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1 Finance Act 2015

PREFACE

Finance Act 2015

This document gives a brief insight of significant amendments made through

Finance Act 2015 and SROs relating to Income Tax, Sales Tax and Federal Excise

Duty. This document also presents significant changes made in fiscal laws through

respective Provincial Finance Acts. Changes made in Custom laws and the Sindh

Sales Tax on Services Act, 2011 are not included in this document.

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

to the specific wordings in the relevant statute.

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

July 4, 2015

F.R.A.N.T.S. & Co. Chartered Accountants, is a member firm of the PKF International Limited network of legally independent firms and doesnot accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

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3 Finance Act 2015

1.

PREFACE

01

2.

INCOME TAX

05

2.1

Powers of Federal Government

06

2.2

Tax Credit

06

2.3

Others

07

2.4

Income Tax Schedule

11

3.

SALES TAX

15

4.

FEDERAL EXCISE DUTY

23

5.

ICT ORDINANCE, 2001

24

6.

PUNJAB FINANCE ACT, 2015

25

7.

KPK PROVINCIAL FINANCE ACT, 2015

29

F.R.A.N.T.S. & Co,Chartered Accountants, is a member firm of the PKF International Limited network of legally independent firms and doesnot accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

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5 Finance Act 2015

INCOME TAX

Definitions

Section 2

The definition of “Consumer Goods “and“Fast

Moving Consumer Goods” has been

introduced to give clarity regarding eligibility for

reduction in Minimum Tax.

Definitions related to “Real Estate Investment

Trust” and “Pakistan Mercantile Exchange

Limited “have been introduced with regard to

new taxation m|easures.

“Small Company” definition has been amended to

increase the maximum paid up capital and

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

Imposition of Super Tax (Tax Year 2015)

Section 4B

For the Tax Year 2015, Banking Companies and

Other Persons having income equal to or

exceeding Rs. 500 million, will additionally be

subjected to Super Tax for Rehabilitation of

Temporarily Displaced Persons at the rate of 4%

and 3% respectively. Final tax related income

will be calculated through imputable income

basis for the calculation of Super Tax.

Tax on Undistributed Reserves

Section 5A

From Tax Year 2015, Public Companies

(excluding banking companies, public companies

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

Government and a modaraba) derives profit for a

tax year and having undistributed tax reserves

exceeding 100% of its paid up capital after paying

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

exceed 100% of its paid up capital shall be treated

as income and will be subjected to tax at the rate

of 10%. For tax year 2015, Companies have been

given option of distributing cash dividend before

the filing of tax return to avoid tax under this

section. This provision shall not apply to public

companies who distribute 40% of their after tax

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

the end of tax year.

It has also been clarified that reserves include all

revenue reserves but exclude capital reserves,

share premium reserves and reserves required to

be created under any law, rules or regulations

Tax on Shipping of a resident

Person Section 7A

Presumptive tax on the shipping income of

resident persons previously provided in Second

Schedule has now been placed in this section

at following rates:

- Pakistani ships or vessel - US$ 1 per ton

per gross registered tonnage per annum.

- Foreign ships or vessels - US $ 0.15 per

ton per gross registered tonnage foreach charter subject to a maximum of

US$ 1 per annum per ton.

Tax on Profit on Debt

Section 7B

Fixed Tax regime on Profit on Debt has been

revised where maximum tax rate has been

increased to 15% from earlier 10% in case the

profit on debt exceeds Rs. 25 million; in a

progressive manner and will be treated as

separate block of income in cases other than

companies. However, companies shall continueto pay tax at their applicable corporate tax rates.

This Tax shall not apply to profit on debt which is

exempt under ITO, 2001.

Depreciation First Year Allowance

Section 23 A

This section has been amended to include

undertakings engaged in the manufacturing of

cellular mobile phones and qualifying for exemption

under clause 126N of Part I of the Second Schedule

for claiming first year allowance.

Capital Gain Section 37A

Rates on Capital Gains on disposal of securities

have been revised. Such gains are subject to

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

respectively if the security sold having holding

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

period of security is between twelve to twenty four


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6 Finance Act 2015

months, gains are subject to 10% and 12.50% tax twenty four months but for the Tax Year 2016,

for Tax Year 2015 & 2016 respectively. However,

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

for the Tax Year 2015, there will be no tax if the holding period is upto forty eight months.

period of holding of the security sold exceeds

POWERS OF FEDERAL GOVERNMENT

The power of the Federal Government for Coordination Committee of Cabinet, that too, on

allowing exemptions and concession under the the basis of specific purposes and circumstances

Income Tax Ordinance, 2001(ITO) have been as defined in the law. Moreover, the maximum

made subject to the approval for Economic validity of notifications shall be one year.

TAX CREDITS

Investment in Shares & Insurance

Section 62

The maximum limit of Rs.1.000 Million has been

increased to Rs. 1.500 Million for calculation of tax

credit on Investment in shares and insurance

premium.

Profit on Debt

Section 64 A

The Tax Credit available for Profit on HouseLoan/Debt has been replaced by deductibleallowance for house loan/debt and its maximumlimit has been enhanced to Rs. 1.000 Millionfrom Rs. 0.750 Million. Previously tax credit wasallowed on average tax rate formula but nowstraight deduction has been allowed subject torestriction of 50% of taxable income or Rs. 1.000Million which ever is less. Further any excessprofit on debt paid shall not be allowed to carryforward to next years.

Credit for Employment Generation

Section 64 B

A new Tax Credit has been introduced forEmployment Generation. The Manufacturers,setting up new manufacturing units (between July1, 2015 to June 30

th, 2018), will be eligible for a

tax credit of 1% of tax payable (subject to

maximum of 10% of tax payable) for every fiftyregistered employees' with EOBI and ESSI, Thecompany can avail the Tax Credit for a period often years.

Miscellaneous - Tax Credit

Section 65

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

allowed against the final/minimum taxation but

due to section 169(2) and 113 (1) there was

confusion in eligibility of such tax credits. A newsub-section has now been introduced for theresolution of said ambiguity as tax credits undersaid sections are already allowed againstfinal/minimum tax.

Balancing, Modernization & Replacement

Section 65 B

Tax credit for investment in Balancing,Modernization and Replacement of existing plantand machinery which was available with respectto investments made up till 30 June 2015 hasbeen extended for one more year i.e. 30 June,2016.

Tax Credit for Enlistment

Section 65 C

Tax Credit for the Company opting for enlistment

in any registered stock exchanges in Pakistan has

now been increased to 20% from existing 15%.

Tax Credit for Industrial

Undertakings Section 65 E

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


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7 Finance Act 2015

OTHERS

Agreements for the avoidance of double

taxation

Section 107

In order to exchange information with regard to

double taxation and prevention of fiscal evasion,

the Federal Government is authorized to enter into

agreements with Government or Governments of

foreign countries or tax jurisdictions. In addition, the

Federal Government has ensured the confidentiality

of such sort of information under the cover of

“Notwithstanding”clause. Similar authority has also

been introduced in the Sales Tax as well as Federal

Excise laws.

Tax on Builders

Section 113A

Tax on Builders, which was introduced through

Finance Act, 2013 on the income of builders,

has been suspended till June 30, 2018.

Tax on Land Developers

Section 113B

Minimum Tax on Land Developers has been

introduced at the rate of 2% of the value of land

notified by any authority for the purpose of stamp

duty.

Alternative Corporate Tax Section 113C

The Finance Act has clarified the term “Corporate

tax” as higher of tax payable by the company on

income liable to corporate tax rate mentioned in

the 1st Schedule and minimum tax payable under

any of the provisions of the Ordinance.

Furthermore, the applicability of ACT has been

extended to a company setting up an Industrial

undertaking that is subject to reduced corporate

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

of the Second Schedule to the Ordinance.

Revision of Income Tax Return

Section 114

Taxpayer has been authorized to revise the Tax

Return without the prior approval of Commissioner,

if the Revised Tax Return is filed within 60 days of

filing of the Original Tax Return.

Furthermore, in case the order for approval for

revision of return is not made within 60 days, the

approval shall be deemed to have been granted.

Stay in Recovery Proceedings by

Commissioner Appeals

Section 128

The Commissioner (Appeals) may extend the stay

for another thirty days after hearing the

Commissioner against whose order an appeal has

been made, provided that order on appeal shall be

passed within the said period of such thirty days.

Recovery against Order

Section 137

The period for the recovery of tax under an

assessment order or an amended assessment

order or any other order issued by the

Commissioner has been extended to thirty days

from existing fifteen days. However, the period of

sixty days allowed for the provisional assessment

under Section 122C of the ITO has been reduced

to forty five days.

Advance Payment of Tax

Section 147

Tax payer is now required to estimate its Tax

Liability for the Tax Year before the end of itssecond quarter instead of the prevailing

requirement before the end of fourth quarter. In

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

be more than the amount required to be paid as

per provisions of law, the tax payer is required to

pay 50% of such tax liability by due date of

second installment and the balance 50% in two

equal installments payable by the due dates of

third and fourth quarters of the Tax Year.

Imports

Section 148

Power of exempting persons, goods or classes of

goods from tax withholding under section 148

has been withdrawn from the Board. However, all

the active notifications shall remain in place

unless rescinded by the Board.

Moreover, special rate of final tax on local


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8 Finance Act 2015

purchase of cooking oil or vegetable ghee by

manufacturers at the rate of 2 percent has

been placed under a special provision; earlier it

was covered under clause 13C of Part II of

Second Schedule.

Exemption Certificate for Permanent

Establishment

Section 152

The Permanent Establishment in Pakistan of

a non-resident person is now entitled to apply

Commissioner for tax exemption/reduction

certificate on account of tax payable under

Section 152(2A) of the ITO.

With holding from Services

Section 153

Tax deducted while making payment to

companies on account of services rendered was

proposed in Finance Bill 2015 to be made

adjustable for the Companies Rendering Services

with effect from tax year 2009 on the demand of

Services Sector. But surprisingly clause 79 of Part

IV of Second Schedule has been omitted through

the Finance Act passed by Parliament which

means that the tax withheld from both companies

and others shall be minimum tax on their income.

Tax deducted at the rate of 10% while making

payment to a Sports person has been declared

Final Tax with effect from Tax Year 2013.

Option of Normal Taxation for

Exporters Section 154

Exporters have been provided with an

irrevocable option to opt for filing of normal

income tax return under Section 114 of the ITO,

2001 instead of filing statement of final taxation

under Section 115(4) of the ITO, 2001. This

option shall be exercised every year at the time

of filing the income tax return. However, no

incentives have been provided in this regard astax deducted on the exports proceeds shall be

minimum tax for such tax year.

Timing of Deduction of Tax

Section (158)

Board has been empowered to define the term

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

to be made on the 'amount actually paid' to

the recipients in most cases.

Payment of Surcharge/Refund

Section 161/171

Rate of Default Surcharge on account of non-

deduction/payment of tax has been reduced to

12% from 18% whereas additional payment for

delayed refund payable by Board has also

been reduced to KIBOR plus 0.5% from 15%.

Banking Information of Non Residents

Section 165B

A new section 165B has been introduced to

empower the Board to procure information related

to non-resident persons from financial institutions

including banks to discharge its duties under

bilateral or multilateral treaties/agreements.

Special Audit Panels

Section 176-177

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

been introduced this year which will be comprising of

two or more members, consisting of an officer of the

Inland Revenue, a firm of Chartered Accountants, a

firm of Cost and Management Accountants or any

persons as directed by Board. SAP will be headed

by the chairman who shall be an Officer of Inland

Revenue. Such SAPs, after getting approvals from

the Commissioner, may exercise powers under

Sections 121, 176, 177, 210 and 211 of the ITO,

2001.

Computerized National Identity Card (CNIC)

Number

Section (181)

Through this amendment, Individuals'

Computerized National Identity card numbers

shall be used as National Tax Number from the

tax year 2015. It implies that NTN number shall be

no longer required for filing returns of individuals.

Penalties

Section 182

Minimum Penalty for Non-Filing of statement of

final taxation and withholding tax statements has

been brought in the main section from the

respective schedule and has been reduced to

ten thousand rupees from fifty thousand rupees.


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9 Finance Act 2015

The penalty for non-filing of wealth statement

and wealth reconciliation statement has been

enhanced from Rs. 100/per day of default to

higher of 0.1% of the taxable income per week or

Rs. 20,000.

Automatic Selection for Audit

Section 214 D

Finance Act now provides for automatic

selection for tax audit of a person who doesn't:

a) file his tax return within specified time

provided in the Ordinance or within the

time extended by the Board or further

extended upto 30 days by the

Commissioner; or

b) pay tax due alongwith return within due

date.

However, audit proceedings in such cases shall

only be initiated after the expiry of ninety days

from the due date of filing of return as mentioned

in (a) above.

Subject to provisions regarding levy of penalty,

default surcharge and selection for audit by the

Board under section 182, 205 and 214C

respectively, aforesaid automatic selection

provisions shall not apply if the person files the

return within ninety days from the date

mentioned in (a) above;

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

the basis of taxable income declared during

immediately preceding tax year;

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

per the applicable tax rate under the First

Schedule, whichever is higher, is paid

alongwith the return in cases where either a

return was not filed or income below taxable

limit was declared in the immediately

preceding tax year; and

- where return has been filed for immediately

preceding tax year, turnover declared for

the tax year is not less than the turnover

declared for the immediately preceding tax

year.

Section 177 and 214C regarding audit and

selection for audit by the Board shall not apply for

a tax year to a person registered as a retailer

under rule (4) of the Sales Tax Special Procedure

Rules, 2007 subject to the condition that the nameof the person so registered remained on the sales

tax active taxpayers' list throughout the tax year.

This provision shall have effect from the date

announced by the Board through Notification in

the official gazette.

Reward to Whistle blowers

Section 227B

A concept of whistle blower has been introduced

in Income Tax, Sales Tax and Federal Excise

laws for the person who reports concealment or

evasion of income tax, fraud, corruption ormisconduct by providing credible information

leading towards detection of tax evasion and

related recovery. The Board may sanction reward

to such whistle blowers subject to the procedures

to be prescribed in this behalf.

Domestic Electricity Consumption

Section 235A

For the purpose of collection of advance tax from

the domestic consumers' monthly limit of

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

75,000.

Advance Tax on Internet

Section 236

Advance tax rates applicable on telephone services

expanded to include internet services in their ambit

for deduction of tax.

Advance Tax on Domestic Tickets

Section 236B

Collection of advance tax has been abolished on

purchase of air tickets for travailing to Balochistan

Coastal Belt, Azad Jammu and Kashmir, FATA,

Gilgit-Baltistan and Chitral.

Advance Tax on Sales to Retailers or

Wholesalers

Section 236H

Fertilizer has been excluded from the ambit of


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10 Finance Act 2015

advance tax on sales to retailers or wholesalers.

The Finance Act has also levied tax on

transactions between dealers and wholesalers. .

Advance tax by Educational Institutions

Section 236I

Collection of advance tax by Educational

Institutions from non-resident person has been

relaxed on the premise that the non-resident

has no Pakistan source income and fee is

remitted directly to the bank account of

educational institution from abroad through

normal banking channels.

Advance tax on Non Cash Banking

Transactions

Section 236P

For Non-Filers, all banking transactions related to

transfer and purchase of banking instruments,

exceeding fifty thousand rupees a day, will be

liable to adjustable advance tax at the rate of

0.6%. It includes payments through crossed

cheques. Amount shall be deducted from the

account of person issuing banking instrument.

Advance tax on Rental of Machinery &

Equipment

Section 236Q

Payment to a resident person for rent to use

commercial, industrial, scientific equipment ormachinery has been made subject to deduction of

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

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

income. Agriculture machinery and machinery

owned and leased by a leasing company, an

investment bank, a modaraba, a scheduled bank or

a developmental finance institution shall not becovered by this provision.

Advance tax on Educational Expenses remitted

abroad

Section 236R

Education related expenses remitted abroad will

also be made liable to deduction of adjustable

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

collected from the payer of education related

expenses.

Dividend in Specie

Section 236S

Dividend in specie has also been made liable for

deduction of advance tax at the rates applicable to

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

for Non-Filers.

Future Commodity Contracts

Section 236 T

Pakistan Mercantile Exchange Limited is required to

collect advance tax from purchase, sale and

commission on future commodity contracts at the

rate of 0.05%. The aforementioned collection of tax

shall be adjustable against tax liability.


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11 Finance Act 2015

INCOME TAX SCHEDULES

FIRST SCHEDULE

Tax Rates For Business Individual and AOPs

Taxable income Rate

from

upto

0 400,000 0%

400,001 500,000 7%of amount exceeding

400,000

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

exceeding 500,000

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

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

exceeding 1,500,000

2,500,001 4,000,000 Rs. 344,500 + 25% of amount

exceeding 2,500,000

4,000,001 6,000,000 Rs. 719,500 + 30% of amount

exceeding 4,000,000

6,000,001

and above

Rs. 1,319,500 + *35% of

amount exceeding 6,000,000

* for AOP’s (Professional firms prohibited fromincorporating by any law) rate of tax shall be at 32% from

tax year 2016 and onwards.

Tax Rates For Salaried Individual

Taxable income Rate

from upto

0

400,000

0%

400,001

500,000

2%of amount exceeding

400,000

500,001

750,000

Rs. 2,000 + 5% of amount

exceeding 500,000

750,001

1,400,000

Rs. 14,500 + 10% of amount

exceeding 750,000

1,400,001

1,500,000

Rs. 79,500 + 12.5% of amount

exceeding 1,400,000

1,500,001

1,800,000

Rs. 92,000 + 15% of amount

exceeding 1,500,000

1,800,001

2,500,000

Rs. 137,000 + 17.5% of amount

exceeding 1,800,000

2,500,001

3,000,000

Rs. 259,500 + 20% of amount

exceeding 2,500,000

3,000,001

3,500,000

Rs. 359,500 + 22.5% of amount

exceeding 3,000,000

3,500,001

4,000,000

Rs. 472,500 + 25% of amount

exceeding 3,500,000

4,000,001

7,000,000

Rs. 597,000 + 27.5% of amount

exceeding

4,000,000

7,000,001

and above

Rs. 1,422,000 + 30% of amount

exceeding 7,000,000

Tax Rates For Companies

Description

Rate

Banking company 35%

Other than banking company- TY- 2016

32%

Other than banking company- TY- 2017 31%

Other than banking company- TY- 2018

30%

Super Tax Rates

Description Rate

Banking company 4%

Other person having income equal to or 3%

exceeding Rs. 500 Million

Tax Rates For Profit on debt

Taxable income Rate

from upto

0

25,000,000 10%

25,000,001 50,000,000 Rs. 2,500.000 + 12.5% of

amount exceeding 25 Million

50,000,001

and above

Rs. 5,625,000 + 15% of amount

exceeding 50 Million


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12 Finance Act 2015

Sec.

Category

Filer

Non

Filer

37A Capital Gains Tax - Company

Stock Funds

10 %

25%

Other than Stock Funds

25%

25%

Capital Gains Tax - Individuals & 10%

17.5%

AOPs

148 Industrial undertaking importing

re-meltable steel (PCP Heading

72.04) and directly reduced iron

for its own use.

Manufacturers covered under

SOR 1125( I)/2011, dated 3112- 1% 1.5% 2011.

Import of Potassic Fertilizer Imports of Urea fertilizer Import of gold Import of cotton

Import of LNG- designated bryers

Import of pulses

2%

3%

Commercial importers covered under 3% 4.5%

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

2011

Ship breaker on import of ship 4.5% 6.5%

Tax to be collected from every

importer of goods on the value of

goods.

a)

In the case of Industrial 5.5%

8%

undertaking not otherwise

covered

b) all other cases of companies 5.5% 8%

c)

In the case of persons other

6%

9% than those covered in a & b

above

Sec.

Category

Filer

Non

Filer

150 Dividend income 12.5% 17.5%

151

Profit on Debit

10 %

17.5%

152 Payments to Permanent

Establishment of Non- Residents

supply of goods - Company 4% 6%

- Others 4.5%

6.5%

supply of services - Company 8% 12%

- Others

10% 15% transport services

2% 2% execution of contract

- Company

7%

10%

- Others 7.5%

10%

Sport persons 10%

10%

153

Payments to Residents

supply of goods

- Company

4%

6%

- Others

4.5%

6.5

supply of services

- Company

8%

12%

- Others 10% 15%

transport services 2% 2%

execution of contract - Company 7% 10%

- Others

7.5%

10%

Sport Persons

10%

10%

Electronic and Print Media

Services

- Company

1%

12%

1%

15%

- Others

156A Commission on Petroleum 12% 15%

products

231A

Cash withdrawal exceeding Rs.

0.3%

0.6%

50,000/- in a day

231AA

Other transaction with Bank 0.3% 0.6%


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13 Finance Act 2015

Sec

Category

Filer

Non Filer

233 Brokerage & Commission

Advertisements

10%

15%

Others 12% 15%

234 Goods Transport Vehicles Rs. 2.5 Rs. 4 (per kg) Passenger Transport Vehicles

Seating capacity

>410

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15 Finance Act 2015

SALES TAX

Who is not Active Tax Payer

Section 2(l)

The definition of active tax payer in the SalesTax Act has been introduced through

amendment in subsection 2(1). The Active

Taxpayer means a registered person who does

not fall in any of the following categories:

(a) who is black listed or whose registration is

suspended or blocked under section 21;

(b) who fails to file Sales Tax returns by

due date for consecutive 2 periods;

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

or statement u/s 115 of IT Ordinance

2001 by due date; and

(d) who fails to file two consecutive monthly

or an annual withholding statement under

section 165 of the Income Tax

Ordinance, 2001.

The Board shall have the power to maintain active

taxpayers list (ATL) in the manner as prescribed

through rules under section 21A.The Board

updates the ATL on 15th of every month. It is

important to be on ATL all times otherwise it

would adversely affect the tax payer in terms of

application of higher tax rate and non-admissibility

of input tax.

Cottage Industry

Section 2( 5AB)

Previously persons being manufacturer having

utility bills value during the last 12 months less

than Rs.700,000 are defined as “Cottage

Industry”.Now this limit of utility bills has been

increased to Rs.800,000 considering the

inflationary impact and increasing utilities cost.

Retailer

Section 2(28)

Definition of retailer has been modified and the

threshold limit for retailer having combine

business of importer or manufacturer for

registration as retailer has been omitted.

Supply

Section 2(33)

The definition of “Supply” has been extended toinclude goods belonged to another person when

transferred or delivered to the owner or to a

person nominated by him. The definition of

supply has been amended to give legal cover for

sales tax collection on supply upon toll

manufacturing. Here it is important to note the

dispute over rights to claim sales tax on toll

manufacturing service is prevailing among

provinces and Federal Government. The Board

though has strengthened their stance on their

right to collect sales tax on toll manufacturing,

however, the issue will not be resolved until and

unless provincial governments delete the entry of

Sales Tax on toll manufacturing from their

charging Schedule of respective Sales Tax Act

otherwise dispute would continue to prevail over

the exclusive right of collection of sales tax on toll

manufacturing.

Further Tax

Section 3 (1A)

The rate of further sales tax has been increased

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

to be paid by a registered person on supplies toun-registered person. The rationale behind

increase of further sales tax is to increase cost of

doing business with unregistered segment of the

trade and also to recover some indirect tax.

Scope of Tax

Section 3(2) / 13

The Power of the Federal Government for allowing

exemptions and concession under the Sales Tax

Act, 1990 have been made subjected to the

approval of Economic Coordination Committee of

Cabinet, and that too, on the basis of specificpurposes and circumstances as defined in the

law. Any notification issued after 1st July 2015

shall stand rescind on expiry of financial year if not

approved by the National Assembly.


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16 Finance Act 2015

Time and manner of payment

Section 6.

The powers of Customs authority has been

extended with respect to recovery of sales tax which is currently available with Inland Revenue

officials only.

Determination of tax liability

Section 7

The anomalies faced by persons on provisional

clearance of their bill of entry has been

addressed. Earlier, credit of input tax on

provisionally cleared bill of entry was not available

for adjustment with sales tax liability.

Tax credit not allowed

Section 8

The restriction on Input Tax adjustment placed

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

buildings” has been removed.

The restriction on Input Tax adjustment against

services has been placed in respect of which

adjustment is barred by the respective provincial

sales tax laws.

No input shall be allowed against import or

purchase of agricultural machinery and

equipment.

The restriction on input adjustment is also placed

on such goods and service which at the time of

filing of return by the buyer have not be declared

by the supplier in its respective return. This is very

dangerous amendment and shall have serious

consequences. The effective date of this particular

restriction will be notified by the Board.

Joint & Several Liability

Section 8A

The burden has been placed on tax department to

discharge onus in respect of unpaid amount of

sales tax under section 8-A. The amendment is

very important in nature considering the frequent

abuse of this section by the field formations in

past against the spirit of the law.

Registration

Section 14

The basic sales tax registration laws were

transferred into Sales Tax Rules which are now

being transferred back to main legislation. As per

existing provisions of law, following categories

are required to be registered under Sales Tax Act, 1990.

a) a manufacturer other than cottage

industry

b) a retailer who is liable to pay sales tax

under the Act or Rules excluding such

retailers required to pay sales tax through

electricity bills.

c) an importer

d) an exporter who intends to obtain sales

tax refund.

e) a wholesaler, dealer or distributor

f) a person required to be registered

under Federal or Provincial law

The Board has amended Sales Tax Rules, 2006

to include the concept of temporary registration for

import purposes by the new manufacturers.

Special Audit Panels

Section 32A

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

been introduced this year which will be comprising

of two or more members, consisting of an officerof the Inland Revenue, a firm of Chartered

Accountants, a firm of Cost and Management

Accountants or any persons as directed by Board.

SAP will be headed by the chairman who shall be

an Officer of Inland Revenue. This penal shall

lawfully function even one member other than

chairman is absent from conducting audit.

Penalty

Section 33

Penalty of Rs.100 per day was applicable for the

first fifteen days in case of delayed filing of SalesTax Return. Now the time limit of fifteen days has

been reduced to ten days. Likewise, minimum

penalty amount of Rs.500 per day is now provided

if the due amount of sale tax is paid within next

ten days instead of earlier fifteen days.


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17 Finance Act 2015

Monitoring / Tracking by electronic

means Section 40C

Regarding barcode facility for the goods which

cannot be sold without affixing the tax stamp,

banderole, sticker by the manufacturer, importer

or any other person. The Board shall appoint

licensee from whom such tax stamp, banderole,

stickers, barcode, etc. would be acquired against

price approved by the Board including cost of

equipment installed by such licensee in the

premises of the registered person.

Power of the Board and Commissioner to call

records

Section 45A

A meaningful amendment has been made

whereby the Board or CIR can call record foreither on his own motion or otherwise. Previously

such power can only be exercised on his own

motion only.

Agreement for exchange of information

Section 56A

The Federal Government has been empowered to

enter into bilateral or multilateral agreements with

provincial government or foreign governments for

exchange of information. However the disclosure

of such information by a public servant shall be

confidential and restricted as provided undersection 216 of ITO 2001.

Prize Scheme

Section 56C

Federal Board of Revenue is authorized to

introduce prize schemes to promote tax culture. In

order to encourage the general public to make

purchases only from registered persons against

valid sales tax invoice, the Board may introduce

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

Reward to Whistle blower

Section 72D

A concept of whistle blower has been introduced

in Income Tax, Sales Tax and Federal Excise

laws for the person who reports concealment or

evasion of income tax fraud, corruption or

misconduct by providing credible information

leading towards detection of tax and related

recovery. The Board may sanction reward to such

whistle blowers subject procedures to be

prescribed in this behalf.

Certain important amendments in Schedules

Flavored milk, milk cream, yogurt, cheese butter,

desi ghee and whey powder which are sold in

retail packing under a brand name were under

Zero Rating Regime under Fifth Schedule read

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

to Eighth Schedule with chargeability of Sales

Tax at the rate of 10%.

Air crafts, aviation equipment, diagnostic kits and

other medical related material will be exempted

from sales tax.

Raw, pickled and wet blue hides and skins,

manufacturers of marble and granite (turnover

being less than five million), Poultry and Cattle

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

2018) are now exempted from sales tax.

Incinerators, motorized sweepers, snow plough,

reclaimed lead, waste paper, ginned cotton and

plant & machinery for Bio Diesel will now be

subject to sales tax at the rate of 5%.

Sales tax slabs on import of and registration of

Mobile Phones will be doubled. However,

regulatory duty currently applicable has been

withdrawn.


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18 Finance Act 2015

IMPACT OF SALES TAX SROs

S.R.O 483(I)/2015 –

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

April, 2015

Petroleum products related Sales Tax rates have

been changed by amending SRO 383(I)/2015

dated April 30th, 2015. The comparisons of rates

are as under

Rates prior

Rates

Product

to

w.e.f.

01.07.2015 01.07.2015

Motor Spirit

19%

17%

HOBC

17%

17%

Kerosene Oil 17% 17%

HSD 28% 29%

LDO 16% 17%

S.R.O 484(I)/2015 –

Amendment In Sales Tax (Special Procedures)

Rules, 2007

The summary of proposed changes is as under:

Chapter IX relating to special procedure for

processing of refund claims filed by the

cotton ginners has been omitted, as the

same become redundant due to ginned

cotton's exemption status under the

prevailing provisions of sales tax law.

Wholesaler-cum-retailers falling under

Chapter XIII are given waiver from

provisions of section 73 of the Act and

allowed to issue tax invoice in respect of

specified goods subject to extra tax.

Sales tax invoices shall be issued by theregistered persons in steel sector for the

product / category at the following rates

Prior to July After July 01,

01, 2015

2015

Invoices issued by

Amount of sales tax

Amount of sales tax

and for or to

to mentioned on the

to mentioned on the

invoices

invoices

By steel melters or

Rs. 6,447 per metric


composite units of

ton

ton

melting, re-rolling

and MS cold

drawing to

registered re-rollers

By steel re-rollers,

Rs.7,357 per metric

Rs.9,217 per metric

using ingots or

ton

ton

billets of steel

melters or

composite units of

melting, re-rolling

and MS cold

drawing, to registerd

persons

By re-rollers, using



billets of Pakistan

ton

ton

Steel Mills or

Peoples Steel Mills

or Heavy

Mechanical

Complex or

imported billets, to

registered persons

By re-rollers,using

Rs.7,610 per metric

Rs.9,170 per metric

ship-plated and re-

ton

ton

rollable scrap as raw

material, to

registered persons

By re-rollers, to

Rs. 910 per metric


unregistered

ton

ton

persons

By persons



supplying imported

ton

ton

MS products, to

registered persons

By persons

Rs. 910 per metric


supplying imported

ton

ton

MS products, to

unregistered

persons

With a view to rationalizing the present

concessionery regime of sales tax rates on steel

sector, rates have been changed as under:


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19 Finance Act 2015

Description

Rates prior

Rates w.e.f.

to

01.07.2015

01.07.2015

Steel Melter, Steel re-roller,

Rs.7 per unit

Rs.9 per unit

composite unit of melting, re-

of electricity

of electricity

rolling and MS cold drawing

consumed

consumed

Import of re-meltable iron

Adjustable

Adjustable

and steel scrap

sales tax of

sales tax of

Rs.5,600/PM

Rs.5,600/PM

T

T

Import of waste and scrap -

Non-

compressor adjustable

sales tax of

Rs.5,600/P

MT

Local supply of waste and

-

Not subject to

scrap compressor

sales tax

Local supply of re-meltable

-

Rs.5,600/PM

iron and steel scrap

T

Ship breakers-at the time of

Rs.1,663

Rs.2,138

import on re-rollable scrap

Steel melters and re-rolling

Rs.45,458

Rs.58,446

units-generating self-

electricity

Re-rollable scrap supplied by

Rs.39,412/P

Rs.47,059/P

ship breakers

MT

MT

S.R.O 485(I)/2015 –

Amendment in the Sales Tax Special Procedure

(Withholding) Rules, 2007

Sales Tax is now liable to be withheld on purchase

basis. Petroleum Dealers supplying motor spirit and

diesel are inserted in Exclusion clause whereas the

words “including Petroleum dealers” have been

omitted from the clause allowing one tenth

withholding of Sales Tax. Chapter XI of Special

Procedure Rules, 2007 has now grossly included in

the exclusion instead of already provided "mild steel

products". Further, exclusion available to paper, in

rolls or sheets and plastic products including pipes

has been withdrawn. Now these products shall

also be subject to withholding of sales tax.

S.R.O 486(I)/2015 –

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

Rate of sales tax applicable to persons doing

business in textile (including jute), carpets,

leather, sports and surgical goods sectors who is

registered as manufacturer, importer, exporter or

wholesaler under the Sales Tax, 1990 and appear

on the Active Taxpayers List (ATL) has been

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

for Commercial importer, the rates converted to

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

to ixa have been deleted for presenting the same

in tabular form with increased rate of 1%

generally. The summary of changes madealongwith comparison with previously applicable

rates are as follows:

S. No.

Description of goods and

Rate of

Previous

point of taxation

Sales Tax

rate

w.e.f.July 1, 2015

Goods usable as industrial inputs, specified in Table I

1.

Import for in-house

3%

2%

consumption

by registered

manufacturers of the five

sectors

2.

Commercial imports

3% + 1% value

2% + 2%

addition tax

value addition

tax

Supplies to registered or

3%

unregistered persons of

2%

the said five sectors

Supplies to persons 17% 17%

outside the said five

sectors

Import by,

or supply

to, registered

manufacturers, whether or

3% not of the said five sectors, 2%

for the manufacture of

goods specified in Table-I

or Table-II


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20 Finance Act 2015

Fabric, including grey fabric

3.

Import for in-house consumption

3% 3%

by registered manufacturers of the

five sectors

3% Plus 3% Plus

Commercial imports

1% value

1% value

addition addition

tax tax

Supplies

3% 3%

Processed goods, including fabrics

4.

Processing of goods owned by other

3% of the

2% of the

persons, by registered manufacturers

processing

processing

of the five sectors mentioned in

charges

charges

condition (i) below.

Locally manufactured finished articles of (a) textiles and textile

made-ups and (b) leather and artificial leather

5.

Supplies to any person, including

5%

5%

retail sales

Imported finished goods ready for use by the general public

6.

(i) Import

17%, plus

17%, plus

2% value

2% value

addition

addition

tax

tax

(ii) Supply thereof

17%

17%

There is no change in prevalent conditions of SRO

1125(I)/2011 regarding input tax adjustment and

refund.

S.R.O492(I)/2015 –

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

“Persons subject to reduced rate regime under

SRO 1125(I)/2011 have been excluded from

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

1990. Such persons can now fully adjust their

input tax against the output tax liability subject to

condition that value of such supplies must exceed

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

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

Supersedes SRO 88(I)/2002 dt. 11.02.1988

The due date for payment of sales tax on

petroleum products by petroleum exploration and

production companies is reduced from twenty fifth

(25th) to eighteenth (18th) day of the month and

return would be filed on the following twenty first(21st) day of that month.

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

Rescission of certain Sales Tax SROs

In accordance with its drive to eliminate SRO

culture, certain SROs has been rescinded either

being redundant or as consequence of placement

of the exemptions to the relevant Schedules of the

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

SRO 208/1998 dated March 31, 1998‐

Time bound exemption to excessive sales tax

leviable above the notified value of sugar.

SRO 397/2001 dated June 18, 2001-

Exemption with respect to supply of Plant and

machinery to companies in Export Processing

Zones alongwith the respective procedure to be

followed has been placed in 5th Schedule, hence

this SRO exhibiting the same procedure

withdrawn

SRO 77/2004 dated January 28, 2004-

Time bound Exemption to Trading Corporation

of Pakistan for export of sugar.

SRO 433/2005 dated May 14, 2005-

One time exemption to M/s Hino Pak Motors for

manufacturing buses for donation to Afghanistan.

SRO 1007/2005 dated September 26, 2005 ‐

Exemption to ingredients of poultry and cattle feed

withdrawn and now sales tax will be charged at

5%.

SRO 69/2006 dated January 28, 2006‐

Sales tax leviable at 16% at import stage on

sunflower seed, canola seed by solvent extraction

industries placed in 8th Schedule.

SRO 313/2006 dated March 31, 2006-

Sales tax leviable at 6% at import stage on

soyabeen seed by solvent extraction industries


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21 Finance Act 2015

placed in 8th Schedule.

SRO 880/2007 dated September 01, 2007-

Zero rating available to medical diagnostics

equipment placed in 6th Schedule.

SRO 76/2008 dated January 23, 2008‐

Exemption available to marble and granite

manufacturers through this SRO have been

placed in Table II of the 6th Schedule.

SRO 408/2012 dated April 19, 2012-

Exemption available to Blood Bag CPDA has

now been provided in part II of 6th Schedule

SRO 760/2012 dated June 22, 2012 ‐

Exemption available to Urine bags has now

been provided in part II of 6th Schedule.

SRO 460/2013 dated May 30, 2013-

Sales tax on import stage of cellular phones

has now been provided in 9th Schedule.

SRO 657/2013 dated July 11, 2013-

Reduced rate of 5% on second hand and worn

clothes has now been placed in 8th Schedule.

SRO 572/2014 dated June 26, 2014-

Reduced rate on import and supply of agricultural

tractors falling under PCT heading 8701.9020 has

now been placed in 8th Schedule

SRO 84/2015 dated January 28, 2015 ‐

Exemption granted to import and supply of raw

material for the basic manufacture of

pharmaceutical active ingredients and for

manufacture of pharmaceutical products, falling

in respective headings of the first Schedule to the

Customs Act, 1969 (IV of 1969) has been

withdrawn.

S.R.O 491(I)/2015 –

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

The minimum value of assessment of locally

produced coal has been enhanced from Rs.

1,000 per metric ton to Rs. 2,500 per metric ton

S.R.O 493(I)/2015 –

Rescinds SRO 863(I)/2008 dt. 20.08.2008

Production and supply data of certain

manufacturers is now made part of Sales

Tax Rules, 2006, hence this SRO rescinded.

S.R.O494(I)/2015 –

Amendments in the Sales Tax Rules, 2006.

In the Sales Tax Rules, 2006 following

significant changes have been made:

In order to apply the barcodes, band roles,

etc. relevant definitions has been provided.

Biometric verification of the owner, partner or

member has been made compulsory for sales tax

registration.

Concept of temporary registration for two months

to the new manufacturer who intends to import

plant & machinery and raw material introduced to

avail the rates applicable to manufacturers.

However, during this period, neither any invoice

can be issued nor can refund be claimed. A

return shall also be filed in specified format

during temporary registration period.

If a person cannot electronically file application for

registration, he may submit the manual

application to the concerned Commissioner who

will ensure its entry in online system.

If a registered person fails to file sales tax return

for consecutive six months, he can be

deregistered subject to other conditions. If a

registered person intends to file return after

failure of six months, he will be required prior

approval of the concerned Commissioner.

Monthly production and supply data as required

in the SRO 863/2007 has now been made part of

Rules including ten additional categories of

manufacturers

Import and supply of exempt goods to

organizations or agencies under grants-in-aid

shall now be made subject to exemption

certificate issued by Economic Affairs Division.

Registered persons operating restaurants, cafes,

coffee shops, eateries, snack bars and hotels

shall ensure access to the FBR with respect to the

electronic invoice system and other record


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22 Finance Act 2015

maintained by such persons. The intention of the

Federal Government to bring this sector under

Federal Sales Tax as against the Provincial

Sales Tax Authorities claim to tax this sector as

service sector.

Manufacturers and importers of aerated waters,

cigarettes, fertilizers, cements and sugar have

now been made subject of electronic monitoring

and tracking through barcodes, band roles, tax

stamps etc. The electronic system shall be

installed on the production lines or at port or

bonded ware house and persons of these

mentioned sector shall not route any productionotherwise than electronic system after the date

to be specified by the FBR in this regard.


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23 Finance Act 2015

FEDERAL EXCISE DUTY

POWER OF THE FEDERAL GOVERNMENT

SECTION 16

The Power of the Federal Government for

allowing exemptions and concession under the

Federal Excise Act, 2005 have been made

subjected to the approval of Economic

Coordination Committee of Cabinet, and that

too, on the basis of specific purposes and

circumstances as defined in the law.

Concept of Whistle blower. special audit panel

and power of Federal Government to enter into

bilateral agreements in line with Income and

Sales tax laws have also been introduced under

Federal Excise Laws.

First Schedule

The rate of Federal Excise Duty (FED) on Aerated

Waters has been increased to 10.5% from 9%.

The FED on locally produced cigarettes has been

increased to Rs. 3,030 per thousand cigarettes

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

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

retail price exceeding three thousand three

hundred and fifty per thousand cigarettes and for

lesser on pack printed value respectively.

FED of Rs. 0.75 per filter rod for cigarettes has

been introduced.

FED on air travel for socio-economic routes has

been withdrawn. Socio-economic routes mean the

shortest part of journeys starting from or ending at

an airport located in Makran coastal region,

FATA, Azad Jammu and Kashmir, Gilgit-Baltistan

or Chitral.

Third Schedule

White Cement and Motor Vehicles of cylinder

capacity exceeding 850cc have been

exempted from the levy of FED.

Advertisement in newspapers and periodicals, air

travel services for Hajj passengers, Diplomats &

Supernumerary crew and services rendered by

banking companies and non-banking financial

companies in respect of Hajj & Umrah, cheque

book, insurance, Musharika & Modaraba

financing and utility bill collection have also been

exempted from the levy of FED.

S.R.O 489(I)/2015 –

Amends SRO 550(I)/2006 dt. 05.06.2006

FED on air travel service and carriage of goods by

air service is excluded from sales tax mode

hence; input tax adjustment against these

services will not be available.

S.R.O 490(I)/2015 –

Rescission of certain FED SROs which have

been transposed to the Third Schedule of

Federal Excise Act, 2005

SRO 778/2006 dated August 01, 2006

SRO 474/2009 dated June 13, 2009

SRO 802/2009 dated September 14, 2009

SRO 81/2010 dated February 13, 2010

Exemption available to following has been

made part of Third Schedule, hence the above

SROs rescinded.

Hajj passengers, Diplomats,

Supernumerary crew

Motor cars exceeding cylinder capacity

of 850

Certain services provided by the banking

and non banking companies viz.a.viz

Haj and Umrah, cheque books,

insurance, Musharika, Modaraba and

utility bill collection

White cement

Advertisement in newspapers

and periodicals


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24 Finance Act 2015

ISLAMABAD CAPITAL TERRITORY

( TAX ON SERVICES) ORDINANCE, 2001 (ICTO)

The ambit of taxable services has been expanded

to included forty two categories of services

against previous four categories in line with

services taxable under other Provincial Sales Tax

on Services Laws. General rate of sales tax at

16% except for few services has been specified

as below.

Existing taxable services has been amended

as under:

1. Services provided or rendered by hotels,

motels, guest houses, marriage halls

and lawns (by whatever name called)

including “pandal” and “shamiana”

services, clubs including race clubs, and

caterers.

United Nations Children's Fund

(UNICEF)

3. Services provided by persons authorized

to transact business on behalf of others–

Stevedore;

Customs agents; and

Ship chandlers.

4. Courier services and cargo services by

road provided by courier companies.

Following services have been excludedfrom general rate of sales tax:

2. Advertisement on television and

radio, excluding advertisements–

Sponsored by an agency of the

Federal or Provincial Government for

health education;

Sponsored by the Population Welfare

Division relating to educationalpromotion campaign;(c) financed out

of funds provided by a Government

under grant-in-aid agreement; And

Conveying public service messages,

if telecast on television by the World

Wide Fund for Nature (WWF) or

Call centres

18.5%

Freight forwarding agents,

packers and movers 16% or

400/bill of

lading

Services provided by property

developers and constructors

100/sq

yard and 50/sq

feet respectively


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25 Finance Act 2015

AMENDMENTS BY PUNJAB FINANCE ACT 2015

PUNJAB SALES TAX ON SERVICES ACT,

2012

Addition in list of taxable services

Second Schedule

The following services have been added in list

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

on them):

a) Services in relation to transport of goods

(including domestic transportation

through air) and inter-city carriage of

goods by rail or road;

b) Visa processing services including

consultancy services for foreigneducation or migration etc;

c) Services in relation to supply of

tangible goods including machinery,

equipment and appliances for use,

without transferring right of possession

and effective control of such

machinery, equipment and appliances;

d) Public relation services including

communication services, media

management and research and services

provided by opinion poll agencies;e) Services provided by practicing chartered or

cost accountants, auditors, actuaries, tax

consultants, practicing company secretaries,

receivers, liquidators, auctioneers and

corporate law consultants irrespective of

their legal status;

f) Chartered flight services within

or originating from the Punjab;

g) Debt collection and similar other

recovery services;

h) Supply chain management or

distribution (including delivery) services;

i) Services provided by photography

studios and event or occasion

photographers / filmmakers; and

j) Sponsorship services.

k) Services provided for Air Travel in respect

of passengers embarking from Punjab:

Domestic Air Travel: Long Routes

(journey exceeding 500 kms) @ Rs 2,500

per ticket and short routes @ Rs 1,500

per ticket;

International Air Travel (excluding Hajj or

Umrah passengers, diplomats and

supernumerary crew): Economy &

Economy plus @ Rs 5,000 per ticket

and Club, Business and First class @

Rs 10,000 per ticket.

Broadening of scope of taxable services

Second Schedule

The scope of following services already

taxable has been broadened without any

change of rate:

a) Services of caterers will include floral

or other decoration, furnishing of space

involving rental of equipment and

accessories or without it;

b) Courier services will include

express cargo or logistic services;

c) Franchise services will cover licensing

arrangements;

d) Services of builders are clubbed

with those of property developers

and promoters;

e) Services provided for personal care by

beauty parlors, salons, clinics, hair

transplants etc excluding parlors or

clinics where air-conditioners are not

installed or available;

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

g) Services provided by other consultants

will cover evaluation services, certification,

verification and equivalence services,

marketing or sales services, surveyors

services, training or coaching services

(other than general education


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26 Finance Act 2015

services);

h) Services provided by shares registrar

will include share transfer or depository

services, investor account services,

trustee or custodial services;

i) Services provided by fashion

designers will include use of logo,

brand name, house mark etc in the

manufacturing or trading of products;

j) Services provided by landscapers and

landscape designers are included

with those architects, town planners

and interior decorators; and

k) Rent-a-car services will include services

of rental of any vehicle fortransportation of persons.

All the new services and/ or services with

broadened scope will be chargeable to sales

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

respect whereof flat rates as mentioned above

are applicable.

Increase in sales tax rate

Second Schedule

Sales tax on freight forwarding agents

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

400 per bill of lading.

Reduced rate scheme

In the Budget Speech, Punjab Finance

Minister proposed to introduce reduced rate

scheme whereby flat rates ranging from 2% to

10% would be applicable on certain service

sectors. However, no such amendment has

been made in Finance Act, 2015.

Withdrawal of exemptions

Second Schedule

a) Ambit of exemption available toadvertisement services on television and

radio financed out of funds provided

under grant-in-aid agreements has been

restricted to foreign agreements only.

b) Exemption in respect of the following

construction services has been

withdrawn:

Construction of industrial and

commercial projects of value not

exceeding Rs 50 million per annum;Construction of Industrial zones; and

Construction services to organizations

exempt from income tax;

c) Sales tax exemption on construction

services to residential construction

projects with covered area not exceeding

10,000 sq. feet in case of houses and

20,000 sq. feet in case of apartments will

be restricted to one such unit.

d) Exemption available to beauty parlors:

Having corporate status or trademark

or annual turnover exceeding Rs. 3.6

million; or

Which are part of chain business

or franchise arrangement have

been withdrawn.

Grant of exemptions

Second Schedule

a) With respect to sales tax on

transportation, goods do not include water.

b) Services provided by an individual

owner of a vehicle for carriage of goods

are exempt.

c) Services provided by non-corporate

photographers operating from small road-

side shops as declared by PRA are

exempt.

Retention of records

Section 32(1)

Time period for retention of records has beenincreased from five to six years, thereby

making it harmonized with the requirements of

FBR for records' retention.


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27 Finance Act 2015

Forensic Audit

Section 34

Punjab Revenue Authority (PRA) has been

empowered to appoint Chartered Accountants,

Cost and Management Accountants or Forensic

Auditors for conduct of special audit or forensic

audit or both of records of any registered

person with or without collaboration of FBR or

any other provincial sales tax authority.

Basically, concept of forensic audit has been

introduced as power to conduct special audit

was already available with PRA.

Penalties

Section 48

Minimum penalties for non-compliance with

compulsory registration requirement have beenincreased:

Type of

Penalty Rate

Previous

persons

(Rs.) with

Status (Rs.)

effect from 1-

7-2015

Company 1,00,000 10,000

Other than 50,000 10,000

company

Penalties for non-production of records as

required by PRA have been increased as per

below:

1-7-2015

Prize Schemes

Section 88

In order to promote tax culture and encourage

the general public to make purchases only from

registered persons, PRA has been empowered to

introduce prize schemes with the approval of the

Punjab Government.

Reward to Whistleblowers

Section 89

The concept of “whistle blowers” has been

introduced in same line as introduced in federal

fiscal laws with same purpose. However, such

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

in case he fails to prove that his information is

not false or misleading.

STAMP ACT, 1899 (PUNJAB)

Calculation of value of leasehold property as

per Valuation Table for stamp

duty Section 27-A

Previously, Stamp Duty on the instruments of

transfer of lease hold rights is charged on the value

of property as declared by the parties without

considering the Valuation Table as notified by the

District Collector under Section 27-A of the Stamp

Act, 1899. In order to regularize the calculation of

value of property as per Valuation Table, scope of

Section 27-A of said Act has been increased to

cover Article 63 of Schedule-I to said Act which

pertains to transfer of lease hold rights.

CAPITAL VALUE TAX (PUNJAB FINANCE

ACT, 2010)

Withdrawal of exemption on urban property

The Capital Value Tax on property is a provincial

subject in the aftermath of the 18th Constitutional

Amendment. It is payable by a person who

acquires an immovable property by purchase,

gift, exchange or power of attorney, surrender or

relinquishment of right by the owner or a right to

use thereof for twenty years or more or renewal

of lease. Previously, immovable properties other


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28 Finance Act 2015

than commercial or industrial property, plaza or

multi-storey building situated in urban area and

valuing less than one million rupees were

exempt from CVT. The said exemption has been

withdrawn to avoid its misuse.

EDUCATION CESS ON CLUBS (PUNJAB

FINANCE ACT, 2011)

Withdrawal of Education Cess

Education Cess on Clubs was levied through

Punjab Finance Act, 2011, while services of clubs

were subjected to sales tax at 16% since July,

2012. In order to avoid dual taxation of clubs,

the Punjab Government has decided to abolish

Education Cess on clubs to prevent hardships to

such clubs.


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29 Finance Act 2015

AMENDMENTS BY KHYBER PAKHTUNKHWA FINANCE ACT 2015

Property Tax

KP government has raised the property Tax on

Commercial buildings on the basis of their

annual letting values. The enhanced rates for

different categories are as follows:

Description Rate

Commercial Property

Locality A1 13%

Locality A 10%

Locality B

7%

Locality D 4%

Petrol Pumps & CNG Stations

With Store Rs. 15,000

Without Store Rs. 7,500 p.a

Motor Vehicle Tax

Provincial government has provided for option ofpaying vehicle token tax on a lump sum basis

for vehicles not for plying for hire at the time of

registration of vehicles. Moreover, the vehicle

token tax rates have been increased. The

summary of new rates is as follows:

Description Rate

(Rs.)

Motorcycle

Once for lifetime

1,000

Vehicles for Haulage

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

Vehicles for plying

On the basis of Seats (upto 6

400-652 p.a

person)

More than 6 120-180 per

seat

Other Vehicles

On the basis of engine 500-5,000 p.a

capacity

Tractors

With or without trolly 600 p.a

Khyber Pakhtunkhwa Revenue Authority

Following amendments have been made

in the Finance Act, 2013 through which KP

Revenue Authority was legislated:

Special Audit

Section 51

In addition to Chartered Accountant and Cost

& Management firms, any foreign or local

consultant having experience of forensic

audit can be appointed for the special audit ofany registered person.

Authority for Exemptions

Section 94

Through this amendment, provincial

government has provided for power of

exempting any goods through notification.

Amendment in Sales Tax Schedule I

In order to broaden the scope of provincial

sales tax, the following new services have

been notified in the First Schedule:

9812.2600 Voice over I. P services

9812.2700 Teleconferencing services

9812.2800 3G/4G LTE services

9875.0000 Electric power transmission or

distribution services.


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FA 15 (4 July 2015) Safi

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