riaz ahmad & company · riaz ahmad & company chartered accountants i n d e x finance act...
TRANSCRIPT
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
RIAZ AHMAD & COMPANY Chartered Accountants
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This Memorandum should not be published in any manner without the consent of the firm.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
RIAZ AHMAD & COMPANY Chartered Accountants
EXECUTIVE SUMMARY
FINANCE ACT 2019
- 2 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
EXECUTIVE SUMMARY
FINANCE ACT 2019
- 3 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
EXECUTIVE SUMMARY
FINANCE ACT 2019
- 4 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
EXECUTIVE SUMMARY
FINANCE ACT 2019
- 5 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
EXECUTIVE SUMMARY
FINANCE ACT 2019
- 6 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 7 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 8 -
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 9 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 10 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 11 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 12 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 13 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 14 -
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,
whichever is higher.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 15 -
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,
whichever is higher.
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
whichever is higher.
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 16 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001
FINANCE ACT 2019
- 17 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – THE FIRST SCHEDULE
FINANCE ACT 2019
- 18 -
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
5. Where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,000,000
Rs. 250,000 + 20% of the amount exceeding Rs. 2,400,000
6. Where taxable income exceeds Rs. 3,000,000 but does not exceed Rs. 4,000,000
Rs. 370,000 + 25% of the amount exceeding Rs. 3,000,000
7. Where taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 6,000,000
Rs. 620,000 + 30% of the amount 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
Rates of tax for salaried individuals (where income under the head “salary” exceeds seventy-five percent of taxable income):
Sr. No.
Taxable income Rate of tax
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
3. Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000
Rs. 30,000 + 10% of the amount exceeding Rs. 1,200,000
4. Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000
Rs. 90,000 + 15% of the amount exceeding Rs. 1,800,000
5. Where taxable income exceeds Rs. 2,500,000 but does not exceed Rs. 3,500,000
Rs. 195,000 + 17.5% of the amount exceeding Rs. 2,500,000
6. Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000
Rs. 370,000 + 20% of the amount exceeding Rs. 3,500,000
7. Where taxable income exceeds Rs. 5,000,000 but does not exceed Rs. 8,000,000
Rs. 670,000 + 22.5% of the amount exceeding Rs. 5,000,000
8. Where taxable income exceeds Rs. 8,000,000 but does not exceed Rs. 12,000,000
Rs. 1,345,000 + 25% of the amount exceeding Rs. 8,000,000
9. Where taxable income exceeds Rs. 12,000,000 but does not exceed Rs. 30,000,000
Rs. 2,345,000 + 27.5% of the amount exceeding Rs. 12,000,000
10. Where taxable income exceeds Rs. 30,000,000 but does not exceed Rs. 50,000,000
Rs. 7,295,000 + 30% of the amount exceeding Rs. 30,000,000
11. Where taxable income exceeds Rs. 50,000,000 but does not exceed Rs. 75,000,000
Rs. 13,295,000 + 32.5% of the amount exceeding Rs. 50,000,000
12. Where taxable income exceeds Rs. 75,000,000 Rs. 21,420,000 + 35% of the amount exceeding Rs. 75,000,000
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – THE FIRST SCHEDULE
FINANCE ACT 2019
- 19 -
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
3. Where the gross amount of rent exceeds Rs. 600,000 but
does not exceed Rs. 1,000,000
Rs. 20,000 + 10% of the gross
amount exceeding Rs. 600,000
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – THE FIRST SCHEDULE
FINANCE ACT 2019
- 20 -
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
Rs. 60,000 + 15% of the gross
amount exceeding Rs. 1,000,000
5. Where the gross amount of rent exceeds Rs. 2,000,000
but does not exceed Rs. 4,000,000
Rs. 210,000 + 20% of the gross
amount exceeding Rs. 2,000,000
6. Where the gross amount of rent exceeds Rs. 4,000,000
but does not exceed Rs. 6,000,000
Rs. 610,000 + 25% of the gross
amount exceeding Rs. 4,000,000
7. Where the gross amount of rent exceeds Rs. 6,000,000
but does not exceed Rs. 8,000,000
Rs. 1,110,000 + 30% of the gross
amount exceeding Rs. 6,000,000
8. Where the gross amount of rent exceeds Rs. 8,000,000 Rs. 1,710,000 + 35% of the gross
amount exceeding Rs. 8,000,000
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%
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – THE FIRST SCHEDULE
FINANCE ACT 2019
- 21 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
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.
RIAZ AHMAD & COMPANY Chartered Accountants
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).
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – THE SECOND SCHEDULE
FINANCE ACT 2019
- 24 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
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.
RIAZ AHMAD & COMPANY Chartered Accountants
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – THE SEVENTH AND TENTH SCHEDULES
FINANCE ACT 2019
- 27 -
(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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – THE TENTH SCHEDULE
FINANCE ACT 2019
- 28 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – THE TENTH SCHEDULE
FINANCE ACT 2019
- 29 -
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – THE TENTH SCHEDULE
FINANCE ACT 2019
- 30 -
(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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL
FINANCE ACT 2019
- 31 -
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%
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL
FINANCE ACT 2019
- 32 -
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.
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 5. Where taxable income exceeds Rs. 2,400,000 but does not
exceed Rs. 3,000,000
Rs. 250,000 + 20% of the amount
exceeding Rs. 2,400,000 6. Where taxable income exceeds Rs. 3,000,000 but does not
exceed Rs. 4,000,000
Rs. 370,000 + 25% of the amount
exceeding Rs. 3,000,000 7. Where taxable income exceeds Rs. 4,000,000 but does not
exceed Rs. 6,000,000
Rs. 620,000 + 30% of the amount
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL
FINANCE ACT 2019
- 33 -
Rates of tax for salaried individuals (where income under the head “salary” exceeds seventy-
five percent of taxable income):
Sr. No.
Taxable income Rate of tax
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
3. Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000
Rs. 30,000 + 10% of the amount exceeding Rs. 1,200,000
4. Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000
Rs. 90,000 + 15% of the amount exceeding Rs. 1,800,000
5. Where taxable income exceeds Rs. 2,500,000 but does not
exceed Rs. 3,500,000
Rs. 195,000 + 17.5% of the amount
exceeding Rs. 2,500,000 6. Where taxable income exceeds Rs. 3,500,000 but does not
exceed Rs. 5,000,000
Rs. 370,000 + 20% of the amount
exceeding Rs. 3,500,000 7. Where taxable income exceeds Rs. 5,000,000 but does not
exceed Rs. 8,000,000
Rs. 670,000 + 22.5% of the amount
exceeding Rs. 5,000,000
8. Where taxable income exceeds Rs. 8,000,000 but does not
exceed Rs. 12,000,000
Rs. 1,345,000 + 25% of the amount
exceeding Rs. 8,000,000
9. Where taxable income exceeds Rs. 12,000,000 but does not exceed Rs. 30,000,000
Rs. 2,345,000 + 27.5% of the amount exceeding Rs. 12,000,000
10. Where taxable income exceeds Rs. 30,000,000 but does not exceed Rs. 50,000,000
Rs. 7,295,000 + 30% of the amount exceeding Rs. 30,000,000
11. Where taxable income exceeds Rs. 50,000,000 but does not exceed Rs. 75,000,000
Rs. 13,295,000 + 32.5% of the amount exceeding Rs. 50,000,000
12. Where taxable income exceeds Rs. 75,000,000 Rs. 21,420,000 + 35% of the amount exceeding Rs. 75,000,000
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL
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:
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL
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
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
3. Where the gross amount of rent exceeds Rs. 600,000 but
does not exceed Rs. 1,000,000
Rs. 20,000 + 10% of the gross
amount exceeding Rs. 600,000
4. Where the gross amount of rent exceeds Rs. 1,000,000
but does not exceed Rs. 2,000,000
Rs. 60,000 + 15% of the gross
amount exceeding Rs. 1,000,000
5. Where the gross amount of rent exceeds Rs. 2,000,000
but does not exceed Rs. 4,000,000
Rs. 210,000 + 20% of the gross
amount exceeding Rs. 2,000,000
6. Where the gross amount of rent exceeds Rs. 4,000,000
but does not exceed Rs. 6,000,000
Rs. 610,000 + 25% of the gross
amount exceeding Rs. 4,000,000
7. Where the gross amount of rent exceeds Rs. 6,000,000
but does not exceed Rs. 8,000,000
Rs. 1,110,000 + 30% of the gross
amount exceeding Rs. 6,000,000
8. Where the gross amount of rent exceeds Rs. 8,000,000 Rs. 1,710,000 + 35% of the gross
amount exceeding Rs. 8,000,000
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%
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL
FINANCE ACT 2019
- 36 -
- 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%
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL
FINANCE ACT 2019
- 39 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL
FINANCE ACT 2019
- 40 -
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 41 -
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
import value as increased
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
Collector of customs
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 42 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
import value as increased
by customs
– duty, sales tax and
federal excise duty
6% of
import value as increased
by customs
– duty, sales tax and
federal excise duty
Collector of customs
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%
Collector of customs
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%
Collector of customs
6. Ship breakers on import of ships [Sr.
No. 6 of Table, Part II, 1st Sch.]
4.5% 9%
Collector of customs
7. Industrial undertakings not covered
under S. Nos. 1 to 6 [Sr. No. 7 of Table, Part II, 1st Sch.]
5.5% 11%
Collector of customs
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%
Collector of customs
9. Persons not covered under S. Nos. 1
to 8 [Sr. No. 9 of Table, Part II, 1st Sch.]
6% 12%
Collector of customs
Persons importing mobile phones.
[Proviso, Part II, 1st Sch.]:
Collector of customs
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 43 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
Active Non-active
C&F value of mobile phone (in USD):
1. Up to 30
2.Exceeding 30 & up to 100
3.Exceeding 100 & up to 200
4.Exceeding 200 & up to 350
5.Exceeding 350 & up to 500
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 44 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 45 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 46 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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%
Every person making payment
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 47 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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%
Every person making payment
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%
Every prescribed person making payment
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
Every prescribed person making payment
Minimum (Adjustable for
manufacturing company and listed
company)
Sale of goods not
exceeding Rs. 75,000 in a financial year
Services not
exceeding Rs. 30,000
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%
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 48 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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%
Every person making payment
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%
Every prescribed person
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)].
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 49 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
Active Non-active
- electronic and print media for
advertising services: - in case of companies
- in case of other taxpayers
- other services: - in case of companies
- in case of other taxpayers
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%
Every person making payment
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
Every prescribed person making payment
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-
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 50 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
exceeding Rs. 200,000
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
amount exceeding Rs. 2,000,000
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 51 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
Active Non-active
Rs. 4,000,001 – Rs. 6,000,000
Rs. 610,000 + 25% of the
amount exceeding Rs. 4,000,000
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%
Every person making payment
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%
Every person making payment
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 52 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 53 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
Second Pakistan International Sukuk Company Limited and The Third Pakistan International
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 54 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 55 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 56 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 57 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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%
The person preparing
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 58 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
Second Pakistan International Sukuk Company Limited and The Third Pakistan International
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 59 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 60 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 61 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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%
The person preparing
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
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 62 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
Second Pakistan International Sukuk Company Limited and The Third Pakistan International
Sukuk Company Limited. [Cl. (95) & (96), Part IV, 2nd Sch.]
- Advance tax shall be collected on installments
by any person responsible for collecting
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 63 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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%
Every prescribed person
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.
RIAZ AHMAD & COMPANY Chartered Accountants
INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME
FINANCE ACT 2019 - 64 -
Section Nature of Payment / Transactions
Withholding / Collection
Rate
% / Rupees
Responsibility for
Deduction / Deposit Remarks
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
RIAZ AHMAD & COMPANY Chartered Accountants
SALES TAX
FINANCE ACT 2019
- 65 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
SALES TAX
FINANCE ACT 2019
- 66 -
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
RIAZ AHMAD & COMPANY Chartered Accountants
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.
Proceedings against authority and persons Section 33A
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.
RIAZ AHMAD & COMPANY Chartered Accountants
SALES TAX
FINANCE ACT 2019
- 68 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
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%
RIAZ AHMAD & COMPANY Chartered Accountants
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
RIAZ AHMAD & COMPANY Chartered Accountants
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:
RIAZ AHMAD & COMPANY Chartered Accountants
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
RIAZ AHMAD & COMPANY Chartered Accountants
SALES TAX
FINANCE ACT 2019
- 73 -
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.
RIAZ AHMAD & COMPANY Chartered Accountants
SALES TAX
FINANCE ACT 2019
- 74 -
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. 692(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019)
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).
S.R.O. 693(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019)
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.
S.R.O. 694(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019)
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.
RIAZ AHMAD & COMPANY Chartered Accountants
SALES TAX
FINANCE ACT 2019
- 75 -
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.
S.R.O. 697(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019)
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
S.R.O. 698(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019)
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.
RIAZ AHMAD & COMPANY Chartered Accountants
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.
Proceedings against authority and persons Section 19A
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%]
RIAZ AHMAD & COMPANY Chartered Accountants
FEDERAL EXCISE DUTY
FINANCE ACT 2019
- 77 -
Sr.
No. Description of goods
Heading / sub-
heading No. Rate of duty
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-
heading No. Rate of duty
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.
RIAZ AHMAD & COMPANY Chartered Accountants
FEDERAL EXCISE DUTY
FINANCE ACT 2019
- 78 -
Sr.
No. Description of goods
Heading / sub-
heading No. Rate of duty
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:
RIAZ AHMAD & COMPANY Chartered Accountants
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.”
RIAZ AHMAD & COMPANY Chartered Accountants
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]
RIAZ AHMAD & COMPANY Chartered Accountants
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%.
RIAZ AHMAD & COMPANY Chartered Accountants
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
exceed Rs. 2,400,000
5% of the amount exceeding Rs.
1,200,000
(5) Where the total income exceeds Rs. 2,400,000 but does not
exceed Rs. 4,800,000
Rs. 60,000 plus 10% of the
amount exceeding Rs. 2,400,000
(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)
RIAZ AHMAD & COMPANY Chartered Accountants
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.
RIAZ AHMAD & COMPANY Chartered Accountants
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%
RIAZ AHMAD & COMPANY Chartered Accountants
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
FINANCE ACT 2019 - 86 -
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