RIAZ AHMAD & COMPANY · riaz ahmad & company chartered accountants i n d e x finance act 2019 description page no. introduction 1 executive summary 2 – 6 income tax 7 – 64 sales

RIAZ AHMAD & COMPANY Chartered Accountants

I N D E X

FINANCE ACT 2019

DESCRIPTION PAGE NO.

INTRODUCTION 1

EXECUTIVE SUMMARY 2 – 6

INCOME TAX 7 – 64

SALES TAX 65 – 75

FEDERAL EXCISE DUTY 76 – 79

PUNJAB SALES TAX ON SERVICES ACT, 2012 80 – 81

PUNJAB AGRICULTURAL INCOME TAX ACT, 1997 82

ISLAMABAD CAPITAL TERRITORY (TAX ON SERVICES) ORDINANCE, 2001 83

SINDH SALES TAX ON SERVICES ACT, 2011 84

KHYBER PAKHTUNKHWA FINANCE ACT, 2013 - SALES TAX ON SERVICES 85

CONTACT PARTNERS 86


INTRODUCTION

FINANCE ACT 2019 - 1 -

This Memorandum has been prepared to facilitate our clients in better understanding of the changes

made through Federal and Provincial Finance Acts, 2019 in Income Tax, Sales Tax, Federal Excise Duty and Punjab Agricultural Income Tax. The changes have been explained in a concise manner and

insignificant changes of consequential, administrative, procedural or editorial nature have been ignored for the sake of brevity.

Included under the heading of Income Tax Ordinance, 2001 is a dedicated portion, titled “General”,

which covers complete rates of income tax, schedule of filing of various periodical statements, rates for deduction of income tax at source, filing date of income tax return, computation of advance tax, etc., for

convenience and ready reference of our clients.

The Federal and Provincial Finance Acts, 2019, unless otherwise stated, shall come into force on 01 July 2019.

This Memorandum may be accessed on our web-site: www.racopk.com

It is recommended that the text of the Finance Acts, 2019 as published in the Official Gazette and the relevant laws and notifications, wherever applicable should be referred to in considering the

interpretation of any provision. This Memorandum contains only general comments. Final decision on any

issue should not be taken without detailed consideration and professional advice.

This Memorandum should not be published in any manner without the consent of the firm. For

professional advice, you may contact our following tax experts:

Sarfraz Mahmood

Muhammad Arshad

Inaam Ellahi Sheikh

Muhammad Waqas

Liaqat Ali Panwar

Pirzada M. Khurram

Raheel Arshad

Bilal Ahmad

Lahore Office Karachi Office Faisalabad Office Islamabad Office

LAHORE: 29 July 2019


EXECUTIVE SUMMARY

FINANCE ACT 2019

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Income tax

Brought forward depreciation, amortization and business losses shall not be set off against income

for computing the super tax in cases of insurance businesses, production and exploration of

petroleum, extraction of mineral deposits, banking companies and capital gains on listed securities.

Profit on debt earned by every person other than a company, if exceeds Rupees 36 million shall now

be charged to tax under normal tax regime instead of fixed tax regime.

Individual or association of persons will also be eligible to claim specified deductions, as allowed in

case of a company, if income from property exceeds Rupees 4 million by opting to pay income tax under normal tax regime.

No deduction shall be allowed in respect of commission on supply of products listed in Third Schedule

to the Sales Tax Act, if it exceeds 0.2% of gross amount of supplies unless name of the recipient is

appearing in the active taxpayers’ list.

Normal useful life of an intangible asset in cases where useful life is not ascertainable has been

enhanced from 10 years to 25 years and self generated goodwill or any adjustment arising on accounting treatment, as may be prescribed have been excluded from the definition of intangible.

For computation of gain on disposal of immoveable property, slab rates based on amount of gain and

holding periods of the property have been enhanced.

Non-cash gifts other than from grandparents, parents, spouse, brother, sister, son or a daughter shall

now be chargeable to tax under the head of ‘Income from Other Sources’.

A person employing fresh graduates shall be entitled to a tax credit in respect of the amount of

annual salary paid to such graduates for the tax year.

Rate of tax credit of investment in purchase of plant and machinery for BMR has been reduced to 5%

from 10% for tax year 2019. Further, no such tax credit shall be available in respect of such investment made after 30 June 2019.

No person shall purchase immoveable property of value greater than five million rupees or any other

asset valuing more than one million rupees otherwise than by crossed cheque or any other crossed

banking instrument.

Individual present in Pakistan for a period or periods in aggregate to one hundred and twenty days or

more in a tax year and in the four preceding years for aggregate periods of three hundred and sixty five days or more, shall also be a resident individual for a tax year.

Collection or deduction of advance tax, computation of income and tax thereon in the case of a

person not appearing on active taxpayers’ list shall now be determined in accordance with the

specified rules. The rules further specify hundred percent increase in withholding tax rates, provisional assessment on the basis of concealed income, etc.

If the Commissioner is of the opinion that a transaction has not been declared at arm's length, he

may with prior approval of FBR, obtain report from an independent chartered accountant or cost and

management accountant to determine the fair market value of asset, product, expenditure or service at the time of transaction.

In case of supplies made to a dealer who is unregistered under the Sales Tax Act and whose name is

not appearing in active taxpayers’ list, seventy-five percent of the dealer's margin shall be added to

the income of the person making such supplies and dealers’ margin for this purpose shall be ten percent of the sale price of the manufacturer.


EXECUTIVE SUMMARY

FINANCE ACT 2019

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Maximum limit of foreign exchange remitted from outside Pakistan through normal banking channels

for exemption from probe has been reduced from ten million rupees to five million rupees in a tax

year.

A member of the association of persons, shall be jointly and severally liable for payment of the tax

due by the association of persons.

If the Commissioner believes that the person likely to leave Pakistan may be involved in offshore tax

evasion or is about to dispose of any such asset, he may freeze any domestic asset of the person for a period of one hundred and twenty days or till the finalization of proceedings.

The tax collected from every importer on import of goods including import of ships by ship breakers

shall now be minimum tax instead of final tax. However, tax collected in respect of items specified in

section 148(7) shall continue to be adjustable tax.

Tax deductible on profit on debt shall be minimum tax on the profit on debt arising to a taxpayer

other than a company or where profit on debt is taxable at fixed slab rates.

Tax deductible on the income of a non-resident person arising from specified contracts shall be

minimum tax instead of final tax.

Tax deductible on sale of goods, execution of contracts and on services of stitching, dyeing, printing,

embroidery, washing, sizing and weaving shall now be treated as minimum tax. Similarly, tax

deducted on payments to sportsperson and to electronic and print media for advertising services shall

also be a minimum tax instead of final tax.

Every person paying an amount of royalty to a resident person shall deduct tax from the gross

amount payable (including Federal Excise Duty and Provincial Sales Tax, if any) at the rate of 15%.

Payment of refunds may be through income tax refund bonds in lieu of payment through cheque or

bank debit advice.

Every person engaged in any business, profession or vocation shall be required to obtain and display

a business license as prescribed by the FBR.

Penalties for not filing of return of income within due date, non-filing of wealth statement and others

have been revised and enhanced substantially.

A person not filing the return of income within due date shall be included in the active taxpayers’ list

on payment of surcharge at (i) twenty thousand rupees in case of a company; (ii) ten thousand

rupees in case of an association of persons and (iii) one thousand rupees in case of an individual. Moreover, such person shall not be issued refund, or additional payment for delayed refund.

Any person who fails to furnish particulars or complete or accurate particulars of persons in the

withholding tax statement, shall commit an offence punishable with fine or imprisonment not

exceeding one year or both.

Any person who fails to declare offshore asset or furnishes inaccurate particulars of an offshore asset

and revenue impact of such concealment or furnishing of inaccurate particulars is ten million rupees or more shall commit an offence punishable with imprisonment upto three years or with a fine upto

five hundred thousand rupees or both.

Any person who, fails to comply with a notice in respect of filing of foreign income and assets

statement shall commit an offence punishable with imprisonment up to one year or with a fine up to

fifty thousand rupees or both.


EXECUTIVE SUMMARY

FINANCE ACT 2019

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Any enabler who enables, guides or advises any person to design, arrange or manage a transaction

or declaration in such a manner which results in offshore tax evasion, shall commit an offence

punishable on conviction with imprisonment for a term not exceeding seven years or with a fine up to

five million rupees or both.

The FBR has been authorized to publish the names of offshore evaders, in the print and electronic

media who have evaded offshore tax equal to or exceeding two and half million rupees and to publish the names of offshore tax enablers, in the print and electronic media who have enabled

offshore tax evasion.

FBR shall prescribe rules for initiating criminal proceedings against any income tax authority and

officer who willfully and deliberately commits or omits an act which results in undue benefit or advantage to the authority or the officer.

Restriction imposed on purchase of motor vehicle and immovable property by a person not having its

name in the active taxpayers’ list (non-filer) has been withdrawn.

Alternate impersonal taxation regime may be designed to minimize personal interaction for low risk

and compliant taxpayers.

Tax deducted or required to be collected in respect of brokerage and commission shall now be

minimum tax instead of final tax.

Tax collected on the amount of gas bill and on electricity bill of a Compressed Natural Gas Station

shall be minimum tax.

Now, advance tax on sale or transfer of immovable property shall not be collected if holding period of

the property exceeds five years instead of three years.

Non-adjustable advance tax at the rate of three percent of difference of value of immovable property

determined by FBR and the value recorded by the authority registering the transfer of the property has been withdrawn.

Exemption has also been provided to any amount paid to the Armed Forces personnel as internal

security allowance and compensation in lieu of bearer allowance.

Any amount paid as donation to the “Layton Rahmatullah Benevolent Trust (LRBT)” and “Akhuwat”

has been exempted from tax. Any income derived by “Akhuwat”, “Audit Oversight Board” and

“Patient’s Aid Foundation” shall also be exempt from tax.

Exemption from tax on gains on sale of immovable property to a rental REIT scheme has been

extended up to 30th day of June 2021.

Exemption has been provided to dividend income derived by a company, if the recipient of the

dividend, for the tax year is eligible for group relief.

Rate of withholding tax under section 153(1)(a) in case of dealers and sub-dealers of sugar, cement

and edible oil shall be 0.25% of the gross amount of payments.

Rate of minimum tax under section 113 in case of dealers and sub-dealers of sugar, cement and

edible oil shall be 0.25% subject to the condition that names of such dealers or sub-dealers appear in

the active taxpayers’ lists.


EXECUTIVE SUMMARY

FINANCE ACT 2019

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Rate of reduction in tax liability for a full time teacher or a researcher has been reduced from 40% to

25%. Such reduction shall not be available to a full time teacher or a researcher of government

training institutions and teachers of medical profession who derive income from private medical

practice or who receive share of consideration received from patients.

Provisions of withholding tax under section 153(1)(a) of the Income Tax Ordinance will not be

applicable in case of goods transport contractors, if such contractors pay tax at the rate of 3% on payments for rendering or providing carriage services.

Exemption from withholding tax on import has been provided on mobile phones brought in personal

baggage under the Baggage Rules, 2006.

Initial allowance at the rate of 15% for buildings has been withdrawn.

From tax year 2020 and onwards, taxable income arising from mark-up income earned from

additional investment in Federal Government securities by a bank shall be taxed at the rate of 37.5%.

Sales tax

“Cottage industry” means a manufacturing concern which does not have industrial gas or electricity

connection, is located in a residential area, has labour force of not more than ten workers and its annual turnover from all supplies does not exceed three million rupees.

The retailer whose shop measures one thousand square feet or more in area, has also been included in definition of “Tier-1 retailers”.

Value of supply for toll manufacturing would be the actual consideration received by such

manufacturer for value addition carried out in relation to such goods.

In case of supply of electricity by an independent power producer, the amount received on account

of energy purchase price only shall be the value of supply.

In case of supply of electric power and gas by a distribution company, the value of supply shall be

the total amount billed including price of electricity and natural gas, charges, rents, commissions and

all duties and taxes, local, provincial and federal but excluding the amount of late payment surcharge and the amount of sales tax.

Tax through electricity bills shall not be charged from Tier-1 retailers and for this purpose the

Commissioner of Inland Revenue shall decide who is either a Tier-1 retailer or not a retailer. Such tax

collected shall be deposited directly without adjusting input tax.

Claim of input tax credit attributable to supplies made to unregistered person has been restricted on

pro-rata basis, for which sales invoices do not bear the CNIC number or NTN of the buyer.

In case, a Tier-1 retailer does not integrate his retail outlet with FBR’s computerized system for real-

time reporting of sales, the adjustable input tax for that tax period shall be reduced by 15%.

Refund of input tax against exports shall be paid at fixed rates and in the manner notified by the

FBR. Earlier, such input tax was paid along with duty drawbacks at specified rates.


EXECUTIVE SUMMARY

FINANCE ACT 2019

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A registered person making a taxable supply shall issue tax invoice containing CNIC or NTN of the

unregistered person, excluding supplies made by a retailer where the transaction value inclusive of

sales tax amount does not exceed fifty thousand rupees and sale is made to an ordinary consumer. The condition of CNIC or NTN shall be effective from 1st August 2019. However, if it is proved

subsequently that CNIC provided by the purchaser was not correct, the liability of tax or penalty shall not arise against the seller if sale was made in good faith.

Relaxation of tax audit of a registered person to be conducted only once in every three years has

been withdrawn.

Sales tax return may be revised without permission of the Commissioner if filed within sixty days of

filing of original return and either the tax payable therein is more than the amount paid or the refund claimed is less than the amount as claimed under the return sought to be revised.

A shareholder, owning not less than ten per cent of the paid-up capital in the company or business

enterprise shall be liable for the payment of tax if any private company or business enterprise is

wound up.

Exemption of tax on supply of ginned cotton has been withdrawn and exemption of tax has been

provided on supply of cotton seed oil.

S.R.O. 1125(I)/2011 dated 31 December 2011 regarding zero rating for persons doing business in

textiles, carpets, leather, sports and surgical goods has been rescinded.

Federal excise duty

New concept of monthly minimum production in respect of goods, specified in the Fourth Schedule

has been introduced. Minimum production for a month shall be determined on the basis of a single or more inputs as consumed in the production process.

Penalty shall be imposed either in shape of fine up to twenty thousand rupees or imprisonment upto

five years or both on a person who sells cigarettes in retail at a price lower than the price printed

thereon.

Rate of duty on services in respect of travel by air within the territorial jurisdiction of Pakistan over

long routes has been reduced to fifteen hundred rupees from two thousand rupees and over short

routes to nine hundred rupees from twelve hundred and fifty rupees.

Duty on steel billets, ingots, ship plates, bars and other long re-rolled products shall be collected

under sales tax mode.

The minimum production for steel products shall be determined as per criterion specified in the Forth

Schedule.


INCOME TAX ORDINANCE, 2001

FINANCE ACT 2019

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Active Taxpayers’ List - definition Section 2(1A)

‘Active Taxpayers’ List’ means list instituted by FBR and includes list issued by the Azad Jammu and

Kashmir Central Board of Revenue or Gilgit-Baltistan Council Board of Revenue.

Asset move - definition Section 2(5C)

‘Asset move’ means transfer of an offshore asset to an unspecified jurisdiction by or on behalf of the

person who owns, possesses, controls or is the beneficial owner of such offshore asset for the purpose of

tax evasion.

FBR Refund Settlement Company Limited - definition Section 2(22C)

‘FBR Refund Settlement Company Limited’ means the company incorporated for the purposes of

settlement of income tax refund including payment by issuing refund bonds.

‘filer’ and ‘non-filer’ Sections 2(23A) & 2(35C)

Definitions of ‘filer’ and ‘non-filer’ have been omitted.

Offshore asset - definition Section 2(38AA)

‘Offshore asset’ in relation to a person, includes any moveable or immoveable asset held, any gain, profit or income derived or any expenditure incurred outside Pakistan. Offshore evader - definition Section 2(38AB)

‘Offshore evader’ means a person who owns, possesses, controls or is beneficial owner of an offshore

asset and does not declare or under declares or provides inaccurate particulars of such asset.

Offshore enabler - definition Section 2(38AC)

‘Offshore enabler’ includes any person who enables, assists or advises to plan, design, arrange or manage a transaction or declaration relating to an offshore asset, which has resulted or may result in tax

evasion.

Specified jurisdiction - definition Section 2(60A)

‘Specified jurisdiction’ means any jurisdiction which has committed to automatically exchange information under the Common Reporting Standard with Pakistan.

Unspecified jurisdiction - definition Section 2(73A)

‘Unspecified jurisdiction’ means a jurisdiction which is not specified.

Super tax for rehabilitation of temporarily displaced persons Section 4B(2)(iv)

For the purpose of calculating super tax in cases of insurance businesses, exploration and production of

petroleum, exploration and extraction of mineral deposits (other than petroleum), banking company and capital gains on listed securities, brought forward depreciation, amortization and business losses shall not

be set off against income.

Tax on profit on debt Section 7B(3)

If the amount of profit on debt earned by a person other than a company exceeds Rupees 36 million then

the whole amount shall be charged to tax under normal tax regime instead of final tax regime.



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Deductions in computing income chargeable under the head

‘Income from Property’

Section 15A(7)

Now, an individual or an association of persons will also be eligible to claim specified deductions, as allowed in case of a company, if income from property exceeds Rupees 4 million and it is opted to pay

tax under normal tax regime instead of fixed tax regime.

Deductions in computing income chargeable under the head ‘Income from Business’

Section 21(ca)

No deduction shall be allowed in respect of commission paid or payable on supply of products listed in 3rd

Schedule to the Sales Tax Act, if the amount of commission exceeds 0.2% of gross amount of supplies

unless name of the recipient of such commission is appearing in the active taxpayers’ list.

Intangibles Section 24(4) & (11)

Normal useful life of an intangible has been enhanced from 10 years to 25 years in cases where such

useful life is not ascertainable for the purpose to allow amortization deduction. Further, self generated goodwill or any adjustment arising on accounting treatment, as may be prescribed have been excluded

from the definition of intangible.

Capital gains Section 37(3A) & (3B)

Gain arising on disposal of immoveable property shall continue to be charged to tax as separate block of income. Specified slab rates are based on amount of gain. Tax shall be charged @ 5% on gain upto

Rupees 5 million, @ 10% on gain upto Rupees 10 million, @ 15% on gain upto Rupees 15 million and @

20% if gain exceeds Rupees 15 million.

Further, for computation of tax gain on disposal of immoveable property being open plot shall be reduced by 25% if holding period of open plot exceeds one year but does not exceed eight years and if the

holding period exceeds eight years such gain shall be treated as zero for the purpose of computation of

tax. Similarly, gain on immoveable property being a constructed property shall be reduced by 25% if the holding period of the property exceeds one year but does not exceeds four years. No such reduction shall

be allowed if holding period of open plot or constructed property does not exceed one year.

Income from other sources Section 39(1)(la)

Any amount or fair market value of any property received without consideration or received as gift other

than from grandparents, parents, spouse, brother, sister, son or a daughter shall now be chargeable to

tax under the head of ‘Income from Other Sources’. This clause has been added to deal with the gifts in shape of property other than cash.

Set off of losses of companies operating hotels Section 56A

Now, public company as defined in the Companies Act, 2017 and registered in Pakistan or Azad Jammu

and Kashmir, as well as Gilgit-Baltistan, operating hotels therein shall be entitled to have the amount of loss set off against the Company’s income in Pakistan, Gilgit-Baltistan or Azad Jammu and Kashmir.

Earlier, the benefit was available to all companies registered in Pakistan or Azad Jammu and Kashmir

only.

Tax credit for persons employing fresh graduates Section 64C

A person employing any person who has graduated after 01 July 2017 from any institution or university

recognized by Higher Education Commission shall be entitled to a tax credit in respect of the amount of



FINANCE ACT 2019

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annual salary paid to the fresh graduates for the tax year. New section inserted in this regard states as

under:

“64C. Tax credit for persons employing fresh graduates.— (1) A person employing freshly qualified graduates from a university or institution recognized by Higher Education Commission shall

be entitled to a tax credit in respect of the amount of annual salary paid to the freshly qualified

graduates for a tax year in which such graduates are employed.

(2) The amount of tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula, namely:—

(A/B) x C

where—

A is the amount of tax assessed to the person for the tax year before allowance of tax credit under this section;

B is the person's taxable income for the tax year; and

C is the lessor of —

a) the annual salary paid to the freshly qualified graduates referred to in sub-section (1)

in the year; and

b) five percent of the person's taxable income for the year;

(3) The tax credit shall be allowed for salary paid to the number of freshly qualified graduates not exceeding fifteen percent of the total employees of the company in the tax year.

(4) In this section, “freshly qualified graduate” means a person who has graduated after the first day of July, 2017 from any institution or university recognized by the Higher Education Commission.”

Tax credit for investment – (effective retrospectively) Section 65B

Rate of tax credit in respect of investment in purchase of plant and machinery for the purpose of

extension, expansion or balancing, modernization and replacement has been reduced to 5% from 10% of the amount so invested for the tax year 2019. Further, no such tax credit shall be available in respect of

such investment made after 30 June 2019. However, carry forward of the credit to be deducted from tax payable shall continue after the tax year 2019 as specified in sub-section (5) of this section.

Purchase of assets through banking channel Sections 75A & 182

By virtue of inserting this overriding provision in the law, no person shall purchase immoveable property

of fair market value greater than five million rupees or any other asset having fair market value of more than one million rupees otherwise than by crossed cheque, crossed demand draft or crossed pay order or

any other crossed banking instrument showing transfer of amount from one bank account to another

bank account. Fair market value will be the higher of the value notified by FBR or value fixed by provincial authority for stamp duty.



FINANCE ACT 2019

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In case the transaction is not undertaken in the above manner, such asset shall not be eligible for any

allowance under section 22 (depreciation), section 23 (initial allowance), section 24 (amortization of intangibles) and under section 25 (amortization of pre-commencement expenditure). Further, such

amount shall not be treated as cost for computation of gain on sale of such asset.

In addition to above, the person violating the aforesaid provisions in case of immoveable property shall

also pay penalty of five percent of the value of property.

Resident individual Section 82(ab) Earlier clause (b) of this section, omitted by Finance Act, 2003 has now been added as clause (ab)

whereby an individual present in Pakistan for a period or periods in aggregate to one hundred and twenty

days or more in a tax year and in the four preceding years for aggregate periods of three hundred and sixty five days or more, shall also be a resident individual for a tax year.

Special procedure for certain persons Section 99C

Under this new section, the Federal Government may prescribe special procedure for scope and payment of tax, record keeping, return filing and assessment of small businesses, construction businesses, medical

practitioners, hospitals, educational institutions and any other sector in specified cities or territories.

Special provisions relating to persons not appearing in active taxpayers’ list

Section 100BA

Collection or deduction of advance tax, computation of income and tax thereon in the case of person not

appearing on active taxpayers’ list shall now be determined in accordance with the rules specified in the

Tenth Schedule. The rules specify hundred percent increase in withholding tax rates, provisional assessment on the basis of concealed income, etc., as given in the Tenth Schedule.

Tax credit for certain persons Section 100C

For allowance of hundred percent tax credit under this section, trusts or welfare institutions will have to

obtain approval of the Commissioner under section 2(36) with effect from 01 July 2020.

Moreover, none of the assets of trusts or welfare institutions confers, or may confer, private benefit to

the donors or family, children or author of the trust or his descendents or the maker of the institution or to any other person. In case such private benefit is conferred, the amount of such benefit shall be added

to the income of the donor.

Report from independent chartered accountant or cost and management accountant

Section 108A

If the Commissioner is of the opinion that a transaction has not been declared at arm's length, he may

with prior approval of FBR, obtain report from an independent chartered accountant or cost and management accountant to determine the fair market value of asset, product, expenditure or service at

the time of transaction.

Where the Commissioner is satisfied with the report of the independent chartered accountant or cost and

management accountant, the fair market value of asset, product, expenditure or service determined in the report shall be treated as definite information for the purpose of amendment of assessment.



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If the Commissioner is not satisfied, he with prior approval of FBR, may seek such report from another independent chartered accountant or cost and management accountant.

Transaction under dealership arrangements Section 108B

Where a person supplies products listed in the Third Schedule to the Sales Tax Act, 1990 or any other

products as prescribed by FBR, under a dealership arrangement with the dealers who are not registered

under the Sales Tax Act, 1990 and are not appearing in the active taxpayers’ list under the Income Tax Ordinance, an amount equal to seventy-five percent of the dealer's margin shall be added to the income

of the person making such supplies.

Dealers’ margin for this purpose shall be ten percent of the sale price of the manufacturer.

Unexplained income or assets Section 111(4)(a) & (c)

Maximum limit of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed in rupees by scheduled bank and a certificate from such bank is produced to avoid probe by

the tax authorities has been reduced from ten million rupees to five million rupees in a tax year. Further,

by omitting clause (c) of sub-section (4) of this section, exclusion from probe of source of investment in immoveable property has been withdrawn.

Return of income Section 114

Person owning immoveable property with a land area of two hundred and fifty square yards or more was

required to furnish return of income. Now, this threshold has been enhanced to five hundred square yards.

Mode of furnishing returns and other documents Section 118(3)

Last date for filing of return of income by salaried person and final tax statement under section 115(4)

shall now be 30th day of September instead of 31st day of August.

Restriction of proceedings Section 120B

Where any person declares undisclosed assets, undisclosed expenditure and undisclosed sales under the

Assets Declaration Act, 2019 to pay tax, no proceedings shall be undertaken under the Income Tax Ordinance in respect of such declaration. Moreover, particulars of the persons making such declaration or

any information received in any such declaration shall be confidential.

Collection of tax in the case of private companies and associations of persons

Section 139(5) & (6)

In case any tax payable by an association of persons in respect of any tax year cannot be recovered from

the association of persons, every person who was, at any time in that tax year, a member of the

association of persons, shall be jointly and severally liable for payment of the tax due by the association of persons.

Moreover, any member who pays such tax shall be entitled to recover the tax paid from the association

of persons or a share of the tax from any other member.



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Assessment of persons about to leave Pakistan Section 145(5)

According to this new sub-section having overriding effect, if the Commissioner believes, on the basis of

information received from any offshore jurisdiction, that a person likely to leave Pakistan may be involved in offshore tax evasion or is about to dispose of any such asset, he may freeze any domestic asset of the

person including any asset beneficially owned by the person for a period of one hundred and twenty days or till the finalization of proceedings including but not limited to recovery proceedings whichever is

earlier.

Imports Section 148(7)

The tax required to be collected from every importer of goods on the value of goods imported including

tax collected on import of ships by ship breakers shall now be minimum tax instead of final tax. However, tax collected in respect of items specified in section 148(7) shall continue to be adjustable tax.

Profit on debt Section 151(3)

Tax deductible on profit on debt shall be minimum tax on the profit on debt arising to a taxpayer other

than a company and in case where profit on debt is taxable under section 7B, at fixed slab rates.

Payment to non-residents Section 152(1B) & (4B)

Tax deductible on the income of a non-resident person arising from specified contracts shall be minimum tax instead of final tax.

New sub-section (4B) has been inserted in this section whereby the Commissioner may, in case of

payment that constitutes part of an overall arrangement of a cohesive business operation, on application made by the person making payment and after making such inquiry, as the Commissioner thinks fit, allow

by order in writing, the person to make payment after deduction of tax equal to thirty percent of the tax chargeable on such payment. It is provided that the credit of the tax so deducted shall be available to the

permanent establishment of the non-resident accounting for overall profits arising on the overall cohesive

business operation.

Payments for goods, services and contracts Section 153

Tax deductible on sale of goods, execution of contract and on services of stitching, dyeing, printing,

embroidery, washing, sizing and weaving shall now be treated as minimum tax. Earlier, such deductible

tax was final tax on the income of a resident person.

Similarly, tax deducted on payments to sportsperson and to electronic and print media for advertising services shall also be a minimum tax instead of final tax. Moreover, tax deductible shall remain minimum

tax on rendering or providing services referred to in clause (b) of sub-section (1) and provisos regarding

carry forward of minimum tax on specified sectors have been omitted.

Payment of royalty to resident persons Section 153B New withholding tax provision has been added whereby every person paying an amount of royalty, in full

or in part including by way of advance, to a resident person shall deduct tax from the gross amount

payable (including Federal Excise Duty and Provincial Sales Tax, if any) at the rate of 15%. Such tax deductible shall be adjustable.



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Failure to pay tax collected or deducted Section 161(3)

The Commissioner has been authorized to amend or further amend the order of recovery if he considers that the order is erroneous in so far it is prejudicial to the interest of revenue. It is provided that such

order shall not be amended, unless the person has been provided an opportunity of being heard.

Tax collected or deducted as final tax Section 169(4)

Sub-section (4) has been substituted as under:

“(4) Where the tax collected or deducted is final tax under any provision of this Ordinance and

hundred percent higher tax rate has been prescribed for the said tax under the Tenth Schedule, the final tax shall be the tax rate prescribed in the First Schedule and the excess tax collected under the

Tenth Schedule specified for persons not appearing in the active taxpayers’ list shall be adjustable in case the return is filed before finalization of assessment as provided in rule 4 of the Tenth Schedule.”

Payment of refund through income tax refund bonds Section 171A

This section has been introduced for payment of refunds through optional income tax refund bonds

instead of payment through cheque or bank debit advice. Salient features are briefed as under:

1. The income tax refunds payable may also be paid through income tax refund bonds to be issued by

FBR Refund Settlement Company Limited, in book-entry form in lieu of payment to be made through issuance of cheques or bank debit advice.

2. The FBR shall issue a promissory note to FBR Refund Settlement Company Limited, incorporating the

details of refund claimants and the amount of refund payable to each for issuance of income tax refund bonds.

3. The bonds shall be issued in values in multiples of one hundred thousand rupees.

4. The bonds so issued shall have a maturity period of three years and shall bear annual simple profit at ten percent.

5. The bonds shall be traded freely in the country’s secondary markets.

6. The bonds shall be approved security for calculating the statutory liquidity reserve.

7. The bonds shall be accepted by the banks as collateral.

8. There shall be no compulsory deduction of Zakat against the bonds.

9. After period of maturity, the company shall return the promissory note and the FBR shall make the

payment of amount due under the bonds, along with profit due, to the bond holders.

10. The bonds shall be redeemable before maturity only at the option of the FBR along with simple profit

payable at the time of redemption in the light of general or specific policy to be formulated by the FBR.



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Audit Section 177(6) & (6A)

The audit process has been substituted. Now, the Commissioner shall, after obtaining taxpayer’s

explanation on all the issues raised in the audit, issue an audit report containing audit observations and findings, and after providing an opportunity of being heard to the taxpayer, the Commissioner may, if

considered necessary, amend the assessment under sub-section (1) or sub-section (4) of section 122.

Business license scheme Section 181D

Every person engaged in any business, profession or vocation shall be required to obtain and display a

business license as prescribed by the FBR.

Offences and penalties Section 182

Minimum penalty for not filing of return of income within due date has been enhanced to Rupees 40,000

from Rupees 20,000. It is further provided that if seventy five percent of the income is from salary and the amount of income under salary is less than five million rupees, the minimum amount of penalty shall

be five thousand rupees.

The person who fails to furnish wealth statement or wealth reconciliation statement shall pay penalty of 0.1% of taxable income per week or Rupees 100,000 (earlier Rupees 20,000) whichever is higher.

If a person is required to be registered under income tax but fails to file application for registration shall now pay penalty of ten thousand rupees instead of five thousand rupees.

Penalty of Rupees 30,000 (earlier Rupees 5,000) or three percent of the amount of tax involved

whichever is higher shall be paid if any person repeats erroneous calculation in the return for more than one year and pays tax less than the actual tax.

Any person who denies or obstructs the access of the Commissioner to premises, place, accounts, documents, computers or stocks shall pay penalty of Rupees 50,000 (earlier Rupees 25,000) or one

hundred percent of tax involved whichever is higher.

On concealment of income or furnishing inaccurate particulars regarding income, deduction etc., shall pay penalty of one hundred thousand rupees (earlier Rupees 25,000) or amount equal to tax evaded

whichever is higher.

Penalty of forty thousand rupees (earlier Rupees 25,000) or 10% of the amount of tax whichever is

higher shall be paid if any person fails to collect or deduct and pay tax so collected or deducted.

In addition to the above amendments, following new penalties have been inserted in the law.

OFFENCES PENALTIES

Any person who purchases immovable

property having fair market value greater

than Rupees five million through cash or bearer cheque.

Such person shall pay a penalty of five

percent of the value of property

determined by the FBR or by the provincial authority for the purposes of stamp duty,




FINANCE ACT 2019

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OFFENCES PENALTIES

Where an offshore tax evader is involved in offshore tax evasion in the course of any

proceedings under this Ordinance before any Income Tax authority or the appellate

tribunal.

Such person shall pay a penalty of one hundred thousand rupees or an amount

equal to two hundred per cent of the tax which the person sought to evade,


Where in the course of any transaction or declaration made by a person an enabler

has enabled, guided, advised or managed

any person to design, arrange or manage that transaction or declaration in such a

manner which has resulted or may result in offshore tax evasion in the course of any

proceedings.

Such person shall pay a penalty of three hundred thousand rupees or an amount

equal to two hundred per cent of the tax

which was sought to be evaded, whichever is higher.

Any person who is involved in asset move from a specified territory to an un-specified

territory.

Such person shall pay a penalty of one hundred thousand rupees or an amount

equal to one hundred per cent of the tax


Where a Reporting Financial Institution fails to comply with any provisions of the

relevant law.

Such Reporting Financial Institution shall pay a penalty of Rupees 10,000 for each

default and an additional Rupees 10,000 each month until the default is redressed.

Where a Reporting Financial Institution files

an incomplete or inaccurate report under provisions of the relevant law.

Such Reporting Financial Institution shall

pay a penalty of Rupees 10,000 for each default and an additional Rupees 10,000

each month until the default is redressed.

Where a Reporting Financial Institution fails to obtain valid self-certification for new

accounts or furnishes false self-certification

made by the Reportable Jurisdiction Person

Such Reporting Financial Institution shall pay a penalty of Rupees 10,000 for each

default and an additional Rupees 10,000

each month until the default is redressed.

Where a Reportable Jurisdiction Person fails

to furnish valid self-certification or furnishes

false self-certification

Such Reportable Jurisdiction Person shall

pay a penalty of Rupees 5,000 for each

default and an additional Rupees 5,000 each month until the default is redressed.

Return not filed within due date Section 182A

Previously, the person failing to file return of income within due date was not eligible to be included in active taxpayers’ list for the year. Now, this provision is relaxed to some extent by providing that the

person shall be included in the active taxpayers’ list on filing of return after the due date, if the person pays surcharge at Rupees (i) twenty thousand in case of a company; (ii) ten thousand in case of an

association of persons; and (iii) one thousand in case of an individual.



FINANCE ACT 2019

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Moreover, such person shall not be issued refund during the period the person is not included in the

active taxpayers’ list and not be entitled to additional payment for delayed refund. Further, the period the person is not included in the active taxpayers’ list, shall not be counted for computation of additional

payment for delayed refund.

Prosecution for non-compliance with certain statutory

obligations

Section 191(1)(ca)

Any person who fails to furnish particulars or complete or accurate particulars of persons in the withholding tax statement, shall commit an offence punishable with fine or imprisonment not exceeding

one year or both.

Prosecution for concealment of an offshore asset Section 192B

This new section has been added whereby any person who fails to declare offshore asset or furnishes

inaccurate particulars of an offshore asset and revenue impact of such concealment or furnishing of inaccurate particulars is ten million rupees or more shall commit an offence punishable on conviction with

imprisonment upto three years or with a fine upto five hundred thousand rupees or both.

Prosecution for non-compliance with notice under section 116A Section 195A

Any person who, fails to comply with a notice in respect of filing of foreign income and assets statement

shall commit an offence punishable on conviction with imprisonment up to one year or with a fine up to fifty thousand rupees or both.

Prosecution for enabling offshore tax evasion Section 195B

Any enabler who enables, guides or advises any person to design, arrange or manage a transaction or

declaration in such a manner which results in offshore tax evasion, shall commit an offence punishable on

conviction with imprisonment for a term not exceeding seven years or with a fine up to five million rupees or both.

Disclosure of information by a public servant Section 216(6B) & (6C)

By adding new sub-sections in this section, the FBR has been authorized to publish the names of offshore

evaders, in the print and electronic media who have evaded offshore tax equal to or exceeding two and

half million rupees and to publish the names of offshore tax enablers, in the print and electronic media who have enabled offshore tax evasion.

Proceedings against authority and persons Section 216A

Under this new section, the FBR shall prescribe rules for initiating criminal proceedings against any

income tax authority and officer of the Directorates General including any person subordinate to the

aforesaid authorities or officers of the Directorates General who willfully and deliberately commits or omits an act which results in undue benefit or advantage to the authority or the officer or official or to

any other person. When such proceedings are initiated against the authority or officer or official, the FBR shall simultaneously intimate the relevant Government agency to initiate criminal proceedings against

such person.



FINANCE ACT 2019

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Further, the proceedings under this section shall be without prejudice to any other liability that the

authority or officer or official or the person may incur under any other law for the time being in force.

Fee and service charges Section 222A

By virtue of this new section, the Federal Government may subject to such conditions, limitations or restrictions as it may deem fit to impose, levy fee and service charges for valuation or in respect of

any other service or control mechanism provided by any formation under the control of the FBR, including ventures of public-private partnership at such rates as may be specified in the notification.

Restriction on purchases of certain assets Section 227C

By omitting this section, restrictions imposed on purchase of motor vehicle, immovable property by the

person not having its name in the active taxpayers’ list (non-filer) have been withdrawn.

Automated impersonal tax regime Section 227D

This section has been added to design an alternate impersonal taxation regime whereby personal interaction will be minimized. However, this section shall be applicable only for low risk and compliant

taxpayers as may be prescribed.

Directorate General of Special Initiative Section 230G

The new Directorate General of Special Initiative shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors, Assistant Directors and such other officers as the FBR

may appoint. The FBR may specify the functions, jurisdiction and powers of the Directorate General of

Special Initiative and its officers.

Directorate General of Valuation Section 230H

New Directorate General of Valuation has been introduced which shall consist of a Director General and

as many Directors, Additional Directors, Deputy Directors, Assistant Directors and such other officers as

the FBR may appoint. The FBR may specify the functions, jurisdiction and powers of the Directorate General of Valuation and its officers.

Brokerage and commission Section 233

Tax deducted or required to be collected in respect of brokerage and commission shall now be minimum

tax instead of final tax.

CNG stations Section 234A

Tax collected on the amount of gas bill and on electricity bill of a Compressed Natural Gas Station shall

be minimum tax. Earlier, the same was final tax.

Advance tax on sale or transfer of immoveable property Section 236C

Now, advance tax on sale or transfer of immovable property shall not be collected if holding period of the

property exceeds five years. Earlier, the limit of holding period of such property was three years.

Tax on purchase or transfer of immovable property Section 236W

Non-adjustable advance tax to be collected at the rate of three percent on the amount of difference of

value of immovable property determined by the applicable rate specified by FBR and the value recorded

by the authority registering the transfer of the property, has been withdrawn by omitting this section.


INCOME TAX ORDINANCE, 2001 – THE FIRST SCHEDULE

FINANCE ACT 2019

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THE FIRST SCHEDULE

Part I – RATES OF TAX

Division I – Rates of Tax for Individuals and Association of Persons

Rates of tax for individuals (other than salaried) and association of persons:

Sr. No.

Taxable income Rate of tax

1. Where the taxable income does not exceed Rs. 400,000 0% 2. Where taxable income exceeds Rs. 400,000 but does not exceed Rs.

600,000 5% of the amount exceeding Rs. 400,000

3. Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000

Rs. 10,000 + 10% of the amount exceeding Rs. 600,000

4. Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,400,000

Rs. 70,000 + 15% of the amount exceeding Rs. 1,200,000







8. Where taxable income exceeds Rs. 6,000,000 Rs. 1,220,000 + 35% of the amount exceeding Rs. 6,000,000

Rates of tax for salaried individuals (where income under the head “salary” exceeds seventy-five percent of taxable income):

Sr. No.


1. Where the taxable income does not exceed Rs. 600,000 0% 2. Where taxable income exceeds Rs. 600,000 but does not exceed Rs.

1,200,000 5% of the amount exceeding Rs. 600,000






Rs. 195,000 + 17.5% of the amount exceeding Rs. 2,500,000




Rs. 670,000 + 22.5% of the amount exceeding Rs. 5,000,000


Rs. 1,345,000 + 25% of the amount exceeding Rs. 8,000,000


Rs. 2,345,000 + 27.5% of the amount exceeding Rs. 12,000,000








FINANCE ACT 2019

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Division II – Rates of Tax for Companies

The rate of tax for company (other than banking company and a small company) shall be 29% for tax year 2019 and onwards.

Division III – Rate of Dividend Tax

Now, rate of tax imposed under section 5, on dividend received from a company shall be as follows:

(a) 7.5% in case of dividend paid by Independent Power Producers where such dividend is a pass through item under an Implementation Agreement or Power Purchase Agreement or Energy Purchase

Agreement and is required to be re-imbursed by Central Power Purchasing Agency (CPPA-G) or its

predecessor or successor entity.

(b) 15% in mutual funds and cases other than those mentioned in clauses (a) and (c).

(c) 25% in case of a person receiving dividend from a company where no tax is payable by such

company, due to exemption of income or carry forward of business losses or claim of tax credits.

Division IIIA – Rate for Profit on Debt

Rates of tax for profit on debt imposed under section 7B shall be as under:

Sr. No.

Profit on debt Rate of tax

1. Where profit on debt does not exceed Rs. 5,000,000 15%

2. Where profit on debt exceed Rs. 5,000,000 but does not

exceed Rs. 25,000,000

17.5%

3. Where profit on debt exceed Rs. 25,000,000 but does not

exceed Rs. 36,000,000

20%

If profit exceeds Rupees 36 million, the whole amount will be taxed under normal tax regime.

Division VIA – Income from Property

Revised rates of charge of tax on income from property to be paid under section 15 and withholding tax to be deducted under section 155 with reference to Division V, Part III of First Schedule in case of

individual and association of persons are as follows:

Sr.

No. Gross amount of rent Rate of tax

1. Where the gross amount of rent does not exceed Rs.

200,000

Nil

2. Where the gross amount of rent exceeds Rs. 200,000 but

does not exceed Rs. 600,000

5% of the gross amount

exceeding Rs. 200,000


does not exceed Rs. 1,000,000

Rs. 20,000 + 10% of the gross

amount exceeding Rs. 600,000



FINANCE ACT 2019

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Sr. No.

Gross amount of rent Rate of tax

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

but does not exceed Rs. 2,000,000


amount exceeding Rs. 1,000,000











Rs. 1,110,000 + 30% of the gross


8. Where the gross amount of rent exceeds Rs. 8,000,000 Rs. 1,710,000 + 35% of the gross


Division VII – Capital Gains on Disposal of Securities

The rate of tax under section 37A are as under:

Sr.

No. Holding Period

Tax Years 2018, 2019 and

2020

Securities

acquired before 01-07-

2016

Securities

acquired after

01-07-2016

1. Where holding period of a security is less than twelve months 15% 15%

2. Where holding period of a security is twelve months or more but less than twenty-four months

12.5% 15%

3. Where holding period of a security is twenty-four months or

more but the security was acquired on or after 1st July, 2013

7.5% 15%

4. Where the security was acquired before 1st July, 2013 0% 0%

5. Future commodity contracts entered into by the members of Pakistan Mercantile Exchange

5% 5%

It has been clarified that the fifth proviso providing that no deduction of capital gains tax if the holding period of security is more than four years is applicable only in case of security issued under a mutual fund

or collective investment scheme or a REIT scheme.

Division VIII - Tax on Capital Gain on disposal of Immoveable Property

Now, rate of tax to be paid under sub-section (1A) of the section 37 shall be as follows:

Sr. No.

Amount of gain Rate of

tax

1. Where the gain does not exceed Rs. 5 million 5%

2. Where the gain exceeds Rs. 5 million but does not exceed

Rs. 10 million

10%

3. Where the gain exceeds Rs. 10 million but does not exceed Rs. 15 million

15%

4. Where the gain exceeds Rs. 15 million 20%



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Division IX - Minimum tax under section 113

Rate of minimum tax under section 113 has been enhanced as follows:

Sr.

No.

Person(s)

Minimum Tax as percentage of the

person’s turnover

for the year

1. (a) Oil marketing companies, Oil refineries, Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited (for

the cases where annual turnover exceeds rupees one billion);

(b) Pakistani Airlines; (c) Poultry industry including poultry breeding, broiler production,

egg production and poultry feed production; (d) Dealers or distributors of fertilizers; and

(e) Person running an online marketplace as defined in clause

(38B) of section 2.

0.75%

2. (a) Distributors of pharmaceutical products, fast moving consumer goods and cigarettes;

(b) Petroleum agents and distributors who are registered under the Sales Tax Act, 1990;

(c) Rice mills and dealers; and

(d) Flour mills.

0.25%

3. Motorcycle dealers registered under the Sales Tax Act, 1990. 0.3%

4. In all other cases. 1.5%

Part II – RATES OF ADVANCE TAX

Now, advance tax on imports under section 148 at the rate of 4% shall also be collected from persons

importing finished pharmaceutical products that are not manufactured otherwise in Pakistan, as

certified by the Drug Regulatory Authority of Pakistan.

Part III – DEDUCTION OF TAX AT SOURCE

Division I – Advance Tax on Dividend

Now, rate of tax to be deducted from dividend under section 150 and 236S shall be as follows:

(a) 7.5% in case of dividend paid by Independent Power Producers where such dividend is a pass through item under an Implementation Agreement or Power Purchase

Agreement or Energy Purchase Agreement and is required to be re-imbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or successor entity.

(b) 15% in all cases other than mentioned in (a) above.


INCOME TAX ORDINANCE, 2001 – THE FIRST AND SECOND SCHEDULES

FINANCE ACT 2019

- 22 -

Division IA – Profit on Debt

The rate of tax to be deducted under section 151 has been increased from 10% to 15%. However, the rate of tax will be 10% in cases where yield or profit paid is not more than Rupees 500,000.

Division III – Payments for Goods or Services

By substituting clause (2) of this Division, from now onwards, rate of tax to be deducted under section

153(1)(b) in respect of following services shall be 3% of the gross amount payable:

Transport services, freight forwarding services, air cargo services, courier services, manpower

outsourcing services, hotel services, security guard services, software development services, IT services and IT enabled services as defined in clause (133) of Part I of the Second Schedule, tracking services,

advertising services (other than by print or electronic media), share registrar services, engineering

services, car rental services, building maintenance services, services rendered by Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange Limited, inspection, certification, testing and training

services.

Division IIIB – Royalty paid to resident persons

From now onwards, tax at the rate of 15% of the gross amount payable shall be deducted under section

153B on account of royalty paid to resident person.

Part IV – DEDUCTION OR COLLECTION OF ADVANCE TAX

Division XVII – Advance tax on dealers, commission agents and arhatis, etc. Rate of tax to be collected under section 236J for each “Group or Class” has been increased as follows:

Group or Class Amount of tax (per annum)

Group or Class A Rs. 100,000 Group or Class B Rs. 75,000

Group or Class C Rs. 50,000 Any other category Rs. 50,000

Division XVIII – Advance tax on purchase of immovable property

From now onwards, tax under section 236K from buyer shall be collected at the rate of 1% of the fair

market value of immovable property.

THE SECOND SCHEDULE

Part I – EXEMPTIONS FROM TOTAL INCOME

Allowances paid to the Armed Forces personnel Clause (39A)

By amendment in clause (39A), exemption has also been provided to any amount paid to the Armed

Forces personnel as internal security allowance and compensation in lieu of bearer allowance.


INCOME TAX ORDINANCE, 2001 – THE SECOND SCHEDULE

FINANCE ACT 2019

- 23 -

Exemption for amounts paid as donation Clause (61)

Any amount paid as donation to the following entities has been exempted from tax by adding following

new sub-clauses to clause (61):

(lv) Layton Rahmatullah Benevolent Trust (LRBT). (lvi) Akhuwat.

Income exempt from tax Clause (66)

By adding new sub-clauses to clause (66), any income derived by following entities shall also be exempt from tax:

(lxvi) Akhuwat (lxvii) Audit Oversight Board

(lxviii) Patient’s Aid Foundation

Exemption on profit and gains accruing to a person from sale of immovable property to a rental REIT scheme

Clause (99A)

Exemption from tax has been extended to gains on sale of immovable property to a rental REIT scheme

up to 30th day of June 2021.

Exemption on dividend income derived by a company

eligible for group relief

Clause (103C)

By amendment in clause (103C), exemption has been provided to dividend income derived by a

company, if the recipient of the dividend, for the tax year is eligible for group relief under section 59B, computed according to the formula given in this clause. Previously, such exemption was available where

the company had availed group relief.

Exemption on first sale of immovable property Clause (114B)

Profit and gains accruing to a person being the dependent of a Shaheed belonging to Pakistan Armed

Forces or a person who dies while in the service of the Pakistan Armed Forces or the service of Federal or Provincial Government shall be exempt in respect of first sale of immovable property acquired from or

allotted by the Federal Government or Provincial Government or any authority duly certified by the

official allotment authority, and the property acquired or allotted is in recognition of services rendered by the Shaheed or the person who dies in service. Earlier, this exemption was available as proviso in First

Schedule.

Exemption to income of specified persons Clause (145A) New clause (145A) has been added to provide exemption to any income which was not chargeable to tax prior to the commencement of the Constitution (Twenty-fifth Amendment), 2018 of any individual

domiciled or company and association of persons resident in the Tribal Areas forming part of the

Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June 2018 to the 30th day of June, 2023 (both days inclusive).


INCOME TAX ORDINANCE, 2001 – THE SECOND SCHEDULE

FINANCE ACT 2019

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Part II – REDUCTION IN TAX RATES

Rate of tax under section 153(1)(a) and under section 113 for

dealers and sub-dealers of sugar, cement and edible oil

Clauses (24C) & (24D)

By adding new clause (24C), rate of tax under section 153(1)(a) in case of dealers and sub-dealers of

sugar, cement and edible oil shall be 0.25% of the gross amount of payments.

Similarly, under clause (24D), rate of tax under section 113 in case of dealers and sub-dealers of sugar,

cement and edible oil shall be 0.25% subject to the condition that names of such dealers or sub-dealers as the case may be, appear on the active taxpayers’ lists issued under the provisions of the Sales Tax

Act, 1990 and Income Tax Ordinance, 2001.

Part III – REDUCTION IN TAX LIABILITY

Reduction in tax liability for a full time teacher or a researcher Clause (2)

Rate of reduction in tax liability for a full time teacher or a researcher mentioned in this clause has been

reduced from 40% to 25%.

Further, the aforesaid reduction in tax liability shall not be available to a full time teacher or a researcher

of government training institutions and teachers of medical profession who derive income from private medical practice or who receive share of consideration received from patients.

Reduction in tax liability on income under the head capital

gain on disposal of immovable property

Clause (9A)

By adding new clause (9A), tax payable on income chargeable under the head, capital gains on disposal

of immovable property has been reduced by fifty percent on the first sale of immovable property acquired or allotted to ex-servicemen and serving personnel of Armed Forces or ex-employees or serving

personnel of Federal and Provincial Governments, being original allottees of the immovable property, duly

certified by the allotment authority.

Part IV – EXEMPTION FROM SPECIFIC PROVISIONS

Exemption from provisions of section 153(1)(a) Clause (43E)

Provisions of section 153(1)(a) are not applicable in case of goods transport contractors subject to the

condition that such contractors pay tax at the rate of 2.5% on payments for rendering or providing carriage services. Now, by amendment in this clause, the said rate of tax has been increased from 2.5%

to 3%.

Exemption from provisions of section 148 Clause (60E)

Exemption from provisions of section 148 regarding withholding tax on imports has been provided on

mobile phones brought in personal baggage under the Baggage Rules, 2006.


INCOME TAX ORDINANCE, 2001 – THE SECOND, THIRD AND FOURTH SCHEDULES

FINANCE ACT 2019

- 25 -

Exemption from provisions of section 165(1)(a) to

manufacturer, distributor, dealer, wholesaler and

banking companies withdrawn

Clauses (81) & (81A)

Previously, under clause (81), manufacturer, distributor, dealer, wholesaler or commercial importer was not required under section 165(1)(a) to furnish name, Computerized National Identity Card Number,

National Tax Number, address etc., of retailers from whom advance tax has been collected under section 236H. Similarly, under clause (81A), banking companies were not required to furnish the same

information of the persons from whom tax has been collected or deducted under section 151 and 231A.

Now, by omission of clauses (81) and (81A), the aforesaid exemption has been withdrawn.

Exemption from provisions of section 153(1)(b) withdrawn Clause (94)

By omitting clause (94), conditional exemption available from provisions of section 153(1)(b), available

from first day of July 2015 to thirtieth day of June 2019, for services sectors mentioned in this clause has

now been withdrawn. Resultantly, from now onwards, tax shall be deducted on payments on account of such services under section 153(1)(b).

Exemption from provisions of section 177 and 214C withdrawn Clause (105)

Clause (105) was inserted through Finance Act, 2018 wherein exemption from provisions of sections 177 and 214C were provided to a person whose income tax affairs have been audited in any of the preceding

three tax years. Now, by omitting this clause the aforementioned exemption has been withdrawn.

Exemption from provisions of withholding tax for specified persons Clause (109A)

Provisions of sections in Division III of Part V of Chapter X and Chapter XII for deduction or collection of

withholding tax which were not applicable prior to commencement of the Constitution (Twenty-fifth

Amendment) Act, 2018 shall not apply to individual domiciled or company and association of persons resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan under

paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June, 2018 to the 30th day of June, 2023 (both days inclusive).

THE THIRD SCHEDULE

PART II – INITIAL ALLOWANCE AND FIRST YEAR ALLOWANCE

Initial allowance on building under section 23 Clause (1)

By amendment in clause (1), initial allowance for buildings has been withdrawn. Previously, initial

allowance at the rate of 15% was available on addition to building.

THE FOURTH SCHEDULE

RULES FOR THE COMPUTATION OF THE PROFITS AND GAINS OF INSURANCE BUSINESS

Power of Commissioner to examine and amend the amount of income Rule 6E

By inserting new rule (6E), the Commissioner has been empowered to examine and amend the amount

of income as disclosed in the financial statement presented to the Securities and Exchange Commission of Pakistan with respect to commission paid and claimed for losses.


INCOME TAX ORDINANCE, 2001 – THE SEVENTH SCHEDULE

FINANCE ACT 2019

- 26 -

THE SEVENTH SCHEDULE

RULES FOR THE COMPUTATION OF THE PROFITS AND GAINS OF A BANKING COMPANY AND TAX PAYABLE THEREON

Taxable income Rule 1(c), (d) & (h)

Explanation to clause (c) of Rule 1 has been added to clarify that provision for advances and off balance

sheet items allowed maximum at the rate of 1 percent of total advances or maximum at the rate of 5

percent of total advances for consumers and small and medium enterprises (SMEs), shall be exclusive of reversals of such provisions. It is further clarified that reversal of “bad debts” classified as “doubtful” are

taxable and reversal of “bad debts” classified as “loss” are taxable with effect from tax year 2020 and onwards as the respective provisions have been allowed under this clause.

The amount of “bad debts” classified as “sub-standard” or “doubtful” under the Prudential Regulations issued by State Bank of Pakistan, shall not be allowed as expense.

It is clarified that Commissioner has power to conduct audit of the income tax affairs under section 177

as under:

“Explanation.- For removal of doubt, it is clarified that nothing contained in this Schedule shall be so construed as to restrict power of Commissioner, while conducting audit of the income tax affairs under

section 177, to call for record or such other information and documents as he may deem appropriate

in order to examine accounts and records to conduct enquiry into expenditure, income, assets and liabilities of a banking company and all provisions of this Ordinance shall be applicable accordingly.”

Rate of tax on additional income earned from additional

investment in Federal Government securities

Rule 6C

New rule 6C has been inserted which states that from tax year 2020 and onwards, taxable income arising

from mark-up income earned from additional investment in Federal Government securities by the bank shall be taxed at the rate of 37.5% instead of 35% for the tax year 2020. Rule 6C states as follows:

“6C. Enhanced rate of tax on taxable income from Federal Government securities.-(1) The taxable income arising from additional income earned from additional investment in Federal

Government securities for the tax years 2020 and onwards, shall be taxed at the rate of 37.5% instead of the rate provided in Division II of Part I of the First Schedule.

(2) A banking company shall furnish a certificate from external auditor along with accounts while e-

filing return of Income certifying the amount of the money invested in Federal Government securities

in preceding tax year, additional investments made for the tax year and mark-up income earned from the additional investments for the tax year.

(3) Notwithstanding anything contained in this Ordinance, the Commissioner may require the banking

company to furnish details of the investments in Federal Government securities to determine the

applicability of the enhanced rate of tax.

(4) “Additional income earned” means mark-up income earned from additional investment in Federal Government securities by the bank for the tax year.


INCOME TAX ORDINANCE, 2001 – THE SEVENTH AND TENTH SCHEDULES

FINANCE ACT 2019

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(5) “Additional investments” means average investment made in Federal Government securities by the bank during the tax year, in addition to the average investments held during the tax year 2019.

(6) The taxable income arising from additional investment under sub-rule (1) shall be determined

according to the following formula, namely:-

Taxable income subject to enhanced rate of tax = A x B/C

Where-

A is taxable income of the banking company;

B is mark-up income earned from the additional investment for the tax year; and

C is the total of the mark-up income and non-markup income of the banking company as per

accounts.”

Computation of income for Super tax under section 4B Rule 7C

Proviso has been added to rule 7C, which states that brought forward losses, if any, shall be excluded

from income computed under this Schedule for the purpose of super tax.

THE TENTH SCHEDULE

(See section 100BA)

RULES FOR PERSONS NOT APPEARING IN THE ACTIVE TAXPAYERS' LIST

Rate of deduction of collection of tax Rule 1

Where tax is required to be deducted or collected from persons not appearing in the active taxpayers' list, the rate of tax shall be increased by hundred percent of the rate specified in the First Schedule to this

Ordinance.

Persons not required to file return or statement Rule 2

Where the withholding agent or the person from whom tax is required to be collected or deducted is satisfied that a person not appearing in the active taxpayers' list was not required to file a return of

income he shall before collecting or deducting tax furnish to the Commissioner a notice in writing

electronically setting out—

(a) the name, CNIC or NTN and address of the person not appearing in the active taxpayers' list;

(b) the nature and amount of the transaction on which tax is required to be collected or deducted;

and

(c) reason on the basis of which it is considered that the person was not required to file return of income.

The Commissioner, on receipt of such notice shall within thirty days pass an order accepting the contention or directing to the withholding agent to deduct or collect the tax.


INCOME TAX ORDINANCE, 2001 – THE TENTH SCHEDULE

FINANCE ACT 2019

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Provided that in case the Commissioner does not pass any order within thirty days of receipt of notice,

the Commissioner shall be deemed to have accepted the contention and approval shall be treated to have been granted.

Provisional assessment Rule 3

Where for a tax year a person's tax has been collected or deducted and the person fails to file return of

income for that tax year within the due date the Commissioner shall notwithstanding anything contained

in sub-sections (3) and (4) of section 114 within sixty days of the due date of filing the return make a provisional assessment of the taxable income of the person and issue a provisional assessment order

specifying the taxable income assessed and tax due thereon.

In making the provisional assessment, the Commissioner shall impute taxable income on the amount of

tax deducted or collected by treating the imputed income as concealed income.

Provided that the provision of section 111 shall be applicable on unexplained income, asset or expenditure in excess of imputed income treated as concealed income under this rule.

It is clarified that the imputable income so calculated or concealed income so determined shall not

absolve the person so assessed, from requirement of filing of wealth statement, explanation of the nature

and source of amounts subject to deduction or collection of tax, selection of audit or subsequent amendment of assessment and all the provisions of the Income Tax Ordinance shall apply.

Finalization or abatement of provisional assessment Rules 4 & 5

The provisional assessment shall be treated as the final assessment order after the expiry of forty-five

days from the date of service of order of provisional assessment and the provisions of this Ordinance

shall apply accordingly.

However, the provisional assessment shall stand abated and shall be taken to be assessment finalized in case the returns of income and wealth statement for the relevant tax year and the preceding tax year

along with prescribed forms, statements or documents are filed by the person within a period of forty-five days of receipt of provisional assessment order.

It is also provided that in cases where returns have been filed before provisional assessment, such tax

deducted or collected shall be adjustable against the tax payable in the return filed for the relevant tax

year.

Where the provisional assessment has been treated as final assessment, the Commissioner may within thirty days of the final assessment initiate proceedings for imposition of penalties on account of non-

furnishing of return and concealment of income.

For the purposes of this Schedule, imputed income means Rule 6

(a) income for individuals and association of persons which would have resulted in the amount of normal tax equal to the tax collected or deducted for not appearing in the active taxpayers’ list; or

(b) income for companies which would have resulted in the amount of normal tax equal to the tax collected or deducted at the higher rate for not appearing in the active taxpayers' list.



FINANCE ACT 2019

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Withholding statement Rule 7

Where the withholding agent fails to furnish in the withholding statement complete or accurate particulars of persons not appearing on active taxpayers' list, the Commissioner shall initiate penalty

proceedings against the withholding agent within thirty days of filing of withholding statement.

Amendment of assessment Rule 8

The Commissioner may amend an assessment order where the imputed income is less than the amount on which tax was deducted or collected or on the basis of definite information acquired from an audit or

otherwise, the Commissioner is satisfied that (a) any income chargeable to tax has escaped assessment;

or (b) total income has been under-assessed, or assessed at a too low rate, or has been the subject of excessive relief or refund; or (c) any amount under a head of income has been misclassified.

Notwithstanding the aforesaid amendment provisions, where a provisional assessment has been treated

as final assessment or where in response to the provisional assessment, return has been filed within forty five days or where assessment has been amended and the assessment order is considered erroneous in

so far it is prejudicial to the interest of revenue, the Commissioner may, after making or causing to be

made, such enquiries as he deems necessary, amend the assessment order.

Provisions of Ordinance to apply Rule 9

The provisions of Income Tax Ordinance not specifically dealt with in the aforesaid rules shall apply,

mutatis mutandis, in the case of proceedings against the persons not appearing on active taxpayers’ list.

Non-applicability of this Schedule Rule 10

The provisions of this Schedule shall not apply on tax collectible or deductible under the following

sections:

(a) section 149 - Salary

(b) section 152 other than sub-section (1), (1AA), (2), (2A)(b) and (2A)(c) of section 152 - Payments

to non-residents

(c) section 154 - Exports

(d) section 155 - Income from property

(e) section 156B - Withdrawal of balance under Pension Fund

(f) section 231A - Cash withdrawal from a bank

(g) section 231AA - Advance tax on Transaction in Bank

(h) section 233AA - Collection of tax by NCCPL

(i) section 235 - Electricity consumption

(j) section 235A - Domestic electricity consumption

(k) section 235B - Tax on steel melters and composite units



FINANCE ACT 2019

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(l) section 236 - Telephone and internet users

(m) section 236B - Advance tax on purchase of air ticket

(n) section 236D - Advance tax on functions and gatherings

(o) section 236F - Advance tax on cable operators and other electronic media

(p) section 236I - Collection of advance tax by educational institutions

(q) section 236J - Advance tax on dealers, commission agents and arhatis etc.

(r) section 236L - Advance tax on purchase of international air ticket

(s) section 236P - Advance tax on banking transactions otherwise than through cash

(t) section 236Q - Payment to residents for use of machinery and equipment

(u) section 236R - Collection of advance tax on education related expenses remitted abroad

(v) section 236U - Advance tax on insurance premium

(w) section 236V - Advance tax on extraction of minerals

(x) section 236X - Advance tax on tobacco


INCOME TAX ORDINANCE, 2001 – GENERAL

FINANCE ACT 2019

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Important provisions regarding income tax rates, advance tax, withholding tax rates, filing dates of

various periodical statements and return of income, etc. are given in this part for convenience of our

clients.

INCOME TAX RATES – TAX YEAR 2020

Rates of Tax for Companies

Sr.

No. Description

Rate of

Tax

1 Modaraba Company [Clause (18), Part II, 2nd Schedule] 25%

2 Company other than a banking company [Clause (i), Division II, Part I, 1st Schedule] 29% 3 Banking Company [(Clause (i), Division II, Part I, 1st Schedule)] 35%

4 Small Company [Clause (iii), Division II, Part I, 1st Schedule] 23%

The rate of tax as specified in Division II of Part I of the First Schedule shall be reduced by 2% in case of a company whose shares are traded on stock exchange if:

(a) it fulfils prescribed shari’ah compliant criteria approved by State Bank of Pakistan, Securities and

Exchange Commission of Pakistan and the FBR;

(b) derives income from manufacturing activities only; (c) has declared taxable income for the last three consecutive tax years; and

(d) has issued dividend for the last five consecutive tax years.

The rate of tax imposed on taxable income of a small company shall be reduced by 1% every year upto tax year 2023.

Rate of Super Tax – (Division IIA, Part I, First Schedule)

Sr.

No. Person Rate of super tax (percentage of income)

Tax year 2018

Tax year 2019

Tax year

2020

Tax year

2021

1. Banking company 4% 4% 4% 4%

2. Person other than a banking company, having

income equal to or exceeding Rs. 500 million

3%

2%

0%

0%

MINIMUM TAX UNDER SECTION 113 ON INCOME OF CERTAIN PERSONS - (Division IX, Part

I, 1st Schedule)

Sr.

No.

Person(s)

Minimum Tax as percentage of the

person’s turnover

for the year

1. (a) Oil marketing companies, Oil refineries, Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited (for the

cases where annual turnover exceeds rupees one billion); (b) Pakistani Airlines;

(c) Poultry industry including poultry breeding, broiler production,

egg production and poultry feed production; (d) Dealers or distributors of fertilizers; and

(e) Person running an online marketplace as defined in clause (38B) of section 2.

0.75%



FINANCE ACT 2019

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2. (a) Distributors of pharmaceutical products, fast moving consumer goods and cigarettes;

(b) Petroleum agents and distributors who are registered under the

Sales Tax Act, 1990; (c) Rice mills and dealers; and

(d) Flour mills.

0.25%

3. Motorcycle dealers registered under the Sales Tax Act, 1990. 0.3%

4. In all other cases. 1.5%

Rate of minimum tax u/s 113 in case of dealers and sub-dealers of sugar, cement and edible oil shall be

0.25% subject to the condition that names of such dealers or sub-dealers as the case may be, appear on the active taxpayers’ lists issued under the provisions of the Sales Tax Act, 1990 and Income Tax

Ordinance, 2001. [Clause (24D), Part II, 2nd Schedule)]

INCOME TAX RATES ON DIVIDEND – (Division III, Part I, First Schedule)

The rate of tax imposed under section 5, on dividend received from a company shall be:

(a) 7.5% in case of dividend paid by Independent Power Producers where such dividend is a pass

through item under an Implementation Agreement or Power Purchase Agreement or Energy Purchase Agreement and is required to be re-imbursed by Central Power Purchasing Agency (CPPA-G) or its

predecessor or successor entity.

(b) 15% in mutual funds and cases other than those mentioned in clauses (a) and (c).

(c) 25% in case of a person receiving dividend from a company where no tax is payable by such

company, due to exemption of income or carry forward of business losses or claim of tax credits.

Income from dividend received by a banking company shall be taxed @ 35%. [Rule 7B, 7th Schedule]

TAX RATES FOR INDIVIDUALS AND ASSOCIATION OF PERSONS

Rates of tax for individuals (other than salaried individuals) and association of persons:

Sr. No.


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

2. Where taxable income exceeds Rs. 400,000 but does not exceed Rs. 600,000

5% of the amount exceeding Rs. 400,000


Rs. 10,000 + 10% of the amount exceeding Rs. 600,000

4. Where taxable income exceeds Rs. 1,200,000 but does not

exceed Rs. 2,400,000

Rs. 70,000 + 15% of the amount

exceeding Rs. 1,200,000 5. Where taxable income exceeds Rs. 2,400,000 but does not









exceeding Rs. 4,000,000 8. Where taxable income exceeds Rs. 6,000,000 Rs. 1,220,000 + 35% of the amount

exceeding Rs. 6,000,000



FINANCE ACT 2019

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Rates of tax for salaried individuals (where income under the head “salary” exceeds seventy-

five percent of taxable income):

Sr. No.


1. Where the taxable income does not exceed Rs. 600,000 0%


5% of the amount exceeding Rs. 600,000







Rs. 195,000 + 17.5% of the amount






Rs. 670,000 + 22.5% of the amount



exceed Rs. 12,000,000

Rs. 1,345,000 + 25% of the amount









REDUCTION IN TAX LIABILITY OF TEACHERS OR RESEARCHERS – [Clause (2), Part III, Second Schedule]

The provision to reduce the income tax liability of a full time teacher or a researcher employed in a non-

profit educational or research institution duly recognized by Higher Education Commission, a Board of

Education or a University recognized by the Higher Education Commission including government research institution, continues to be available. The tax liability in such cases shall now be reduced by an amount

equal to 25% (instead of 40%) of the tax payable on income from salary.

However, this reduction in tax liability will not be available to teachers of medical profession who derive

income from private medical practice or who receive share of consideration received from patients.

ADJUSTMENT OF TAX CREDIT BY EMPLOYER

Every responsible person, while deducting tax on the income chargeable under the head salary of

employees, shall allow tax credit on charitable donations (section 61), investment in shares and insurance (section 62); and contribution to an approved pension fund (section 63) and make adjustments of tax

withheld from employee under other heads during the tax year after obtaining evidences regarding:

i) tax withheld from the employee under this Ordinance during the tax year; ii) any excess deduction or deficiency arising out of any previous deductions; or

iii) failure to make deduction during the year.



FINANCE ACT 2019

- 34 -

The employers will, however, be responsible to obtain documentary evidences alongwith declaration from

employees on prescribed form “IT-3”, for correct application of relevant provisions of law.

The said declaration and evidences are required to be retained by the employer for at least 6 years after

the end of the tax year to which they relate. [Section 174(3)]

VALUATION OF PERQUISITES, ALLOWANCES AND BENEFITS

In case of salaried taxpayers, special allowance and medical allowance are exempt from tax under Clause

(39) and Clause (139) respectively of Part I of Second Schedule. However, value of other perquisites, allowances and benefits provided by the employer shall be included in income of the employee in

accordance with the Rules 4 to 6 of Part I of Chapter II of Income Tax Rules, 2002 as reproduced below:

“4. Valuation of Accommodation - The value of accommodation provided by an employer to the

employee shall be taken equal to the amount that would have been paid by the employer in case such accommodation was not provided.

Provided that the value taken for this purpose shall, in any case, not be less than forty-five

percent of the minimum of the time scale of the basic salary or the basic salary where there is no

time scale.

Provided further that where House Rent Allowance is admissible @ thirty per cent, the value taken for the purpose of this rule shall be an amount not less than thirty per cent of minimum of

the time scale of basic salary or the basic salary where there is no time scale.

5. Valuation of conveyance - The value of conveyance provided by the employer to the

employee shall be taken equal to an amount as below: -

(i)

Partly for personal and partly for official use

5% of:

(a) the cost to the employer for acquiring the motor vehicle; or

(b) the fair market value of the motor vehicle at the

commencement of the lease, if the motor vehicle is taken on lease by the employer;

(ii) For personal use only 10% of:

(a) the cost to the employer for acquiring the motor vehicle; or,

(b) the fair market value of the motor vehicle at the commencement of the lease, if the motor vehicle is taken on

lease by the employer; and

6. For the purpose of this part, “employee” includes a director of a company.”

INCOME FROM PROPERTY UNDER SECTIONS 15 AND 155

The rate of tax to be paid under section 15 and tax to be deducted under section 155 shall be as follows:



FINANCE ACT 2019

- 35 -

For individual and association of persons:

Sr.

No. Gross amount of rent Rate of tax

1. Where the gross amount of rent does not exceed Rs.

200,000

Nil


does not exceed Rs. 600,000

5% of the gross amount



does not exceed Rs. 1,000,000


amount exceeding Rs. 600,000















Rs. 1,110,000 + 30% of the gross


8. Where the gross amount of rent exceeds Rs. 8,000,000 Rs. 1,710,000 + 35% of the gross


In case of an individual or association of persons whose income from property for a tax year exceeds Rs. 4

million, may opt to pay tax at normal rates specified in Division I of Part I of the First Schedule instead of tax rates provided under section 15.

For Company:

Rate of tax to be deducted under section 155 shall be 15% of the gross amount of rent. Income tax

under section 15 shall be charged as per rates under Division II, Part I, First Schedule applicable to a company under normal tax regime.

RATE OF TAX ON CAPITAL GAIN ON SALE OF SECURITIES – (Section 37A)

Sr. No.

Holding Period

Tax Years 2018, 2019 and 2020

Securities acquired before

01-07-2016

Securities acquired after 01-07-2016

1. Where holding period of a security is less than twelve months 15% 15%

2. Where holding period of a security is twelve months or more but less than twenty-four months

12.5% 15%

3. Where holding period of a security is twenty-four months or more but the security was acquired on or after 1st July, 2013

7.5% 15%

4. Where the security was acquired before 1st July, 2013 0% 0%

5. Future commodity contracts entered into by the members of Pakistan Mercantile Exchange

5% 5%



FINANCE ACT 2019

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- Provided that the rate of tax on cash settled derivatives traded on the stock exchange shall be 5% for

the tax year 2018 to 2020.

- Provided that in case of debt securities the rate of tax for companies shall be as specified in Division II

of Part I of First Schedule.

- Provided further that a mutual fund or a collective investment scheme or a REIT scheme shall deduct

Capital Gains Tax on redemption of securities at the rates as specified below:

Sr.

No. Category

Rate of tax

Stock Funds Other Funds

1. Individual and association of persons 10% 10%

2. Company 10% 25%

However, in case of stock fund rate of tax deduction will be 12.5% instead of 10%, if dividend receipts of

the fund are less than capital gains.

No capital gains tax shall be deducted in case where security is issued under a mutual fund or collective investment scheme or a REIT scheme, if the holding period of the security is more than four years.

Moreover, income from capital gains in case of banking company shall be taxed at the rate of 35%. [Rule

7B, 7th Schedule]

COMPUTATION OF CAPITAL GAIN ON DISPOSAL OF IMMOVABLE PROPERTY UNDER

SECTION 37(1A) AND RATE OF TAX ON CAPITAL GAIN – (Division VIII, Part I, First Schedule)

Computation of capital gain:

Holding period Taxable

capital gain

- Open plots:

Where holding period does not exceed one year 100%

Where holding period exceeds one year but does not exceed eight years 75% Where holding period exceeds eight years

0% - Constructed property: Where holding period is does not exceed one year 100%

Where holding period exceeds one year but does not exceed four years 75% Where holding period exceeds four years 0%

Rate of tax on capital gain:

Sr.

No. Amount of gain Rate of tax

1. Where the gain does not exceed Rs. 5 million 5% 2. Where the gain exceeds Rs. 5 million but does not exceed Rs. 10 million 10% 3. Where the gain exceeds Rs. 10 million but does not exceed Rs. 15 million 15%

4. Where the gain exceeds Rs. 15 million 20%



FINANCE ACT 2019

- 37 -

Profit and gains on sale of immovable property to a Developmental REIT Scheme with the object of

development and construction of residential buildings shall be exempt upto the 30th day of June 2020. [First proviso, Clause (99A), Part I, Second Schedule]

Profit and gains on sale of immovable property to a Rental REIT Scheme shall be exempt upto the 30th

day of June 2021. [Second proviso, Clause (99A), Part I, Second Schedule]

Profits and gains accruing to persons mentioned in proviso to sub-section (1) of section 236C in respect of first sale of immovable property acquired from or allotted by the Federal Government or Provincial

Government or any authority duly certified by the official allotment authority and the property acquired or

allotted is in recognition of services rendered by the Shaheed or the person who dies in service shall be exempt from tax. [Clause (114B), Part I, Second Schedule]

The amount of tax payable on income chargeable under the head, “Capital Gains” on disposal of

immovable property shall be reduced by 50% on the first sale of immovable property acquired or allotted

to ex-servicemen and serving personnel of Armed Forces or ex-employees or serving personnel of Federal and Provincial Governments, being original allottees of the immovable property, duly certified by the

allotment authority. [Clause (9A), Part III, Second Schedule]

ADVANCE TAX UNDER SECTION 147

Every taxpayer whose income was charged to tax for the latest tax year under this Ordinance excluding

the following shall pay advance tax for the year under section 147 of Income Tax Ordinance, 2001 as reduced by the tax already paid/deducted at source in the year:

i) Dividend received from a company (Section 5)

ii) Income of a non-resident from Pakistan-source royalty or fee for technical services, shipping and transport (Sections 6 & 7)

iii) Salary income subject to deduction of tax (Section 149) iv) All income where the tax collected or deducted is considered as final tax (Section 168)

Advance tax in case of an individual, will be calculated in accordance with the following formula:

( A / 4 ) - B

Where —

A is the tax assessed to the taxpayer for the latest tax year under the Ordinance; and

B is the tax paid in the quarter for which a tax credit is allowed under section 168, other than tax deducted on dividend income, salary income or income from property.

Individual whose latest assessed income excluding incomes referred to in items (i) to (iv) above is less than Rupees 1,000,000 is not required to pay advance income tax under section 147 of Income Tax

Ordinance, 2001.

Where the taxpayer is an association of persons or a company, advance tax will be computed according to the following formula:

(A x B / C) – D

Where —

A is the taxpayer’s turnover for the quarter

B is the tax assessed of the taxpayer for the latest tax year



FINANCE ACT 2019

- 38 -

C is turnover of the taxpayer for the latest tax year

D is the total amount of tax paid/deducted in the quarter other than tax collected/deducted which

is considered as final tax.

Where the taxpayer fails to provide turnover or the turnover for the quarter is not known as stated in

component A above, it shall be taken to be one-fourth of 110% of the turnover of the latest tax year for which return has been filed.

The provision of minimum tax u/s 113 and Alternative Corporate Tax u/s 113C will also be taken into

account while computing advance tax liability.

Adjustable advance tax on capital gain from sale of securities will be computed at following rates:

[Section 147(5B)]

Where holding period of a security is less

than 6 months

2% of the capital gains derived during the quarter

Where holding period of a security is 6

months or more but less than 12 months

1.5% of the capital gains derived during the quarter

However, provisions regarding advance tax on capital gain from sale of securities are not applicable to

individual investors.

In case the taxpayer is an association of persons or a company including a banking company, it shall estimate the tax payable by it for the relevant tax year at any time before the 2nd installment is due. In

case the tax payable is likely to be more than the amount that the taxpayer is required to pay under sub-

section (4), the taxpayer shall furnish to the Commissioner on or before the due date of the 2nd quarter an estimate of the amount of tax payable by the taxpayer and pay 50% of such amount by the due date

of the 2nd quarter of the tax year after making adjustment for the amount, if any, already paid in terms of sub-section (4). The remaining 50% of the estimate shall be paid in two equal installments payable by

the due date of the 3rd and 4th quarter of the tax year.

Similarly, according to the provisions of sub-section (6), if the tax payable is less than the tax due on the

said basis, every taxpayer who is required to pay advance tax, after furnishing the estimates to Commissioner, will pay such estimated amount after adjustment of tax already paid. Where the payable

advance tax is estimated at lower side, such estimate of the amount of tax payable shall contain turnover for the completed quarters of the relevant tax year, estimated turnover of the remaining quarters

alongwith reasons for any decline in estimated turnover, documentary evidence of estimated expenses or

deductions which may result in lower payment of advance tax and the computation of the estimated taxable income of the relevant tax year. In the absence of such details, or if the Commissioner is not

satisfied with the documentary evidences provided to him, he may reject the estimate after providing an opportunity of being heard to the taxpayer and the taxpayer shall pay advance tax according to the

formula contained in sub-section (4).

New company or an association of persons, are required to pay advance income tax even in the first year

of their operation. The taxpayer will estimate the amount of advance tax payable on quarterly income basis and thereafter pay such amount after taking into account minimum tax payable under section 113

and Alternate Corporate Tax u/s 113C. If minimum tax payable comes more than the advance tax calculated on the basis of quarterly income, then advance tax will be paid equal to minimum tax

calculated under section 113 on aggregated turnover of the quarter after adjustment of the amount

already paid during the quarter, if any.



FINANCE ACT 2019

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Where the advance tax paid on the basis of estimation under sub-section (4A) or (6) of section 147 is

less than 90% of the tax chargeable for the relevant tax year, the taxpayer shall be liable to pay default

surcharge under section 205(IB) at the rate of 12% per annum on the amount by which the tax paid by him falls short of the 90%. Such default surcharge shall be calculated from 1st day of April in that year to

the date on which the assessment is made or the 30th day of June of the financial year next following whichever is earlier. [Sub-section (1B) of Section 205]

As required u/s 147A, provincial sales tax registered person, whose name was not appearing in active

taxpayers’ list on 30 June of previous tax year, shall also pay advance tax at the rate of three percent of

the turnover declared before the provincial revenue authority.

DATE OF PAYMENT OF ADVANCE TAX

Tax Payable For On or Before

Individuals Companies and AOPs

(excluding Banking Company)

September quarter 15 September 25 September

December quarter 15 December 25 December

March quarter 15 March 25 March

June quarter 15 June 15 June

Advance tax on capital gain from sale of securities is payable within 21 days after the close of each

quarter. [Section 147(5b)]

Banking company will be required to pay advance tax under section 147 in twelve installments on or

before 15th of every month. [Rule 5(1), 7th Schedule]

PAYMENT OF TAX COLLECTED / DEDUCTED (RULE 43 OF INCOME TAX RULES, 2002)

DATE OF FILING OF STATEMENTS U/S 165 - [Section 165(2)]

Every prescribed person shall furnish or e-file biannual statement under sub-section (1) of section 165 within the time frame set out as follows:

Biannual Statement period Date of Filing

Half-year ending on the 30 June 31 July

Half-year ending on the 31 December 31 January

Tax collected / deducted by Deposit into Government treasury

Federal / Provincial Government On the same day

Other persons - Within 7 days from the end of each week ending on Sunday.

- In case of remittance abroad to a non-resident through State Bank of Pakistan or other baking company, prior to remitting

abroad of the amount from which tax is to be deducted or

collected.



FINANCE ACT 2019

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DATE OF FILING OF ANNUAL STATEMENT U/S 165(6) - [(Rule 44(5) of Income Tax Rules,

2002)]

Annual statements will be furnished on or before 31 July of each year by the person deducting tax from

salary under section 149.

DATE OF FILING OF RETURN OF INCOME, STATEMENT UNDER SECTION 115(4)

Category of Taxpayer Date of Filing of

return / statement u/s 115(4)

Companies: [Section 118(2)]

Having tax year ending between 01 January to 30 June 31 December

Other cases 30 September

Persons other than Companies: [Section 118(3)]

In case of individual and association of persons 30 September


INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME


Section Nature of Payment / Transactions

Withholding / Collection

Rate

% / Rupees

Responsibility for

Deduction / Deposit Remarks

Active Non-active

148 1.(i) Industrial undertaking importing

remeltable steel (PCT Heading 72.04) and directly reduced iron for its own use [Sr.

No. 1(i) of Table, Part II, 1st Sch.] (ii) Import of potassic fertilizers in

pursuance of Economic Coordination

Committee of the Cabinet’s decision No. ECC-155/12/2004 dated 09 December

2004 [Sr. No. 1(ii) of Table, Part II, 1st Sch.]

(iii) Import of Urea [Sr. No. 1(iii) of

Table, Part II, 1st Sch.] (iv) Manufacturers covered under

Notification No. S.R.O. 1125(I)/2011 dated 31 December 2011 and importing

items covered under S.R.O.

1125(I)/2011 dated 31 December, 2011 [Sr. No. 1(iv) of Table, Part II, 1st Sch.]

(v) Person importing gold [Sr. No. 1(v) of Table, Part II, 1st Sch.]

(vi) Person importing cotton [Sr. No.

1(vi) of Table, Part II, 1st Sch.] (vii) Persons importing LNG. [Sr. No.

1(vii) of Table, Part II, 1st Sch.]

1% of

import value as increased

by customs – duty, sales

tax and

federal excise duty

-do-

-do-

-do-

-do-

-do-

2% of


by customs-duty, sales

tax and

federal excise duty

-do-

-do-

-do-

-do-

-do-

Collector of customs

-do-

-do-

-do-

-do-

-do-

-do-

Minimum - except the followings (Sec.

148(7)): (a) raw material, plant, machinery,

equipment and parts by an industrial undertaking for its own use.

(b) Motor vehicles in CBU condition by

manufacturer of motor vehicles. (c) Large import houses.

(d) Foreign produced film imported for the purpose of screening and viewing.

2. Import of pulses [Sr. No. 2 of Table, Part II, 1st Sch.]

2% of import value as

increased by customs – duty, sales

tax and

4% of import value as

increased by customs – duty, sales

tax and







Rate

% / Rupees

Responsibility for


Active Non-active

federal excise duty

federal excise duty

3. Commercial importers covered under

Notification No. S.R.O. 1125(I)/2011 dated 31 December 2011 and importing

items covered under S.R.O.

1125(I)/2011 dated the 31 December, 2011[Sr. No. 3 of Table, Part II, 1st Sch.]

3% of


by customs

– duty, sales tax and

federal excise duty

6% of


by customs

– duty, sales tax and

federal excise duty


Rate of tax in case of commercial importer

importing plastic raw material falling under PCT Heading 39.01 to 39.12 shall be 4.5% and 9%

in case of active and non-active taxpayer,

respectively.

4. Persons importing coal [Sr. No. 4 of Table, Part II, 1st Sch.]

4% 8%


5. Import of finished pharmaceutical

products that are not manufactured otherwise in Pakistan, as certified by the

Drug Regulatory Authority of Pakistan [Sr. No. 5 of Table, Part II, 1st Sch.]

4% 8%


6. Ship breakers on import of ships [Sr.

No. 6 of Table, Part II, 1st Sch.]

4.5% 9%


7. Industrial undertakings not covered

under S. Nos. 1 to 6 [Sr. No. 7 of Table, Part II, 1st Sch.]

5.5% 11%


Rate of tax in case of industrial undertaking

importing plastic raw material falling under PCT Heading 39.01 to 39.12 for its own use shall be

1.75% and 3.5% in case of active and non-active taxpayer, respectively.

8. Companies not covered under S. Nos.

1 to 7 [Sr. No. 8 of Table, Part II, 1st Sch.]

5.5% 11%


9. Persons not covered under S. Nos. 1

to 8 [Sr. No. 9 of Table, Part II, 1st Sch.]

6% 12%


Persons importing mobile phones.

[Proviso, Part II, 1st Sch.]:







Rate

% / Rupees

Responsibility for


Active Non-active

C&F value of mobile phone (in USD):

1. Up to 30

2.Exceeding 30 & up to 100




6.Exceeding 500

(Rupees)

70

730

930

970

3,000

5,200

(Rupees)

140

1,460

1,860

1,940

6,000

10,400

148A Purchase of locally produced edible oil by manufacturers of cooking oil and

vegetable ghee.

2% 4%

Person making the payment

Final

149(1) Basic salary and taxable allowances

Average rate

Employer Adjustable. Tax shall not be deducted where the taxable income does not exceed Rupees

600,000. [Division I, Part I, 1st Sch.]

- Tax deducted at source of the employee,

short / excess tax deducted from salary, tax

credits under sections 61, 62, 63 etc., can be adjusted by the employer. [Sec. 149(1)].

- Payment of salary more than Rupees 15,000 should be through crossed cheques or direct

transfer of funds to the employee’s bank

account. [Sec. 21(m)]

(3) Directorship fee or fee for attending

board meeting or such fee by whatever name called

20% 20%

Employer / responsible

person for making payment

Adjustable






Rate

% / Rupees

Responsibility for


Active Non-active

150 i – Dividend paid by Independent Power

Producers where such dividend is a pass through item under an Implementation

Agreement or Power Purchase Agreement or Energy Purchase

Agreement and is required to be re-

imbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or

successor entity. [Division I, Part III, 1st Sch.]

7.5%

15%

Every person paying

dividend

-do-

Final - Following are exempt:

- any income derived from inter-corporate dividend within the group companies entitled to

group taxation under section 59AA subject to condition that return of the group has been

filed for the tax year. [Cl. (103A), Part I, 2nd

Sch.] - Payment to approved Pension fund,

recognized provident fund, approved superannuation fund or an approved gratuity

fund or REIT Scheme, etc. [Cl. (47B), Part IV,

2nd Sch.] - Tax shall not be deducted in case of dividend

paid to Transmission Line Projects under Transmission Line Policy 2015. [Clause (12A),

Part IV, 2nd Sch.]

ii – other than mentioned in (i) above

15%

30%

150A Return on investment in Sukuks

- Company - Individual and AOP:

(i) Return on investment more

than 1 million rupees (ii) Return on investment less

than 1 million rupees

15%

12.5%

10%

30%

25%

20%

Special purpose vehicle,

Company

- Adjustable against tax imposed under section

5AA. - Tax shall not be deducted in case of The

Second Pakistan International Sukuk Company

Limited and The Third Pakistan International Sukuk Company Limited. [Cl. (95) & (96), Part

IV, 2nd Sch.]

151(1):

(a) Yield on an account, deposit or a

certificate under the National Saving Scheme or post office saving account

15% 30%

Every person making

payment

Minimum - Except where taxpayer is a company

or profit on debt is taxable under section 7B.

(b) Profit on a debt, being an account or deposit maintained with the Banking

company or financial institution

15% 30%

Banking company or financial institution

If the yield or profit paid is Rupees 500,000 or less, the rate of tax shall be 10% and 20% in






Rate

% / Rupees

Responsibility for


Active Non-active

(c) Profit on any security other than that

referred in Clause (a), issued by Federal Government, Provincial Government or

local Government.

15% 30%

Federal Government,

Provincial Government or local Government

case of active and non-active taxpayer,

respectively. [Div. IA, Pt. III, 1st Sch.]. No tax will be deducted in following

cases: - Yield or profit on investment in Bahbood

Saving Certificates or Pensioners Benefit

Account and Shuhada Family Welfare Account. [Cl. (36A), Part IV, 2nd Sch]

- If monthly installment in monthly income Savings Accounts Scheme does not exceed Rs. 1,000 - [Cl. (59)(iv)(b), Part IV, 2nd Sch.].

- Any yield from National Saving Schemes of Directorate of National Savings where

investment was made on or before 30 June 2001 and any income derived from Mahana

Amdani Account where monthly installment

does not exceed Rupees 1,000 shall continue to remain exempt and any person paying such

yield or income shall not deduct tax u/s 151. The recipient of such receipt or income is not

required to produce exemption certificate in this regard [S. 239(14)]

- Tax shall not be deducted in case of The

Second Pakistan International Sukuk Company Limited and The Third Pakistan International

Sukuk Company Limited. [Cl. (95) & (96), Part IV, 2nd Sch.]

(d) Profit on bond, certificate, debenture,

security or instrument of any kind to any

person other than financial institution

15% 30%

Banking company,

financial institution, etc.

152

(1) Royalty or fee for technical services to non-resident

15% 30%

Every person making payment

Final






Rate

% / Rupees

Responsibility for


Active Non-active

(1A) Payment to non-resident persons on

account of certain contracts

7% 7%

Every person making

payment

Minimum

(1AA) Payments to non-resident on account of insurance or re-insurance premium

5% 10%


Minimum

(1AAA) Payment for advertisement services to

non-resident media person relaying from outside Pakistan [Cl. (3) Div II, Part III,

Ist Sch.]

10% 10%

Every person making

payment

Final

(1C) Payment of fee for offshore digital services to a non-resident person on

behalf of any resident or a permanent

establishment of a non-resident in Pakistan

5% 5%

Every banking company or financial institution

making payment

Final

(2) Payment to non-resident other than

amount to which sub-section (1), (IA), (IAA), (IAAA) or (1C) above applies

20% 40%

Every person making

payment

Adjustable

(2) Payment to non-resident having no PE in

Pakistan, in respect of profit on debt [Cl. (5A), Part II, 2nd Sch.]

10% 20%

Every person making

payment

Final - Subject to proviso of clause (5A) of Part

II of 2nd Schedule

(2A)(a) Payment to PE for sale of goods:

- In case of company - In other cases

Every person making

payment

Adjustable No tax shall be deducted in case

where the sale of goods is made by importer of the goods and tax u/s 148 in respect of such

goods has been paid and the goods are sold in

same condition as they were when imported.

4% 4.5%

4% 4.5%

(2A)(b) i) Payment to PE for transport services

ii) Payment to PE for other services:

2% 4%

Every person making

payment

Minimum

Minimum






Rate

% / Rupees

Responsibility for


Active Non-active

- In case of company

- In other case

8%

10%

16%

20%

Every person making

payment

(2A)(c) Payment to PE in any other case - In case of sportsperson

- In other cases

10%

7%

20%

14%


Adjustable

152A Payment for foreign produced commercial for advertisement

20% 40%

Every prescribed person making payment

Final

153

(1)(a) -Sale of rice, cotton seed oil or edible oils [Div III, Part III, 1st Sch.]

1.5% 3%


Minimum (Adjustable for

manufacturing

company and listed company)

Gross amount payable for sale of

goods shall include

the sales tax. [S.153(1)]

Tax will not be deducted on

account of payments made

for:

-Sale of other goods (except fast moving consumer goods sold by

distributors): [Div III, Part III, 1st Sch.]

- in case of companies

- in case of other taxpayers -Sale of fast moving consumer goods by

distributors: - in case of companies

- in case of other taxpayers


Minimum (Adjustable for

manufacturing company and listed

company)

Sale of goods not

exceeding Rs. 75,000 in a financial year

Services not


in a financial year. Provided that where

the total payments in a financial year,

exceed Rs. 75,000 /

4%

4.5%

2% 2.5%

8%

9%

4% 5%






Rate

% / Rupees

Responsibility for


Active Non-active

-Sale of cigarettes and pharmaceutical

products by distributors of such products and by large distribution houses subject

to the fulfillment of conditions u/s 148(7). [Cl. (24A), Part II, 2nd Sch.]

1% 2%

Every prescribed person

making payment

Minimum

(Adjustable for manufacturing

company and listed company)

30,000 as stated

above, the taxpayer will deduct tax from

the payments including the

payments made

earlier without deduction of tax

during the same financial year.

Local sales, supplies to taxpayers as per clause (45A) of Part IV of 2nd Schedule.

1% 2%


Minimum

(1)(b) Rendering or providing of services:

[Cl. (2), Div III, Part III, 1st Sch.]

- Transport services, freight forwarding services, air cargo services, courier

services, manpower outsourcing services, hotel services, security guard

services, software development services,

IT services and IT enabled services as defined in clause (133), Part I, 2nd Sch.,

tracking services, advertising services (other than by print or electronic media),

share registrar services, engineering

services, car rental services, building maintenance services, services rendered

by Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange

Limited, inspection, certification, testing and training services.

3%

6%


making payment

Minimum

Where the recipient

of the payment for services receives the

payment through an

agent or the third person by whatever

name called, the agent or the third

person shall be

treated to have been paid the service

charges or fee by the recipient and the

recipient shall collect tax along with the

payment received.

[Proviso 153(1)].






Rate

% / Rupees

Responsibility for


Active Non-active

- electronic and print media for

advertising services: - in case of companies


- other services: - in case of companies


1.5%

1.5%

8%

10%

3%

3%

16%

20%

Minimum

Minimum

Services provided to taxpayers as per clause (45A) of Part IV of 2nd Schedule

1% 2%


Minimum

(1)(c) Execution of a contract (Residents) [Cl. (3), Div III, Part III, 1st Sch.]

- in case of companies

- in case of other taxpayers - in case of sportsperson


Minimum -Adjustable for listed companies)

[Sec153(3)]

7%

7.5%

14%

15% 10% 20%

(2) Payments made by every exporter or an export house to a resident person or

permanent establishment in Pakistan, on account of rendering of services of

stitching, dyeing etc. [Cl. (3), Division IV, Part III, 1st Sch.]

1% 2%

Every exporter or export house

Minimum

153B Payment of royalty to resident persons 15% 30% Every person making

payment

Adjustable

– Tax will be deducted on gross amount

payable (including FED and Provincial sales tax, if any.)

154(1) Realization of foreign exchange on

account of export of goods by exporter

1% 1%

Every authorized dealer

in foreign exchange

Final. Minimum tax, if the taxpayer opts not to

be subject to final tax at the time of filing of return.

(2) Commission due to an indenting commission agent

5% 5%

Every authorized dealer in Foreign Exchange

-do-






Rate

% / Rupees

Responsibility for


Active Non-active

(3) Sale of goods to an exporter under an

inland back-to-back L/C

1% 1%

Every banking company -do-

(3A) Export of goods by an industrial

undertaking – Export Processing Zone

1% 1%

Export Processing Zone

Authority

-do-

(3B) Indirect exporter

1% 1%

Direct exporter, export house

-do-

(3C) Clearing of goods

1% 1%

Collector of customs -do-

155 Payment in full or part (including

advance) on account of rent of immovable property (including rent of

furniture and fixture and services relating to such property)

Prescribed persons as

mentioned in sub-section (3) of section

155

Individuals and Association of

Persons where the gross amount of rent is:

Up to Rs. 200,000

Nil

Adjustable

Rs. 200,001 – Rs. 600,000

5% of the amount


Rs. 600,001 – Rs. 1,000,000

Rs. 20,000 + 10% of the amount exceeding Rs.

600,000

Rs. 1,000,001 – Rs. 2,000,000

Rs. 60,000 + 15% of the

amount exceeding Rs.

1,000,000

Rs. 2,000,001 – Rs. 4,000,000

Rs. 210,000 + 20% of the







Rate

% / Rupees

Responsibility for


Active Non-active

Rs. 4,000,001 – Rs. 6,000,000

Rs. 610,000 + 25% of the


Rs. 6,000,001 – Rs. 8,000,000

Rs. 1,110,000 + 30% of the amount exceeding Rs.

6,000,000

Over Rs. 8,000,000

Rs. 1,710,000 + 35% of the amount exceeding Rs.

8,000,000

Company

15% 15%

Adjustable - Tax shall not be deducted in case

of The Second Pakistan International Sukuk

Company Limited and The Third Pakistan International Sukuk Company Limited. [Cl.

(96), Part IV, 2nd Sch.]

156 - Payment of prize on a prize bond or cross word puzzle.

15% 30%


Final Where the prize is not in cash, the person

while giving the prize shall collect tax on

the fair market value

of the prize. [Sec.156(2)]

- Payment on winning from a raffle, lottery, prize on winning a quiz, prize

offered by companies for promotion of

sales.

20% 40%


Final

156A Commission paid or discount allowed to petrol pump operator

12% 24%

Every person selling petroleum products

Final

156B Withdrawal of balance under pension

fund:

(a) Withdrawn before the retirement

age

Average rate [Sec. 12(6)]

of tax for the last 3 years or

tax rate for the year whichever is less

Pension fund manager Adjustable - Tax will not be deducted:

i) in case of disability

ii) on share of the nominated survivor of the deceased person

iii) invested in an approved income payment plan






Rate

% / Rupees

Responsibility for


Active Non-active

(b) Withdrawn if in excess of 50% of

accumulated balance at or after the age of retirement

- do - iv) paid to life insurance company for purchase

of approved annuity plan [Provisos to sec. 156B(a) and 156B(b)]

TRANSITIONAL ADVANCE TAX

Advance tax under this chapter shall not be

collected or deducted from the Federal Government, Provisional Government, foreign

diplomat or a diplomatic mission in Pakistan or

a person who produces a certificate from the Commissioner that his income during the tax

year is exempt.

231A Cash withdrawal from a bank

- 0.6%

Banking company

Adjustable tax – Tax will not be collected, if

cash withdrawal does not exceed Rs. 50,000 in

aggregate from all bank accounts in a single day. However, if cash amount withdrawn

exceeds Rs. 50,000 in a day, tax will be deducted on the whole amount withdrawn.

[Circular No. 9 of 2008 dated 15-08-2008].

- Tax shall not be deducted in case of The Second Pakistan International Sukuk Company

Limited and The Third Pakistan International Sukuk Company Limited. [Cl. (95) Part IV, 2nd

Sch.] - No tax will be collected in respect of cash

withdrawal made from a “Branchless Banking

(BB) Agent Account” utilized to render branchless banking services to customers. [Cl.

(101), Pt. IV, 2nd Sch.]

231AA Sale of various banking instruments against cash, receipt of cash on

cancellation of these instruments and

- 0.6%

Banking company, non-banking financial

institution, exchange

Adjustable – No tax will be collected where sum total of the transaction does not exceed

Rupees 25,000 in a day.






Rate

% / Rupees

Responsibility for


Active Non-active

transfer of any sum against cash through

online transfer, telegraphic transfer, mail transfer or any other mode of electronic

transfer.

company, authorized

dealer of foreign exchange.

- Tax shall not be deducted in case of The


Sukuk Company Limited. [Cl. (95) Part IV, 2nd Sch.]

231B (1) Registration of a new locally

manufactured motor vehicle:

(Rupees)

(Rupees)

Motor vehicle

registration authority of

Excise and Taxation Department

Adjustable - No advance tax shall be collected

at the time of registration of a motor vehicle

after five years from the date of first registration in case the vehicle is acquired from

the Armed Forces of Pakistan or from a foreign diplomats or a diplomatic mission in Pakistan or

from the Federal or Provincial Government. - Tax will not be deducted if a person produces

evidence that tax while transfer of registration

or ownership in case of locally manufactured or tax u/s 148 in the case of imported vehicle was

collected from the same person in respect of the same vehicle.

upto 850 cc

7,500 15,000

851 cc to 1000 cc

15,000 30,000

1001 cc to 1300 cc

25,000 50,000

1301 cc to 1600 cc

50,000 100,000

1601 cc to 1800 cc

75,000 150,000

1801 cc to 2000 cc

100,000 200,000

2001 cc to 2500 cc

150,000 300,000

2501 cc to 3000 cc

200,000 400,000

Above 3000 cc

250,000 500,000

(1A) Leasing of motor vehicle

- 4%

Leasing company,

scheduled bank, investment bank, non-

banking financial institutions,

development finance

institution and modaraba.

Adjustable – Tax will not be collected in case

of light commercial vehicles leased under Prime Minister’s Youth Business Loan Scheme. [Cl.

(102), Pt. IV, 2nd Sch.]

(2) Transfer of registration or ownership of a motor vehicle:

Excise and Taxation Department

Adjustable - Tax will not be collected if vehicle is transferred after five years from the date of

first registration in Pakistan.

- Rate of tax to be collected shall be reduced by 10% each year from the date of first

upto 850 cc

- -

851 cc to 1000 cc

5,000 10,000

1001 cc to 1300 cc

7,500 15,000






Rate

% / Rupees

Responsibility for


Active Non-active

1301 cc to 1600 cc

12,500 25,000

registration in Pakistan. [Cl. (2), Div. VII, Pt.

IV, 1st Sch.]

Adjustable

1601 cc to 1800 cc

18,750 37,500

1801 cc to 2000 cc

25,000 50,000

2001 cc to 2500 cc

37,500 75,000

2501 cc to 3000 cc

50,000 100,000

Above 3000 cc

62,500 125,000

(3) Sale of motor vehicle:

Manufacturer of motor vehicle

Engine Capacity

(Rupees) (Rupees)

upto 850 cc

7,500 15,000

851 cc to 1000 cc

15,000 30,000

1001 cc to 1300 cc

25,000 50,000

1301 cc to 1600 cc

50,000 100,000

1601 cc to 1800 cc

75,000 150,000

1801 cc to 2000 cc

100,000 200,000

2001 cc to 2500 cc

150,000 300,000

2501 cc to 3000 cc

200,000 400,000

Above 3000 cc

250,000 500,000

233 Payment on account of brokerage or

commission made to a person:

Federal Government,

Provincial Government, Local Government, a

Company or an AOP

(termed as principal)

Minimum – In case of payment to advertising

agent, directly or through electronic or print media the principal shall deduct tax on the

amount equal to “A x 15/85”.

Where A is the amount paid or to be paid to

electronic or print media for advertising services (excluding commission) on which tax

is deductible u/s 153(1)(b).

(i) Advertising agents

(ii) Life insurance agents where

commission received is less than Rs. 0.5 million per annum

(iii) Commission agents (other than

(i) and (ii) above and export indenting commission agents)

10%

8%

12%

20%

16%

24%

233A(1) Collection of tax by a Stock Exchange of

Pakistan on commission earned by its members on purchase and sales of

shares

This section is inapplicable w.e.f 01 March 2019

vide Finance Supplementary (Second Amendment) Act, 2019






Rate

% / Rupees

Responsibility for


Active Non-active

233(AA) - Profit or mark-up or interest earned by

member, margin financer, or security lender

10% 10%

NCCPL Adjustable – No tax shall be collected on any

mutual fund subject to certain conditions as specified in sub-clause (2) of clause (57) of Part

I, 2nd Schedule

234 Advance tax will be collected at the time of collecting motor vehicle tax:

Motor vehicle tax Collecting Authority

Adjustable

(1) In the case of goods transport

vehicles

Rs. 2.50 per

kg. of the laden weight

Rs. 5 per kg.

of the laden weight

No advance tax after 10 years from the date of

first registration in Pakistan on vehicle with registered laden weight less than 8120 Kgs. [

S. 234(4)]. In case of laden weight 8120 Kgs. or more, tax will be collected Rs. 1,200 and Rs.

2,400 per annum in case of active and non-

active taxpayer, respectively. [Cl. (1A), Div. III, Pt. IV, 1ST Sch.]

(2) In the case of passenger transport vehicles plying for hire with registered

seating capacity of:

Rupees

per seat per annum

Advance tax on passenger transport vehicles

with registered seating capacity of ten or more

persons, shall not be collected after a period of 10 years from 1st day of July of the year of

make of the vehicle. [S. 234(3)].

In case of motor cars used for more than 10 years in Pakistan, no advance tax shall be

collected after a period of 10 years. [S. 234(2A)]

a) Four or more persons but less than

ten persons

50 100

b) Ten or more persons but less than

twenty persons

100 200

c) Twenty persons or more

300 600

(3) Other private motor vehicles with

engine capacity of:

(Rupees) (Rupees)

a) up to 1000 cc

800 1,600

b) 1001 - 1199 cc

1,500 3,000

c) 1200 - 1299 cc

1,750 3,500

d) 1300 - 1499 cc

2,500 5,000






Rate

% / Rupees

Responsibility for


Active Non-active

e) 1500 - 1599 cc

3,750 7,500

f) 1600 – 1999 cc

4,500 9,000

g) 2000 cc and above

10,000 20,000

(4) Where the motor vehicle tax is

collected in lump sum:

(Rupees)

(Rupees)

a) up to 1000 cc

10,000 20,000

b) 1001 - 1199 cc

18,000 36,000

c) 1200 - 1299 cc

20,000 40,000

d) 1300 - 1499 cc

30,000 60,000

e) 1500 - 1599 cc

45,000 90,000

f) 1600 – 1999 cc

60,000 120,000

g) 2000 cc and above

120,000 240,000

234A Advance tax shall be collected on the amount of gas bill of a Compressed

Natural Gas (CNG) station.

4% 8%

The person preparing gas consumption bill

Minimum

235 Rate of collection of advance tax on

electricity bill of commercial or industrial

consumers, where the gross amount of bill:

(Rupees)

(Rupees)

The person preparing

electricity bills

Tax collected from CNG stations shall be

minimum tax. [Sec. 234A(3)]

No tax shall be collected from the taxpayers who are registered as exporter or

manufacturers of carpets, leather and articles

thereof, surgical goods, sports goods and textile and articles thereof. [Cl (66) Part IV, 2nd

Sch.].

No advance tax shall be collected from a person who produces a certificate from Commissioner

that his income during the tax year is exempt from tax. [S. 235(3)]

As per section 235(4), tax collected will be:

(a) does not exceed Rs. 400 - -

(b) Rs. 401 – 600 80 80

(c) Rs. 601 – 800 100 100

(d) Rs. 801 - 1,000 160 160

(e) Rs. 1,001 - 1,500 300 300

(f) Rs. 1,501 - 3,000 350 350

(g) Rs. 3,001 - 4,500 450 450

(h) Rs. 4,501 - 6,000 500 500

(i) Rs. 6,001 - 10,000

650 650






Rate

% / Rupees

Responsibility for


Active Non-active

(j) Rs. 10,001 - 15,000

1,000 1,000

- In case of company, adjustable.

- In case of other than Company:

- minimum tax up to bill of Rs. 360,000 per annum

- adjustable if monthly bill exceeds Rupees 30,000

(k) Rs. 15,001 - 20,000

1,500 1,500

(l) Exceeding Rs. 20,000:

- Commercial consumers

12% 12%

- Industrial consumers

5% 5%

235A Rate of collection of advance tax on the

amount of electricity bill of domestic consumer where the amount of bill

inclusive of sales tax and all incidental

charges is: (i) Rupees 75,000 or more

(ii) Less than Rupees 75,000

7.5%

0%

7.5%

0%


electricity bill

Adjustable

235B Rate of advance tax to be collected from steel melters and composite steel units,

registered for the purpose of chapter XI of Sales Tax Special Procedure Rules,

2007 for electricity consumed for the

production of steel billets, ingots and mildsteel (MS Products) excluding

stainless steel.

Rs. 1 per unit of electricity consumed for such

production

The person preparing electricity bill

Tax collected shall be deemed to be deducted under sub-section (1) of section 153 on the

payment for local purchase of scrap. Tax collected shall be non-adjustable and credit of

tax shall not be allowed to any person.

236 Advance tax shall be collected on account of the following:

The person preparing telephone or internet

bills / issuing or selling prepaid card

Adjustable

a) in case of telephone subscriber (other

than mobile phone subscriber) where the amount of monthly bill exceeds Rs. 1,000

10% of the exceeding

amount of bill.






Rate

% / Rupees

Responsibility for


Active Non-active

b) in case of subscriber of internet,

mobile telephone and prepaid internet or telephone card

12.5% of the amount of bill

or sales price of internet prepaid card or prepaid

telephone card or sale of units through any electronic

medium or whatever form.

236A Collection of advance tax at the time of

sale by public auction or auction by a tender

10% 20%

Any person making sale

by public auction or auction by a tender

Adjustable – Tax collected on lease of the

right to collect tolls shall be final. [236A(3)] - Tax shall not be deducted in case of The


Sukuk Company Limited. [Cl. (95) Part IV, 2nd Sch.]

236B Collection of advance tax on purchase of

domestic air ticket.

5% of the gross amount of

air ticket.

The airline issuing air

ticket

Adjustable - No tax shall be collected from

routes of Balochistan coastal belt, Azad Jammu

and Kashmir, Federally Administrated Tribal Areas, Gilgit Baltistan and Chitral

236C Advance tax on sale or transfer of

immovable property

1% 2%

The person responsible

for registering, recording or attesting the transfer,

including the person responsible for

registering or attesting transfer for local

authority, housing

authority, housing society, co-operative

society and registrar of properties

Adjustable – Tax collected shall be minimum

tax if immovable property is acquired and disposed of within the same tax year.

- No tax shall be collected if immovable property is held for a period exceeding five

years. - No tax shall be collected irrespective of

holding period, if the seller is dependent of a

Shaheed belonging to Pakistan Armed Forces or a person who dies while in the service of the

Pakistan Armed Forces or the Federal or Provincial Government in respect of first sale of

immovable property acquired from or allotted






Rate

% / Rupees

Responsibility for


Active Non-active

by the Federal Government or Provincial

Government or any authority duly certified by the official allotment authority or the property

acquired or allotted is in recognition of or for services rendered by the Shaheed or the person

who dies in service.

236D(1) (i) Advance tax on functions and

gatherings other than functions of marriage

5% 5%

Prescribed person as

mentioned in clause (b) of sub-section (4) of

section 236D

Adjustable

(ii) Advance tax on functions of marriage

in Islamabad, Lahore, Multan, Faisalabad, Rawalpindi, Gujranwala,

Bahawalpur, Sargodha, Sahiwal,

Shekhupura, Dera Ghazi Khan, Karachi, Hyderabad, Sukkur, Thatta, Larkana,

Mirpur Khas, Nawabshah, Peshawar, Mardan, Abbotabad, Kohat, Dera Ismail

Khan, Quetta, Sibi, Loralai, Khuzdar, Dera Murad Jamali and Turbat.

5% of the bill ad valorem

or Rs. 20,000 per function whichever is higher

-do- Adjustable – In following cases, rate of tax

shall be 5% of bill ad valorem or Rs. 5,000 per function whichever is higher:

- Function of marriage in a marriage hall,

marquee or a community place with the total function area less than 500 square yards

- Function of marriage in multi storied

premises, with the largest total function area on one floor less than 500 square yards

(iii) Advance tax on functions of marriage

other than than cities mentioned at serial

(ii) above

5% of the bill ad valorem

or Rs. 10,000 per function

whichever is higher

-do- Adjustable

(2) In case where food, service or any other

facility is provided by any other person

5% 5%

-do- Adjustable

236F(1) Advance tax on cable operators and other electronic media shall be as

follows:

Pakistan Electronic Media Regulatory

Authority (PEMRA)

Adjustable






Rate

% / Rupees

Responsibility for


Active Non-active

License Category

Tax on

License fee

Tax on

Renewal

(Rupees) (Rupees)

H

7,500 10,000

H-I

10,000 15,000

H-II

25,000 30,000

R

5,000 12,000

B

5,000 40,000

B-1

30,000 35,000

B-2

40,000 45,000

B-3

50,000 75,000

B-4

75,000 100,000

B-5

87,500 150,000

B-6

175,000 200,000

B-7

262,500 300,000

B-8

437,500 500,000

B-9

700,000 800,000

B-10

875,500 900,000

(2) Advance tax in case of IPTV, FM

Radio, MMDS, Mobile TV, Mobile Audio, Satellite TV Channel and Landing Rights

20% of

permission fee or

renewal fee

20% of

permission fee or

renewal fee

PEMRA

(3) Advance tax from TV channel on which foreign TV drama serial or a play

in any language, other than English, is screened or viewed.

50% of permission

fee or renewal fee

50% of permission

fee or renewal fee

PEMRA






Rate

% / Rupees

Responsibility for


Active Non-active

236G(1)

Advance tax on sales to distributors,

dealers and wholesalers: - Fertilizers

- Other than fertilizers

0.7%

0.1%

1.4%

0.2%

Manufacturer,

commercial importer

Adjustable - Tax shall be collected in respect

of following sectors: Electronic, sugar, cement, iron and steel products, fertilizer, motorcycles,

pesticides, cigarettes, glass, textile, beverages and paint of foam sector.

236H(1) Advance tax on sale to retailer:

- Electronics - Others

1% 0.5%

2% 1%

Manufacturer,

distributors, dealer, wholesaler or

commercial importer

Adjustable - Tax credit for the tax collected

under sections 236G(1) and 236H(1) shall be allowed in computing the tax due by the

distributor, dealer, wholesaler / retailer on the taxable income for the tax year in which the tax

was collected.

236HA Advance tax on sale of petroleum products to a petrol pump operator or

distributor where operator or distributor

is not allowed a commission or discount

0.5% of ex-depot sale

price

1% of ex-depot sale

price

Every person selling petroleum products

Final

236I(1) Collection of advance tax by educational

institutions

5% 5%


fee voucher or challan

Adjustable – Tax shall not be collected from

a person on an amount which is paid by way of

scholarship or where annual fee does not exceed two hundred thousand rupees.

-No tax shall be collected from a non-resident where;

copy of passport is provided as an evidence

to the educational institution that during

previous tax year, his stay in Pakistan was less than one hundred eighty-three days;

a certificate is furnished that he has no

Pakistan source income; and






Rate

% / Rupees

Responsibility for


Active Non-active

the fee is remitted directly from abroad

through normal banking channel to the

bank account of the educational institution

-Tax shall also not be collected on the amount which is refundable.

236J(1) Advance tax on dealers, commission

agents and arhatis etc.

Market committee Adjustable

Tax (per annum)

Group:

(Rupees) (Rupees)

Group or Class A

100,000 100,000

Group or Class B

75,000 75,000

Group or Class C

50,000 50,000

Any other category

50,000 50,000

236K(1) Advance tax on purchase or transfer of immovable property

1% of fair

market

value

2% of fair

market

value

The person responsible for registering, recording

or attesting the transfer,

including the person responsible for

registering or attesting transfer for local

authority, housing

authority, housing society, co-operative

society and registrar of properties

Adjustable - Tax shall also not be collected from a scheme introduced by the Federal

Government, or Provincial Government or an

Authority under a Federal or Provincial law for expatriate Pakistanis provided that the mode of

payment by the expatriate Pakistanis in the said scheme or schemes shall be in the foreign

exchange remitted from outside Pakistan

through normal banking channels. - Tax shall not be deducted in case of The


Sukuk Company Limited. [Cl. (95) & (96), Part IV, 2nd Sch.]

- Advance tax shall be collected on installments

by any person responsible for collecting






Rate

% / Rupees

Responsibility for


Active Non-active

payments in installments for purchase or

allotment of any immovable property from the allotee or transferee where the transfer is to be

effected after making payment of all installments. [Section 236K(3)]

236L Advance tax on purchase of international

air tickets: - First / Executive class

- Others excluding Economy

- Economy

Rupees per

person 16,000

12,000

-

Rupees per

person 16,000

12,000

-

Airline issuing air ticket Adjustable

236P Advance tax on banking transactions

otherwise than through cash

- 0.6%

Every banking company Adjustable – No tax shall be collected, if sum

of all transactions mentioned in this section

does not exceed Rupees 50,000, in aggregate from all bank accounts in a day. However, if

amount exceeds Rs. 50,000 in a day, tax will be collected on the whole amount.

-Tax shall not be collected in case of

transactions or payments made for Federal, Provincial or local Government taxes.

236Q Payments to residents for use of

machinery and industrial, commercial and scientific equipment

10% 10%


making payment

Final – Tax shall not be collected in case of

agricultural machinery and machinery leased by a leasing company, an investment bank or a

modaraba or a scheduled bank or a development finance institution in respect of

assets owned by the leasing company or an

investment bank or a modaraba or a scheduled bank or a development finance institution.






Rate

% / Rupees

Responsibility for


Active Non-active

236R Advance tax on education related

expenses remitted abroad

5% 5%

Banks, financial

institutions, foreign exchange companies or

any other person responsible for remitting

foreign currency abroad

Adjustable against the income of the person

remitting payment of education related expenses

236S Dividend in specie

As stated above in Section

150

Every person making

payment of dividend

Final

236U Advance tax on insurance premium:

- General insurance premium

- Life insurance premium exceeding Rs. 0.3 million in aggregate per annum

- Others

-

-

-

4%

1%

-

Every insurance

company

Adjustable - Tax shall not be collected by an

insurance company from premiums under Crop

Loan Insurance Scheme (CLIS) and Livestock Insurance Scheme (LIS) [Cl. (100), Part IV, 2nd

Sch.]

236V Advance tax on extraction of minerals

- 5%

Provincial authority Adjustable

236X Advance tax on tobacco

5% 5%

Pakistan Tobacco Board or its contractors

Adjustable

236Y Advance tax on person remitting amounts abroad by transactions through

debit card, credit card or prepaid card

1% 2%

Banking company Adjustable


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FINANCE ACT 2019

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Cottage industry Section 2(5AB)

Definition of “Cottage industry” has been substituted, now it means a manufacturing concern which (a)

does not have an industrial gas or electricity connection; (b) is located in a residential area; (c) does not have a total labour force of more than ten workers; and (d) annual turnover from all supplies does not

exceed three million rupees.

Retail price Section 2(27)

By virtue of amendment in definition of “retail price”, now an importer, in case of imported goods mentioned in the Third Schedule, shall also fix retail price for the purpose of sales tax at import stage.

Previously such fixation of retail price was vested with manufacturers only.

Tier-1 retailers Section 2(43A)

The retailer whose shop measures one thousand square feet or more in area has also been included in

definition of “Tier-1 retailers”.

Value of supply Section 2(46)

Now, in case of imported goods (excluding goods specified in the Third Schedule), value of supply shall be determined under section 25 of the Customs Act, 1969 including the amount of customs-duties and

central excise duty.

In case of manufacture of goods belonging to another person, value of supply would be the actual

consideration received by such manufacturer for value addition carried out in relation to such goods.

In case of supply of electricity by an independent power producer, the amount received on account of energy purchase price only shall be the value of supply and the amount received on account of capacity

purchase price, energy purchase price premium, excess bonus, supplemental charges, etc., shall not be included in the value of supply.

In case of supply of electric power and gas by a distribution company, the value of supply shall be the

total amount billed including price of electricity and natural gas, as the case may be, charges, rents,

commissions and all duties and taxes, local, provincial and federal but excluding the amount of late payment surcharge and the amount of sales tax.

Scope of tax Section 3(1B), (2), (7), (9) & (9A)

Tax shall be levied and collected on goods specified in the newly introduced Tenth Schedule, in the mode

and manner specified therein:

(a) on the production capacity of plants, machinery, undertaking, establishments or installation, producing or manufacturing such goods, or

(b) on fixed basis, from any person who is in a position to collect such tax due to the nature of the

business and different rates may be so prescribed for different regions or areas.

In case of import of goods specified in the Third Schedule, tax shall be charged at the rate of seventeen

percent of retail price and in case of import of goods specified in the Eighth Schedule, tax shall be charged at the rate specified therein. Moreover, retail price of such imported goods shall also be legibly,

prominently and indelibly printed or embossed by the importer on each article, packet, container, package, cover or label.


SALES TAX

FINANCE ACT 2019

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Eleventh Schedule has been introduced which prescribes the rate of tax to be withheld by the buyer or by

the person or class of person as withholding agent.

As per amended sub-section (9), from now onwards, tax through monthly electricity bills as specified in this sub-section shall not be charged from Tier-1 retailers. It is also provided that Commissioner of Inland

Revenue shall issue order to the electricity supplier regarding exclusion of the person who is either a Tier-1 retailer or not a retailer. Moreover, the tax collected under this sub-section shall be deposited by the

electricity supplier directly without adjusting against his input tax.

Sub-section (9A) has been substituted whereby the Tier-1 retailers shall pay sales tax at the rate as

applicable to the goods sold under relevant provisions of this Act or notification issued thereunder. Provided that the customers of a Tier-1 retailer shall be entitled to receive a cash back of up to five

percent of the tax involved. Date, manner and extent of such receipt may be prescribed by the FBR. Provided further that from such date, mode and manner, as prescribed by the FBR, all Tier-1 retailers

shall integrate their retail outlets with FBR’s computerized system for real-time reporting of sales.

Determination of tax liability Section 7(2)(i)

In case of supply of electricity or gas, only those registered persons shall be entitled to claim input

adjustment if respective electricity or gas bill contains his registration number and the address where the connection is installed.

Levy and collection of tax on specified goods on value addition Section 7A(2)

In respect of the goods or class of goods specified in the Twelfth Schedule, the minimum value addition

tax, against the value added by the registered person shall be payable at the rate and by the registered

persons or the class of registered persons specified therein subject to the conditions, limitations, restrictions and procedure specified therein.

Tax credit not allowed Section 8(1)(m)

Clause (m) restricting claim of input tax on import of scrap compressor (PCT heading 7204.4940) has

been substituted. Newly substituted clause (m) restricts claim of input tax credit attributable to supplies that have been made to unregistered person on pro-rata basis, for which sales invoices do not bear the

CNIC number or NTN as the case may be, of the buyer as stipulated in section 23.

Adjustable input tax Section 8B(6)

In case a Tier-1 retailer does not integrate his retail outlet with FBR’s computerized system for real-time

reporting of sales, during a tax period or part thereof, the adjustable input tax for whole of that tax period shall be reduced by 15%.

Refund of input tax Section 10(1)

From now onwards, the refund of input tax against exports shall be paid at fixed rates and in the manner

notified by the FBR. Earlier, such input tax was paid along with duty drawbacks at specified rates.

Tax invoices Section 23(1)

A registered person making a taxable supply shall issue a serially numbered tax invoice at the time of

supply of goods containing particulars in Urdu or English language, namely:- (a) name, address and registration number of the supplier; (b) name, address and registration number of the recipient and CNIC

or NTN of the unregistered person, excluding supplies made by a retailer where the transaction value


SALES TAX

FINANCE ACT 2019

- 67 -

inclusive of sales tax amount does not exceed fifty thousand rupees, if sale is being made to an ordinary

consumer. For the purpose of this clause, ordinary consumer means a person who is buying goods for his own consumption and not for the purpose of resale or processing. The condition of CNIC or NTN shall be

effective from 1st August 2019; Moreover, description shall include count, denier, and construction in case of textile yarn and fabric. It is also provided that if it is proved subsequently that CNIC provided by the purchaser was not correct,

the liability of tax or penalty shall not arise against the seller, in case of a sale made in good faith. Access to record, documents, etc. Section 25

The proviso, stating that tax audit of a registered person under this section shall be conducted only once

in every three years has been omitted.

Return Section 26(3)

A new proviso has been inserted whereby the sales tax return may be revised without permission of the Commissioner subject to the conditions that revised return is filed within sixty days of filing of return and

either the tax payable therein is more than the amount paid or the refund claimed therein is less than the

amount as claimed under the return sought to be revised.

Offences and penalties Section 33

By amendment in section 33, penalty in case of late filing of return has been increased. Now, where any person fails to furnish a return within the due date, such person shall pay a penalty of ten thousand

rupees (earlier five thousand rupees). In case a person files a return within ten days of the due date, he shall pay a penalty of two hundred rupees (earlier one hundred rupees) for each day of default.


Under this new section, the FBR shall prescribe rules for initiating criminal proceedings against any authority including any officer or official subordinate to the aforesaid authority who willfully and

deliberately commits or omits an act which results in undue benefit or advantage to the authority or the officer or official or to any other person. Where such proceedings are initiated against the authority or

officer or official, the FBR shall simultaneously intimate the relevant Government agency to initiate

criminal proceedings against such person.

Liability for payment of tax in case of private companies or business enterprises

Section 58

Previously, if any private company or business enterprise is wound up and any tax chargeable on the

company or business enterprise, whether before or in the course, or after its liquidation, in respect of any tax period cannot be recovered from the company or business enterprise, every person who was an

owner or partner or director, was jointly and severally liable for the payment of such tax.

Now, liability for payment of such tax has been extended to a shareholder, owning not less than ten per

cent of the paid-up capital in the company or business enterprise.

Moreover, any director or partner who pays such tax shall be entitled to recover the tax paid from the company or a share of the tax from any other director or partner. Similarly, where the shareholder who

pays tax shall be entitled to recover the tax paid from the company or from any other shareholder, owning not less than ten percent of the paid-up capital, in proportion to the shares owned by that other

shareholder.


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FINANCE ACT 2019

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Fee and service charges Section 76

The Federal Government may, subject to such conditions, limitations or restrictions levy fee and service

charges for valuation, in respect of any other service or control mechanism provided by any formation under the control of the FBR, including ventures of public-private partnership, at such rates as may be

specified in the notification.

THE THIRD SCHEDULE

After serial No. 37, following new serial numbers have been inserted to charge sales tax at retail price on

certain goods:

Sr. No.

Description

38. Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions,

recorders and players, electric bulbs, tube-lights, electric fans, electric irons, washing machines,

and telephone sets 39. Household gas appliances, including cooking range, ovens, geysers and gas heaters.

40. Foam or spring mattresses and other foam products for household use 41. Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners,

blacks, cellulose lacquers and polishes sold in retail packing

42. Lubricating oils, brake fluids, transmission fluid, and other vehicular fluids sold in retail packing 43. Storage batteries excluding those sold to automotive manufacturers or assemblers

44. Tyres and tubes excluding those sold to automotive manufacturers or assemblers 45. Motorcycles

46. Auto rickshaws

47. Biscuits in retail packing with brand name 48. Tiles

49. Auto-parts, in retail packing, excluding those sold to automotive manufacturers or assemblers

THE SIXTH SCHEDULE (EXEMPTIONS)

TABLE - 1 (IMPORTS OR SUPPLIES)

Exemption of tax on following items has been withdrawn:

Products of milling industry falling under PCT heading 1102.1000 (other than wheat and meslin flour)

and fat filled milk sold in retail packing bearing brand name or a trademark.

Silver and gold in unworked condition falling under PCT headings 7106.1000, 7106.9110, 7106.9190,

7108.1100, 7108.1210 and 7108.1290.

Vessels for breaking up falling under PCT heading 89.08

Supply of electricity and natural gas to hospitals run by Federal or Provincial Government or

charitable operating hospitals of fifty beds or more or the teaching hospitals of statutory universities of two hundred or more beds.

Moreover, exemption of tax already available to uncooked poultry meat (PCT heading 02.07) has now

been specified as exemption to uncooked poultry meat whether or not fresh, frozen or otherwise,

preserved or packed.


SALES TAX

FINANCE ACT 2019

- 69 -

Following new entries have been inserted to allow exemption on import or supply thereof:

Sr. No.

Description PCT Headings

151. (a) Supplies; and

(b) imports of plant, machinery, equipment for installation in tribal areas and of

industrial inputs by the industries located in the tribal areas, as defined in the

Constitution of Islamic Republic of Pakistan,-

as made till 30th June, 2023, to which the provisions of the Act or the

notifications issued thereunder, would have not applied had Article 247 of the Constitution not been omitted under the Constitution (Twenty-fifth Amendment)

Act, 2018.

Respective

heading

152. Supplies of electricity, as made from the day of assent to the Constitution (Twenty-fifth Amendment) Act, 2018, till 30th June, 2023, to all residential and

commercial consumers in tribal areas, and to such industries in the tribal areas

which were set and started their industrial production before 31st May, 2018, but excluding steel and ghee or cooking oil industries.

2716.0000

153. Steel billets, ingots, ship plates, bars and other long re-rolled profiles, on such

imports and supplies by the manufacturer on which federal excise duty is payable in sales tax mode.

Respective

headings

TABLE – 2 (LOCAL SUPPLIES ONLY)

Exemption of tax on supply of ginned cotton has been withdrawn.

Exemption of tax has been provided on supply of cotton seed oil (PCT heading 1512.2100 and

1512.2900).

THE EIGHT SCHEDULE SPECIAL TAX RATES FOR SPECIFIED GOODS

Following serial numbers have been substituted for special tax rate purposes:

Sr. No.

Description PCT

Headings Rate Conditions

14. Milk and cream, concentrated

or containing added sugar or

other sweetening matter

0402.1000

&

0402.2000

10% Sold in retail packing under a

brand name

22 Soya bean seed

1201.1000

10%

[Previously 6%]

On import by solvent extraction

industries, subject to the condition that no refund of input tax shall be

admissible

26 (xx)

Laser land leveler comprising of laser transmitter, laser

receiver, control box, rigid mast pack, with or without

scrapper [Previous description

was ‘Laser land leveler’ only]

Respective heading

5%


SALES TAX

FINANCE ACT 2019

- 70 -

Sr.

No. Description

PCT

Headings Rate Conditions

56 Potassium chlorate (KCLO3)

Respective headings

17% alongwith

Rs. 70

[Previously Rs. 65]

per kilogram

Import and supply thereof. Provided that rate of Rs. 70

[Previously Rs. 65] per kilogram

shall not apply on imports made by and supplies made to organizations

under the control of Ministry of Defence Production.

Facility of reduced rate of tax on Reclaimed lead, Rapeseed (Respective headings), sunflower seed and

canola seed (PCT headings 1205.0000, 1206.0000) and White crystalline sugar (PCT headings 1701.9910,

1701.9920) has been withdrawn.

After serial No. 58, following new entries have been inserted, to be taxed at reduced rate:

Sr.

No. Description PCT Headings Rate Condition

59. Products of milling industry except

wheat and meslin flour

1102.2000,

1102.9000,

1103.1100, 1103.1300,

1103.1900, 1104.2200,

1104.2300, 1104.2900 &

1104.3000

10% If sold in retail packing under a

brand name or trademark

60. Fat filled milk 1901.9090 10% If sold in retail packing under a brand name or trademark

61. Silver, in unworked condition 7106.1000,

7106.9110

& 7106.9190

1%

62. Gold, in unworked condition 7108.1100, 7108.1210

& 7108.1290

1%

63. Articles of jewellery, or parts thereof, of precious metal or of metal clad with

precious metal.

71.13 1.5% of value of

gold, plus 0.5% of

value of diamond,

used

therein, plus 3% of

making charges

No input tax adjustment to be allowed except of the tax paid

on gold


SALES TAX

FINANCE ACT 2019

- 71 -

Sr. No.

Description PCT Headings Rate Condition

64. Prepared food, foodstuff and sweetmeats supplied by restaurants,

bakeries, caterers and sweetmeat shops

Respective headings

7.5% Supplies only, subject to condition that no input tax shall

be adjusted

65. Ginned cotton Respective headings

10%

66. Supplies as made from retail outlets as

are integrated with FBR’s computerized system for real-time reporting of sales

Respective

Headings

14% if supplied goods are finished

fabric, and locally manufactured finished articles

of textile and textile made-ups and leather and artificial

leather subject to the condition that they have maintained 4%

value addition during the last

six months

67. LNG imported for servicing CNG sector and local supplies thereof

2711.1100, 2711.2100

5%

68. Frozen prepared or preserved sausages and similar products of poultry meat or

meat offal

1601.0000 8%

69. Meat and similar products of prepared

frozen or preserved meat or meat offal

of all types including poultry, meat and fish

1602.3200,

1602.3900,

1602.5000, 1604.1100,

1604.1200, 1604.1300,

1604.1400, 1604.1500,

1604.1600,

1604.1900, 1604.2010,

1604.2020 & 1604.2090

8%

THE NINTH SCHEDULE [SUB-SECTION (3B) OF SECTION 3 - SCOPE OF TAX]

Serial No. 2 of the Table has been substituted as follows:

Sr.

No. Description/Specification of Goods

Sales tax on import or

local supply

Sales tax at registration

of IMEI

2. Cellular mobile phones or satellite phones to be charged on the basis of import value per set, or equivalent value in rupees in

case of supply by the manufacturer, at the rate as indicated

against each category:


SALES TAX

FINANCE ACT 2019

- 72 -

Sr. No.

Description/Specification of Goods

Sales tax on

import or local supply

Sales tax at

registration of IMEI

A. Not exceeding US$ 30

B. Exceeding US$ 30 but not exceeding US$ 100 C. Exceeding US$ 100 but not exceeding US$ 200

D. Exceeding US$ 200 but not exceeding US$ 350

E. Exceeding US$ 350 but not exceeding US$ 500 F. Exceeding US$ 500

Rs. 135

Rs. 1,320 Rs. 1,680

Rs. 1,740

Rs. 5,400 Rs. 9,270

Rs. 135

Rs. 1,320 Rs. 1,680

Rs. 1,740

Rs. 5,400 Rs. 9,270

THE TENTH SCHEDULE

[SUB-SECTION (1B) OF SECTION 3 - SCOPE OF TAX]

Tax on bricks, falling in PCT heading 6901.1000, shall be paid on a fixed basis, on monthly return, at the rates specified in the table below:

Sr.

No. Region or area

Tax payable

per month

1 Lahore, Rawalpindi and Islamabad districts Rs. 12,500

2 Attock, Chakwal, Jehlum, Mandi Bahauddin, Sargodha, Gujrat, Sialkot, Narowal,

Gujranwala, Hafizabad, Sheikhupura, Kasur, Nankana Sahib, Chiniot, Faisalabad, Jhang, Toba Tek Singh, Okara and Sahiwal districts

Rs. 10,000

3 Khushab, Mianwali, Bhakar, Layyah, Muzaffarghar, Dera Ghazi Khan, Rajanpur, Multan, Lodhran, Khanewal, Vehari, Bahawalpur, Pakpattan, Bahawalnagar, Rahim

Yar Khan districts; and Sindh, Khyber-Pakhtunkhwa and Baluchistan provinces

Rs. 7,500

THE ELEVENTH SCHEDULE

[SUB-SECTION (7) OF SECTION 3 - SCOPE OF TAX]

Following are the rates of withholding tax to be withheld by the buyer or by the person or class of person as withholding agent. Previously these were covered in Sales Tax Special Procedure (Withholding) Rules,

2007.

Sr. No.

Withholding agent Supplier category

Rate or extent of deduction

1. (a) Federal and provincial government

departments; autonomous bodies; and public

sector organizations (b) Companies as defined in the Income Tax

Ordinance, 2001

Registered

persons

1/5th of Sales Tax as

shown on invoice

2. (a) Federal and provincial government

departments; autonomous bodies; and public sector organizations

(b) Companies as defined in the Income Tax Ordinance, 2001

Person registered

as a wholesaler, dealer or

distributor

1/10th of Sales Tax as

shown on invoice

3. Federal and provincial government

departments; autonomous bodies; and public sector organizations

Unregistered

persons

Whole of the tax involved

or as applicable to supplies on the basis of

gross value of supplies


SALES TAX

FINANCE ACT 2019

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Sr.

No. Withholding agent

Supplier

category

Rate or extent of

deduction

4. Companies as defined in the Income Tax Ordinance, 2001

Unregistered persons

5% of gross value of supplies

5. Registered persons as recipient of advertisement services

Person providing advertisement

services

Whole of sales tax applicable

6. Registered persons purchasing cane molasses. Unregistered

persons

Whole of sales tax

applicable

The above rates of withholding tax or deduction by the withholding agents shall not be applicable to the

specified goods and supplies:

(a) Electrical energy; (b) Natural gas; (c) Petroleum products as supplied by petroleum production and

exploration companies, oil refineries, oil marketing companies and dealers of motor spirit and high-speed

diesel; (d) Vegetable ghee and cooking oil; (e) Telecommunication services; (f) Goods specified in the Third Schedule; (g) Supplies made by importers who paid value addition tax on such goods at the time of

import; and (h) Supplies made by an Active Taxpayer to another registered persons with exception of advertisement services.

THE TWELFTH SCHEDULE

[SUB-SECTION (2) OF SECTION 7A – TAX ON SPECIFIED GOODS ON VALUE ADDITION]

A minimum value addition tax shall be charged at the rate of three percent ad valorem in addition to

normal sales tax chargeable under section 3 on all imported taxable goods. Previously, these were covered in Sales Tax Special Procedure Rules, 2007.

Charging of aforementioned value addition tax will be subject to following procedure and conditions:

1. The value addition tax under this Schedule shall not be charged on: (i) Raw materials and

intermediary goods meant for use in an industrial process which are subject to customs duty at a rate

less than 16% ad valorem under First Schedule to the Customs Act, 1969; (ii) The petroleum products falling in Chapter 27 of Pakistan Customs Tariff as imported by a licensed Oil Marketing

Company for sale in the country; (iii) Registered service providers importing goods for their in-house business use for furtherance of their taxable activity and not intended for further supply; (iv) Cellular

mobile phones or satellite phones; (v) LNG / RLNG; (vi) Second hand and worn clothing or footwear (PCT Heading 6309.000); (vii) Gold, in un-worked condition; and (viii) silver, in un-worked condition.

2. The value addition tax paid at import stage shall form part of input tax, and the importer shall deduct the same from the output tax due for the tax period, subject to limitations and restrictions under the

Act, for determining his net liability. The excess of input tax over output tax shall be carried forwarded to the next tax period as provided in section 10 of the Act.

3. In no case, the refund of excess input tax over output tax, which is attributable to tax paid at import

stage, shall be refunded to a registered person.

4. The registered person, if also dealing in goods other than imported goods, shall be entitled to file

refund claim of excess carried forward input tax for a period as provided in section 10 or in a notification issued there under by the FBR after deducting the amount attributable to the tax paid at

import stage i.e. sum of amounts paid during the claim period and brought forward to claim period. Such deducted amount may be carried forward to subsequent tax period.


SALES TAX

FINANCE ACT 2019

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S.R.O. 691(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019)

PVC and PMC materials exported by air or via land route to Afghanistan and through Afghanistan to

Central Asian Republic were not covered under zero-rating vide S.R.O. 190(I)/2002 dated 02 April 2002. Now, by amendments through this notification zero-rating has been allowed on such exports.


S.R.O. 648(I)/2013 has been amended and thereby further tax at the rate of 3% shall not be charged on

taxable supplies made to Government, semi-government and statutory regulatory bodies and on supply of white crystalline sugar (PCT heading 1701.9910 and 1701.9920).


Amendment has been made in S.R.O. 509(I)/2013 dated 12 June 2013. Now, levy of extra tax at the rate

of 5% shall not be applicable in case of supply of electric power to Government, semi-government and

statutory regulatory bodies.


Vide this S.R.O., the FBR has rescinded its following notifications:

S.R.O. 68(I)/2006 dated 28 January 2006 (adjustment of input tax on supply of oil extracted from

imported rapeseed)

S.R.O. 480(l)/2007 dated 09 June 2007 (Sales Tax Special Procedures Rules, 2007)

S.R.O. 660(l)/2007 dated 30 June 2007 (Sales Tax Special Procedures (Withholding) Rules, 2007)

S.R.O. 769(l)/2009 dated 04 September 2009 (conditional zero rating on import and supply of

polyethylene and polypropylene)

S.R.O. 398(l)/2015 dated 08 May 2015 (tax rate for LNG imported for servicing CNG sector and

fertilizer produced by using imported LNG)

S.R.O. 1125(l)/2011 dated 31 December 2011 (zero rated / reduced tax rates for persons doing

business in textile, carpets, leather, sports and surgical goods sectors).

Moreover, in order to resolve the issue of increased sales tax refunds of exporters due to withdrawal of zero-rating on inputs, the scope of Expeditious Refund System is proposed to be extended with

automated payment on generated RPOs. Main features of the newly proposed Chapter V-A in Sales Tax

Rules, 2006 are as under (Sales Tax circular No. 01 of 2019):

Filing and Processing of refund claims - The data provided in the monthly return shall be treated

as data in support of refund claim and no separate electronic data shall be required to be provided. The amount specified in column 29 of the return, as prescribed in the form STR-7, shall be considered as

amount claimed, once the return has been submitted along with all prescribed annexes thereof:

Provided that the claimant will be able to submit his return without Annex-H and the same may be filed separately at any time but not later than one hundred and twenty days of submission of the return

without Annex-H. The date of submission of Annex-H shall be considered as the date of filing of refund

claim.

Provided further that the period of one hundred and twenty days, as aforesaid, may be extended for a

period not exceeding sixty days, by the Commissioner having jurisdiction, for reasons to be recorded in writing on the basis of an application made by the claimant.


SALES TAX

FINANCE ACT 2019

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Risk management in refund processing - After submission of refund claim, in the aforesaid

manner, the same shall be processed by Risk Management System (RMS). Based on the parameters in RMS, a refund claim shall be routed to the processing module referred to as Fully Automated Sales

Tax e-Refund (FASTER). The claims that do not fulfil RMS parameters for processing through FASTER module shall be routed for processing under Chapter V of the Sales Tax Rules, 2006.

Processing in FASTER module - The claims routed to FASTER module shall be electronically processed. The data in the refund claim shall be scrutinized and verified by the system and the payable

refund amount shall be determined on the basis of input consumed in exports or supplies. The refund payment order (RPO) of the amount found admissible shall be generated and the same shall be

electronically communicated direct to the State Bank of Pakistan, within seventytwo hours of

submission of claim, for onward advice to the respective banks for credit into the notified account of the claimant.

Provided that in case of refund claim of a commercial exporter, the payment of such refund shall be

made after the realization of export proceeds.

Provided further that the part of the refund claim that is not verified or not found admissible shall be

subjected to system validation checks every week and RPO shall be generated for the amount found

valid during each validation check.

After every validation process, the information regarding RPO generated, if any, as well as the objections shall be communicated by the system to the refund claimant and also to the concerned RTO

or LTU for information. RPO so generated shall be communicated to the State Bank of Pakistan for

payment in the aforesaid manner. After eight validation checks, including the initial one, if any amount still remains un-cleared, the same shall then be processed under STARR module as referred to in

Chapter V.


The FBR has fixed the minimum value of supply for following locally produced goods:

Sr.

No. Goods Value

1. Steel Bars Rs. 83,000 per metric ton 2. Steel Billets Rs. 74,000 per metric ton

3. Steel Ingots/bala Rs. 72,000 per metric ton

4. Ship plates Rs. 72,000 per metric ton 5. Other re-rollable iron and steel scrap Rs. 47,000 per metric ton


SALES TAX RULES, 2006

Certain rules regarding application for registration have been substituted.

Moreover, rules under new Chapter XIV-D “WITHHOLDING OF SALES TAX BY THE RECIPIENT OF

SUPPLY” have been inserted for the purpose of deduction and deposit of sales tax under Eleventh Schedule to the Act and Islamabad Capital Territory (Tax on Services) Ordinance, 2001, etc.


FEDERAL EXCISE DUTY

FINANCE ACT 2019

- 76 -

Duties specified in the First Schedule to be levied Section 3(5A)

New concept of monthly minimum production in respect of goods, specified in the Fourth Schedule has

been introduced. Minimum production for a month shall be determined on the basis of a single or more inputs as consumed in the production process and if minimum production so determined exceeds the

actual supplies for the month, such minimum production shall be treated as quantity supplied during the

month and the liability to pay duty shall be discharged accordingly.

Offences, penalties, fines, and allied matters Section 19(2)(d)

This sub-section has been substituted to impose penal provisions on a person who sells cigarettes in retail at a price lower than the retail price plus the amount of sales tax as printed thereon. The penalty

may attract either fine up to twenty thousand rupees or imprisonment upto five years or both.


Under this new section, the FBR shall prescribe rules to initiate criminal proceedings against its officials

who willfully and deliberately commit or omit an act that results in undue benefit or advantage to the authority or officials or to any other person.

Fee and service charges Section 49

The Federal Government may levy fee and service charges for valuation, in respect of any other service or control mechanism provided by any formation under the control of the FBR, including ventures of

public-private partnership.

FIRST SCHEDULE TABLE – I (EXCISABLE GOODS)

Description and duty on the following goods have been substituted as follows:

Sr. No.

Description of goods Heading / sub-

heading No. Rate of duty

1. Edible oils excluding deoxidized soybean 15.07 to 15.18 Seventeen percent ad val

[Previously 16%]

2. Vegetable ghee and cooking oil

(a) in retail packing

(b) not in retail packing

Respective

heading

Seventeen percent of retail price [Previously 16%]

Seventeen percent ad val

[Previously 16%]

4. Aerated waters 2201.1020 Thirteen percent of retail price [Previously 11.5%]

5. Aerated waters, containing added sugar or other

sweetening matter or flavored

2202.1010 Thirteen percent of retail

price [Previously 11.5%]

6. Aerated waters if manufactured wholly from juices

or pulp of vegetables, food grains or fruits and which do not contain any other ingredient,

indigenous or imported, other than sugar, coloring materials, preservatives or additives in quantities.

Respective

headings

Thirteen percent of retail

price [Previously 11.5%]


FEDERAL EXCISE DUTY

FINANCE ACT 2019

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Sr.

No. Description of goods

Heading / sub-


7. Un-manufactured tobacco 24.01 Ten rupees [Previously Rupees 300] per kilogram

9. Locally produced cigarettes if their on-pack printed retail price exceeds five thousand nine

hundred and sixty rupees [Previously Rupees

4,500] per thousand cigarettes.

24.02 Rupees five thousand two hundred [Previously

Rupees 4,500] per

thousand cigarettes

10. Locally produced cigarettes if their on-pack printed retail price does not exceed five thousand

nine hundred and sixty rupees [Previously

exceeds Rupees 2,925 but does not exceed Rupees 4,500] per thousand cigarettes

24.02 Rupees one thousand six hundred and fifty

[Previously Rupees 1,840]

per thousand cigarettes

13. Portland cement, aluminous cement, slag cement, super sulphate cement and similar hydraulic

cements, whether or not coloured or in the form

of clinkers

25.23 Two rupees [Previously Rupees 1.50] per kilogram

31. Liquefied Natural Gas

2711.1100 Ten rupees per Million British Thermal Unit

(MMBTu) [Previously

Rupees 17.18 per hundred cubic meters]

55. Imported motor cars, SUVs and other motor vehicles, excluding auto rickshaws, principally

designed for the transport of persons (other than

those of headings 87.02), including station wagons and racing cars:

(a) of cylinder capacity up to 1000cc (b) of cylinder capacity from 1001cc to 1799cc

(c) of cylinder capacity 1800cc to 3000cc (d) of cylinder capacity exceeding 3000cc

87.03

2.5% ad val. 5% ad val.

25% ad val. 30% ad val.

55B. Locally manufactured or assembled motor cars, SUVs and other motor vehicles, excluding auto

rickshaws principally designed for the transport of persons (other than those of headings 87.02),

including station wagons and racing cars: (a) of cylinder capacity up to 1000cc

(b) of cylinder capacity from 1001cc to 2000cc

(c) of cylinder capacity 2001cc and above

87.03

2.5% ad val.

5% ad val.

7.5% ad val.

Following new entries have been inserted:

Sr. No.

Description of goods Heading / sub-


57. Fruit juices, syrups and squashes, waters containing added sugar or sweetening matter etc. excluding

mineral and aerated waters

Respective headings

Five percent of retail price.


FEDERAL EXCISE DUTY

FINANCE ACT 2019

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Sr.

No. Description of goods

Heading / sub-


58. Steel Billets, ingots, ship plates, bars and other long re-rolled products

Respective headings

Seventeen percent ad val.

Entries No. 10a and 54 of Table-I relating to duty at the rate Rupees 1,250 per thousand cigarettes on locally produced cigarettes if their on-pack printed retail price does not exceed two thousand nine

hundred and twenty-five rupees per thousand cigarettes falling under respective heading 24.02 and duty

at the rate of Rupees 0.40 per Kg. on oilseeds have been omitted.

TABLE – II (EXCISABLE SERVICES)

Facilities for travel Sr. No. 3(a)

Rate of duty on services provided or rendered in respect of travel by air of passengers within the territorial jurisdiction of Pakistan (PCT heading 9803.1000) over long routes has been reduced to fifteen

hundred rupees from two thousand rupees and over short routes has been reduced to nine hundred rupees from twelve hundred and fifty rupees.

SECOND SCHEDULE

(Goods on which duty is collectible under sales tax mode with entitlement for

adjustment with sales tax and vice versa)

Following new item has been inserted to collect duty under sales tax mode:

Sr.

No.

Description of Goods Heading / sub-

heading Number

4. Steel Billets, ingots, ship plates, bars and other long re-rolled products Respective headings

THIRD SCHEDULE - (CONDITIONAL EXEMPTIONS)

TABLE – II (Services)

Telecommunication services (PCT 98.02) Sr. No. 2(i) & (ii)

By omitting entry 2(i) of Table-II, exemption from duty available to internet services whether dialup or broadband including email services, Data Communication Network services (DCNs) and value added data

services, has been withdrawn. Moreover, by amending entry No. 2(ii) of this Table, exemption from duty

available to international leased lines or bandwidth services provided by foreign satellite companies has been withdrawn.

THE FOURTH SCHEDULE - (Minimum Production)

(SUB-SECTION 5A OF SECTION 3)

A new schedule has been inserted to introduce the concept of minimum production for steel products as reproduced below:

“The minimum production for steel products shall be determined as per criterion specified against

each in the Table below:


FEDERAL EXCISE DUTY

FINANCE ACT 2019

- 79 -

Table

Sr.

No. Product Production criteria

1. Steel billets and ingots One metric ton per 700 kwh of

electricity consumed 2. Steel bars and other re-rolled long profiles of

steel

One metric ton per 110 kwh of

electricity consumed

3. Ship plates and other re-rollable scrap 85% of the weight of the vessel imported for breaking

Procedure and conditions:

i. Both actual and minimum production, and the local supplies shall be declared in the monthly return. In case, the minimum production exceeds actual supplies for the month, the liability to pay

duty shall be discharged on the basis of minimum production:

Provided that in case, in a subsequent month, the actual supplies exceed the minimum

production, the registered person shall be entitled to get adjustment of excess duty on account of excess of minimum production over actual supplies:

Provided further that in a full year, as per financial year of the company or registered person, or

period starting from July to June next year, in other cases, the duty actually paid shall not be less

than the liability determined on the basis of minimum production for that year and in case of excess payment no refund shall be admissible:

Provided also that in case of ship-breaking, the liability against minimum production, or actual

supplies, whichever is higher, shall be deposited on monthly basis on proportionate basis

depending upon the time required to break the vessel.

ii. The payment of FED on ship plates in aforesaid manner does not absolve ship breakers of any tax liability in respect of items other than ship plates obtained by ship-breaking.

iii. The melters and re-rollers employing self-generated power shall install a tamperproof meter for

measuring their consumption. Such meter shall be duly locked in room with keys in the custody of

a nominee of the Commissioner Inland Revenue having jurisdiction. The officers Inland Revenue having jurisdiction shall have full access to such meter.

iv. The minimum production of industrial units employing both distributed power and self-generated

power shall be determined on the basis of total electricity consumption.”


PUNJAB SALES TAX ON SERVICES ACT, 2012

FINANCE ACT 2019

- 80 -

Tax credit not allowed Section 16B(1)(g) & (h)

Registered person shall not be entitled to claim input tax incurred with respect to goods and services

liable to sales tax at a rate lesser than 15%.

Determination of minimum tax liability Section 24A

An officer of the Authority has been empowered to determine the minimum tax liability where a registered person fails to file a return. Offences and penalties Section 48(2)

Penalties have been inserted for certain offences which include failure or refusal to issue sales tax invoice, failure to intimate changes in; (i) particulars of registration, (ii) business and branch offices

addresses (iii) business bank accounts within fourteen days and failure to issue electronic invoice.

Monitoring or tracking by electronic or other means Section 59B(2A)

The Authority has been empowered to devise, implement and declare mandatory an electronic invoicing system for issuance of tax invoices by a registered person or class of registered persons or a service or a

class of services.

Appeal to the Appellate Tribunal Section 66(1)

Any person including an officer not below the rank of Additional Commissioner aggrieved by any order passed by: (i) the Commissioner (Appeals) or (ii) the Commissioner or (iii) Authority, may prefer an

appeal within 30 days of receipt of such decision before the Appellate Tribunal.

Recovery of arrears of tax Section 70(1)(c)

The officer of the Authority already has powers to attach any person’s bank accounts by a notice in writing to any bank and recover the amount of tax payable. Now, the officer has also been authorized to

recover such amount without attachment of bank accounts.

AMENDMENTS IN SECOND SCHEDULE

The basis of taxation of following taxable services have been changed as follows:

Sr.

No. Description Rate of tax

15. (i) Services provided by property developers, builders,

promoters excluding actual purchase value or documented cost of land.

8% without input tax adjustment

or 16% with input tax adjustment [Previously was Rupees 100 per

square yard for land development and Rupees 50 per square feet for

building construction]

(ii) Affordable housing services provided under Government

sponsored housing programs.

5% without input tax adjustment

or 16% with input tax adjustment

54. Facilities for travel originating from Punjab by air for domestic and international travel excluding Hajj, Umrah,

diplomats and supernumerary crew.

5% without input tax adjustment [Previously rate of tax was per

ticket]


PUNJAB SALES TAX ON SERVICES ACT, 2012

FINANCE ACT 2019

- 81 -

Following new taxable services have been brought into tax net:

Sr.

No.

Particulars of Services Classification Rate of

tax

64. Dress designing and stitching services. Respective

headings

16%

65. Rental of bulldozers, excavators, cranes, construction equipment,

scaffolding, framework and shuttering, generators, storage

containers, refrigerator, shelf or rack renting, etc.

Respective

headings

16%

66. Services in respect of treatment of textile, leather but not limited to

dyeing services, edging and cutting, cloth treating, water proofing,

embroidery, engraving, fabric bleaching, knitting, leather staining, leather working, pre-shrinking, colour separation services, pattern

printing and shoe making services.

Respective

headings

16%

67. Apartment house management, real estate management and

services of rent collection.

Respective

headings

16%

68. (i) Medical consultation / visit fee exceeding Rupees 1,500 per consultation / visit of doctors, medical practitioners and specialists.

(ii) Bed / room charges of hospitals exceeding Rupees 6,000 per day per bed / room.

9815.1000 and other

Respective headings

5% without input tax

adjustment

Moreover, services of interior designers and services provided in field of amusement parks, arcades and

other recreation facilities have also been included in taxable services subject tax at the rate of 16%.


PUNJAB AGRICULTURAL INCOME TAX ACT, 1997

FINANCE ACT 2019

- 82 -

The First Schedule and Second Schedule have been entirely substituted and tax rates have been

increased substantially by the Act as given below:

THE FIRST SCHEDULE

[Section 3(1)]

Sr. No.

Description Rate of tax

per acre

(1) Slab of total cultivated land, computed rate of tax per acre as

irrigated land, by treating one acre of irrigated land as equal to two acre of unirrigated land, excluding mature orchards.

(i) Not exceeding 12½ acres Nil

(ii) Exceeding 12½ acres but not exceeding 25 acres Rs. 300

(iii) Exceeding 25 acres but not exceeding 50 acres Rs. 400

(iv) Exceeding 50 acres Rs. 500

(2) Mature orchards:

(i) Irrigated Rs. 600

(ii) Unirrigated Rs. 300

THE SECOND SCHEDULE

[Section 3(3)]

RATES OF TAX ON TOTAL AGRICULTURAL INCOME

The rate of tax on total agricultural income shall be as under:

Sr.

No. Description Rate of tax

(1) Where the total income does not exceed Rs. 400,000 0%

(2) Where the total income exceeds Rs. 400,000 but does not exceed Rs. 800,000

Rs. 1,000

(3) Where the total income exceeds Rs. 800,000 but does not exceed Rs. 1,200,000

Rs. 2,000

(4) Where the total income exceeds Rs. 1,200,000 but does not


5% of the amount exceeding Rs.

1,200,000

(5) Where the total income exceeds Rs. 2,400,000 but does not


Rs. 60,000 plus 10% of the


(6) Where the total income exceeds Rs. 4,800,000 Rs. 300,000 plus 15% of the amount exceeding Rs. 4,800,000

Provision of minimum tax of Rupees 2,000 on amount exceeding Rupees 800,000 should have been made part of the above table.

Last date for filing of agricultural income tax return is 30th day of September next following the income year. (Rule 5)


ISLAMABAD CAPITAL TERRITORY (TAX ON SERVICES) ORDINANCE, 2001

FINANCE ACT 2019

- 83 -

By amendment in the Schedule, the rate of tax on call centres has been reduced to 17% from 18.5% and

following new services have been brought into tax net:

Sr. No.

Description PCT heading Rate of

tax

43. Advertisement on hoarding boards,

pole signs and signboards, and websites or internet 9802.9000 16%

44. Services provided by landscape designers 9814.4000 16%

45. Sponsorship services 9805.9100 16%

46. Services provided or rendered by legal practitioners and consultants 9815.2000 16%

47. Services provided by accountants and auditors 9815.3000 16%

48. Service provided or rendered by Stockbrokers, future brokers and commodity brokers, money exchanger, surveyors, outdoor

photographers, event photographers, videographers, art painters, auctioneers (excluding value of goods) and registrar to an issue

9819.1000,

9819.2000,

9819.5000,

9819.7000,

9819.8000,

9819.9100,

9819.9500

and

9819.9090

16%

49. Services provided by race clubs: Entry / admission and other services

- 16%

50. Services provided or rendered by corporate law consultants 9815.9000 16%

51. Visa processing services, including advisory or consultancy services

for migration or visa application filing services - 16%

52. Debt collection services and other debt recovery services - 16%

53. Supply chain management or distribution (including delivery)

services - 16%

54. Services provided or rendered by persons engaged in inter-city

transportation or carriage of goods by road or through pipeline or conduit

- 16%

55. Ready mix concrete services - 16%

56. Public relation services - 16%

57. Training or coaching services other than education services - 16%

58. Cleaning services including janitorial services, collection of waste and

processing of domestic waste

9822.2000,

9822.3000

and

9822.9000

16%

Further, all the provisions of the Sales Tax Act, 1990, and rules made and notifications, orders and

instructions issued there under shall, mutatis mutandis, apply to the collection and payment of tax under this Ordinance in so far as they relate to:

a) manner, time and mode of payment,

b) registration and de-registration;

c) keeping of records and audit; d) enforcement and adjudication;

e) penalties and prosecution; and f) all other allied and ancillary matters.


SINDH SALES TAX ON SERVICES ACT, 2011

FINANCE ACT 2019

- 84 -

Special procedures and tax withholding provisions Section 13(3)

Withholding agents have been made personally liable to pay amount of tax and default surcharge in case

of failure either to withhold or deposit of tax withheld.

Records Section 26(1)

Registered person is now also required to maintain records of tax invoices, debit and credit notes issued

and received and records of custom documents (GDs), etc.

Audit proceedings Section 28

The Auditor SRB has been empowered to conduct the audit of a registered person. Further, an Officer of SRB, with permission of the Commissioner, can conduct audit in the place of business or the office of

registered person directing him to produce the records and documents as indicated in notice.

Offences and penalties Section 43(2A) & (2B)

Following penalties have been added in this section:

1. The person shall pay a penalty of twenty-five thousand rupees on first default and fifty thousand

rupees for each subsequent default if the person fails or refuses to issue tax invoice.

2. On failure to comply with e-invoicing system, the person shall pay a penalty upto one hundred thousand rupees but not less than twenty-five thousand rupees.

In case of three consecutive defaults, the place of business shall liable to be sealed in the aforesaid both

cases.

Procedure in appeal Section 58(4)

The power of Commissioner (Appeals) to grant stay against recovery of tax demand has been enhanced from 60 days to 120 days in aggregate. Moreover, the Commissioner (Appeals) may now grant stay of

the whole or any part of the due amount of sales tax.

Recovery of arrears of tax Section 66(1)

Recovery proceedings by any officer of SRB shall not be initiated until the expiry of period of 30 days from the date of assessment order.

SECOND SCHEDULE (Taxable services)

The following services have been brought into tax net under the Act:

Tariff heading Description Rate of

Tax

9806.6 Renting of machinery, equipment, appliances and other tangible goods 13%

9812.7000 and

respective headings

Other specified telecommunication services, etc. 19.5%

9821.2000 Indoor sports and games centers 13%

9846.0000 to

9855.0000

- Cab aggregator, - warehouse or depot for storage or cold storage, -

training, - actuarial, - mining of minerals and allied and ancillary, - site preparation and clearance and excavation and earth moving and

demolition, - waste collection, transportation, processing and

management, - vehicle parking and valet, - electric power transmission, - insurance agents services, respectively.

13%


KHYBER PAKHTUNKHWA FINANCE ACT, 2013 – SALES TAX ON SERVICES

FINANCE ACT 2019

- 85 -

Definitions Section 2(37)(b) & (55A)

The definition of ‘place of business’ has been broadened to include any economic activity carried on

through virtual presence or a website or a web-portal or through any other form of e-commerce by whatever name called.

The term ‘unregistered’ has been defined to mean a person who is liable to be registered under the Act but is actually not registered and does not hold Khyber Pakhtunkhwa Sales Tax Registration Number

(KNTN).

Application of principles of origin and reverse charge in certain situations Section 20(2)

The recipient of taxable services if registered, is now required to deduct the amount of tax to the extent

as prescribed by regulations and pay the same to Government. Previously, the registered person was required to deduct the whole amount of tax in respect of services received.

Scope of tax and allied matters Section 26(4)

A new proviso has been inserted to disallow claim of input tax, if payment of a transaction exceeding Rupees 50,000 (excluding payment for utility bill) is not made through a crossed cheque drawn in favor

of service provider or through any other banking instrument from the business bank account of the service recipient to the business bank account of service provider.

Offences and penalties Section 64(2)

Where a person fails to withhold or withholds but fail to deposit the tax shall be liable to pay penalty of twenty-five thousand rupees or 5% of the tax involved, whichever is higher.

Substitution of First and Second Schedules

The Act has entirely substituted the First Schedule and Second Schedule of the Khyber Pakhtunkhwa Finance Act, 2013. Nature / classification of services and tax rates thereon have been revised

substantially.

Further, the Act has also outlined principles of application and interpretation of Second Schedule and all

allied matters in detail which shall be binding and followed as integral part of the Second Schedule.

RIAZ AHMAD & COMPANY

Chartered Accountants

CONTACT PARTNERS


For further explanations, please contact following partners:

LAHORE: Principal Office

10-B, Saint Mary Park Main Boulevard, Gulberg-III

LAHORE-54660

Phones : (042) 35718137-9 Fax : (042) 35718136

E-Mail : [email protected]

Mr. Sarfraz Mahmood FCA, FITM, FICS

Syed Mustafa Ali

FCA

Mr. Muddassar Mehmood

FCA, ACA (England & Wales)

Mr. Mubashar Mehmood

FCA

Mr. Atif Anjum FCA

Other offices at:

ISLAMABAD: 2-A, ATS Centre, 30-West

Fazal-e-Haq Road, Blue Area ISLAMABAD

Phones : (051) 2274121-22 Fax : (051) 2278859

E-Mail : [email protected]

Mr. Raheel Arshad

FCA

Mr. Bilal Ahmad ACA

FAISALABAD: 560-F, Raja Road, Gulistan Colony

FAISALABAD-38000 Phones : (041) 8861042,

8863644

Fax : (041) 8863611 E-Mail : [email protected]

Mr. Liaqat Ali Panwar

FCA, FITM, FICS

KARACHI: 108-109, Park Avenue, Block-6, P.E.C.H.S.

Shahrah-e-Faisal KARACHI-75400

Phones : (021) 34310826-7,

Fax : (021) 34313951 E-Mail : [email protected]

Mr. Inaam Ellahi Sheikh

FCA, FCA (England & Wales)

Mr. Muhammad Waqas

ACA

Website www.racopk.com

mailto:[email protected]




http://www.racopk.com/

RIAZ AHMAD & COMPANY · riaz ahmad & company chartered accountants i n d e x finance act 2019 description page no. introduction 1 executive summary 2 – 6 income tax 7 – 64 sales

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