2 fa 2015 final draft 07072015.pdf

8/15/2019 2 FA 2015 FINAL DRAFT 07072015.pdf

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PREFACE Finance Act 2015

This document gives a brief insight of significant amendments made through Finance

Act 2015 and SROs relating to Income Tax, Sales Tax and Federal Excise Duty. This

document also presents significant changes made in fiscal laws through respective

Provincial Finance Acts. Changes made in Custom laws and the Sindh Sales Tax on

Services Act, 2011 are not included in this document.

In order to understand the impact of a particular change, reference should be made to

the specific wordings in the relevant statute.

This summary of Finance Acts can also be accessed on our website www.frants.pk

July 4, 2015

Finance Act 20151

F.R.A.N.T.S. & Co,Chartered Accountants, is a member firm of the PKF International Limited network of legally independent firms and do not acceptany responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.


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1. PREFACE 01

2. INCOME TAX 05

2.1 Powers of Federal Government 06

2.2 Tax Credit 06

2.3 Others 07

2.4 Income Tax Schedule 11

3. SALES TAX 15

4. FEDERAL EXCISE DUTY 23

5. ICT ORDINANCE, 2001 24

6. PUNJAB FINANCE ACT, 2015 25

7. KPK PROVINCIAL FINANCE ACT, 2015 29

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DefinitionsSection 2

The definition of “Consumer Goods “and“Fast

Moving Consumer Goods” has been introduced

to give clarity regarding eligibility for reduction in

Minimum Tax.

Definitions related to “Real Estate Investment

Trust” and “Pakistan Mercantile Exchange

Limited “have been introduced with regard to new

taxation m|easures.

“Small Company” definition has been amendedto increase the maximum paid up capital and

Reserves from Rs. 25 Million to Rs. 50 Million.

Imposition of Super Tax (Tax Year 2015)Section 4B

For the Tax Year 2015, Banking Companies and

Other Persons having income equal to or

exceeding Rs. 500 million, will additionally be

subjected to Super Tax for Rehabilitation of

Temporarily Displaced Persons at the rate of 4%

and 3% respectively. Final tax related income will

be calculated through imputable income basis for

the calculation of Super Tax.

Tax on Undistributed ReservesSection 5A

From Tax Year 2015, Public Companies

(excluding banking companies, public companies

in which not less than 50% shares are held by the

Government and a modaraba) derives profit for a

tax year and having undistributed tax reserves

exceeding 100% of its paid up capital after paying

dividend (if any), so much of its reserves as

exceed 100% of its paid up capital shall be treated

as income and will be subjected to tax at the rate

of 10%. For tax year 2015, Companies have

been given option of distributing cash dividend

before the filing of tax return to avoid tax under

this section. This provision shall not apply to

public companies who distribute 40% of their after

tax profit or 50% of paid up capital within 6 months

of the end of tax year.

It has also been clarified that reserves include all

revenue reserves but exclude capital reserves,

share premium reserves and reserves required to

be created under any law, rules or regulations

Tax on Shipping of a resident PersonSection 7A

Presumptive tax on the shipping income of

resident persons previously provided in Second

Schedule has now been placed in this section at

following rates:

- Pakistani ships or vessel - US$ 1 per ton

per gross registered tonnage per annum.- Foreign ships or vessels - US $ 0.15 per

ton per gross registered tonnage for each

charter subject to a maximum of US$ 1

per annum per ton.

Tax on Profit on DebtSection 7B

Fixed Tax regime on Profit on Debt has been

revised where maximum tax rate has been

increased to 15% from earlier 10% in case the

profit on debt exceeds Rs. 25 million; in aprogressive manner and will be treated as

separate block of income in cases other than

companies. However, companies shall continue to

pay tax at their applicable corporate tax rates.

This Tax shall not apply to profit on debt which is

exempt under ITO, 2001.

Depreciation First Year AllowanceSection 23 A

This section has been amended to include

undertakings engaged in the manufacturing of

cellular mobile phones and qualifying for

exemption under clause 126N of Part I of the

Second Schedule for claiming first year allowance.

Capital GainSection 37A

Rates on Capital Gains on disposal of securities

have been revised. Such gains are subject to

12.50% and 15% tax for Tax Year 2015 & 2016

respectively if the security sold having holding

period of one year or less. Whereas, if the holding

period of security is between twelve to twenty four

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1

POWERS OF FEDERAL GOVERNMENT

The power of the Federal Government for

allowing exemptions and concession under the

Income Tax Ordinance, 2001(ITO) have been

made subject to the approval for Economic

Coordination Committee of Cabinet, that too, on

the basis of specific purposes and circumstances

as defined in the law. Moreover, the maximum

validity of notifications shall be one year.

TAX CREDITS

Investment in Shares & InsuranceSection 62

The maximum limit of Rs.1.000 Million has beenincreased to Rs. 1.500 Million for calculation of taxcredit on Investment in shares and insurancepremium.

Profit on DebtSection 64 A

The Tax Credit available for Profit on HouseLoan/Debt has been replaced by deductible

allowance for house loan/debt and its maximumlimit has been enhanced to Rs. 1.000 Million fromRs. 0.750 Million. Previously tax credit wasallowed on average tax rate formula but nowstraight deduction has been allowed subject torestriction of 50% of taxable income or Rs. 1.000Million which ever is less. Further any excessprofit on debt paid shall not be allowed to carryforward to next years.

Credit for Employment GenerationSection 64 B

A new Tax Credit has been introduced forEmployment Generation. The Manufacturers,setting up new manufacturing units (between July

th1, 2015 to June 30 , 2018), will be eligible for atax credit of 1% of tax payable (subject tomaximum of 10% of tax payable) for every fiftyregistered employees' with EOBI and ESSI, Thecompany can avail the Tax Credit for a period often years.

Miscellaneous - Tax CreditSection 65

Tax credit under section 65B, 65D and 65E were

allowed against the final/minimum taxation but

due to section 169(2) and 113 (1) there wasconfusion in eligibility of such tax credits. A newsub-section has now been introduced for theresolution of said ambiguity as tax credits undersaid sections are already allowed againstfinal/minimum tax.

Balancing, Modernization & ReplacementSection 65 B

Tax credit for investment in Balancing,Modernization and Replacement of existing plant

and machinery which was available with respectto investments made up till 30 June 2015 hasbeen extended for one more year i.e. 30 June,2016.

Tax Credit for EnlistmentSection 65 C

Tax Credit for the Company opting for enlistmentin any registered stock exchanges in Pakistan hasnow been increased to 20% from existing 15%.

Tax Credit for Industrial UndertakingsSection 65 E

The time frame for the Tax Credit under Section65E of ITO for industrial undertakings establishedbefore July 1, 2011 has been rationalized byallowing five years from the date of setting up orcommencement of commercial production fromthe new plant or expansion project, whichever islater.

months, gains are subject to 10% and 12.50% tax

for Tax Year 2015 & 2016 respectively. However,

for the Tax Year 2015, there will be no tax if the

period of holding of the security sold exceeds

twenty four months but for the Tax Year 2016,

such gains will attract tax at the rate 7.5% if the

holding period is upto forty eight months.


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Agreements for the avoidance of double

taxationSection 107

In order to exchange information with regard to

double taxation and prevention of fiscal evasion, the

Federal Government is authorized to enter into

agreements with Government or Governments of

foreign countries or tax jurisdictions. In addition, the

Federal Government has ensured the confidentiality

of such sort of information under the cover of

“Notwithstanding”clause. Similar authority has also

been introduced in the Sales Tax as well as Federal

Excise laws.

Tax on BuildersSection 113A

Tax on Builders, which was introduced through

Finance Act, 2013 on the income of builders, has

been suspended till June 30, 2018.

Tax on Land DevelopersSection 113B

Minimum Tax on Land Developers has been

introduced at the rate of 2% of the value of landnotified by any authority for the purpose of stamp

duty.

Alternative Corporate TaxSection 113C

The Finance Act has clarified the term “Corporate

tax” as higher of tax payable by the company on

income liable to corporate tax rate mentioned in

the 1st Schedule and minimum tax payable under

any of the provisions of the Ordinance.

Furthermore, the applicability of ACT has beenextended to a company setting up an Industrial

undertaking that is subject to reduced corporate

tax rate of 20 percent under clause (18A) of Part II

of the Second Schedule to the Ordinance.

Revision of Income Tax ReturnSection 114

Taxpayer has been authorized to revise the Tax

Return without the prior approval of

Commissioner, if the Revised Tax Return is filed

within 60 days of filing of the Original Tax Return.

Furthermore, in case the order for approval for

revision of return is not made within 60 days, theapproval shall be deemed to have been granted.

Stay in Recovery Proceedings by

Commissioner AppealsSection 128

The Commissioner (Appeals) may extend the stay

for another thirty days after hearing the

Commissioner against whose order an appeal has

been made, provided that order on appeal shall be

passed within the said period of such thirty days.

Recovery against Order Section 137

The period for the recovery of tax under an

assessment order or an amended assessment

order or any other order issued by the

Commissioner has been extended to thirty days

from existing fifteen days. However, the period of

sixty days allowed for the provisional assessment

under Section 122C of the ITO has been reduced

to forty five days.

Advance Payment of TaxSection 147

Tax payer is now required to estimate its Tax

Liability for the Tax Year before the end of its

second quarter instead of the prevailing

requirement before the end of fourth quarter. In

case, the tax payable for the tax year is likely to be

more than the amount required to be paid as per

provisions of law, the tax payer is required to pay

50% of such tax liability by due date of second

installment and the balance 50% in two equal

installments payable by the due dates of third and

fourth quarters of the Tax Year.

ImportsSection 148

Power of exempting persons, goods or classes of

goods from tax withholding under section 148 has

been withdrawn from the Board. However, all the

active notifications shall remain in place unless

rescinded by the Board.

Moreover, special rate of final tax on local

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purchase of cooking oil or vegetable ghee by

manufacturers at the rate of 2 percent has been

placed under a special provision; earlier it was

covered under clause 13C of Part II of SecondSchedule.

Exemption Certificate for Permanent

Establishment Section 152

The Permanent Establishment in Pakistan of a

non-resident person is now entitled to apply

Commissioner for tax exemption/reduction

certificate on account of tax payable under

Section 152(2A) of the ITO.

With holding from ServicesSection 153

Tax deducted while making payment to companies

on account of services rendered was proposed in

Finance Bill 2015 to be made adjustable for the

Companies Rendering Services with effect from

tax year 2009 on the demand of Services Sector.

But surprisingly clause 79 of Part IV of Second

Schedule has been omitted through the Finance

Act passed by Parliament which means that the

tax withheld from both companies and others shallbe minimum tax on their income.

Tax deducted at the rate of 10% while making

payment to a Sports person has been declared

Final Tax with effect from Tax Year 2013.

Option of Normal Taxation for ExportersSection 154

Exporters have been provided with an irrevocable

option to opt for filing of normal income tax return

under Section 114 of the ITO, 2001 instead of

filing statement of final taxation under Section115(4) of the ITO, 2001. This option shall be

exercised every year at the time of filing the

income tax return. However, no incentives have

been provided in this regard as tax deducted on

the exports proceeds shall be minimum tax for

such tax year.

Timing of Deduction of TaxSection (158)

Board has been empowered to define the term

'actually paid' as the deduction of tax at source is

to be made on the 'amount actually paid' to the

recipients in most cases.

Payment of Surcharge/Refund

Section 161/171

Rate of Default Surcharge on account of non-

deduction/payment of tax has been reduced to

12% from 18% whereas additional payment for

delayed refund payable by Board has also been

reduced to KIBOR plus 0.5% from 15%.

Banking Information of Non ResidentsSection 165B

A new section 165B has been introduced to

empower the Board to procure information related

to non-resident persons from financial institutions

including banks to discharge its duties under

bilateral or multilateral treaties/agreements.

Special Audit PanelsSection 176-177

The concept of “Special Audit Panels(SAP)” has

been introduced this year which will be comprising

of two or more members, consisting of an officer

of the Inland Revenue, a firm of Chartered

Accountants, a firm of Cost and Management

Accountants or any persons as directed by Board.SAP will be headed by the chairman who shall be

an Officer of Inland Revenue. Such SAPs, after

getting approvals from the Commissioner, may

exercise powers under Sections 121, 176, 177,

210 and 211 of the ITO, 2001.

Computerized National Identity Card (CNIC)

Number Section (181)

Through this amendment, Individuals'

Computerized National Identity card numbersshall be used as National Tax Number from the

tax year 2015. It implies that NTN number shall be

no longer required for filing returns of individuals.

PenaltiesSection 182

Minimum Penalty for Non-Filing of statement of

final taxation and withholding tax statements has

been brought in the main section from the

respective schedule and has been reduced to ten

thousand rupees from fifty thousand rupees.

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The penalty for non-filing of wealth statement and

wealth reconciliation statement has been

enhanced from Rs. 100/per day of default to

higher of 0.1% of the taxable income per week orRs. 20,000.

Automatic Selection for AuditSection 214 D

Finance Act now provides for automatic selection

for tax audit of a person who doesn't:

a) file his tax return within specified time

provided in the Ordinance or within the

time extended by the Board or further

extended upto 30 days by the

Commissioner; or

b) pay tax due alongwith return within due

date.

However, audit proceedings in such cases shall

only be initiated after the expiry of ninety days

from the due date of filing of return as mentioned

in (a) above.

Subject to provisions regarding levy of penalty,

default surcharge and selection for audit by the

Board under section 182, 205 and 214C

respectively, aforesaid automatic selection

provisions shall not apply if the person files the

return within ninety days from the date mentioned

in (a) above;

- 25% higher tax is paid than the tax paid on

the basis of taxable income declared during

immediately preceding tax year;

- tax at the rate of 2% of turnover or tax as per

the applicable tax rate under the First

Schedule, whichever is higher, is paid

alongwith the return in cases where either a

return was not filed or income below taxable

limit was declared in the immediately

preceding tax year; and

- where return has been filed for immediately

preceding tax year, turnover declared for the

tax year is not less than the turnover

declared for the immediately preceding tax

year.

Section 177 and 214C regarding audit and

selection for audit by the Board shall not apply for

a tax year to a person registered as a retailer

under rule (4) of the Sales Tax Special ProcedureRules, 2007 subject to the condition that the name

of the person so registered remained on the sales

tax active taxpayers' list throughout the tax year.

This provision shall have effect from the date

announced by the Board through Notification in

the official gazette.

Reward to Whistle blowersSection 227B

A concept of whistle blower has been introduced

in Income Tax, Sales Tax and Federal Excise lawsfor the person who reports concealment or

evasion of income tax, fraud, corruption or

misconduct by providing credible information

leading towards detection of tax evasion and

related recovery. The Board may sanction reward

to such whistle blowers subject to the procedures

to be prescribed in this behalf.

Domestic Electricity ConsumptionSection 235A

For the purpose of collection of advance tax fromthe domestic consumers' monthly limit of

electricity bill is reduced from Rs. 100,000 to Rs.

75,000.

Advance Tax on InternetSection 236

Advance tax rates applicable on telephone services

expanded to include internet services in their ambit

for deduction of tax.

Advance Tax on Domestic Tickets

Section 236BCollection of advance tax has been abolished on

purchase of air tickets for travailing to Balochistan

Coastal Belt, Azad Jammu and Kashmir, FATA,

Gilgit-Baltistan and Chitral.

Advance Tax on Sales to Retailers or

WholesalersSection 236H

Fertilizer has been excluded from the ambit of


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advance tax on sales to retailers or wholesalers.

The Finance Act has also levied tax on

transactions between dealers and wholesalers. .

Advance tax by Educational InstitutionsSection 236I

Collection of advance tax by Educational

Institutions from non-resident person has been

relaxed on the premise that the non-resident has

no Pakistan source income and fee is remitted

directly to the bank account of educational

institution from abroad through normal banking

channels.

Advance tax on Non Cash Banking

TransactionsSection 236P

For Non-Filers, all banking transactions related to

transfer and purchase of banking instruments,

exceeding fifty thousand rupees a day, will be

liable to adjustable advance tax at the rate of

0.6%. It includes payments through crossed

cheques. Amount shall be deducted from the

account of person issuing banking instrument.

Advance tax on Rental of Machinery &

EquipmentSection 236Q

Payment to a resident person for rent to use

commercial, industrial, scientific equipment or

machinery has been made subject to deduction of

Income Tax at the rate of 10% (irrespective of filer

or non-filer) which would be Final Tax on such

income. Agriculture machinery and machinery

owned and leased by a leasing company, an

investment bank, a modaraba, a scheduled bank ora developmental finance institution shall not be

covered by this provision.

Advance tax on Educational Expenses remitted

abroadSection 236R

Education related expenses remitted abroad will

also be made liable to deduction of adjustable

advance tax at the rate of 5%. Tax shall be

collected from the payer of education related

expenses.Dividend in SpecieSection 236S

Dividend in specie has also been made liable for

deduction of advance tax at the rates applicable to

cash dividend i.e. 12.50% for filers while 17.50%

for Non-Filers.

Future Commodity ContractsSection 236 T

Pakistan Mercantile Exchange Limited is required

to collect advance tax from purchase, sale andcommission on future commodity contracts at the

rate of 0.05%. The aforementioned collection of

tax shall be adjustable against tax liability.

INCOME TAX

INCOME TAX


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TAX CREDITSTAX CREDITSINCOME TAX SCHEDULES


FIRST SCHEDULE

Tax Rates For Business Individual andAOPs

Taxable incomefrom upto

Rate

0 400,000 0%

400,001 500,000 7%of amount exceeding400,000

500,001 750,000 Rs. 7,000 + 10% of amountexceeding 500,000

750,001 1,500,000 Rs. 32,000 + 15% of amountexceeding 750,000

1,500,001 2,500,000 Rs. 144,500 + 20% of amountexceeding 1,500,000



6,000,001 and above Rs. 1,319,500 + *35% ofamount exceeding 6,000,000

* for AOP’s (Professional firms prohibited from incorporatingby any law) rate of tax shall be at 32% from tax year 2016and onwards.

Tax Rates For Salaried Individual

Taxable income from upto

Rate

0 400,000 0%

400,001 500,000 2%of amount exceeding400,000

500,001 750,000 Rs. 2,000 + 5% of amountexceeding 500,000

750,001 1,400,000 Rs. 14,500 + 10% of amountexceeding 750,000

1,400,001 1,500,000 Rs. 79,500 + 12.5% of amountexceeding 1,400,000







7,000,001 and above Rs. 1,422,000 + 30% of amountexceeding 7,000,000

Tax Rates For Companies

Description Rate

Banking company 35%

Other than banking company- TY- 2016 32%



Super Tax Rates

Description Rate

Banking company 4%

Other person having income equal to orexceeding Rs. 500 Million

3%

Tax Rates For Profit on debt

Taxable income from upto

Rate

0 25,000,000 10%

25,000,001 50,000,000 Rs. 2,500.000 + 12.5% ofamount exceeding 25 Million

50,000,001 and above Rs. 5,625,000 + 15% of amountexceeding 50 Million

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Sec. Category Filer Non

Filer

37A Capital Gains Tax - Company

Stock Funds 10 % 25%

Other than Stock Funds 25% 25%

Capital Gains Tax - Individuals &AOPs

10% 17.5%

148 Industrial undertaking importing

re-meltable steel (PCP Heading

72.04) and directly reduced iron

for its own use.

Manufacturers covered under

SOR 1125( I)/2011, dated 3112-

2011. Import of Potassic Fertilizer Imports of Urea fertilizer Import of gold Import of cotton Import of LNG- designated bryers

1% 1.5%

Import of pulses 2% 3%

Commercial importers covered under

SRO 1125 (I) / 2011, dated 31-12-

2011

3% 4.5%

Ship breaker on import of ship 4.5% 6.5%

Tax to be collected from every

importer of goods on the value of

goods.

a) In the case of Industrialundertaking not otherwise

covered

b) all other cases of companies

c) In the case of persons other

than those covered in a & b

above

5.5%

5.5%

6%

8%

8%

9%

Sec. Category Filer NonFiler

150 Dividend income 12.5% 17.5%

151 Profit on Debit 10 % 17.5%

152 Payments to PermanentEstablishment of Non- Residents

supply of goods - Company

- Others

supply of services - Company

- Others

transport services

execution of contract - Company

- Others

Sport persons

4%

4.5%

8%

10%

2%

7%7.5%

10%

6%

6.5%

12%

15%

2%

10%10%

10%

153 Payments to Residents

supply of goods - Company

- Others

supply of services - Company

- Others

transport services

execution of contract - Company

- Others

Sport Persons

Electronic and Print Media

Services - Company

- Others

4%

4.5%

8%

10%

2%

7%

7.5%

10%

1%

1%

6%

6.5

12%

15%

2%

10%

10%

10%

12%

15%

156A Commission on Petroleumproducts

12% 15%

231A Cash withdrawal exceeding Rs.50,000/- in a day

0.3% 0.6%

231AA Other transaction with Bank 0.3% 0.6%


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Sec Category Filer Non Filer

233

Brokerage & Commission Advertisements 10% 15%

Others 12% 15%

234 Goods Transport Vehicles(per kg)Passenger Transport VehiclesSeating capacity>410


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Terminals

Taxpayers In most affected areas

of KPK, FATA or PATA for tax

years 2010, 2011 and 2012

excluding manufacturers and

suppliers of cement, sugar,

beverages and cigarettes.

Rice Mills (for Tax Year 2015 only)

Tax on Cash withdrawal by exchange

companies @ reduced rate of 0.15%.

Incentive available to green field

undertakings in the form of Non-

disclosure of source of income has beenextended to June 30, 2017 by amending

clause 86 of part IV.

That section 113 and 153 remain not

applicable to trading houses where sale of

in house produced and processed food

and allied items to customers doesn't

exceed 2% of total sales

Exemptions withdrawn from the Second

Schedule.

Capital Gains from sale of shares ofPublic Companies set up in Special

Industrial Zone.

Provision of section 153(1)(b) shall now

be applied on payments to electronic and

print media services in respect of

advertising services.

Income from Hajj Operations.

Minimum tax exemption is withdrawn from

KAPCO

Blanket exemption to exchange company

from withholding tax u/s 231A through

exemption certificate from Commissioner

has been withdrawn.

Clause 79 of part IV has been omitted

whereby exemption of levy of minimum

tax to companies on services u/s

153(3)(b) has been withdrawn. Thisamendment shall have serious effect on

service providing companies because the

withholding tax on services have been

increased.

Filing of wealth statement by each tax

payer has been made mandatory because

clause 82 has not been extended.

4TH TO 8TH SCHEDULE

The Finance Act seeks to tax the capital gains and

dividend income and chargeability of super tax onthe total income of Insurance, banking and oil

exploration companies.

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Who is not Active Tax PayerSection 2(l)

The definition of active tax payer in the Sales Tax

Act has been introduced through amendment in

subsection 2(1). The Active Taxpayer means a

registered person who does not fall in any of the

following categories:

(a) who is black listed or whose registration is

suspended or blocked under section 21;

(b) who fails to file Sales Tax returns by due

date for consecutive 2 periods;

(c) who fails to file Income Tax return u/s 114

or statement u/s 115 of IT Ordinance

2001 by due date; and

(d) who fails to file two consecutive monthly

or an annual withholding statement under

section 165 of the Income Tax Ordinance,

2001.

The Board shall have the power to maintain active

taxpayers list (ATL) in the manner as prescribed

through rules under section 21A.The Boardthupdates the ATL on 15 of every month. It is

important to be on ATL all times otherwise it would

adversely affect the tax payer in terms of

application of higher tax rate and non-admissibility

of input tax.

Cottage IndustrySection 2( 5AB)

Previously persons being manufacturer having

utility bills value during the last 12 months less

than Rs.700,000 are defined as “Cottage

Industry”.Now this limit of utility bills has beenincreased to Rs.800,000 considering the

inflationary impact and increasing utilities cost.

Retailer Section 2(28)

Definition of retailer has been modified and the

threshold limit for retailer having combine

business of importer or manufacturer for

registration as retailer has been omitted.

SupplySection 2(33)

The definition of “Supply” has been extended to

include goods belonged to another person when

transferred or delivered to the owner or to a

person nominated by him. The definition of

supply has been amended to give legal cover for

sales tax collection on supply upon toll

manufacturing. Here it is important to note the

dispute over rights to claim sales tax on toll

manufacturing service is prevailing among

provinces and Federal Government. The Board

though has strengthened their stance on their

right to collect sales tax on toll manufacturing,

however, the issue will not be resolved until and

unless provincial governments delete the entry of

Sales Tax on toll manufacturing from their

charging Schedule of respective Sales Tax Act

otherwise dispute would continue to prevail over

the exclusive right of collection of sales tax on toll

manufacturing.

Further Tax

Section 3 (1A)The rate of further sales tax has been increased

from 1% to 2%. This further sales tax is required

to be paid by a registered person on supplies to

un-registered person. The rationale behind

increase of further sales tax is to increase cost of

doing business with unregistered segment of the

trade and also to recover some indirect tax.

Scope of Tax Section 3(2) / 13

The Power of the Federal Government forallowing exemptions and concession under the

Sales Tax Act, 1990 have been made subjected to

the approval of Economic Coordination Committee

of Cabinet, and that too, on the basis of specific

purposes and circumstances as defined in the law.st

Any notification issued after 1 July 2015 shall

stand rescind on expiry of financial year if not

approved by the National Assembly.

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Time and manner of paymentSection 6.

The powers of Customs authority has beenextended with respect to recovery of sales tax

which is currently available with Inland Revenue

officials only.

Determination of tax liabilitySection 7

The anomalies faced by persons on provisional

clearance of their bill of entry has been

addressed. Earlier, credit of input tax on

provisionally cleared bill of entry was not available

for adjustment with sales tax liability.Tax credit not allowedSection 8

The restriction on Input Tax adjustment placed

under section 8(1)(h) on “pre-fabricated buildings”

has been removed.

The restriction on Input Tax adjustment against

services has been placed in respect of which

adjustment is barred by the respective provincial

sales tax laws.

No input shall be allowed against import orpurchase of agricultural machinery and

equipment.

The restriction on input adjustment is also placed

on such goods and service which at the time of

filing of return by the buyer have not be declared

by the supplier in its respective return. This is very

dangerous amendment and shall have serious

consequences. The effective date of this particular

restriction will be notified by the Board.

Joint & Several LiabilitySection 8A

The burden has been placed on tax department to

discharge onus in respect of unpaid amount of

sales tax under section 8-A. The amendment is

very important in nature considering the frequent

abuse of this section by the field formations in

past against the spirit of the law.

RegistrationSection 14

The basic sales tax registration laws were

transferred into Sales Tax Rules which are now

being transferred back to main legislation. As per

existing provisions of law, following categories arerequired to be registered under Sales Tax Act,

1990.

a) a manufacturer other than cottage

industry

b) a retailer who is liable to pay sales tax

under the Act or Rules excluding such

retailers required to pay sales tax through

electricity bills.

c) an importer

d) an exporter who intends to obtain sales

tax refund.

e) a wholesaler, dealer or distributor

f) a person required to be registered under

Federal or Provincial law

The Board has amended Sales Tax Rules, 2006 to

include the concept of temporary registration for

import purposes by the new manufacturers.

Special Audit Panels

Section 32AThe concept of “Special Audit Panels(SAP)” has

been introduced this year which will be comprising

of two or more members, consisting of an officer

of the Inland Revenue, a firm of Chartered

Accountants, a firm of Cost and Management

Accountants or any persons as directed by Board.

SAP will be headed by the chairman who shall be

an Officer of Inland Revenue. This penal shall

lawfully function even one member other than

chairman is absent from conducting audit.

PenaltySection 33

Penalty of Rs.100 per day was applicable for the

first fifteen days in case of delayed filing of Sales

Tax Return. Now the time limit of fifteen days has

been reduced to ten days. Likewise, minimum

penalty amount of Rs.500 per day is now provided

if the due amount of sale tax is paid within next

ten days instead of earlier fifteen days.


Finance Act 201516


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Monitoring / Tracking by electronic means Section 40C

Regarding barcode facility for the goods which

cannot be sold without affixing the tax stamp,

banderole, sticker by the manufacturer, importer

or any other person. The Board shall appoint

licensee from whom such tax stamp, banderole,

stickers, barcode, etc. would be acquired against

price approved by the Board including cost of

equipment installed by such licensee in the

premises of the registered person.

Power of the Board and Commissioner to call

records

Section 45A A meaningful amendment has been made

whereby the Board or CIR can call record for

either on his own motion or otherwise. Previously

such power can only be exercised on his own

motion only.

Agreement for exchange of informationSection 56A

The Federal Government has been empowered to

enter into bilateral or multilateral agreements with

provincial government or foreign governments forexchange of information. However the disclosure

of such information by a public servant shall be

confidential and restricted as provided under

section 216 of ITO 2001.

Prize Scheme Section 56C

Federal Board of Revenue is authorized to

introduce prize schemes to promote tax culture. In

order to encourage the general public to make

purchases only from registered persons against

valid sales tax invoice, the Board may introduce

incentive in terms of cash, prize or as it deem fit.

Reward to Whistle blower Section 72D

A concept of whistle blower has been introduced

in Income Tax, Sales Tax and Federal Excise laws

for the person who reports concealment or

evasion of income tax fraud, corruption or

misconduct by providing credible information

leading towards detection of tax and related

recovery. The Board may sanction reward to such

whistle blowers subject procedures to be

prescribed in this behalf.

Certain important amendments in Schedules

Flavored milk, milk cream, yogurt, cheese butter,

desi ghee and whey powder which are sold inretail packing under a brand name were under

Zero Rating Regime under Fifth Schedule read

with SRO 608/(I) 2014. The same are now shifted

to Eighth Schedule with chargeability of Sales Tax

at the rate of 10%.

Air crafts, aviation equipment, diagnostic kits and

other medical related material will be exempted

from sales tax.

Raw, pickled and wet blue hides and skins,

manufacturers of marble and granite (turnoverbeing less than five million), Poultry and Cattle

Feeds, Bricks & Crush Stone(upto June 30th,

2018) are now exempted from sales tax.

Incinerators, motorized sweepers, snow plough,

reclaimed lead, waste paper, ginned cotton and

plant & machinery for Bio Diesel will now be

subject to sales tax at the rate of 5%.

Sales tax slabs on import of and registration of

Mobile Phones will be doubled. However,

regulatory duty currently applicable has beenwithdrawn.


Finance Act 201517


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IMPACT OF SALES TAX SROs


S.R.O 483(I)/2015 –

Amendment in S.R.O 383(I)/2015 dated the 30th

April, 2015

Petroleum products related Sales Tax rates have

been changed by amending SRO 383(I)/2015

dated April 30th, 2015. The comparisons of rates

are as under

S.R.O 484(I)/2015 –

Amendment In Sales Tax (Special Procedures)

Rules, 2007

The summary of proposed changes is as under:

Chapter IX relating to special procedure for

processing of refund claims filed by the cotton

ginners has been omitted, as the same

become redundant due to ginned cotton's

exemption status under the prevailing

provisions of sales tax law.

Wholesaler-cum-retailers falling under

Chapter XIII are given waiver from provisionsof section 73 of the Act and allowed to issue

tax invoice in respect of specified goods

subject to extra tax.

Sales tax invoices shall be issued by the

registered persons in steel sector for the

product / category at the following rates

With a view to rat ional izing the present

concessionery regime of sales tax rates on steel

sector, rates have been changed as under:

Product

Rates priorto01.07.2015

Ratesw.e.f.01.07.2015

Motor Spirit 19% 17%

HOBC 17% 17%

Kerosene Oil 17% 17%

HSD 28% 29%

LDO 16% 17%

Prior to July01, 2015

After July 01,2015

Invoices issued byand for or to

Amount of sales taxto mentioned on theinvoices

Amount of sales tax

to mentioned on the

invoices

By steel melters orcomposite units ofmelting, re-rollingand MS colddrawing toregistered re-rollers

Rs. 6,447 per metricton

Rs. 8,047 per metric

ton

By steel re-rollers,using ingots orbillets of steelmelters orcomposite units ofmelting, re-rollingand MS colddrawing, to registerdpersons

Rs.7,357 per metricton

Rs.9,217 per metric

ton

By re-rollers, usingbillets of PakistanSteel Mills orPeoples Steel Millsor Heavy

MechanicalComplex orimported billets, toregistered persons

Rs. 8,092 per metricton


ton

By re-rollers,usingship-plated and re-rollable scrap as rawmaterial, toregistered persons

Rs.7,610 per metricton

Rs.9,170 per metric

ton

By re-rollers, tounregisteredpersons

Rs. 910 per metricton


ton

By personssupplying importedMS products, toregistered persons

Rs. 8,526 per metricton Rs. 8,526 per metric

ton

By personssupplying importedMS products, tounregisteredpersons

Rs. 910 per metricton


ton

Finance Act 201518


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2. Commercial imports

Supplies to registered or

unregistered persons of

the said five sectors

Supplies to persons

outside the said five

sectors

Import by, or supply

to, registered

manufacturers, whether or

not of the said five sectors,

for the manufacture of

goods specified in Table-I

or Table-II

3% + 1% value

addition tax

3%

17%

3%

2% + 2%valueadditiontax

2%

17%

2%


S.R.O 485(I)/2015 –

Amendment in the Sales Tax Special Procedure

(Withholding) Rules, 2007

Sales Tax is now liable to be withheld on purchase

basis. Petroleum Dealers supplying motor spirit

and diesel are inserted in Exclusion clause whereas

the words “including Petroleum dealers” have been

omitted from the clause allowing one tenth

withholding of Sales Tax. Chapter XI of Special

Procedure Rules, 2007 has now grossly included in

the exclusion instead of already provided "mild steel

products". Further, exclusion available to paper, in

rolls or sheets and plastic products including pipes

has been withdrawn. Now these products shall also

be subject to withholding of sales tax.

S.R.O 486(I)/2015 –

Amendment in S.R.O 1125(I)/2011 dt. 31.12.2011

Rate of sales tax applicable to persons doing

business in textile (including jute), carpets, leather,

sports and surgical goods sectors who is

registered as manufacturer, importer, exporter or

wholesaler under the Sales Tax, 1990 and appear

on the Active Taxpayers List (ATL) has been

revised. Increase of 1% rate from 2% to 3% and

for Commercial importer, the rates converted to

3%+1% instead of 2%+2%. The conditions from iv

to ixa have been deleted for presenting the samein tabular form with increased rate of 1%

generally. The summary of changes made

alongwith comparison with previously applicable

rates are as follows:S. No. Description of goods and

point of taxation

Rate of

Sales Tax

w.e.f.July 1, 2015

Previous

rate

Goods usable as industrial inputs, specified in Table I

1. Import for in-house

consumption by registered

manufacturers of the five

sectors

3% 2%

Description Rates priorto01.07.2015

Rates w.e.f.01.07.2015

Steel Melter, Steel re-roller,composite unit of melting, re-rolling and MS cold drawing

Rs.7 per unitof electricityconsumed

Rs.9 per unitof electricityconsumed

Import of re-meltable ironand steel scrap

Adjustablesales tax ofRs.5,600/PMT

Adjustablesales tax ofRs.5,600/PMT

Import of waste and scrapcompressor -

Non-

adjustablesales tax ofRs.5,600/PMT

Local supply of waste andscrap compressor -

Not subject tosales tax

Local supply of re-meltableiron and steel scrap -

Rs.5,600/PMT

Ship breakers-at the time ofimport on re-rollable scrap

Rs.1,663 Rs.2,138

Steel melters and re-rollingunits-generating self-electricity

Rs.45,458 Rs.58,446

Re-rollable scrap supplied byship breakers

Rs.39,412/PMT

Rs.47,059/PMT

Finance Act 201519


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There is no change in prevalent conditions of SRO

1125(I)/2011 regarding input tax adjustment and

refund.

S.R.O492(I)/2015 –

Amendment in SRO 647(I)/2007 dt. 27.06.2007

“Persons subject to reduced rate regime under

SRO 1125(I)/2011 have been excluded from

applicability of Section 8B(1) of the Sales Tax Act,

1990. Such persons can now fully adjust their

input tax against the output tax liability subject to

condition that value of such supplies must exceed

50% of value of all taxable supplies in a tax period

S.R.O 487(I)/2015 -

Supersedes SRO 88(I)/2002 dt. 11.02.1988

The due date for payment of sales tax on

petroleum products by petroleum exploration and

production companies is reduced from twenty fifth

(25th) to eighteenth (18th) day of the month andreturn would be filed on the following twenty first

(21st) day of that month.

S.R.O 488(I)/2015 -

Rescission of certain Sales Tax SROs

In accordance with its drive to eliminate SRO

culture, certain SROs has been rescinded either

being redundant or as consequence of placement

of the exemptions to the relevant Schedules of the

Act. Following is the list of SRO's rescinded.

SRO 208/1998 dated March 31, 1998 ‐

Time bound exemption to excessive sales tax

leviable above the notified value of sugar.

SRO 397/2001 dated June 18, 2001-

Exemption with respect to supply of Plant and

machinery to companies in Export Processing

Zones alongwith the respective procedure to be

followed has been placed in 5th Schedule, hence

this SRO exhibiting the same procedurewithdrawn

SRO 77/2004 dated January 28, 2004-

Time bound Exemption to Trading Corporation of

Pakistan for export of sugar.

SRO 433/2005 dated May 14, 2005-

One time exemption to M/s Hino Pak Motors for

manufacturing buses for donation to Afghanistan.

SRO 1007/2005 dated September 26, 2005 ‐

Exemption to ingredients of poultry and cattle feed

withdrawn and now sales tax will be charged at

5%.

SRO 69/2006 dated January 28, 2006 ‐

Sales tax leviable at 16% at import stage on

sunflower seed, canola seed by solvent extraction

industries placed in 8th Schedule.

SRO 313/2006 dated March 31, 2006-

Sales tax leviable at 6% at import stage on

soyabeen seed by solvent extraction industries

Processed goods, including fabrics

4. Processing of goods owned by other

persons, by registered manufacturers

of the five sectors mentioned in

condition (i) below.

3% of the

processing

charges

2% of the

processing

charges

Locally manufactured finished articles of (a) textiles and textile

made-ups and (b) leather and artificial leather

5. Supplies to any person, including

retail sales

5% 5%

Imported finished goods ready for use by the general public

6. (i) Import

(ii) Supply thereof

17%, plus

2% value

addition

tax

17%

17%, plus

2% value

addition

tax

17%

Fabric, including grey fabric

3. Import for in-house consumption

by registered manufacturers of the

five sectors

Commercial imports

Supplies

3%

3% Plus1% valueaddition

tax

3%

3%

3% Plus1% valueaddition

tax

3%

Finance Act 201520


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placed in 8th Schedule.

SRO 880/2007 dated September 01, 2007-

Zero rating available to medical diagnosticsequipment placed in 6th Schedule.


Exemption available to marble and granite

manufacturers through this SRO have been

placed in Table II of the 6th Schedule.

SRO 408/2012 dated April 19, 2012-

Exemption available to Blood Bag CPDA has now

been provided in part II of 6th Schedule

SRO 760/2012 dated June 22, 2012 ‐

Exemption available to Urine bags has now been

provided in part II of 6th Schedule.

SRO 460/2013 dated May 30, 2013-

Sales tax on import stage of cellular phones has

now been provided in 9th Schedule.

SRO 657/2013 dated July 11, 2013-

Reduced rate of 5% on second hand and worn

clothes has now been placed in 8th Schedule.

SRO 572/2014 dated June 26, 2014-

Reduced rate on import and supply of agricultural

tractors falling under PCT heading 8701.9020 has

now been placed in 8th Schedule


Exemption granted to import and supply of raw

material for the basic manufacture of

pharmaceutical active ingredients and for

manufacture of pharmaceutical products, falling in

respective headings of the first Schedule to the

Customs Act, 1969 (IV of 1969) has beenwithdrawn.

S.R.O 491(I)/2015 –

Suppression of SRO 532(I)/2008 dt June 11, 2008

The minimum value of assessment of locally

produced coal has been enhanced from Rs. 1,000

per metric ton to Rs. 2,500 per metric ton

S.R.O 493(I)/2015 –

Rescinds SRO 863(I)/2008 dt. 20.08.2008

Production and supply data of certain

manufacturers is now made part of Sales Tax

Rules, 2006, hence this SRO rescinded.

S.R.O494(I)/2015 –

Amendments in the Sales Tax Rules, 2006.

In the Sales Tax Rules, 2006 following significant

changes have been made:

In order to apply the barcodes, band roles, etc.

relevant definitions has been provided.

Biometric verification of the owner, partner or

member has been made compulsory for sales tax

registration.

Concept of temporary registration for two months

to the new manufacturer who intends to import

plant & machinery and raw material introduced to

avail the rates applicable to manufacturers.

However, during this period, neither any invoice

can be issued nor can refund be claimed. A return

shall also be filed in specified format during

temporary registration period.

If a person cannot electronically file application for

registration, he may submit the manual application

to the concerned Commissioner who will ensureits entry in online system.

If a registered person fails to file sales tax return

for consecutive six months, he can be

deregistered subject to other conditions. If a

registered person intends to file return after failure

of six months, he will be required prior approval of

the concerned Commissioner.

Monthly production and supply data as required in

the SRO 863/2007 has now been made part of

Rules including ten additional categories ofmanufacturers

Import and supply of exempt goods to

organizations or agencies under grants-in-aid

shall now be made subject to exemption certificate

issued by Economic Affairs Division.

Registered persons operating restaurants, cafes,

coffee shops, eateries, snack bars and hotels

shall ensure access to the FBR with respect to the

electronic invoice system and other record

Finance Act 201521


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maintained by such persons. The intention of the

Federal Government to bring this sector under

Federal Sales Tax as against the Provincial Sales

Tax Authorities claim to tax this sector as servicesector.

Manufacturers and importers of aerated waters,

cigarettes, fertilizers, cements and sugar have

now been made subject of electronic monitoring

and tracking through barcodes, band roles, tax

stamps etc. The electronic system shall be

installed on the production lines or at port or

bonded ware house and persons of thesementioned sector shall not route any production

otherwise than electronic system after the date to

be specified by the FBR in this regard.


Finance Act 201522


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The Power of the Federal Government for

allowing exemptions and concession under the

Federal Excise Act, 2005 have been made

subjected to the approval of Economic

Coordination Committee of Cabinet, and that too,

on the basis of specific purposes and

circumstances as defined in the law.

Concept of Whistle blower. special audit panel

and power of Federal Government to enter into

bilateral agreements in line with Income and Sales

tax laws have also been introduced under Federal

Excise Laws.

First Schedule

The rate of Federal Excise Duty (FED) on Aerated

Waters has been increased to 10.5% from 9%.

The FED on locally produced cigarettes has been

increased to Rs. 3,030 per thousand cigarettes

from Rs. 2,632 and to Rs.1,320 per thousand

cigarettes from Rs.1,085 for the on pack printed

retail price exceeding three thousand three

hundred and fifty per thousand cigarettes and for

lesser on pack printed value respectively.

FED of Rs. 0.75 per filter rod for cigarettes has

been introduced.

FED on air travel for socio-economic routes has

been withdrawn. Socio-economic routes mean the

shortest part of journeys starting from or ending at

an airport located in Makran coastal region, FATA,

Azad Jammu and Kashmir, Gilgit-Baltistan or

Chitral.

Third Schedule

White Cement and Motor Vehicles of cylinder

capacity exceeding 850cc have been exempted

from the levy of FED.

Advertisement in newspapers and periodicals, air

travel services for Hajj passengers, Diplomats &

Supernumerary crew and services rendered by

banking companies and non-banking financial

companies in respect of Hajj & Umrah, cheque

book, insurance, Musharika & Modaraba financing

and utility bill collection have also been exempted

from the levy of FED.

S.R.O 489(I)/2015 –

Amends SRO 550(I)/2006 dt. 05.06.2006

FED on air travel service and carriage of goods by

air service is excluded from sales tax mode

hence; input tax adjustment against these

services will not be available.

S.R.O 490(I)/2015 –

Rescission of certain FED SROs which have

been transposed to the Third Schedule of Federal

Excise Act, 2005

SRO 778/2006 dated August 01, 2006

SRO 474/2009 dated June 13, 2009

SRO 802/2009 dated September 14, 2009

SRO 81/2010 dated February 13, 2010

Exemption available to following has been made

part of Third Schedule, hence the above SROs

rescinded.

Hajj passengers, Diplomats,

Supernumerary crew

Motor cars exceeding cylinder capacity of

850

Certain services provided by the banking

and non banking companies viz.a.viz Haj

and Umrah, cheque books, insurance,

Musharika, Modaraba and utility bill

collection

White cement

Advertisement in newspapers and

periodicals

FEDERAL EXCISE DUTY


POWER OF THE FEDERAL GOVERNMENT SECTION 16

Finance Act 201523


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The ambit of taxable services has been expanded

to included forty two categories of services against

previous four categories in line with services

taxable under other Provincial Sales Tax on

Services Laws. General rate of sales tax at 16%

except for few services has been specified as

below.

Existing taxable services has been amended as

under:

1. Services provided or rendered by hotels,

motels, guest houses, marriage halls and

lawns (by whatever name called)

including “pandal” and “shamiana”

services, clubs including race clubs, and

caterers.

2. Advertisement on television and radio,

excluding advertisements–

Sponsored by an agency of the

Federal or Provincial Government forhealth education;

Sponsored by the Population

Welfare Division relating to educational

promotion campaign;(c) financed out

of funds provided by a Government

under grant-in-aid agreement; And

Conveying public service messages, if

telecast on television by the World

Wide Fund for Nature (WWF) or

United Nations Children's Fund

(UNICEF)

3. Services provided by persons authorized

to transact business on behalf of others–

Stevedore;

Customs agents; and

Ship chandlers.

4. Courier services and cargo services

by road provided by courier companies.

Following services have been excluded from

general rate of sales tax:

Call centres 18.5%

Freight forwarding agents,

packers and movers 16% or

400/bill oflading

Services provided by property

developers and constructors 100/sq

yard and 50/sq

feet respectively

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


Finance Act 201524


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PUNJAB SALES TAX ON SERVICES ACT,

2012

Addition in list of taxable services Second

Schedule

The following services have been added in list

of taxable services (i.e. sales tax will be charged

on them):

a) Services in relation to transport of goods

(including domestic transportation through

air) and inter-city carriage of goods by rail

or road;

b) Visa processing services including

consultancy services for foreign education

or migration etc;

c) Services in relation to supply of tangible

goods including machinery, equipment

and appliances for use, without

transferring right of possession and

effective control of such machinery,

equipment and appliances;

d) Public relation services includingcommunication services, media

management and research and services

provided by opinion poll agencies;

e) Services provided by practicing chartered

or cost accountants, auditors, actuaries,

tax consultants, practicing company

secretaries, receivers, liquidators,

auctioneers and corporate law consultants

irrespective of their legal status;

f) Chartered flight services within ororiginating from the Punjab;

g) Debt collection and similar other recovery

services;

h) Supply chain management or distribution

(including delivery) services;

i) Services provided by photography studios

and event or occasion photographers /

filmmakers; and

j) Sponsorship services.

k) Services provided for Air Travel in respect

of passengers embarking from Punjab:

Domestic Air Travel: Long Routes (journey

exceeding 500 kms) @ Rs 2,500 per

ticket and short routes @ Rs 1,500 per

ticket;

International Air Travel (excluding Hajj or

Umrah passengers, diplomats and

supernumerary crew): Economy &

Economy plus @ Rs 5,000 per ticket and

Club, Business and First class @ Rs

10,000 per ticket.

Broadening of scope of taxable services

Second Schedule

The scope of following services already taxable

has been broadened without any change of

rate:

a) Services of caterers will include floral or

other decoration, furnishing of space

involving rental of equipment and

accessories or without it;b) Courier services will include express

cargo or logistic services;

c) Franchise services will cover licensing

arrangements;

d) Services of builders are clubbed with

those of property developers and

promoters;

e) Services provided for personal care by

beauty parlors, salons, clinics, hair

transplants etc excluding parlors or clinics

where air-conditioners are not installed or

available;

f) All IT-enabled or IT-based services;

g) Services provided by other consultants

will cover evaluation services,

certification, verification and equivalence

services, marketing or sales services,

surveyors services, training or coaching

services (other than general education

AMENDMENTS BY PUNJAB FINANCE ACT 2015


Finance Act 201525


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services);

h) Services provided by shares registrar will

include share transfer or depository

services, investor account services,

trustee or custodial services;

i) Services provided by fashion designers

will include use of logo, brand name,

house mark etc in the manufacturing or

trading of products;

j) Services provided by landscapers and

landscape designers are included with

those architects, town planners and

interior decorators; and

k) Rent-a-car services will include services

of rental of any vehicle for transportation

of persons.

All the new services and/ or services with

broadened scope will be chargeable to sales tax

at 16%, except in case of air travel in respect

whereof flat rates as mentioned above are

applicable.

Increase in sales tax rate

Second ScheduleSales tax on freight forwarding agents increased

to Rs. 1,000 per bill of lading from Rs. 400 per

bill of lading.

Reduced rate scheme

In the Budget Speech, Punjab Finance Minister

proposed to introduce reduced rate scheme

whereby flat rates ranging from 2% to 10%

would be applicable on certain service sectors.

However, no such amendment has been made

in Finance Act, 2015.

Withdrawal of exemptions

Second Schedule

a) Ambit of exemption available to

advertisement services on television and

radio financed out of funds provided under

grant-in-aid agreements has been

restricted to foreign agreements only.

b) Exemption in respect of the following

construction services has been

withdrawn:

Construction of industrial and

commercial projects of value not

exceeding Rs 50 million per annum;

Construction of Industrial zones; and

Construction services to organizations

exempt from income tax;

c) Sales tax exemption on construction

services to residential construction

projects with covered area not exceeding

10,000 sq. feet in case of houses and

20,000 sq. feet in case of apartments will

be restricted to one such unit.

d) Exemption available to beauty parlors:

Having corporate status or trademark

or annual turnover exceeding Rs. 3.6

million; or

Which are part of chain business or

franchise arrangement have been

withdrawn.

Grant of exemptions

Second Schedule

a) With respect to sales tax on

transportation, goods do not include

water.

b) Services provided by an individual owner

of a vehicle for carriage of goods are

exempt.

c) Services provided by non-corporate

photographers operating from small road-

side shops as declared by PRA areexempt.

Retention of recordsSection 32(1)

Time period for retention of records has been

increased from five to six years, thereby making

it harmonized with the requirements of FBR for

records' retention.


Finance Act 201526


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Forensic AuditSection 34

Punjab Revenue Authority (PRA) has been

empowered to appoint Chartered Accountants,

Cost and Management Accountants or Forensic

Auditors for conduct of special audit or forensic

audit or both of records of any registered person

with or without collaboration of FBR or any

other provincial sales tax authority. Basically,

concept of forensic audit has been introduced

as power to conduct special audit was already

available with PRA.

Penalties

Section 48Minimum penalties for non-compliance with

compulsory registration requirement have been

increased:

Penalties for non-production of records as

required by PRA have been increased as per

below:

Prize SchemesSection 88

In order to promote tax culture and encourage the

general public to make purchases only from

registered persons, PRA has been empowered to

introduce prize schemes with the approval of the

Punjab Government.

Reward to WhistleblowersSection 89

The concept of “whistle blowers” has been

introduced in same line as introduced in federal

fiscal laws with same purpose. However, such

person shall be liable to penalty of Rs. 100,000 in

case he fails to prove that his information is notfalse or misleading.

STAMP ACT, 1899 (PUNJAB)

Calculation of value of leasehold property as

per Valuation Table for stamp dutySection 27-A

Previously, Stamp Duty on the instruments of

transfer of lease hold rights is charged on the

value of property as declared by the parties

without considering the Valuation Table as notified

by the District Collector under Section 27-A of theStamp Act, 1899. In order to regularize the

calculation of value of property as per Valuation

Table, scope of Section 27-A of said Act has been

increased to cover Article 63 of Schedule-I to said

Act which pertains to transfer of lease hold rights.

CAPITAL VALUE TAX (PUNJAB FINANCE

ACT, 2010)

Withdrawal of exemption on urban property

The Capital Value Tax on property is a provincial

subject in the aftermath of the 18th Constitutional

Amendment. It is payable by a person who

acquires an immovable property by purchase, gift,

exchange or power of attorney, surrender or

relinquishment of right by the owner or a right to

use thereof for twenty years or more or renewal of

lease. Previously, immovable properties other


Type ofpersons

Penalty Rate(Rs.) with

effect from 1-7-2015

PreviousStatus (Rs.)

Company 1,00,000 10,000

Other thancompany

50,000 10,000

1-7-2015

Finance Act 201527


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than commercial or industrial property, plaza or

multi-storey building situated in urban area and

valuing less than one million rupees were exempt

from CVT. The said exemption has beenwithdrawn to avoid its misuse.

EDUCATION CESS ON CLUBS (PUNJAB

FINANCE ACT, 2011)

Withdrawal of Education Cess

Education Cess on Clubs was levied through

Punjab Finance Act, 2011, while services of clubs

were subjected to sales tax at 16% since July,

2012. In order to avoid dual taxation of clubs, the

Punjab Government has decided to abolish

Education Cess on clubs to prevent hardships tosuch clubs.


Finance Act 201528


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Property Tax

KP government has raised the property Tax on

Commercial buildings on the basis of their annual

letting values. The enhanced rates for different

categories are as follows:

Motor Vehicle Tax

Provincial government has provided for option of

paying vehicle token tax on a lump sum basis for

vehicles not for plying for hire at the time of

registration of vehicles. Moreover, the vehicle

token tax rates have been increased. The

summary of new rates is as follows:

Khyber Pakhtunkhwa Revenue Authority

Following amendments have been made in

the Finance Act, 2013 through which KP

Revenue Authority was legislated:

Special Audit

Section 51

In addition to Chartered Accountant and Cost

& Management firms, any foreign or local

consultant having experience of forensic audit

can be appointed for the special audit of any

registered person.

Authority for Exemptions

Section 94

Through this amendment, provincial

government has provided for power of

exempting any goods through notification.

Amendment in Sales Tax Schedule I

In order to broaden the scope of provincial

sales tax, the following new services have

been notified in the First Schedule:

9812.2600 Voice over I. P services

9812.2700 Teleconferencing services

9812.2800 3G/4G LTE services

9875.0000 Electric power transmission or

distribution services.

AMENDMENTS BY KHYBER PAKHTUNKHWA FINANCE ACT 2015

Description Rate

Commercial Property

Locality A1 13%

Locality A 10%

Locality B 7%

Locality D 4%

Petrol Pumps & CNG Stations

With Store Rs. 15,000

Without Store Rs. 7,500 p.a

Description Rate(Rs.)

Motorcycle

Once for lifetime 1,000

Vehicles for Haulage

On the basis of haul capacity 500-8,000 p.a

Vehicles for plying

On the basis of Seats (upto 6person)

400-652 p.a

More than 6 120-180 perseat

Other Vehicles

On the basis of enginecapacity

500-5,000 p.a

Tractors

With or without trolly 600 p.a

Finance Act 201529

2 fa 2015 final draft 07072015.pdf

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