tax laws in pakistan.rtf

7/18/2019 Tax Laws in Pakistan.rtf

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Tax Laws in Pakistan:

Q.1: Discuss precisely history of income Tax Laws in Pakistan?

Ans:

History of ncome Tax Law in Pakistan:

1) Promulgation of Income Tax Act, 1922:

When Pakistan came into being, the Goernment of Pakistan !romulgate" theIncome Tax Act, 1922, as amen"e" u!to the "ate for regulating the taxations#stem in Pakistan$

2) An A!!licabilit# of the Income Tax Act, 1922:

The !roisions of the Act %ere exten"e" to the %hole of Pakistan exce!t thes!ecifie" areas$

&) 'ormation of the Taxation In(uir# ommittee:

*A Taxation In(uir# ommittee*, %as intro"uce" in 19+ %hich %as consist ofofficials an" the re!resentaties of tra"e an" commerce$

-) .ecommen"ations of Taxation In(uir# ommittee:

*Taxation In(uir# ommittee* submitte" a re!ort after keen anal#sis of !reailingtax s#stem an" suggeste" some recommen"ations$ /ome of therecommen"ations %ere accommo"ate" %hich resulte" in the amen"ment ofIncome Tax Act, 1922$

+) Abolishment of /u!er Tax:

0efore 19+9, su!er tax %as im!ose" on the incomes of all the !ersons but inregistere" firm an" com!anies$

) x!ression of .ate /lab as a Percentage of Income:

In 19+9, the rates of each slab %ere ex!resse" as a !ercentage of incomeconsi"ering the recommen"ations of *Taxation In(uir# committee*$

3) hange in 'inancial 4ear:

0efore 195, the financial #ear %as consi"ere" from 1st A!ril to &1st 6arch butin 195, it %as change" from 1st 7ul# to &5th 7une$


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) Intro"uction of Income Tax ommittee:

In 191, '0. intro"uce" an *Income Tax ommittee*$ 6ain !ur!ose ofintro"uction of such committee %as to make recommen"ations for sim!lification

of the Income Tax Act, 1922 an" !roce"ure of taxation$

9) Intro"uction of /elf Assessment /cheme:

0efore 19+, an assessment officer %as assesse" the income an" "etermine"the tax liabilit# of the !erson but in 19+, */elf Assessment /cheme* %asintro"uce"$

15) Promulgation an" nforcement of the Income Tax 8r"inance, 1939:

Till 1939, lot of amen"ments %ere ma"e in the context of the Income Tax Act,

1922$ As a result of these amen"ments, the Act became a com!licate" la% an""ifficulties arose in its %orking$ ee!ing these "ifficulties in ie%, the Goernment!romulgate" a ne% income tax la% namel# *The Income Tax 8r"inance, 1939*through the 'inance 8r"inance on 7une 2, 1939 an" inclu"e" all the basicconce!t of the re!eale" Act, so that the benefit of the %hole case la% built u!oer the last +3 #ears is not ren"ere" useless$

11) 'ormation of ational Tax .eform ommission:

In 19+, the 'e"eral Goernment forme" a ational Tax .eform ommission$ It

%as consist of members of /enate an" ational Assembl#, high goernmentofficials an" reno%ne" in"ustrialist$ 6a;or !ur!ose of such commission %as tosuggest %a# an" means to im!roe the existing structure of tax la%s in Pakistan$

12) Income Tax /ure# 1999atestscheme %as intro"uce" in the #ear 2552$

1-) Promulgation of the Income Tax 8r"inance, 2551:


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After 22 #ears of the !romulgation of the Income Tax 8r"inance, 2551, tomo"erni=e the taxation s#stem, a goernment of Pakistan intro"uce" a ne%income tax la% namel#, *The Income Tax 8r"inance, 2551* %hich %as!romulgate" on /e!tember 1&, 2551$ It %as !ublishe" in the xtraor"inar#Ga=ette of Pakistan at !ages bearing os$ 99 to 1213$

1+) /hort Title of the Income Tax 8r"inance, 2551:

?n"er section 1, the 8r"inance s!ecifies that *The Income Tax 8r"inance, 2551*shall be the short title of the la%$

1) A!!licabilit# of the Income Tax 8r"inance, 2551:

?n"er section 1, the 8r"inance s!ecifies that the Income Tax 8r"inance, 2551shall exten" to the %hole of Pakistan$

13) @ate of the nforcement of the Income Tax 8r"inance 2551:

/ection 1 of the 8r"inance, em!o%ers the 'e"eral Goernment to notif# the"ate from %hich the Income Tax 8r"inance, 2551 shall came into force$ The'e"eral Goernment, i"e its notification o$ /$.$8$ &1 1)B 2552, "ate" 1+th7une, 2552, announce" that the Income Tax 8r"inance, 2551 shall came intoforce on the first "a# of 7ul#, 2552$

1) /tatus of the Income Tax 8r"inance, 2551:

Accor"ing to section & *The Income Tax 8r"inance, 2551* oerri"es other la%s

enforceable in Pakistan$ It means, in case of an# contra"iction bet%een the!roisions of the Income Tax 8r"inance, 2551 an" an# other la% of the countr#,the !roisions of the Income Tax 8r"inance, 2551 shall !reail$

19) Pur!ose of the Income Tax 8r"inance, 2551:

The !reamble of the 8r"inance s!ecifies the ob;ect of la%$ It s!ecifies that theIncome Tax 8r"inance, 2551, is !romulgate" to consoli"ate an" to amen" la%relating income tax an" !roi"e for matters ancillar# to an" connecte" %ith theincome tax$

Q.!: "xplain the proce#ure re$ar#in$ imposition of Tax an# what Taxcre#its are a%aila&le to a Taxpayer un#er 'T(!))1*?

Answer:Proce#ure re$ar#in$ mposition of Tax:


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Tax cre#its:

+1. ,harita&le #onations.-1) A !erson shall be entitle" to a tax cre"it for a tax #ear in res!ect ofan# amount !ai", or !ro!ert# gien b# the !erson in the tax #ear asa "onation to a non

2) The amount of a !ersonCs tax cre"it allo%e" un"er sub


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A is the amount of tax assesse" to the !erson for the tax #earbefore allo%ance of an# tax cre"it un"er this PartE/ is the !ersonCs taxable income for the tax #earE an", is the lesser of Da) the total cost of ac(uiring the shares referre" to in

sub


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the !erson attains the age of sixt# #earsEc) that the annuit# is ca!able, in %hole or !art, of surren"er,commutation, or assignmentE or") for !a#ment of the annuit# outsi"e Pakistan$+3. Profit on #e&t.-

39F1) A !erson shall be entitle" to a tax cre"it for a tax #ear in res!ect ofan# !rofit or share in rent an" share in a!!reciation of alue ofhouse !ai" b# the !erson in the #ear on a loan b# a sche"ule"bank un"er a house finance scheme a!!roe" b# the /tate 0ank ofPakistan or a"ance" b# Goernment, the local authorit# or Kouse0uil"ing 'inance or!oration %here the !erson utili=es the loan forthe construction of a ne% house or the ac(uisition of a house$2) The amount of a !ersonCs tax cre"it allo%e" un"er sub


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&) /ub;ect to sub


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A s#stem of license" manufacturers L %holesalers %as institute" %hereb# the#%ere allo%e" to !urchase goo"s free of sales tax from each other an" !a# tax onsales to unlicense" tra"ers$ Im!orts %ere chargeable to /ales Tax but thelicense" manufacturers L %holesalers %ere allo%e" to im!ort goo"s %ithout the!a#ment of /ales Tax$ >ater on /ales Tax became chargeable on locall#

!ro"uce" L im!orte" goo"s at the time of their sales L im!ort, res!ectiel#$ Thesales tax, %as collecte" un"er the 'inance 8r"inance, 19+, on goo"s %hich%ere chargeable to entral xcise @ut#, as if it %ere a "ut# of entral xcise$ In

A!ril 191, b# irtue of an amen"ment in the /ales Tax act, 19+1, the collectionof /ales Tax on non


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'irst /che"ule to the ustoms Act, 199 IM of199)Ei) egetable ghee an" cooking oilE an"ii) fertili=ersE-) to a !erson enrolle" for the !ur!ose of turnoer tax at the rate of t%o !er cent$

2) ot%ithstan"ing the !roisions of sub


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Lia&ility to 7ales Tax:

'ollo%ing sectors are re(uire" to get registration for sales tax an" charge salestax on their su!!liesB serices:

6anufacturing

Im!ort

/erices

@istribution, Wholesale L .etail stage$

Preiousl# it %as being charge" at the manufacturing L im!ort stage, an" itssco!e has been exten"e" no% to remaining sectors$

/ales Tax is chargeable on all locall# !ro"uce" an" im!orte" goo"s exce!tcom!uter soft%are, !oultr# fee"s, me"icines an" un!rocesse" agricultural!ro"uce of Pakistan an" other goo"s s!ecifie" in /ixth /che"ule to The /alesTax Act, 1995$

e$istration

er# !erson in sectors mentione" aboe, %ho makes a taxable su!!l# inPakistan is re(uire" to be registere" un"er the /ales Tax Act$ Ko%eer,manufacturers haing taxable turnoer belo% fie million ru!ees an" also utilit#bill belo% .s$ /een lac "uring the last t%ele months are exem!te" fromregistration an" !a#ment of sales tax$ /imilar exem!tion is also aailable toretailers haing total turnoer belo% .s$ fie million in the last t%ele months$

The rate for sales tax is 1N of alue of su!!lies$ Ko%eer, there are some items%hich are chargeable to sales tax at 1$+N or 21N of alue of su!!lies see/.8 --I)B2553 as amen"e" b# /.8 +&3I)B255 "ate" 11th 7une 255)

The .egistration 'orms) are submitte" to the entral .egistration 8ffice, '0.,or /ales Tax ollectoratesB .T8s for the allotment of a .egistration umber b#the !ersons liable to be registere" un"er the /ales Tax Act$ The tax!a#er is thenissue" a ertificate of .egistration$

A#ministration of 7ale Tax Act 199):

7ection0). Appointment of officer.-

A#ministration consists of followin$ officers:'or the !ur!oses of this Act, the boar" ma#, b# notification in the officialGa=ette, a!!oint in relation to an#, area, an# case or class of cases s!ecifie" inthe notification, an# !erson to beahore an" Islamaba"$

'urthermore, in other big cities, 6e"ium Tax!a#er ?nits hae also beenestablishe"$ ?ltimatel#, it is !lanne" that all 6e"ium Tax!a#ers ?nits shall beconerte" into .egional Tax 8ffices .T8)$ 'ourteen .egional Tax 8ffices shall

be res!onsible for collection of all "omestic taxes$ 'or exam!le: Income tax,sales tax an" excise etc$

?n"er Tax A"ministration .eforms Programme t%ent# three tax!a#ers facilitationcenters hae been o!ene" %hereas 29 more such centres are !lanne" to bestarte"$To im!lement such Tax A"ministration .eforms Programme, the Goernment hastransforme" the entral 0oar" of .eenue 0.) into the 'e"eral 0oar" of.eenue Act, 2553$ Almost, all !o%ers an" functions of the 0. hae beeneste" to the '0.$ The '0. shall consist of at least seen members$ Thesemembers shall be a!!ointe" b# the '0.$ The hea" of the '0. is calle"hairman %ho is a!!ointe" b# the 'e"eral Goernment$

6a;or ob;ecties of such tax a"ministration reforms !rogramme are thefollo%ings:

1) To !roi"e (ualit# serice to each em!lo#ee$

2) To increase !ro"uctiit# b# !roi"ing (ualit# %ork enironment an" a"e(uate


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com!ensation to all em!lo#ees$

&) To im!roe oluntar# com!liance b# tax!a#ers through efficient an" organi=e"management$

-) To bring cultural, o!erational an" structural changes in the taxation structure ofPakistan$

"nforcement of 7ale Tax Act 199):

The stages of enforcement are:

harging B Im!osition of Tax

Assessment

ollection B .ecoer#

,har$in$ mposition of Tax:

Lia&ility to 7ales Tax:

'ollo%ing sectors are re(uire" to get registration for sales tax an" charge salestax on their su!!liesB serices:

6anufacturing

Im!ort

/erices

@istribution, Wholesale L .etail stage$

Preiousl# it %as being charge" at the manufacturing L im!ort stage, an" itssco!e has been exten"e" no% to remaining sectors$

/ales Tax is chargeable on all locall# !ro"uce" an" im!orte" goo"s exce!tcom!uter soft%are, !oultr# fee"s, me"icines an" un!rocesse" agricultural!ro"uce of Pakistan an" other goo"s s!ecifie" in /ixth /che"ule to The /alesTax Act, 1995$

,HA" (; TA


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course or furtherance of an# taxable actiit# carrie" on b# him, !roi"e" that totalturnoer of that manufacturer or !ro"ucer an" that retailer "oes not excee" t%oan" a half million ru!ees an" fie million ru!ees, res!ectiel#, in an# !erio""uring the last t%ele months:

Proi"e" that the !roisions of this section shall not a!!l# to :

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