S. No. Description ========================================================== Table II-Local supplies ========================================================== 1 Supply of cotton seed exclusively meant for sowing purposes, subject to such conditions as the Board may specify. 2 Supply of locally produced crude vegetable oil obtained from the locally produced seeds other than cotton seed, except cooking oil, without having undergone any process except the process of washing. 4 Raw material and intermediary goods manufactured or produced, and services provided or rendered, by a registered person, consumed in-house for the manufacture of goods subject to sales tax 9 Foodstuff and other eatables prepared in the flight kitchens and supplied for consumption on-board in local flights 15 a) Sprinkler Equipment b) Drip Equipment. c) Spray Pumps and nozzles 16 Raw cotton 22 Single cylinder agriculture diesel engines (compression-ignition internal combustion piston engines) of 3 to 36 HP. 23 Match boxes 33 Whey, excluding that sold in retail packing under a brand name 38 Sausages and similar products of poultry meat or meat offal excluding sold in retail packing under a brand name or trademark ========================================================== ================================================================ S. No. Description ================================================================ Table III - Capital goods and Plant and Machinery ================================================================ 1 Machinery and equipment for initial installation, balancing, modernization, replacement or expansion of desalination plants, coal firing system, gas processing plants and oil and gas field prospecting. 2 Machinery, equipment, apparatus, and medical, surgical, dental and Veterinary furniture, materials, fixtures and fittings imported by hospitals and medical or diagnostic institutes, broadly categorized as:- A. Medical Equipment. B. Cardiology/Cardiac Surgery Equipment C. Disposable Medical Devices D. Other Related Equipment 2A Specified raw materials imported by registered manufacturer of auto disabled syringes. 3 Machinery, equipment, materials, capital goods, specialized vehicles (4x4 non-luxury) i.e., single or double cabin pickups, accessories, spares, chemicals and consumables meant for mine construction phase or extraction phase and construction machinery, equipment and specialized vehicles, excluding passenger vehicles, imported on temporary basis as required for such projects. 4 Coal mining machinery, equipment, spares, including vehicles for site use i.e., single or double cabin pick-ups and dump trucks, imported for Thar Coal Field 5 Machinery, equipment and spares meant for initial installation, balancing, modernization, replacement or expansion of projects for power generation through oil, gas, coal, wind and wave energy including under construction projects, which entered into an implementation agreement with the Government of Pakistan and construction machinery, equipment and specialized vehicles, excluding passenger vehicles, imported on temporary basis as required for the construction of project. 6 Machinery, equipment and spares meant for initial installation, balancing, modernization, replacement or expansion of projects for power generation through gas, coal, hydel, and oil including under construction projects and construction machinery, equipment and specialized vehicles, excluding passenger vehicles, imported on temporary basis as required for the construction of project. 7 Machinery, equipment and spares meant for initial Installation, balancing, modernization, replacement or expansion of projects for power generation through nuclear and renewable energy sources like solar, wind, micro-hydel bio-energy, ocean, waste-to-energy and hydrogen cell and construction machinery, equipment and specialized vehicles, excluding passenger vehicles, imported on temporary basis as required for the construction of project. 8 Machinery and equipment meant for power transmission and grid stations including under construction projects and construction machinery, equipment and specialized vehicles, excluding passenger vehicles, imported on temporary basis as required for the construction of project. 9 Machinery, equipment and other education and research related items imported by technical, training institutes, research institutes, schools, colleges and universities. 11 Machinery and equipment for marble, granite and gemstone extraction and processing industries 13 Effluent treatment plants 14 Items for use with solar power systems and water purification plants operating on solar energy. 14A Specified systems and items for dedicated use with renewable source of energy like solar, wind, geothermal as imported on or before the 30th June, 2023. 15 Items for promotion of renewable energy technologies or for conservation of energy. 15A Parts and Components for manufacturing LED lights. 15B CKD kits for single cylinder agriculture diesel engines (compression-ignition internal combustion piston engines) of 3 to 36 HP. 17 Machinery, equipment, raw materials, components and other capital goods for use in building, fittings, repairing or refitting of ships, boats or floating structures imported by Karachi Shipyard and Engineering Works Limited 21 Import of POS machines ================================================================
Exemption limited to local supplies only
Read the first part here: Memorandum on the (additional) finance bill, 2021
Importation and local supplies of the following goods were exempt from sales tax. It is now proposed to restrict the exemption from this to only local supplies, with certain modifications as below:
================================================== S.No. Description ================================================== 40 Live Animals and live poultry 41 Meat of bovine animals, sheep, goat and uncooked poultry meat excluding those sold in retail packing under a brand name 42 Fish and crustaceans excluding those sold in retail packaging under a brand name 43 Live plants including bulbs, roots and the like 44 Cereals other than rice, wheat, wheat and meslin flour 45 Edible vegetables including roots and tubers, except ware potato and onions, whether fresh, frozen or otherwise preserved (e.g. in cold storage) but excluding those bottled or canned. 46 Edible fruits 47 Sugar cane 48 Eggs including eggs for hatching 49 Compost (non-commercial fertilizer) 50 Locally manufactured laptops, computers, notebooks whether or not incorporating multimedia kit and personal computers 51 Newspaper ==================================================
Modification of the perimeter of existing entrances
It is proposed to replace the following entries in Tables I and II of the Sixth Schedule to the Law:
============================================================================================================ S. No. Existing entry Proposed entry ============================================================================================================ Table I-Import and supply ============================================================================================================ 13 Edible vegetables including roots and Edible vegetables imported from tubers, except ware potato and onions, Afghanistan including roots and whether fresh, frozen or otherwise preserved tubers, except ware potato and onions, (e.g., in cold storage) but excluding those whether fresh, frozen or otherwise bottled or canned preserved (e.g., in cold storage) but excluding those bottled or canned 15 Edible fruits excluding imported fruits Fruit imported from Afghanistan whether fresh, frozen or otherwise excluding apples PCT 0808.1 preserved but excluding those bottled or canned. 19 cereals and products of milling industr Rice, wheat, wheat and meslin flour 32 Newsprint, newspapers, journals, Newsprint and educational textbooks periodicals, books but excluding directories. but excluding brochures, leaflets and directories Table-II-local supply 7 Breads prepared in tandoors and Bread, Nan, Chapatti, Sheer mal bakeries, vermicllies, nans, chapattis, prepared in tandoors excluding sheer mal, bun, rusk. those prepared in bakeries, restaurants, food chains and sweet shops. ============================================================================================================
REDUCED SALES TAX RATES – SCHEDULE 8
The bill proposes to omit the entries below from the Eighth Schedule according to which said goods are now offered to be subject to sales tax at the standard rate of 17%:
============================================================================================================= S.No. Description Existing rate of sales tax ============================================================================================================= 4 Oilseeds meant for sowing. 5% 6 Plant and machinery not manufactured locally and having no compatible local substitutes 10% 7 Flavoured milk 10% 8 Yogurt 10% 9 Cheese 10% 10 Butter 10% 11 Cream 10% 12 Desi ghee 10% 13 Whey 10% 14 Milk and cream, concentrated or containing added sugar or other sweetening matter 10% 15 Ingredients of poultry feed, cattle feed, except soya bean meal of PCT heading 2304.0000 and oil-cake of cotton-seed falling under PCT heading 2306.1000 10% 16 Incinerators of disposal of waste management, motorized sweepers and snow ploughs 5% 17 Re-importation of foreign origin goods which were temporarily exported out of Pakistan 5% 20 Plant, machinery, and equipment used in production of bio-diesel 5% 26 Tillage and seed bed preparation equipment. 5% 27 Seeding or planting equipment. 5% 28 Irrigation, drainage and agro-chemical application equipment. 5% 29 Harvesting, threshing and storage equipment. 5% 30 Post-harvest handling and processing & miscellaneous machinery. 5% 34 1. Set top boxes for gaining access to internet 5% 2. TV broadcast transmitter 3. Reception apparatus for receiving satellite signals of a kind used with TV (satellite dish receivers) 4. Other set top boxes 5% 45 Following machinery for poultry sector: (i) Machinery for preparing feeding stuff (ii) Incubators, brooders and other poultry equipment (iii) Insulated sandwich panels (iv) Poultry sheds (v) Evaporative air cooling system (vi) Evaporative cooling pad 7% 46 Multimedia projectors 10% 54 lithium iron phosphate battery (LiFe-PO4) 12% 55 Fish babies/seedlings 5% 59 Products of milling industry except wheat and meslin flour 10% 61 Silver, in unworked condition 1% 62 Gold, in unworked condition 1% 63 Articles of jewellery, or parts thereof, of precious 1.5% of value of metal or of metal clad with precious metal. gold, plus 2% of value of diamond, used therein, plus 3% of making charges 64 Prepared Food, foodstuff and sweetmeats supplied by restaurants, bakeries, caterers and sweetmeat shops 7.5% 66A Supplies excluding those specified in S. No. 66, as made from retail outlets integrated with Board's Computerized System for real time reporting of sales 16% 66B Import of remeltable scrap 14% 68 Frozen prepared or preserved sausages and similar products of poultry meat or meat offal 8% 69 Meat and similar products of prepared frozen or preserved meat or meat offal of all types including poultry, meat and fish. 8% 75 Import of electric vehicle in CBU conditions 5% 76 Business to business transactions specified by the Board through a notification in official Gazette subject to such conditions and restrictions as specified therein. 16.9% =============================================================================================================
It is proposed to increase the reduced rate of sales tax applicable to the following products:
===================================================================================================================== S.No. Description Existing rate Proposed rate of tax of tax ===================================================================================================================== 66 Supplies as made from retail outlets 10% 12% as are integrated with Board's computerized system for real-time reporting of sales (subject to prescribed conditions) 73 Import and local supply of Hybrid Electric Vehicles: (a) Upto 1800 cc 8.5% 12.5% (b) From 1801 cc to 2500 cc 12.75% 17% =====================================================================================================================
â¢ Automobiles currently manufactured or assembled locally with a cylinder capacity of up to 1000 cm3 are subject to a reduced rate of 12.5%. It has been proposed that the said benefit of the reduced rate be limited only to cars with a cylinder capacity of up to 850 cc.
â¢ Currently, the local supply and importation of personal computers, laptops and notebooks are exempt from sales tax under Schedule Six of the Act. The bill proposed to remove this exemption, however, the supply of locally manufactured personal computers, laptops and notebooks would continue to benefit from the said exemption. On the other hand, it has been proposed that the importation of personal computers, laptops and notebooks be subject to a reduced rate of 5% by means of the new entry below in the eighth annex:
=================================================================================================================== S. No. Description Heading Nos. Rate of tax Condition =================================================================================================================== 77 Personal computers and laptop 8471.3020 and 5% If imported computers, notebooks whether 8471.3010 in CBU or not incorporating multimedia kit condition ===================================================================================================================
â¢ Table 2 of the eighth annex to the law specifies the installations, machinery, equipment and apparatus, including capital goods, which are subject to reduced tax rates subject to compliance with prescribed conditions. . The bill proposed to omit Table 2 of the Eighth Schedule, and therefore the goods specified below are proposed to be subject to the standard tax rate of 17%.
============================================================================================================= S. No. Description Rate of tax ============================================================================================================= 1 Machinery and equipment for development of grain handling and storage facilities including silos 10% 2 Cool chain machinery and equipment. 5% 4 1. Machinery, equipment, materials, capital 5% goods, specialized vehicles (4x4 non luxury) i.e. single or double cabin pickups, accessories, spares, chemicals and consumables meant for mineral exploration phase. 2. Construction machinery, equipment and specialized vehicles, excluding passenger vehicles, imported on temporary basis as required for the exploration phase. 5% 5 Complete plants for relocated industries. 10% 6 Machinery, equipment and other capital goods 10% meant for initial installation, balancing, modernization, replacement or expansion of oil refining (mineral oil, hydro-cracking and other value added petroleum products), petrochemical and petrochemical downstream products including fibers and heavy chemical industry, cryogenic facility for ethylene storage and handling. 8 1. Milk chillers 5% 2. Tubular heat exchanger (for pasteurization). 3. Milk processing plant, milk spray drying plant, Milk UHT plant. 4. Milk filters 5. Any other machinery and equipment for manufacturing of dairy products 9 Capital goods otherwise not exempted, for Transmission Line Pr 5% =============================================================================================================
CELLULAR MOBILE PHONES – NINTH SCHEDULE
The bill seeks to amend the sales tax on the importation of cellular mobile phones whereby, instead of the fixed tax amounts for each category, a standard rate of 17% sales tax is proposed as shown below. below.
========================================================================================================================== Sales Tax on CBUs at the time of ========================================================================================================================== import or registration (IMEI number by CMOs) Rate of tax ========================================================================================================================== Description/specification of goods Existing rate Proposed rate ========================================================================================================================== 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: E. Exceeding US$ 200 but not exceeding US$ 350 Rs 1,740 F. Exceeding US$ 350 but not exceeding US$ 500 Rs 5,400 17% ad valorem G. Exceeding US$ 500 Rs 9,270 ==========================================================================================================================
The bill proposes to increase the rate of DEF applicable on vehicles imported or manufactured / assembled locally, as indicated below:
================================================================================================================================= S.No. Description of Goods Tarif Rate of Federal Heading Excise Duty ================================================================================================================================= Existing Proposed ================================================================================================================================= 55 Imported motor cars, SUVs and other 87.03 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 2.5% 2.5% (b) of cylinder capacity from 1001cc to 1799cc 5% 10% (c) of cylinder capacity 1800cc to 3000cc 25% 30% (d) of cylinder capacity exceeding 3001cc 30% 40% 55B Locally manufactured or assembled 87.03 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 0% 0% (b) of cylinder capacity from 1001cc to 2000cc 2.5% 5% (c) of cylinder capacity 2001cc and above 5% 10% 55C Imported double cabin (4x4)pick-up 8704.2190 vehicles 8704.3190 25% 30% 55D Locally manufactured double cabin 8704.2190 7.5% 10% (4x4) pickup vehicles except the 8704.3190 vehicles booked on or before the 30th June, 2020 subject to the restriction or conditions specified by the Board. =================================================================================================================================
CHECKING THE GOODS DECLARATION BY CUSTOMS
Article 80 provides for the reassessment of goods for the duties, taxes and other charges levied on them (in addition to any other action) if, during the verification of the declaration of goods, it turns out that any declaration in this statement or document or any information so provided is not correct.
An amendment has been made to the Third Amendment Order of 2021 providing for a specific period of three years (from the release of the goods) for the reassessment of the goods in such circumstances. The bill proposed to overturn the said amendment.
PROVISIONAL DETERMINATION OF LIABILITY
For the provisional determination of liability in certain circumstances, the importer is notably required to provide a bank guarantee for the additional amount of duty determined.
The Tax Laws (Third Amendment) Order 2021 authorized the acceptance of a corporate guarantee, instead of a bank guarantee or payment order, for the purpose of clearing goods on the basis of a provisional assessment of duties, taxes and other charges.
It is now proposed to withdraw the acceptance of the corporate guarantee to avoid complications in securing government revenue.
AUTHORITY TO DETERMINE CUSTOMS VALUE
The finance law for 2021 extended the powers of valuation of goods to the customs collector, in addition to the director of valuation.
It is now proposed to withdraw the power granted to the customs collector in order to standardize the process of determining the value of goods.
RIGHT OF APPEAL AGAINST THE ORDER OF THE DIRECTOR GENERAL ASSESSMENT
The finance law for 2021 has empowered the director general of valuation to cancel or determine the value of any goods imported or exported. The appeal against such an order could have been brought before the Appeals Tribunal.
Through the Tax Laws (Third Amendment) Order 2021, the Valuation Order was made appealable to member Customs (policy), which could be appealed against to the High Court. . The bill proposes to cancel the said amendment (introduced in the ordinance on the third amendment); consequently, an appeal against a review order (issued by the director general of evaluation) would be contestable before the special chamber of the appeal tribunal.
ISLAMABAD CAPITAL TERRITORY – SALES TAX ON SERVICES
SCOPE OF THE TAX
The sales tax on services rendered or provided in the provinces is regulated by provincial laws, while the sales tax on services in the Capital Territory of Islamabad (TIC) is regulated by the Ordinance of 2001 on the territory of the capital of Islamabad (sales tax on services).
At present, the ordinance lists 59 taxable services in its tax schedule at the standard rate of 16%, with the exception of services provided by real estate developers and developers (taxed at Rs 100 per square meter for the land development and Rs 50 per square foot for construction construction) and freight forwarders etc. (taxed at 16% or Rs 400 per bill of lading, whichever is greater).
Through SRO 495 (I) / 2016, 12 (out of 59) services have been notified that are subject to taxes at preferential rates subject to the conditions and restrictions provided therein.
Through the (additional) finance bill, 2021; the list of these 12 services has been transposed into the Ordinance, without modification of the tax rates / consequences. To this end, the existing schedule has been divided into Tables 1 and 2, according to which Table 1 includes all existing taxable services while the services subject to a reduced rate are now listed in Table 2.
The list of 12 services subject to the reduced rate of sales tax, as listed in Table 2 is given below
================================================================================================================================= S.No. Description PCT Heading Rate of Tax ================================================================================================================================= 1 Construction services, excluding: 9814.2000 0% subject to (i) Construction projects (industrial and and 9824.0000 the condition commercial) of the value (excluding actual that no input and documented cost of land) not exceeding tax adjustment Rs 50 million per annum. or refund (ii) The cases where sales tax is otherwise paid shall be as property developers or promoters. admissible (iii) Government civil works including cantonment boards. (iv) Construction of industrial zones, consular building and other organizations exempt from income tax. (v) Residential construction projects where the covered area does not exceed 10,000 square feet for houses and 20,000 square feet for apartments. 2 Services provided for personal care by beauty 9810.0000, 5% subject to parlours, clinics and slimming clinics, body 9821.4000 the condition massage centres, pedicure centres, including and 9821.5000 that no input cosmetic and plastic surgery by such parlours/ tax adjustment clinics, but excluding cases where- or refund shall (i) annual turnover does not exceed be admissible Rs 3.6 million; or (ii) the facility of air-conditioning is not installed or available in the premises 3 Services provided by freight forwarding 9805.3000 5% or Rs 1,000 agents, and packers and movers and 9819.1400 per bill of lading, whichever is higher subject to the condition that no input tax adjustment or refund shall be admissible 4 Services provided by tour operators and travel 9803.9000, 5% subject to agents including all their allied services or 9805.5000 the condition facilities (other than Hajj and Umrah) and 9805.5100 that no input tax adjustment or refund shall be admissible 5 Services provided by specialized workshops or 98.20 5% subject to undertakings (auto workshops; workshops for the condition industrial machinery, construction and that no input earthmoving machinery or other special tax adjustment purpose machinery etc; workshops for electric or refund shall or electronic equipment or appliances etc. be admissible Including computer hardware; car washing or similar service stations and other workshops) 6 Services provided by health clubs, gyms, 9821.1000, 5% subject to physical fitness centres, indoor sports and 9821.2000 the condition games centres and body or sauna massage centres and 9821.4000 that no input tax adjustment or refund shall be admissible 7 Services provided by laundries and dry cleaners 9811.0000 5% subject to the condition that no input tax adjustment or refund shall be admissible 8 Services provided by property Respective 0% subject to dealers and realtors headings the condition that no input tax adjustment or refund shall be admissible 9 Services provided by car/automobile dealers Respective 5% subject to headings the condition that no input tax adjustment or refund shall be admissible 10 Services provided or rendered by marriage Respective 5% subject to halls and lawns, by whatever name called, headings the condition including "pandal" and "shamiana" services that no input and caterers tax adjustment or refund shall be admissible 11 IT services and IT-enabled services. Respective 5% Explanation.-For the purpose of this entry": headings (a) "IT services" include software development, software maintenance, system integration, web design, web development, web hosting and network design; and (b) "IT enabled services" include inbound or outbound call centres, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs and insurance claims processing 12 Services provided by property developers and 9807.0000 and 0% subject to promoters (including allied services) relating respective the condition to low cost housing schemes sponsored or subheadings that no input approved by Naya Pakistan Housing and of heading 98.14 tax adjustment Development Authority or under Government's or refund shall Ehsaas programme be admissible =================================================================================================================================
It is suggested to introduce a definition of taxable services under the ICT Ordinance. At present, these services are not defined. In addition, the tariff headings and description of these services should also be aligned between provinces and ICT.
Copyright Business Recorder, 2021