers of the Inland Revenue.

The Finance Bill 2010 seeks to reiterate that the reference made to the older nomenclature would be construed as reference made to the new
proposed nomenclature.

Powers of Adjudication Removed Section 31

The Finance Bill 2010 proposes to omit the specific powers of adjudication of various Inland Revenue Officers. This shall not only streamline the
audit procedures and processes as given by the Federal Excise Act, 2005 with other domestic taxes of Pakistan but also enhance the adjudication
spectrum under the relevant provisions of the Federal Excise Act, 2005. In line with the proposed change, the reference to “conclusion of original
adjudication proceedings” is proposed to be replaced with the phrase “determination of liability under sub-section 2A”.

Jurisdiction of Customs Appellate Tribunal for FED Withdrawn Section 34(2)

Owing to the structural changes in the Federal Board of Revenue and with the introduction of Inland Revenue concept the Appellate Tribunal Inland
Revenue is very much in place, therefore, the proposed omission seeks to withdraw the anomalous provision of referring appellate matters of a
domestic tax to the Appellate Tribunal operating under the Customs Act, 1969.

Reference to High Court With Respect to FED Included Section 34(A)

The Finance Bill 2010 seeks to allow aggrieved person or Commissioner to file reference before High Court against the order of Appellate Tribunal
within 90 days of communication of order by inserting a new section.

The following proposals are made in this respect:

Application by the aggrieved person, not the Commissioner, shall be accompanied by a fee of Rs. 100
A bench of two judges of the High Court shall hear the reference
The provisions of Section 98 of the Code of Civil Procedures shall apply to the hearing of such application
The tax shall remain payable in accordance with the decisions of the Appellate Tribunal
The court proceed to hear whereby any question of law arises
The refund of the tax shall be postponed if the Commissioner wants to prefer petition for leave to appeal to the Supreme Court
Section 5 of the Limitation Act, 1908 shall be applicable to applications made to the High Court

FBR Empowered to Make Audit Selection through Computerized Balloting Section 42(B)

The Finance Act, 2010 proposes to empower the Federal Board of Revenue to select persons or classes of persons for audit through computerized
balloting. This balloting may be random or parametric and such powers are proposed to have always been vested in the Federal Board of Revenue.

Empowerment of Passing an Order after Audit Finalization Section 46(2A)

The Finance Bill 2010 seeks to insert new subsection to harmonize the audit procedures by empowering the Officer of Inland Revenue to pass an
order after the completion of audit and impose duty, charge default surcharge, impose penalty and recover erroneous refunds after giving an
opportunity of explanation to the registered person, if necessary.

28
Tax Handbook
2010

Federal Excise Act, 2005

Procedure of Services of Notices and other Documents Defined Section 47

The Finance Bill, 2010 proposes to omit the existing provisions regarding serving of notices and other documents and streamline it with the mode
of serving notices and documents as proposed in Sales Tax Act, 1990 as under:
For Resident Individuals

Personally served on the individual


Served on the representative of the individual, where the individual is under a legal disability
Sent by registered post or courier service to the person’s registered office or address for service of notice or any office or place of
business in Pakistan
Sent by registered post or courier service to the person’s usual or last known address in Pakistan
Served on the individual in the manner prescribed for service of a summons under the Code of Civil Procedures, 1908

For Non-Resident Individuals

Served on the representative of the individual, where the individual is a non-resident individual
Sent by registered post or courier service to the person’s registered office or address for service of notice or any office or place of
business in Pakistan
Served on the individual in the manner prescribed for service of a summons under the Code of Civil Procedures, 1908

For an Association of Persons that is Dissolved

Served on any person who was the principal officer or member of the association immediately before dissolution

For a Discontinued Business

Served on the person personally or his representative at the time of discontinuance

The Finance Act, 2010 proposes that the validity of any notice served under the above-mentioned modes shall not be brought in question after a
notice has been complied in every manner.

First Schedule
Table I (Excisable Goods)

The Bill seeks to make the following amendments in Table I of the First Schedule:

Heading / Current Proposed


Serial
No. Sub-Heading
Number Description Rate Description Rate
8 24.02 Cigars, cheroots, 64.3% Cigars, cheroots, 65%
cigarillos and cigarillos and
cigarettes, of tobacco cigarettes, of tobacco
or of tobacco or of tobacco
substitute. substitute.

9 24.02 Locally produced 64% of retail price Locally produced 65% of retail price
cigarettes if their retail cigarettes if their retail
price exceeds price exceeds nineteen
seventeen rupees per rupees and fifty paisa
ten cigarettes per ten cigarettes

29
Federal Excise Act, 2005

Heading / Current Proposed


Serial
No. Sub-Heading
Number Description Rate Description Rate
10 24.02 Locally produced Rs.4.75 paisa per ten Locally produced Rs.5.25 per ten
cigarettes if their retail cigarettes plus seventy cigarettes if their retail cigarettes plus seventy
price exceeds eight per cent per price exceeds ten per cent per
rupees and twenty-nine incremental rupee or rupees per ten incremental rupee or
paisa per ten cigarettes part thereof cigarettes but does not part thereof
but does not exceed exceed nineteen rupees
seventeen rupees per and fifty paisa per ten
ten cigarettes cigarettes

11 24.02 Locally produced Rs.4.75 per ten Locally produced Rs.5.25 per ten
cigarettes if their retail cigarettes cigarettes if their retail cigarettes
price does not exceed price does not exceed
eight rupees and twenty ten rupees per ten
nine paisa per ten cigarettes
cigarettes

12 24.02 Cigarettes 64% of retail price Cigarettes 65% of retail price


manufactured by a manufactured by a
manufacturer who manufacturer who
remains engaged on remains engaged on
and after the 10th June, and after the 10th June,
1994. either directly or 1994. either directly or
through any other through any other
arrangement, if the arrangement, if the
manufacture of any manufacture of any
brand of cigarette in brand of cigarette in
non-tariff areas non-tariff areas

36 2711.2100 Natural Gas in gaseous Rs.5.09 per Million Natural Gas in gaseous Rs.10 Million British
state British Thermal Units state Thermal Units (MMBTu)
(MMBTu)

37 2711.2900 Other petroleum Gases Rs.5.09 per Million Other petroleum Gases Rs.10 Million British
in gaseous state British Thermal Units in gaseous state Thermal Units (MMBTu)
(MMBTu)

50 5502.0090 Filter rod for cigarettes N/A Filter rod for cigarettes Re.1 per filter rod

51 Respective Headings Air Conditioners N/A Air Conditioners 10% ad valorem

52 Respective Headings Deep Freezers N/A Deep Freezers 10% ad valorem

“Restriction.—For the purpose of levy, collection and payment of duty at the rates specified in column (4) against serial numbers 9, 10 and 11,
no cigarette manufacturer shall reduce price from the level adopted on the day of the announcement of the Budget 2010-11 i.e. June 5, 2010.

It is also proposed that except for reference to the High Court against order by the Appellate Tribunal and increase in tariff on natural gas and other
petroleum products as mentioned in entry 36 and 37 above; all the proposed changes in the Federal Excise Act, 2005 shall be deemed to be effective
from June 5, 2010

30
Tax Handbook
2010

Customs Act, 1969


Customs Act, 1969

Nomenclature of “Appellate Tribunal” Re-designated Section 2(aaa)

In the wake of promulgation of Inland Revenue Ordinance, 2009 the domestic federal taxes like income tax, sales tax and federal excise duty have
been integrated administratively. The Bill seeks to re-designate the Appellate Tribunal as Appellate Tribunal Inland Revenue in order to bring the
unification in nomenclature of the Appellate Authority falling under the jurisdiction of domestic federal taxes.

Limit of Precious Metals and Stones of Exclusion from Smuggling Increased Section 2(s)(ii)

The Finance Bill, 2010 proposes to enhance the limit of inbound or outbound precious metals and stones from Rs. 50,000 to Rs. 150,000 for the
sake of definition of smuggling. The proposed amendment has sought to enhance the limit to bring it in parity with the increased prices of precious
metals in local as well as in international market gold and the change in exchange in of US dollar with Pak Rupees.

Regulatory Duty Included in Export Duty Section 25(15)(b)

By virtue of Finance Bill 2010 the proposed amendment seeks to include the regulatory duty in the value of export duty.

Applicability of Customs Value Determined Section 25A(4)

The Finance Bill 2010 proposes that the custom value determined by the Officers of the Customs shall remain applicable unless revised or rescinded
by the competent authority.

Introduction of Time Period for Review Application Section 25(D)

The Finance Bill 2010 proposes that the review application against the customs value determined by the Collector of Customs or Director of Valuation
could be filed before Director General of Valuation within 30 days from the date of determination of customs value.

Allowing Mutilation or Scrapping of Certain Goods Section 27A

The Finance Bill 2010 seeks to simplify the existing legislation by removing reference to denaturing and request of owner for mutilation before filing
of goods declaration and by making reference to the notification of the Federal Board of Revenue.

Relevant Date for Customs Computerized System Clarified Section 32(5) (e)

The Finance Bill 2010 proposes to clarify the relevant date in connection with date of detection on post clearance audit on Customs Computerized
System. The Bill seeks to include the date of detection on post clearance audit in case of clearance of goods through the Customs Computerized
System, self assessment or electronic assessment.

Fiscal Fraud Redefined Section 32(A)(c)

The Finance Bill 2010 proposes to term mis-declaration of payment of revenue through self-assessment as fiscal fraud. The proposed clause aims
to curb the tendency of deliberate wrong assessment by importers.

Scope of Correct and Complete Declaration of Goods Imported Restricted Section 79 (1)

The Finance Bill 2010 proposes to provide an opportunity to the importer of goods to provide a declaration of goods after inspecting the goods.
However, this opportunity is restricted to used goods only. It is also proposes that such request may be made to an officer of rank of Additional
Collector or above.

31
Customs Act, 1969

Time Period for ‘Actual Value Determination’ Reduced Section 81 (2),(5)

The Finance Bill 2010 proposes to reduce the time period for determining the correct amount of taxes, duty and charges payable on goods cleared
upon provisional determination from 6 months to 3 months. It is also proposed that the time period during the adjournment of proceedings or on
account of stay orders shall not be included in the said 3 months period.

The Finance Bill 2010 also proposes that an appropriate officer shall issue the order for adjustment, refund or recovery of amount secured on final
determination of liability.

Penalty on Certain Offences Enhanced Section 156(1) Serial No.1

The Finance Bill 2010 seeks to increase the penalties on the following offences in the following manner:

Offence Prevailing Penalty Proposed Penalty

If any person contravenes the provision of this act, Rs. 25,000 Rs. 50,000
any rule made thereunder, or fails to comply with any
such provision with which was his duty to comply.

If any person contravenes any rule or condition relatable Penalty not exceeding Rs. 25,000 Not less than twice of the amount
to section 128 or 129. and goods in respect of which of goods.
such offence has been committed
shall also be confiscated.

Review of Value Determined and Appeal before the Appellate Tribunal Section 194A (1) (e)

The new proposed amendment in Finance Bill 2010 would enable any person or an officer of Customs to file an appeal before the Appellate Tribunal
in cases of review order passed by the Director General Customs Valuation provided the appeal is heard by the double bench of the Appellate Tribunal.

32
Tax Handbook
2010

Customs Act, 1969

First Schedule to Customs Act, 1969 (IV of 1969)


Customs Duty on Certain Items Slashed

The Finance Bill 2010 seeks to whittle down the customs duty on certain items and list of some of them is enumerated as under:

Description Existing CD% Proposed CD%


Buffaloes 5 0

Bulls 5 0

Cows 5 0

Oxen 5 0

Other 5 0

Crude Oil Rs.9000/MT Rs.8000/MT

Glucose and glucose Syrup, not 25 20


containing fructose or containing in the dry state less
than 20% by weight of fructose

Ceramic Colors 0 5

Other 10 5

For X-ray 5 0

Silk yarn (other than yarn spun from silk waste) not 5 0
put up for retail sale.

Fully depreciated CNG buses (CBU) 15 0

Fully depreciated CNG buses (CBU) 15 0

33
Customs Act, 1969
Noteable Notifications

SRO 391(1)2010

Through amendment in the SRO 567(1)/2006 dated June 05, 2006 the Federal Government has provided concessionary customs duty of 5% on
following raw materials used in pharmaceuticals:

Description PCT Heading Custom Duty


Protacine (Proglumet, Dimaleate) 2933.5990 5%
Celecoxib 2935.0090 5%
Sodium Casinate 3501.9000 5%
Activated Glucuronate 3824.9099 5%
Tasigna (Nilotinib) - 5%

SRO 392(1)/2010

The Federal Government has granted the exemption from customs duty on import of raw materials, sub-components, components, sub-assemblies
and assemblies for manufacture of specified goods ranging from 0% to 15% as specified therein.

Description PCT Heading Custom Duty

Diode 8541.1000 0%
Transistor 8541.2900 0%
Resister 8533.1000 0%
Torridal 8505.1900 0%
Ferrite Core with Bobbin 8505.9000 0%
Electro galvanized steel sheet in coils. 7210.3090 5%
Sodium sulphate 2833.1100 10%
Shavings/Fleshing /Splitting Blades 8208.9090 15%
Tin Mill Black Plate (of secondary quality) 7209.1810 15%
Stamping Foil 3212.1000 15%

34
Tax Handbook
2010

Customs Act, 1969

SRO 393(1)/2010

By virtue of this amendment, the Federal Government has reduced the rate of customs duty on import of crude oil from Rs. 7650/MT to Rs. 6800/MT.

SRO 394(1)/2010

Through an amendment in the SRO 575(1)/2006 dated June 05, 2006 the Federal Government has provided the following concessionary rates of
customs duty on the flowing equipments, machinery and tools etc.

Description PCT Heading Custom Duty

Rice whitener 8437.8000 0%


Rice polisher 8437.8000 0%
Rice Flow Meter 8437.8000 0%
Milk Filter 8421.3990 0%
LPG Dispenser 8413.1100 5%
Road Sweeping lorries 0087.0500 5%
Pyranometers and Accessories for solar data collection. 9030.8900 5%
Solar chargers for charging electronic devices 8504.4020 5%
Remote control for solar charge controller. 8543.7010 5%
Wind water pump 8413.8190 5%

35
Petroleum Products (Surcharge) Ordinance, 1961
Petroleum Products (Surcharge) Ordinance, 1961

Phraseology of Surcharge and Development Surcharge Replaced with Petroleum Levy Section 3

The Finance Bill 2010 seeks to substitute the phraseology of “surcharge” and “development surcharge” with “Petroleum Levy” in the title
and preamble of Petroleum Products (Surcharge) Ordinance, 1961 and also seeks to replace it with the petroleum levy wherever occurring
in the Ordinance.

Reference of Repealed Laws Substituted with Reference of Prevailing Laws Section 3A

The Finance Bill 2010 seeks to remove references to “Central Excise Act, 1944” with Federal Excise Act, 2005 and “the Income Tax Ordinance,
1979 with the Income Tax Ordinance, 2001.

Payment of Levy on Petroleum Products Section 3(1)

By virtue of Finance Bill 2010 the proposed amendment seeks that every company and licensee shall pay the petroleum levy to the Federal
Government on such products produced by a refinery or purchased by a company for resale as contained in the 5th Schedule. This levy is
proposed to be applicable on such rates as specified by the Federal Government. The manner of payment is proposed to be prescribed by
rules given by the Federal Government.

Anomaly of Price Determination Authority Removed Section 8

Currently Oil and Gas Regulatory Authority (OGRA) is authorized to determine the prices of petroleum products and the proposed omission
seeks to remove the anomalous reference of “Secretary of Oil Companies Advisory Committee or his duly authorized nominee” for price
determination of petroleum products.

Petroleum Development Levy Validated Section 9

By virtue of Finance Bill 2010 the proposed insertion seeks to validate the petroleum development levy charged and collected during March
1, 2010 and June 30, 2010. It also proposes that such levy would not be refunded and any levy not collected or recovered would be collected
in accordance with this Ordinance.

The Fifth Schedule


(Rates of Petroleum Levy)

The Finance Bill 2010 proposes to substitute the existing 5th Schedule with the following:

Prevailing Petroleum Proposed Petroleum


S.No Petroleum Products
Levy Rate (Rs./liters Levy Rate (Rs./liters)

1 High Speed Diesel Oil (HSDO) 8 8


2 Motor Gasoline 87 ROM 10 10
3 SKO 6 6
4 Light Diesel Oil (LDO) 3 3
5 HOBC 14 14
6 E-10 GASOLINE 9 9

36
Tax Handbook
2010

Tax Planning Guide


For Corporations & Individuals
This page is intentionally left blank
Tax Handbook
2010

Income Tax
Income Tax

Who is Required to File a Return of Income?

Following persons are required to furnish a return of income for a tax year:

every company
every AOP
individual whose taxable income for the year exceeds Rs. 300,000
any non-profit organization
any person who

has been charged to tax in respect of any of the two preceding tax years
claims a loss carried forward under the Income Tax Ordinance for a tax year
owns immovable property with a land area of 250 sq. yards or more, or owns any flat located in areas falling within the municipal
limits existing immediately before the commencement of Local Government laws in the provinces, or area in a Cantonment, or
the Islamabad Capital Territory. The following are excluded from this category:

• widows
• orphans below the age of 25 years
• disabled persons
• non-resident Pakistanis in case of ownership of immovable property

owns immovable property with a land area of 500 square yards or more located in a rating area
owns a flat having covered area of 2,000 square feet or more located in a rating area
owns a motor vehicle having engine capacity above 1000cc
has obtained National Tax Number

Who is Required to File Wealth Statement?

Every resident taxpayer filing a return of income whose declared or assessed income is Rs. 500,000 or more
Every resident taxpayer filing statement under FTR and has paid tax of Rs. 35,000

What Year End Can a Taxpayer Adopt?

Class of Person Tax Year Type Year End

Companies, Association of persons Normal Tax Year July 01 to June 30


and Individuals

Sugar Special Tax Year October 01 to September 30

Banking and Insurance Companies Special Tax Year January 01 to December 31

Ginners, Rice huskers, Oil mills Special Tax Year September 01 to August 31

Shawl manufacturers Special Tax Year April 01 to March 31

The FBR is empowered to notify any special tax year.

37
Income Tax

When to File the Return of Income?

Status Year End Date of Filing Tax Year

Salaried Individuals & June 30, 2011 August 31, 2011 2011
Non-corporate Taxpayer (falling under FTR)

Other Individual & AOP June 30, 2011 September 30, 2011 2011

Company (including falling under FTR) June 30, 2011 December 31, 2011 2011

Company September 30, 2011 September 30, 2012 2012

Company December 31, 2011 September 30, 2012 2012

Who is Required to Pay Advance Tax?

Every business individual whose latest assessed taxable income excluding the presumptive tax income is more than
Rs. 500,000

Every Association of Person

Every Company

When to Pay Advance Tax by an AOP or Company?

Period Quarter Payment Date

1st of July to 30th September September quarter On or before the 25th of September

1st October to 31st December December quarter On or before the 25th of December

1st January to 31st March March quarter On or before the 25th March

1st April to 30th June June quarter On or before the 15th of June

38
Tax Handbook
2010

Income Tax

Rate of Tax for Non-Salaried Individual Taxpayers

The basic exemption limit for non-salaried individuals is Rs. 300,000 and the varying slab rates range from 7.5% to 25% as under:

Income Brackets Proposed Rates

Where taxable income:

Does not exceed Rs. 300,000 NIL

Exceeds Rs. 300,000 but does not exceed Rs. 400,000 7.50%

Exceeds Rs. 400,000 but does not exceed Rs. 500,000 10.00%

Exceeds Rs. 500,000 but does not exceed Rs. 600,000 12.50%

Exceeds Rs. 600,000 but does not exceed Rs. 800,000 15.00%

Exceeds Rs. 800,000 but does not exceed Rs. 1,000,000 17.50%

Exceeds Rs. 1,000,000 but does not exceed Rs. 1,300,000 21.00%

Exceeds Rs. 1,300,000 25.00%

Special Rebates

To Senior Citizens

A rebate of 50% of the tax payable is allowed to senior citizen who has attained the age of 60 years or above, provided his total income excluding
FTR income does not exceed Rs. 1,000,000.

To Teachers and Researchers

A further rebate of 50% is allowed to a full time teacher or a researcher, employed in a non profit education or research institution recognized by a
Board of Education or Higher Education Commission including Government training and research institution.

Rates of Tax for Association of Persons (AOP)

The rate of tax imposed on taxable income of an association of persons (AOP) for the Tax Year 2010 and onward shall be 25%.

Minimum Tax

Minimum tax is applicable to a resident company, AOP and individuals at the rate of 1% of turnover if the business sustains losses.

39
Income Tax

Rates of Tax for Salaried Individuals Taxpayers

The basic exemption limit for salaried individuals is Rs. 300,000 and the varying slab rates ranges from 7.5% to 25% as under:

Income Brackets Proposed Rates

Where the taxable income:

Does not exceed Rs. 300,000 NIL


Exceeds Rs. 300,000 but does not exceed Rs. 350, 000 0.75%
Exceeds Rs. 350,000 but does not exceed Rs. 400,000 1.50%
Exceeds Rs. 400,000 but does not exceed Rs. 450,000 2.50%
Exceeds Rs. 450,000 but does not exceed Rs. 550,000 3.50%
Exceeds Rs. 550,000 but does not exceed Rs. 650,000 4.50%
Exceeds Rs. 650,000 but does not exceed Rs. 750,000 6.00%
Exceeds Rs. 750,000 but does not exceed Rs. 900,000 7.50%
Exceeds Rs. 900,000 but does not exceed Rs. 1,050,000 9.00%
Exceeds Rs. 1,050,000 but does not exceed Rs. 1,200,000 10.00%
Exceeds Rs. 1,200,000 but does not exceed Rs. 1,450,000 11.00%
Exceeds Rs. 1,450,000 but does not exceed Rs. 1,700,000 12.50%
Exceeds Rs. 1,700,000 but does not exceed Rs. 1,950,000 14.00%
Exceeds Rs. 1,950,000 but does not exceed Rs. 2,250,000 15.00%
Exceeds Rs. 2,250,000 but does not exceed Rs. 2,850,000 16.00%
Exceeds Rs. 2,850,000 but does not exceed Rs. 3,550,000 17.50%
Exceeds Rs. 3,550,000 but does not exceed Rs. 4,550,000 18.50%
Exceeds Rs. 4,450,000 20.00%

40
Tax Handbook
2010

Income Tax

Marginal Tax Relief for Salaried Taxpayers

Where the total income of the taxpayer marginally exceeds the maximum slab limit, the income tax payable shall be the tax payable upto the maximum
of the slab exceeded plus tax on marginal amount as under:

Income Bracket Marginal Taxable Amount

Where total income:

Does not exceed Rs. 550,000 20%

Does not exceed Rs. 1,050,000 30%

Does not exceed Rs. 2,250,000 40%

Does not exceed Rs. 4,550,000 50%

Exceeds Rs. 4,550,000 60%

Tax on Rental Income

In case of non-corporate taxpayers:

Gross Amount of Rent Rate of Tax

Where the gross amount of rent:

Does not exceed Rs. 150,000 Nil

Exceeds Rs. 150,000 but does not exceed Rs. 400,000 5.00% of the gross amount exceeding Rs. 150,000

Exceeds Rs. 400,000 but does not exceed Rs. 1,000,000 Rs. 12,500 plus 7.50% of the gross amount exceeding Rs. 400,000

Exceeds Rs. 1,000,000 Rs. 57,500 plus 10.00% of the gross amount exceeding Rs. 1,000,000

41
Income Tax

In case of corporate taxpayers:

Gross Amount of Rent Rate of Tax

Where the gross amount of rent:

Does not exceed Rs. 400,000 5.00% of the gross amount of rent

Exceeds Rs. 400,000 but does not exceed Rs. 1,000,000 Rs. 20,500 plus 7.50% of the gross amount exceeding Rs. 400,000

Exceeds Rs. 1,000,000 Rs. 65,000 plus 10.00% of the gross amount exceeding Rs. 1,000,000

Allowances and Tax Credit

Section Particulars Concession Maximum Limit

60 Zakat Straight income deduction N/A

61 Charitable Donation Straight income Lower of amount of donations or:


deduction / Tax credit 30% of taxable income in case of individual and AOP
20% of taxable income in case of company

62 Investment in Shares Tax credit Lower of:


total cost of acquiring shares
10.00% of taxable income
Rs. 300,000 per annum

63 Approved Pension Fund Tax credit Lower of:


total contribution or premium paid by individual
20.00% of taxable income
Rs. 500,000 per annum

64 Profit on Debt or Share Tax credit Lower of:


total profit paid
50.00% of total income
Rs. 750,000 per annum contribution of mark up on
house loan

65A If 90% of sales by the Tax credit 2.50% of tax payable


manufacturer are made to
sales tax registered persons

65B Balancing, modernization Tax credit 10.00% of tax payable


and replacement of plant &
machinery from July 1, 2010
to June 30, 2015

65C Enlisting a company on Tax credit 5.00 % of tax payable


stock exchange

42
Tax Handbook
2010

Income Tax

Tax Rates for Companies

Company Tax Rate

Banking Company 35%

Public Company (other than a banking company) 35%

Private Company (other than a banking company) 35%

Small Company having turnover upto Rs. 250 million 25%

Fixed Tax in Case of Individual and AOP

Category Rate

In case of individual or AOP being retailer and having turnover

upto Rs. 5,000,000 1% of turnover as final tax

In case of individual or AOP being retailers having turnover

Exceeding Rs. 5,000,000 but does not exceed Rs. 10,000,000 Rs. 25,000 plus 0.5% of the turnover exceeding Rs. 5,000,000

Exceeding Rs. 10,000,000 Rs. 50,000 plus 0.75% of the turnover exceeding Rs. 10,000,000

Consequential change has not been incorporated in Section 113B and needs clarification.

Individual and AOP retailer cannot claim any adjustment of withholding tax collected or deducted under any head during the year

Minimum Tax for Builders & Developers

Category Rates

In case of:

Builders Rs. 50 per Sq. ft. on covered constructed area

Developers Rs. 100 per Sq. yard on the area of land developed

43
Income Tax

Tax Depreciation Rates

Third Schedule (Part I)

Description Rate

Building (all types) 10%

Furniture (including fittings) 15%


Machinery and plant (not otherwise specified)
Motor vehicles* (all types)
Ships, technical or professional books

Computer hardware including printer, monitor and allied items 30%


Machinery and equipment used in manufacturing of I.T. products
Aircraft and aero engines

Below ground installations 100%

Offshore platform and production installations 20%

A ramp built to provide access to person with disabilities, 100%


not exceeding Rs. 250,000 each

*Value of passenger vehicles is restricted upto Rs. 1.50 million for depreciation purposes.

Depreciation Allowance

Third Schedule (Part II)

Description Section Rate

Initial allowance 23 50%

First year allowance 23A 90%

First year allowance 23B 90%


(in case of alternate energy projects)

44
Tax Handbook
2010

Income Tax

Penalties

Default Rate of Penalty

Failure to file any return of income 0.1% of tax payable per day subject to minimum
Rs. 5,000 & maximum 25% of tax payable

Failure to pay any tax (other than a penalty)

In case of first default 5% of the amount of tax on default


In case of second default additional penalty 25% of the amount of tax on default
In case of third and subsequent defaults additional penalty 50% of the amount of tax on default

Concealment of income or furnishing of Amount equal to tax sought to be evaded by concealment


i inaccurate particulars of income or furnishing of inaccurate particulars

Failure to maintain records Rs. 10,000 or 5% of the amount of tax on income


whichever is high

Non compliance of notice issued for filing of


wealth statement or obtaining information or evidence:

In case of first default Rs. 2,000


In case of second default Rs. 5,000
In case of third and subsequent defaults Rs. 10,000

Making of false or misleading statement Rs. 25,000 or 100% of the amount of tax short fall,
whichever is higher

Failure to give notice of discontinuation of business Not exceeding the amount of tax payable
by the person

Failure to give notice by liquidator of his appointment Not exceeding Rs.10,000

Penalty for obstruction Rs. 25,000 or 100% of the tax involved, whichever is high

Additional Tax
Failure to

pay tax excluding advance tax collect tax


pay any penalty deduct tax
pay any other amount of tax under deposit tax deducted or collected
the Income Tax Law
pay advance tax

KIBOR plus 3% per quarter of amount of default

45
Deduction/Collection of Tax at Source

Section/
Sub-section
Nature of Standard Adjustable/ Exemption Persons Required Statements of Tax
of I.Tax Ord. Payment/Transaction Tax Rates Final Discharge Limit To Deduct/Collect Tax Collected/Deducted
148 Imports: Minimum except for Subject to certain exclusion Custom Authorities
Commercial imports 5% imports for self use:
Fiber fabrics (other than of cotton), capital goods, cement, coal, mobile phones, 1% Raw material
sugar, gold, silver, wheat raw, wood, medical surgical & dental equipment, certain Plant & machinery & parts
medicines & vaccines, broadcasting equipment etc. import by same business- Quarterly
line manufacturer
Fertilizers
Cars

149 Income from Salary Average rate of tax Adjustable Rs. 300,000 Every Employer Quarterly/Annually

150 Dividends 10% Final Nil Payer Quarterly

151 Profit on Debt: After Deduction of Zakat Payer of Profit


National saving deposit including DSC, under national saving scheme 10% Interest on investment up to Rs.
Profit on TFCs 10% 150,000 is exempt in case of Bank / Financial institution Quarterly
Profit on banking account or deposit 10% Final National Saving Scheme and TFCs Banking Co., Financial Int.
Profit on security 10% and where installment is less than Company, Finance Society
Profit on Post Office Saving Account 10% Rs. 1,000 per month Federal Government, Provincial
Profit on security issued by Federal Government, Provincial Government or Local Authority 10% Adjustable Government or Local Authority

152 Payment to Non-Resident on account of:


Royalty, fee for technical services to a non-resident Person 15%
Execution of Contract (other than for supply of goods & rendering of services) 6%
Contract for construction, assembly, installation projects, supervisory activities 6%
and advertisement services
Other payments to non-resident except payment to foreign news agencies, 20% Final Nil Payer Quarterly
syndicate services & non-resident contributing having no permanent establishment
in Pakistan
Profit on Debt 20%

5%

On payment of insurance or re-insurance premium

153 Payment to resident company or permanent establishment of non resident on


account of:
1.5%
Sale of Goods: 3.5% Final except for manufacturer- Rs. 25,000
Sale of rice, cotton seed or edible oil 1% cum-supplier & listed companies Government Company, a registered AOP, Quarterly
Sale of any other goods foreign contractor or consultant or a
Sale of edible oil to manufacturer of cooking & vegetable ghee mills consortium or a joint venture, Individual
2% with turnover exceeding 25 million, AOP
Rendering of Services: 6% Rs. 10,000 with turnover exceeding 50 million and
Passenger transport services & News print media services exporter of export house
Other services 6% Final except for companies

Execution of Contract (other than supply of goods & rendering of services) 10% Final except for listed companies

153A On payment to non-resident media person 1% Final Nil Payer Quarterly


5%
154 Exports Minimum Nil Collector / Authorized dealer in foreign Quarterly
Foreign exchange proceeds on account of indenting commission As per slabs exchange

155 Income from Property Final Rs. 150,000 Federal Govt., Provincial Govt. Local Quarterly
10% (In case of non-corporate taxpayer) Authority or a company
20%
156 Prize on prize bonds, winning from raffle, lottery or cross word puzzle Final Nil Payer Quarterly
Prize on winning of quiz & prize offered by companies for promotion on sales 10%

156A Payment of commission to petrol pump operators Average rate of tax Final Nil Every person selling petroleum products Quarterly

156B Payment on account of approved pension fund Final 25% of accumulated balance Pension fund manager Quarterly
Income Tax
Section/ Exemption Persons Required Statements of Tax
Subsection
Nature of Standard Adjustable/
of I.Tax Ord. Payment/Transaction Tax Rates Final Discharge Limit To Deduct/Collect Tax Collected/Deducted
231A Cash withdrawals from bank 0.3% Adjustable Rs. 25,000 Every banking company Quarterly

231B Purchase of motor vehicle manufactured locally with engine capacity:


Up to 850CC Rs. 7,500
851CC to 1000CC Rs. 10,500
1001CC to 1300CC Rs. 16,875
1301CC to 1600CC Rs. 16,875 Adjustable Nil Registering Authority Quarterly
1601CC to 1800CC Rs. 22,500
1801CC to 2000CC Rs. 16,875
Above 2000CC Rs. 50,000

233 Brokerage and Commission 10% Final Nil Payer Quarterly

233A Collection of tax by stock exchange registered in Pakistan on account of:


Purchase of shares 0.01%
Sale of shares 0.01% Final Nil Stock exchange Quarterly
Trading of shares 0.01%
Financing of carry over trades (Badla) 10%

234 Tax on motor vehicle


Goods transport vehicle:
Less than 2030 Kg Re. 1 Per Kilo gram
2030 Kg or more but less than 8120 Kg Re. 1 Per Kilo gram
8120 Kg or more but less than 15000 Kg Re. 1 Per Kilo gram
15000 Kg or more but less than 30000 Kg Re. 1 Per Kilo gram
30000 Kg or more but less than 45000 Kg Re. 1 Per Kilo gram
45000 Kg or more but less than 60000 Kg Re. 1 Per Kilo gram
60000 Kg or more Re. 1 Per Kilo gram Person responsible for collection Quarterly
In case of passenger transport vehicle with seating capacity of: Final / Adjustable N/A of motor vehicle tax
4 or more person but less than 10 person Rs. 25 per seat
10 or more person but less than 20 person Rs. 60 per seat
20 or more person Rs. 100 per seat
Other private motor car with engine capacity of:
Upto 1000CC Rs. 750
1001CC to 1199CC Rs. 1250
1200CC to 1299CC Rs. 1750
1300CC to 1599CC Rs. 3000
1600CC to 1999CC Rs.4,000
2000CC and above Rs. 8000

234A Tax on gas consumption charges of a Compressed Natural Gas (CNG) Station 4% Final Nil Person making consumption bill Quarterly

235 Electricity Consumption Rs. 60


Does not exceed Rs. 400 Rs. 80
Exceeds Rs. 400 but does not exceed Rs. 600 Rs. 100
Exceeds Rs. 600 but does not exceed Rs. 800 Rs. 160
Exceeds Rs. 800 but does not exceeds Rs. 1,000 Rs. 300
Exceeds Rs. 1,000 but does not exceed Rs. 1,500 Rs. 350 Fully adjustable for companies Person preparing Quarterly
Exceeds Rs. 1,500 but does not exceed Rs. 3,000 Rs. 450 whereas adjustable upto the extent N/A Electricity bills
Exceeds Rs. 3,000 but does not exceed Rs. 4,500 Rs. 500 of tax liability for individuals and
Exceeds Rs. 4,500 but does not exceed Rs. 6,000 Rs. 650 AOPs
Exceeds Rs. 6,000 but does not exceed Rs. 10,000 Rs. 1,000
Exceeds Rs. 10,000 but does not exceed Rs. 15,000 Rs. 1,500
Exceeds Rs. 15,000 but does not exceed Rs. 20,000 At 5%
Exceeds Rs. 20,000

236 Telephone subscriber where the monthly bill exceeds Rs. 1,000 10% Fully adjustable for companies Person preparing mobile and
Subscriber of mobile phone and prepaid mobile & telephone cards 10% whereas adjustable upto the extent Rs. 1,000 phone bills and person selling Quarterly
Sale of units through any electric medium or whatever form 10% of tax liability for individuals and prepaid cards
Tax Handbook

AOPs

236A Sale of any property or goods by auction 5% Adjustable N/A Person making sale by auction Quarterly
Income Tax
2010

NOTE : The SROs of Section 50 of the Repealed Ordinance has been saved in the Income Tax Ordinance, 2001 unless specifically withdrawn or amended.
Sales Tax
Sales Tax
Sales Tax Applicability

Sales Tax is applicable at the rate of 16% on the following:

Manufacturers or producers
Retailers
Importers
Exporters
Wholesalers (including dealer)
Distributors

Filing of Sales Tax Return

The sales tax return is to be filed within 15 days from the close of month by the registered persons

Sales Tax Registration Threshold

Annual Turnover of Taxable Supply

Manufacturers or Producers Wholesalers


Importers and
(including Dealers)
Exporters
and Distributors

More than Up to Making Taxable Supply


Rs. 5,000,000 Rs. 5,000,000

Sales Tax Exempt u/s 13 Sales Tax

General Sales Tax @ 17%


Monthly Filing of Return
Input Tax Claimable Against Output Tax

48
Penalties

If any person

Fails to furnish return Required to enrol / register Makes or files false documents, Contravenes any provision of Violates any embargo placed Failure to submit summary of
Fails to notify change in Non production of record
statements and declaration this Act for which no specific on removal of goods in sale and purchase invoices
within due date nature of supply himself and fails to do so
Destroys or alters the record penalty is provided and fails to connection with recovery of tax required under this Act
Fails to issue invoice Fails to maintain records Denies or obstructs authorised fulfil conditions prescribed in a
Un-authorisely issues invoice officer to access record and Notification
Fails to deposit tax to perform his duties Fails to make payment in the Rs. 25,000 Rs. 25,000
*Repeats erroneous calculation Commits, causes to commit or manner prescribed in Section 73 or 10% of amount
attempts to commit tax fraud of tax involved
Denies or obstructs Sales Tax whichever is higher
Penalty of Rs. 10,000 Officer posted to business premises to
Rs. 5,000 or 5% of amount access record and to perform his duties
of tax involved
Rs. 5,000
whichever is higher
or 3% of amount
Penalty of Rs. 10,000 or 5% of tax involved Rs. 25,000 or 100% of tax involved Rs. 5,000 or 3% of tax involved On receipt of Repetition of an offence for
of tax involved whichever is higher whichever is higher which a penalty is provided
Rs. 5,000 Rs. 5,000 whichever is higher 1st notice Rs. 5,000
whichever is higher 2nd notice Rs. 10,000 under this Act
or 3% of amount
3rd notice Rs. 50,000
Rs. 10,000 of tax involved
or 5% of amount whichever is higher
of tax involved
whichever is higher Rs. 10,000 due to failure to furnish Twice of the amount of
the information required by Board penalty for the said offence
If return is filed in 15 days
than penalty of Rs. 100
for each day of default

knowingly and without lawful authority gains access to the computerized system
unauthorizedly uses or discloses or publishes information obtained from the computerized system
Rs. 25,000 or 100 % of amount of tax involved whichever is higher
falsifies any record or information stored in the computerized system
knowingly or dishonestly damages or impairs the computerized system Such person shall, further be liable, upon conviction by the Special Judge,
knowingly or dishonestly damages or impairs any duplicate tape or disc or other storage medium to imprisonment for a term which may extend to one year, or with fine which
may extend to an amount equal to the loss of tax involved, or with both.
unauthorizedly uses unique user identifier of any other registered
fails to comply with or contravenes security of unique user identifier

* No penalty shall be imposed, if miscalculation is made first time during the year.
* Certain defaults attract imprisonment along with penalty. Refer to Section 33 of the Sales Tax Act for complete reference of penalties.
*Default Surcharge at the rate KIBOR plus 3% per annumof the tax due would be imposed in the case of tax fraud, inadmissible input tax credit or
refund and on nonpayment of tax and such tax would be calculated on the basis of period of default.
Tax Handbook

Sales Tax
2010
Capital Value Tax (CVT)
Capital Value Tax

Certificates / Instruments of Redeemable Capital

Capital Value Tax is levied on the transactions of certificates or any instrument of redeemable capital as under:

Purchase Rate of CVT Collected by

Modaraba certificates or any 0.02% of purchase value Registered Stock Exchange


instrument of redeemable capital

CVT on Real Estate Transactions

Capital Value Tax is leviable on the real estate transactions of sale and purchase in the following manner:

Nature of Transaction Rate of CVT

Residential immovable property (other than flats)


situated in urban area, measuring at
least 500 square yards or one kanal whichever is less

Where the value of Immovable property is recorded 4 % of the recorded value

Where the value of immovable property is not recorded Rs.100 per square yard of the landed area

Where the immovable property is a constructed property Rs.10 per square feet of the constructed
area in addition to the value worked out above

Commercial immovable of any size situated in urban area

Where the value of immovable property is recorded 4 % of the recorded value

Where the value of immovable property is not recorded Rs.100 per square feet of the landed area

Where the immovable property is a constructed Rs.10 per square feet of the constructed
area in property addition to the value worked
out above

Residential flats

Where the value of immovable property is recorded 4 % of the recorded value

Where the value of immovable property is not recorded Rs.100 per square feet of the covered area

50
Tax Handbook
2010

Notes:
Arranged By: Muhammad Munir
Abdul Razaq
Huma Ijaz

Designed & Printed By: The Fine Graph


Tel: 042-36365099