Introduction to Federal Board of Revenue

8/10/2019 Introduction to Federal Board of Revenue

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Introduction To Federal Board Of Revenue:

The Central Board of Revenue (CBR) was created on April 01, 1924 through enactment of the

Central Board of Revenue Act, 1924. In 1944, a full-fledged Revenue Division was created

under the Ministry of Finance. After independence, this arrangement continued up to 31st

August 1960 when on the recommendations of the Administrative Re-organization Committee,

FBR was made an attached department of the Ministry of Finance. In 1974, further changes were

made to streamline the organization and its functions. In order to remove impediments in the

exercise of administrative powers of a Secretary to the Government and effective formulation

and implementation of fiscal policy measures, the status of FBR as a Revenue Division was

restored under the Ministry of Finance on October 22, 1991. However, the Revenue Division

was abolished in January 1995, and FBR reverted back to the pre-1991 position. The Revenue

Division continues to exist since from December 01, 1998.

Directorate of Customs Intelligence and Investigation was created as an attached department of

Revenue Division on 12th August, 1957 headed by a Director with HQs at Karachi. Three

Regional Offices of the Directorate were established at Chittagong (then East Pakistan), Lahore

and Karachi. Central Excise Work was entrusted to the Directorate on 18th June, 1974. It was in

1984 that the HQs of the Directorate were shifted to Islamabad from Karachi. The department

was up-grated on 21-2-1985 and it was headed by Director General. In 1995, the Directorate

General was assigned the role to carry out detailed audit of cases of Sales Tax fraud. The

Directorate General shifted into its own premises in Sector G-10/4 Islamabad in August 2004. In

2005 the Directorate General was assigned the additional responsibilities of integrity

management. Consequent upon restructuring under reform process, Directorate General of

Intelligence and Investigation (Customs, Sales Tax & Federal Excise) was re-designated as

Directorate General of Intelligence & InvestigationFBR, Islamabad with the responsibility of

both Direct and Indirect Taxes.


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Vision:

To be a Modern, Progressive, Effective, Autonomous and Credible organization for optimizing

revenue by providing quality service and promoting compliance with tax and related laws.

Mission:

Enhance the capability of the tax system to collect due taxes through application of modern

techniques, providing taxpayer assistance and by creating a motivated, satisfied, dedicated and

professional workforce.

FBRs Values:

Integrity

Professionalism

Teamwork

Courtesy

Fairness

Transparency

Responsiveness

Taxation System of Pakistan:

The changes in tax design introduced in 1991 (as continued during 1992 and 1993) have

attempted to partially reverse the existing distortions in resource use, inequities and revenue loss

by phasing out some of the tax exemptions, streamlining the tax rate structure, adjusting thebasic exemption for personal taxes to indices, and expanding the withholding taxes to several

economic activities otherwise not contributing to the revenue effort. Major changes in the design

of taxation system have been introduced in the form of presumptive basis of income taxation,

scheduler basis for taxation of dividends, bank profits and interest, prizes, winnings from lottery,

etc; fixed tax on small business enterprises' minimum taxation on companies and registered firms

based on turnover, and one time Corporate Assets Tax. These policy changes underline the on-

ground economic realities in the background of difficult-to-implement conceptual norms.

Economic Objectives Assigned To Taxation:

While resource mobilization remains as the primary objective of taxation system in Pakistan,

through the medium of various exemptions and incentives, the tax system embodies a wide range

of secondary objective as well. These include:

Encouragement of savings and encouragement of fixed investment. Stimulation of certain industries and promotion of exports.


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Development of backward areas and support for welfare activities.

Promotion of capital markets and Promotion of house building.

Requirement # 1

Previous and current administrative and appellate system of income tax and sales tax:

Previous Structure of Sales Tax department:

Collector ate of Sales Tax in Pakistan were as follow:

Peshawar

Rawalpindi

Faisalabad

Gujranwala

Lahore

Multan

Karachi [East]

Karachi [West]

Hyderabad

Quetta

Mirpur [A J & K]

Officers in collector ate were as follow:

Collector

Additional collector

Deputy collector

Assistant collector

Superintendent Deputy Superintendent

Auditor

Lower Staff


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These officers were appointed for the purpose of managing law & order, revenue, collection,

taxation, the control of planning permission and the handling of natural and man-made

emergencies. A collector was a crucially important colonial officer placed at the district level and

entrusted with the responsibility of revenue collection and other civil duties.

Departments in Collector ate were as follow:

Local Registration office (LRO)

Audit

Adjudication

Refund

Previous structure of income tax

Income tax regions in Pakistan were as follow:

Northern Islamabad

Eastern Lahore

Central Multan

Southern Karachi

Corporate Karachi

Officers of Income Tax were as follow:

Regional commissioner.

Commissioner.

Additional commissioner.

Deputy Commissioner.

Assistant commissioner.

Income Tax

Special Officer.

Special Officer.

Inspector.

Lower Staff.


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Offices of Income Tax were as follows:

Regional Commissioner Office (R.C)

Zonal Office (Commissioner)

Range (Additional Commissioner)

Circle (DC, AC, ITO & SO)

Previous structure of sales tax appeal

Collector (Appeal).

All cases of Customs, Federal Excise and Sales Tax.

Appellate Tribunal:

It means customs, Excise & Sales Tax Appellate Tribunal constituted u/s 194 0f Custom Act.

Appointing Authority:

The Federal Govt. has the appointing authority of the appellate Tribunal.

Members:

The Appellate Tribunal consists of two types of members.

1. Judicial Members

Shall be a person who has been

a. A judge of High Court.

b. A district judge and is qualified to be a judge of High Court.

c. An advocate of High Court and is qualified to be a judge of High Court.

2. TechnicalMembers

An offer of Customs and excise group equivalent to that a member, CBR.

Chairman:

The Federal Govt. shall appoint one of the members of Appellate Tribunal to be the chairman.

Previous Structure of Income Tax Appeal


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Commissioner.

All Cases of Income Tax.

Appointment:

It means income tax appellate tribunal constituted under section 130 of the income tax ordinance

200. Appellate tribunal shall consist of chairperson and such other judicial & accountant

members as are appointed by the federal govt. having regard to the needs of the tribunal.

Chairperson:

1. Federal govt. shall appoint chairperson

2.

Except in special circumstances, the person appointed should be a judicial member.

Judicial Member:

A person may be appointed as a judicial member of the appellate tribunal if

1. The person has the ability to exercise the power of a District Judge and is qualified to be

a Judge of a High Court or

2. The person should be a advocate of High Court and is qualified to be a Judge of the High

Court.

Accountant Members:

A person may be appointed as a accounted member of the Appellate Tribunal if the person

1. The person should be an income tax group equivalent in rank to that of a regional

commissioner

2. And that person at least having five year experience as Commissioner.


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Current Taxation Structure

Federal Board of Revenue:

The Federal Board of Revenue (alternatively known as CBR) is the supreme federal agency ofPakistan that is responsible for enforcing and collecting revenue for the government of Pakistan

FBR has the responsibility for Formulation and administration of fiscal policies. FBR is divided

into further categories

Customs

Inland Revenue services

Customs:

Pakistan Customs is the guardian of Pakistan borders against movement of contra band goods. It

provides a major source of revenue to the Government of Pakistan in the form of taxes levied onthe goods traded across the borders. It also helps to protect the domestic industry, discourage

consumptions of luxury goods and stimulate development in the under -developed areas.

Inland Revenue services:

Inland Revenue Services has been created by the Government of Pakistan. This service group is

responsible for carrying out the functions relating to

Income Tax

Sales Tax

Federal Excise

Large Taxpayer Unit (LTU):

Karachi

Lahore Islamabad

Regional Tax Office (RTO):

Peshawar


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Abbotabad

Rawalpindi

Sialkot

Gujranwala

RTO-I-Lahore

RTO-II-Lahore

Sargodha

Faisalabad

Multan

Bahawalpur

Karachi

Hyderabad

Sukkar

Quetta

Islamabad

Current structure of appellate tribunal:

In the new system there is one Commissioner (Appeals) in all cases of income tax, Sales tax and

Federal Excise. The new system includes three members Chairperson, Judicial members and

Accountant members in all cases of income tax, sales tax and federal excise.


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Requirement # 3

Explain the suggestions given by the tax authorities and other persons to improve this

system.

SUGGESTIONS GIVEN BY THE TAX AUTHORITIES AND other persons to improve

this system:

Before implementation of new system Federal Board of Revenue should conduct training

for all officers to understand all department works.

The success of an organization like FBR crucially depends on how well it serves the

interests of the wide spectrum of its stakeholders. Develop a system with key features of universal self-assessment with selective audit,

centralized information system.

Simplify and standardize the process of issuing exemptions certificate. The Federal board

of revenue has to secure the interests of government and its own employees. Taxpayers Assistance Units must be developed as a point of contact between department

and the taxpayers.

The revenue organization must develop support systems for audit and standardize auditwork.

A tax payer should not be audited for more than once a year. Compulsory registration

process should be made more systematic. Taxpayers must be more educated about the procedures, practices and methods of record

keeping by publishing Booklets and brochures.

The system of recruitment, training, performance evaluation, separation and

accountability should be improved.

The employees of FBR who perform well, should be promoted.

Tax Amnesty Schemes should not be introduced.

Implement NTN as a common tax number on a priority basis to harmonies documentaryrequirements and lower the manpower usage in registration across taxes.

Government of Pakistan should create an enabling environment through legal changes

autonomy and effective supervision so as to improve its efficiency and integrity. Risk Management Techniques should be applied to identify high risks.

Business processes concerning imports and exports should be improved.

There is need of reorganize the pay scales of the employees of FBR. The information system should be kept updated continuously which could address the

matters concerning automation of organizations processes and could generate databases.


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Pakistan - Tax Structure

Taxation System

Federal taxes in Pakistan like most of the taxation systems in the world are classified intotwo broad categories, viz., direct and indirect taxes. A broad description regarding the

nature of administration of these taxes is explained below:

Direct Taxes

Direct taxes primarily comprise income tax, alongwith supplementary role of wealth tax. Forthe purpose of the charge of tax and the computation of total income, all income is

classified under the following heads:

1. Salaries

2. Interest on securities;

3. Income from property;4. Income from business or professions5. Capital gains; and

6. Income from other sources.

Personal Tax

All individuals, unregistered firms, associations of persons, etc., are liable to tax, at the

rates randing from 10 to 35 per cent.

Tax on Companies

All public companies (other than banking companies) incorporated in Pakistan are assessedfor tax at corporate rate of 39%. However, the effective rate is likely to differ on account of

allowances and exemptions related to industry, location, exports, etc.

Inter-Corporate Dividend Tax

Tax on the dividends received by a public company from a Pakistan company is payable at

the rate of 5% and at the rate of 15% in case dividends are received by a foreign company.Inetr-corporate dividends declared or distributed by power generation companies is subject

to reduced rate of tax i.e., 7.5%. Other companies are taxed at the rate of 20%. Dividends

paid to all non-company shareholders by the companies are subject to with holding tax of10% which is treated as a full and final discharge of tax liability in respect of this source of

income.

Treatment of Dividend Income

Dividend income received as below enjoys tax exemption, provided it does not exceed Rs.10,000/-.

1. Dividend received by non-resident from the state enterprises Mutual Fund set by the


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Investment Corporation of Pakistan.

2. Dividends received from a domestic company out of income earned abroad provided it isengaged abroad exclusively in rendering technical services in accordance with an agreement

approved by the Central Board of Revenue.

Unilateral Relief

A person resident in Pakistan is entitled to a relief in tax on any income earned abroad, ifsuch income has already been subjected to tax outside Pakistan. Proportionate relief isallowed on such income at an average rate of tax in Pakistan or abroad, whichever is lower.

Agreement for avoidance of double taxation

The Government of Pakistan has so far signed agreements to avoid double taxation with 39countries including almost all the developed countries of the world. These agreements lay

down the ceilings on tax rates applicable to different types of income arising in Pakistan.

They also lay down some basic principles of taxation which cannot be modified unilaterally.

The list of countries with which Pakistan has concluded tax treaties is given below:

AustriaBelgiumBangladesh

Canada

ChinaDenmarkEgypt

FranceFinlandGermany

GreeceIndiaIndonesia

IranIreland

ItalyJapan

South Korea

LebanonLibya

MaltaMauritius

Saudi Arabia

SingaporePoland

RomaniaSwitzerland

ThailandSri Lanka

Sweden

Turkmenistan


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U.K.

TurkeyTunisia

KazakistanU.A.E.

U.S.A

Customs

Goods imported and exported from Pakistan are liable to rates of Customs duties as

prescribed in Pakistan Customs Tariff. Customs duties in the form of import duties and

export duties constitute about 37% of the total tax receipts. The rate structure of customsduty is determined by a large number of socio-economic factors. However, the general

scheme envisages higher rates on luxury items as well as on less essential goods. Theimport tariff has been given an industrial bias by keeping the duties on industrial plants and

machinery and raw material lower than those on consumer goods.

Central Excise

Central Excise duties are leviable on a limited number of goods produced or manufactured,and services provided or rendered in Pakistan. On most of the items Central Excise duty ischarged on the basis of value or retail price. Some items are, however, chargeable to duty

on the basis of weight or quantity. Classification of goods is done in accordance with the

Harmonized Commodity Description and Coding system which is being used all over theworld. All exports are exempted from Central Excise Duty.

Sales Tax

Sales Tax is levied at various stages of economic activity at the rate of 15 per cent

on: All goods imported into Pakistan, payable by the importers;

All supplies made in Pakistan by a registered person in the course of furtherance ofany business carried on by him;

There is an in-built system of input tax adjustment and a registered person can

make adjustment of tax paid at earlier stages against the tax payable by him on hissupplies. Thus the tax paid at any stage does not exceed 15% of the total sales priceof the supplies;


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Problems and Hurdles with tax advisors and authorities

Reduced rate of sales tax not allowed to Manufacturers cum Retailers 03.01.2011

Details:The Federal Board of Revenue (FBR) has excluded manufacturers-cum-retailers fromspecial procedure pertaining to the payment of sales tax on reduced rates by retail sector.

Now, all manufactures who were directly retailing their goods or selling their goods to the

end consumers would operate under the normal tax regime. The FBR has amended the SalesTax Special Procedure Rules 2007 through SRO 1(I)/2011.

The Special Procedure for Payment of Sales Tax by Retailers would not be applicable to

manufacturers-cum-retailers who sell their products through retail outlets. There aremanufacturers, who are also engaged in the activity of selling through their retail outlets. In

such cases, they would not be eligible to pay sales tax at reduced rates of the SpecialProcedure for Payment of Sales Tax by Retailers.

So far, the special procedure for retailers was not applicable to dealers of motorcycles and

specified electric goods who shall pay sales tax as prescribed under the rules. The special

procedure for retailers would also not be applicable on the said manufacturers-cum-retailers.

Subject:CNG Stations not allowed input tax adjustment 03.01.2011

Details:

The FBR has issued instructions to Large Taxpayer Units (LTUs) and Regional TaxOffices (RTOs) that the facility of refund of excess unadjusted input tax related to

supplies, other than zero-rated, would not be applicable to the CNG stations.

The FBR had allowed the gas transmission and distribution companies refund of excess

input tax not related to zero-rated supplies. The decision was announced through

SRO.748(I)/2010. Through this notification, the refund of excess unadjusted input taxrelating to supplies other than zero-rated shall be claimed and sanctioned in the cases of

gas transmission and distribution companies, manufacturers of fertilisers, electric power

producers and electric power distribution companies may claim refund of excess input

tax over output tax in any tax period. If these categories of taxpayers would have input

tax more than output tax, they would be eligible to claim refund. The CNG stations triedto take the benefit of SRO 748 (I)/2010 for claiming refund of excess input tax not

relating to zero-rated supplies. However, CNG gas stations are not covered under thedefinition of the gas distribution companies and subsequently are not qualified for

availing this concession / facility. The CNG stations are already operating under the

fixed Sales Tax regime and are not entitled to refund excess input tax.


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Subject:E-filing of Income Tax Return - final intimation 30.12.2010

Details:The Federal Board of Revenue has issued notices to almost 12,000 companies,corporate entities and business units to electronically file their income tax returns

by December 31 for the Tax Year 2010. In this regard, the FBR has communicated

the electronic intimations to the registered companies.

The Board has issued intimations to all those corporate taxpayers, who have yet

not filed their income tax returns for the Tax Year 2010. The FBR has advised the

corporate taxpayers to file their returns electronically on December 30 to avoidover burden on the system on December 31. The filing of returns on December 30

would facilitate the corporate entities to work in a hassle free environment. The

FBR has also granted facility to the corporate sector to avail extension in time forfiling of return. In such cases the corporate taxpayers should submit electronicrequest at E-FBR Portal. The timely request by the corporate entities would help

the department.

Subject:FBR extends DTRE facility to ghee

manufactuers-cum-exporters29.12.2010

Details:The Federal Board of Revenue has allowed duties and taxes remission for exports

(DTRE) facility to the manufacturers-cum-exporters of ghee in the war affected

areas of Khyber Pakhtoonkhwa (KP) and Balochistan. In this regard, the FBR hasamended Customs Rules 2001 through a notification SRO ____(I)/2010.

The DTRE facility would now be available to the manufacturers-cum-exporters ofghee in KPK and Balochistan except Hattar and Hub area. The facility would be

available to the exporters on fulfilment of certain conditions laid down by the

Board. These conditions would specifically be applicable for manufacturer-cumexporters of ghee in KPK and Balochistan.

The DTRE facility will be subject to provision of average export made by the

manufacturer-cum-exporters during last four years plus enhancement upto 20%

and the facility be provided on the basis of industries track record andperformance. secondly, time limit will be 90 days for utilising the imported palm

oil under DTRE Scheme. This period will be counted from the date of import

general manifest (IGM) to export date of the consignment. export will be allowedin foreign exchange only.

Under the Customs Rules, the DTRE facility would not be admissible to raw sugar


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and cooking oil or vegetable ghee or their raw materials and the goods which are

banned or restricted under the prevalent import and export policy orders onaccount of national security, public health and cultural, moral or religious

considerations. The FBR has granted fiscal relief to rehabilitate the economic life

in Khyber Pakhtoonkhwa, FATA and PATA by allowing DTRE facility on themanufacture and export of ghee only.

Subject:PVMA criticises ECC decision on DTRE

extension29.12.2010

Details:The Pakistan Vanaspati Manufacturers Association (PVMA) has criticised the

Economic Co-ordination Committee (ECC) of the cabinet for not extending dutytax remission for exports (DTRE) scheme across pakistan. The ECC, presided over

by finance minister Dr Abdul Hafeez Shaikh, in its meeting on december 7, 2010approved the DTRE scheme, called 'fiscal relief to rehabilitate economic life in

Khyber Pakhtunkhawa (KP)', Fata and Pata. However, insiders are of the view thatthis Scheme is meant only for one family of KP, as Hattar and Hub have been

excluded from the scheme. currently, PVMA comprises of 94 units, which are

manufacturing vegetable ghee and cooking oil in the organised sector. Themember units of PVMA contribute more than Rs 40 billion to the national

exchequer in the form of duties and taxes.

According to the PVMA, significant disparity has cropped up after issuance ofSRO___ (1) 2010 of December 13, 2010 by the FBR. Under this SRO, the DTRE

facility has been extended to the ghee manufacturers and exporters of KP andBalochistan, excluding Hattar and Hub. Initially, DTRE provision was applicableto the entire country, but was withdrawn under SRO No. 176(1) 2004 on March

22, 2004. Since the discontinuation of the DTRE, PVMA has been submitting and

pleading at all the concerned fora for its resumption, but inexplicably the facilityhas been resumed only for these two provinces i.e. KP and Balochistan, axing Hub

and Hattar.

Subject:Restoration of DTRE Scheme for KPK and

Balochistan29.12.2010

Details:FBR has restored DTRE scheme for ghee manufacturers-cum-exporters in KhyberPukhtunkhawa and Balochistan, but excluded Hattar and Hub from the facility,

putting the industrial units in these two areas at a disadvantage against the rest of

the industry in the country.

DTRE facility shall be available to the exporters on industrial track record and


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performance basis. The time limit shall be 90 days for utilising the imported palm

oil and this period shall be counted from the date of import general manifest(IGM) to export date of consignment. It is apprehended that excluding Hattar and

Hub from DTRE scheme is going to turn the facility into a negative factor instead

of making it a useful tool to promote export of ghee to neighbouring countries fortwo reasons: one)- by putting major ghee manufacturers-cum-exporters at sheerdisadvantage; and the second- for giving undue favour to those exporters who do

not have the capacity to produce more and export to Afghanistan and other

neighbouring countries.

Subject:Resstoration of DTRE Scheme for KPK and

Balochistan29.12.2010

Details:

FBR has restored DTRE scheme for ghee manufacturers-cum-exporters in KhyberPukhtunkhawa and Balochistan, but excluded Hattar and Hub from the facility,

putting the industrial units in these two areas at a disadvantage against the rest ofthe industry in the country.

DTRE facility shall be available to the exporters on industrial track record andperformance basis. The time limit shall be 90 days for utilising the imported palm

oil and this period shall be counted from the date of import general manifest

(IGM) to export date of consignment. It is apprehended that excluding Hattar and

Hub from DTRE scheme is going to turn the facility into a negative factor insteadof making it a useful tool to promote export of ghee to neighbouring countries for

two reasons: one)- by putting major ghee manufacturers-cum-exporters at sheerdisadvantage; and the second- for giving undue favour to those exporters who donot have the capacity to produce more and export to Afghanistan and other

neighbouring countries.

Subject:FBR is empowered to withdraw exemption 29.12.2010

Details:The powers of section 13 of the Sales Tax Act 1990 may be exercised by the

Federal Board of Revenue to silently withdraw sales tax exemptions and zero-

ratings through issuance of the notifications. The FBR has no legal authority to

increase rate of sales tax and federal excise, but it has ample powers under theSales Tax Act 1990 to reduce tax rates through statutory regulatory order (SRO)

without the approval of the Parliament.

FBR is legally empowered to withdraw list of major sales tax exemptions as

specified in the Sixth Schedule of the Sales Tax Act, 1990. The Exemption


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Schedule of the Sales Tax Act is directly linked with section 13 of the Sales Tax

Act. The FBR is compiling lists of sales tax exemptions and zero-ratings, whichwere issued through notifications from time to time. The exemptions would be

withdrawn through the notifications, if necessary. The Board has the legal

authority to rescind the notifications and the statutory regulatory orders (SROs)through which exemptions and zero-rating facility is granted to different sectors. Ifthe intention of the government is to silently withdrawn the exemptions and zero-

rating, powers of section 13 of the Sales Tax Act 1990 would be enough to take

away such exemptions.

Under section 13 of the Sales Tax Act, 1990, the Federal Government may, by

notification in the official Gazette, exempt any taxable supplies made or import or

supply of any goods or class of goods, from the whole or any part of the taxchargeable under this Act, subject to the conditions and limitations specified

therein. The Board may, by special order in each case stating the reasons, exempt

any import or supply of goods of such description or class, as may be specifiedfrom the payment of the whole or any part of the tax chargeable under Sales TaxAct. The exemption from tax chargeable under sub-section (2) may be allowed

from any previous date specified in the notification issued under clause (a) or, as

the case may be, order made.

Subject:CGT Rules pending for approval 21.12.2010

Details:The Federal Board of Revenue (FBR) has sent the draft of the 'Capital Gains Tax

(CGT) Rules 2010' for vetting purposes to Law and Justice Division to beapplicable on stock exchange investors. The FBR would notify the CGT rules after

clearance from the Law and Justice Division. The FBR will amend the IncomeTax Rules 2002 for issuance of procedure on computation of capital gains tax on

stock market. Once the new amendment is incorporated in the CGT Rules 2010,

the rules would be applicable on the investors of stock exchanges. It is hoped thatthe new rules would be immediately issued after clearance from the Law Division.

Subject:Restoration of taxation of zero rated sectors

opposed07.12.2010

Details:Representatives of five zero-rated export sectors have opposed government's move

to pass the Reformed General Sales Tax (RGST) Bill 2010 from the parliament.They said that once the tax law comes into being will give a free-hand to FBR

officials to raid whatever exporting units they want.


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The zero-rated exporting sectors include; value-added textile sector, sports goods

manufacturing sector, surgical instruments manufacturing sector, leather andcarpet producing sectors. Zubair Motiwala, the Chairman APTMA, showed

distrust over the proposed tax refund system, which would become functional with

the passage of RGST draft law from the parliament, saying that 90% capital of theexporting units would backlog with tax Collectors as refund.

He said 75% exports were made by these five units with more than 60%

employment generation. He said value-added textile sector had sought severaltimes a meeting with the Finance Minister but failed, whereas, he regretted, the

minister was reportedly holding talks with Aptma.

He said the five zero-rated textile sectors were already registered with tax officesand there was no need of bringing them again into such process. The move will

increase corruption during export stage while exporters would increase over-

invoicing and miss-declarations of consignments to render the system ineffective.

Chairman Pakistan Leather Garments Manufacturers and Exporters Association,

Fawad Ijaz Khan expressed doubts the new tax refund system would not be able to

function for more than two months and would return to manual process. He saidhis association members' RGST refunds of two months would touch Rs 2 billion

mark which would bring their businesses to a grinding halt.

Subject:15% ST on power / gas consumption 24.11.2010

Details:Source Business Recorder dated 24.11.2010

The Federal Board of Revenue would impose 15% sales tax on the electricity and

natural gas consumption by thousands of manufacturing units in five leading

export sectors including textile, leather, surgical, carpets and sports goods afterintroduction of the General Sales Tax Bill 2010.

The Board will rescind notifications and Sales Tax General Orders (STGOs) towithdraw sales tax zero-rating facility on the electricity and natural gas

consumption by five major export sectors following approval of the General Sales

Tax Bill by the Parliament.

The Board had frequently issued STGOs to allow sales tax zero-rating facility on

the electricity and natural gas consumption by manufacturers-cum-exporters in

five zero-rated sectors. In this regard, the FBR had issued dozens of notifications

and STGOs to facilitate the export units from time to time. These STGOs wereissued in exercise of the powers conferred by clause (d) of section 4 of the Sales


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Tax Act, 1990.

Under the reformed general sales tax (RGST), the zero-rating facility of natural

gas and power available to export units would be taken away. For this purpose, all

the relevant STGOs would be abolished to bring the export units of five sectorswithin the standard sales tax regime.

The prices of the items in the Third Schedule of the Sales Tax Act, 1990 would be

reduced once the government would introduce the RGST. The items like fruitjuices, ice cream, aerated waters or beverages, syrups/squashes, cigarettes, toilet

soap, detergents/shampoo, toothpaste, shaving cream, perfumery/cosmetics, tea,

powder drink/milky drink, tissue paper and spices sold in retail packing would

come down in the reformed general sales tax (RGST).

About the inflationary impact of the items on which sales tax exemption would be

withdrawn, officials said that it is misconception about 15 percent increase on suchitems. The prices of items, presently exempted under the Sixth Schedule of theSales Tax Act, would be increased under the RGST. However, this would not be

15 percent increase in the price due to tax credit and input tax adjustment facility

to be extended to such sectors. Once the exempted items would operate under thenormal sales tax regime, there would be less inflationary impact due to

adjustments to be claimed by such sectors. The burden of 15 percent sales tax

would not be passed on to the consumers on such exempted items, which would

become taxable under the new regime. In case of zero-rated sectors, the prices ofgoods of zero-rated sectors would increase under the normal sales tax regime.

The amount of sales tax collection would increase from sectors like iron and steelwhich are presently operating under special procedures. These sectors would be

brought under the normal sales tax regime under the GST Bill 2010.

Subject:GST Amendment bill approved by Senate body 24.11.2010

Details:Source Buisness Recorder dated 24.11.2010

The Senate standing committee on finance and revenue has unanimously approved

the General Sales Tax (GST) Bill 2010 and Finance Amendment Bill 2010 tointroduce new taxation measures along with certain recommendations to expandthe exemption basket including medicines, essential food items in packing,

educational material and packed milk / products to minimise the inflationary

impact of the Reformed General Sales Tax (RGST) on the poor masses.

The government successfully managed approval of GST Bill along with taxation


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measures including flood surcharge and increase in Special Excise duty from the

committee in the presence of PML (N), PML (Q) and other opposition parties.However, Chairman of the committee, Senator Ahmed Ali, of MQM, was unable

to attend the proceedings of the meeting.

The committee in the Parliament House with Senator Islamuddin Shaikh in thechair here on Tuesday. Finance Minister Dr Hafeez Shaikh, Minister of State for

Finance Hina Rabbani Khar, Secretary Finance Salman Siddiqui and Chairman of

FBR Sohail Ahmed were present in the meeting.

In the absence of the representatives of MQM, the chairman of the committee,

Islam-ud-din, read a letter of the MQM that the Senate committee should reject the

GST Bill 2010. The committee termed it as a political statement of the MQM.

The chairman of the committee announced unanimous approval of the GST Bill

2010 after hearing observations of committee members, particularly Haroon Khanfrom PML (Q), Ilyas Bilour from Awami National Party, Ishaq Dar of PML (N),Kulsoom Parveen and Khurshid Ahmed from Jamaat-i-Islami in the second

session of the meeting.

During the proceedings, Dar said he was surprised to know that the Federal Board

of Revenue (FBR) had not conducted any sectoral analysis and item-wise revenue

impact by bringing maximum items within the scope of the sales tax regime. He

asked the tax managers to explain whether the Board had conducted any sectoralanalysis of the exempted items. FBR Chairman Sohail Ahmed informed the

committee that the list of the exempted items under the GST Bill had been drafted

after thorough discussions keeping in view the best international practices. FBRChairman strongly supported imposition of the GST on the expensive medicines

consumed by rich people. However, he admitted that the sectoral analysis had not

been conducted by the Board to give any figure about proposed collection fromeach and every sector. "We will move as per systems applicable in the best tax

administrations for the purpose of exemptions', he added.

"Any item has not been placed in the Exempted List of the GST Bill 2010 until orunless it is very necessary directly impacting the poor". When some members

asked the FBR to take away the proposal on the enhancement of the SED from one

percent to two percent, the FBR Chairman said that the doubling of the SED

would have revenue impact of Rs 9 billion to10 billion, which would be applicablefor only six months of current fiscal year.

Khurshid objected that the list of exempted items under the Schedule-I of the GSTBill 2010 has been limited to a few items. The sales tax exemption should be

available to all kinds of basic food items, medicines, children uniforms,


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educational material and books. While reviewing the Schedule-I of the GST Bill

2010, Haroon said that all kinds of dry fruits had been brought into the GSTregime as exemption is restricted to edible oil, edible fruit, red chillies, ginger,

turmeric, fruit juices, etc. He said that the Exemption Schedule of the GST Bill

also reflects that GST would be applicable on bakery products used by the generalpublic. However, Hina pointed out that leading bakeries are only accessible to theelite class.

About the penalty regime under Third Schedule of the GST Bill, Haroon objectedthat the Board has proposed harsh punishments like imprisonment for small

violation of the Sales Tax Act. He said he was shocked that imprisonment has

been proposed as punishment for destruction of record or false statements. The

FBR has proposed imprisonment for violation for any embargo placed on removalof goods in connection with recovery of tax. The FBR assured the committee to

review the penalty regime under the proposals of the committee.

When Ilyas referred to section 52 of the GST Bill 2010, FBR Chairman said that itis the biggest tool for documentation and structural reforms have been introduced

under this provision of the GST Bill 2010. The manufactures would be bound

under the new provision to give details of the un-registered buyers within thesupply chain. The Section-52 would be used as a major reform measure to

document the national economy, he added.

Under section 62 of the Bill, a registered person who makes a taxable supply to anunregistered person shall issue a sales receipt for the supply. A sales receipt must

contain the information prescribed by the Board, including the date on which it is

issued; name and registration number of the supplier; a description of the goods orservices supplied; total amount payable for the supply; an indication that tax is

included in the amount paid and name and computerised national identity card

number (CNIC) in case of individuals and national tax number (NTN) in case ofother buyers.

During the first part of the committee meeting, the opposition members told the

government that there were certain flaws in the language of the RGST bills byidentifying loopholes and they told the ruling PPP that they would prefer to read

RGST and other bills clause by clause even if they decided to consider it for

approval.

The committee recommended certain amendments in the original draft but these

amendments are not binding on the government due to recommendatory stature of

the Upper House. The committee recommended to impose 10 percent floodsurcharge on tax liabilities exceeding Rs 5,00,000 per annum instead of Rs

3,00,000.


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The committee also asked the government to keep the food items, medicines andstationery out of the tax net by exempting from the levy of 15 per cent GST.

However, the FBR opposed these recommendations on the ground that it would

open 'Pandora's box' for other exemptions. "If we start giving exemptions to everysectors, the situation would again become complicated, as happened in case ofSales Tax Act, tax authorities commented".

Earlier, in the morning session, Ministry of Law conceded before the committeethat the 'Reformed General Sales Tax (RGST) bill' was not properly vetted owing

to time constraint and requirement of donors to submit this legislation to the

Parliament before the recently held Pakistan Development Forum (PDF). The

Ministry of Law and FBR representatives had divergent views on certain numberof proposed clauses of the RGST bills.

The senators belonging to PML (N), PML (Q) and Jamaat-i-Ismali were of theview that the government had introduced the RGST bill in haste; so, there wereserious anomalies in it. Ishaq Dar pointed out that RGST bill contains definition of

imports but there was nothing about exports in the GST Bill 2010 which is a major

anomaly.

Safdar Abbasi of the PPP warned during the proceedings of the committee that

there would be serious political ramifications attached to the GST bill and it might

be challenged in the Supreme Court; so, the Upper House must consider all prosand cons before granting approval to the bill. Ministry of Law representative said

that they had got three to four opportunities to remove distortion in the legislative

bills.

Subject:Zero Rating of ST under RGST to continue 08.11.2010

Details:The government will continue zero-rating allowed under the Sales Tax Act 1990 till

the time Federal Government withdraws it by issuing notification in the official

gazette. Pakistan's Economic Policy Makers are discussing Reformed General SalesTax with the visiting IMF team, but the outcome of these talks is still uncertain and

there are indications that the IMF's next tranche will be in peril. A letter written by

the FBR Chairman to the Finance Minister a couple of days ago, suggests immediateintroduction of RGST Bill in the National Assembly.

In his budget 2010-11 speech, the Finance Minister had announced mposition /

mplementation of the Reformed GST from October 2010. After detailed

deliberations with the provincial governments organised by the Finance Divisionunder the NFC framework, a new Sales Tax law for goods has been drafted. The


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following are the main features of the proposed RGST on goods:

(i) tax base has been broadened by limiting exemptions to the bare minimum level as

per international best practices;

(ii) no general zero-rating has been extended to local consumption;(iii) primarily, exports will enjoy zero-rating on actual export turnover basis throughan efficient centralised electronic refund disbursement system (already in place).

However, a provision has been included for the continuity of existing zero-rating;

(iv) a standard tax rate of 15% has been proposed;(v) executive empowerment to grant special exemptions has been done away with;

and

(vi) general annual exemption threshold has been increased from Rs 5 million to Rs

7.5 million.

Subject:Desk-Audit of Withholding Tax Statements 03.11.2010

Details:The withholding tax statements filed by the withholding agents under section 165

of the Income Tax Ordinance 2001 for first quarter (July-September) of 2010-11would be subjected to desk audit to check discrepancies in payment of taxes for

improving collection during current fiscal. The deadline for filing of quarterlystatements by the withholding agents has expired. Now the field formations would

submit report on statements already filed under section 165 of the Ordinance 2001.At the same time, the field offices would start desk audit of the statements filed by

the withholding agents. The income tax department is empowered to conduct desk

audit of the statements as per prescribed pro forma in the Income Tax Rules. Thedesk audit are being done with reference to the correct application of rates as well

as reconciliation of statements with the previously year's filed returns/statements.

The desk audit of withholding tax statements would also help in increasingrevenue collection by improving compliance of the withholding agents.

There are two types of actions being taken against the non-filers of withholdingagents. First, the non-filers of withholding agents are being identified forimposition of penalty. In response to notice, withholding agents usually file the

statements. The penalty is liable to be paid by the non-filer withholding agents

under section 182 (offences and penalties) of the Income Tax Ordinance 2001.This would ensure filing of return by the agents.


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Second, the desk audit would check whether tax has been accurately applied aswell as deducted by the withholding agents. Through desk audit, the penalty would

be imposed in cases tax has not been properly deducted. Under section 161 of the

Income Tax Ordinance 2001, where at the time of recovery of tax, it is establishedthat the tax that was to be deducted from the payment made to a person or

collected from a person has meanwhile been paid by that person, no recovery shall

be made from the person who had failed to collect or deduct the tax but the said

person shall be liable to pay default surcharge at the rate of eighteen percent perannum from the date he failed to collect or deduct the tax to the date the tax was

paid. A person personally liable for an amount of tax as a result of failing to

collect or deduct the tax shall be entitled to recover the tax from the person from

whom the tax should have been collected or deducted.

The provision of section 205 of the Income Tax Ordinance 2001 would also be

applicable in such cases where withholding agents failed to accurately deduct theadmissible amount. Under section 205, a person who fails to pay any tax,

excluding the advance tax and default surcharge any penalty or any amount on or

before the due date for payment shall be liable for default surcharge.

Subject:Exemptions under Reformed GST 18.10.2010

Details:The exemptions, to be retained under the 'reformed general sales tax' (RGST),include newspapers, wheat, pulses, vegetables, peas, salt and water, excluding

those sold under brand names or trademarks. Sales tax exemption would beapplicable on the goods imported under the President's Salary, Allowances andPrivileges Act, 1975; goods imported under the Prime Minister's Salary,

Allowances and Privileges Order, 1975; goods imported under the Governor's

Salary, Allowances and Privileges, Order, 1975 and goods imported under the

Acting Governor's (Allowance and Privileges) Order, 1978.

The FBR has proposed a list of Sales Tax exemptions, to be retained under the

RGST, to the Ministry of Finance. According to the exemption list sales taxexemption would be available on table salt including iodised salt excluding salt

sold in retail packing bearing brand names and trademarks. The sales tax

exemption would also be applicable on books, ambulances, fire-fighting trucks,diapers for adults (patients) and dextrose and saline infusion-giving sets along withempty non-toxic bags for infusion solution, and dextrose and saline infusion

giving sets.

Sales tax exemption would continue on the Holy Quran in whatever form or on


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whatever media. Under the exemption list of the RGST, the exemption would be

applicable on artificial parts of the body, intra-ocular lenses and glucose testingequipment and contraceptives and accessories thereof. The sales tax exemption

would also be applicable on personal wearing apparel and bona fide baggage

imported by overseas Pakistanis and tourists exempt from customs duty under theCustoms Act 1969.

The proposed list further shows that sales tax exemption may not be applicable on

vehicles in CKD condition, imported by recognised local manufacturer for supplyto diplomats, diplomatic missions, privileged persons (as per model rules) and

organisations, etc, eligible to import duty-free vehicles, subject to the procedure

laid down by the Board.

The sales tax exemption has been retained on the goods imported by various

agencies of the United Nations under the United Nations (Privileges and

Immunities) Act, 1948, as certified by the Ministry of Foreign Affairs; goodsimported by Diplomats/Embassies/Consulates under the Diplomatic and Consular

Privileges Act,1972 as certified by the Ministry of Foreign Affairs and RGST

exemption would be available on the goods imported by privilegedpersonnel/organisations under grant-in-aid agreements signed by the Economic

Affairs Division (EAD).

The sales tax exemption would be applicable on household articles and personaleffects including vehicles and goods for donation to projects established in

Pakistan, imported by the rulers and dignitaries of UAE and Qatar. The RGST

would not be applicable on articles, value of which does not exceed Rs 10,000 per

parcel, if imported through post or courier service as unsolicited gift parcel. Salestax exemption would continue on samples of no commercial value imported by

manufacturers-cum-exporters.

The sales tax exemption would continue on relief goods donated by foreign

government/agencies for free distribution among victims of natural disaster or

other catastrophe, as are certified by the authorised officer of federal/provincialgovernment. The exemption would be available on goods imported by Abdul

Sattar Edhi Foundation and Bilques Edhi Foundation; gifts or donations received

by a charitable non-profit making hospital or institution, solely for the purpose of

advancing the declared objectives of such hospital or institution; equipment,

apparatus, reagents, disposables and spares, imported by charitable non-profitmaking institutions operating hospitals of fifty beds or more and hospitals run by

the Federal Government or a Provincial Government; goods imported by ordonated to non profit making educational and research institutions and goods

supplied free of cost as replacement of identical goods previously imported

including goods imported within warranty period not exceeding one year or such


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extended period as allowed by the Collector of Customs.

Sales tax exemption would be applicable on the goods (PCT heading 9919)

heading, imported temporarily for a period not exceeding six months into Pakistan

with a view to subsequent exportation and goods (PCT heading 9920) heading,imported temporarily into Pakistan with a view to subsequent exportation. The

RGST exemption would also be applicable on the container for transportation of

cargo if imported by the shipping companies for use on board the ships and for

transportation of cargo to and from inland container depots or container freightstations. Sales tax exemption would also be applicable on the ship spares, stores

and equipment imported for use in ships registered in Pakistan under the Merchant

Shipping Act, subject to the condition that the importer satisfies the respective

Collector of Customs that the items imported would be used by such vessels. Thesales tax exemption would also be applicable on some other PCT headings of

Chapter 99 of the Pakistan Customs Tariff.

Subject:Particulars of Unregistered buyerss / sellers 12.10.2010

Details:The documentation of business and trade under the 'reformed general sales tax'('RGST') would be undertaken by obtaining particulars of unregistered buyers and

sellers from registered manufacturers and distributors, etc, to bring the entire chain

of supply into the tax net. The Federal Board of Revenue (FBR) may impose some

penalty on unregistered buyers, who do not disclose their National Tax Number(NTN)/computerised national identity card number (CNIC) during business

transactions. In case the Board introduces such penalty, it has estimated acollection of nearly Rs 60-65 billion from un-adjustable extra tax liability of 3%on taxable supplies made by manufacturers, importers and wholesalers to

unregistered buyers without disclosing their NTN/CNIC.

The FBR is expected to propose penalty for those retailers who do not declaretheir NTN/CNIC at the time of purchase of saleable commodities, which would

generate around Rs 60-65 billion under RGST. The cost of unregistered buyers

would increase following imposition of the penalty and they would be compelledto operate under the documented regime. Another proposal under discussion is to

make it mandatory for the manufacturers, distributors and wholesalers to provide

particulars of all registered and unregistered buyers and sellers under the sales andpurchase invoice summaries. The tax department can approach the manufacturers,wholesalers and dealers to obtain the particulars of registered as well as

unregistered buyers. Once the FBR obtains information about the unregistered

buyers, the turnover of the retailers would automatically be known to the taxdepartment without directly approaching the retail outlets.


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Subject:Standard Sales Tax Rate under RGST 12.10.2010

Details:The standard rate of sales tax under the reformed general sales tax (RGST) has

been proposed as 17% in order to circumvent any major revenue shortfall during

the remaining months of current fiscal (2010-11). The Federal Board of Revenue

has also proposed standard rate of 17% for sales tax under the RGST.

However, the decision about the higher rate of sales tax has yet to be taken by the

government. The higher rate of sales tax goes up to 26%, but it has yet not been

finalised to bring down these rates from 26 to 17%. The FBR will suffer around Rs30 billion loss following 1% reduction in sales tax from 17 to 16%. In the present

circumstances due to devastating floods, the government is not in a position to

reduce sales tax rate from 17% to 15%. The accumulative impact of sales taxreduction on revenue collection would be around Rs 60 billion in case rate would

be reduced from 17 to 15%.

Subject:Expeditious Refund System to be extended to

exporters29.09.2010

Details:The facility of Expeditious Refund System (ERS) would be extended to

commercial exporters and accountholders of commercial banks, and refund

amount would be directly transferred to the bank account of the taxpayers under

the plan to expedite refunds under the 'reformed general sales tax' (R-GST).

From October 1, 2010, all manufacturers-cum-exporters would be required to

obtain refund through the ERS. This would end the cumbersome paperwork to becompleted by the refund claimants. Later, different categories of taxpayers would

be gradually brought into the ERS. Under the centralised sales tax refund payment

system, the processing of the refund claims would be done in the Regional TaxOffices (RTOs), but the computerised printing of cheques would be done at the

FBR level. The FBR would dispatch the cheque to the taxpayer through courier,

eliminating intervention of the RTOs during this period. The FBR would be

engaged in electronic reporting of the procedure to the relevant LTU/RTO.

Subject: Sales Tax Rate to remain unchanged in RGST

Regime29.09.2010


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Details:The federal government may impose 10% income tax surcharge on withholdingtax collected from electricity consumed by commercial and industrial consumers.

This means that the withholding tax on electricity consumed by commercialconsumers would increase from 10% to 11% and industrial consumers from 5% to5.5% after imposition of flood surcharge. The government is expected to announce

the imposition of 10% income tax surcharge during October 10-15, 2010 after

completion of damage needs assessment in flood affected areas. The 10% incometax surcharge would be applicable on all categories of taxpayers including salaried

class. It is expected that the Bill to impose flood surcharge may be moved with the

reformed GST Bill in the Parliament.

2010.

Subject:Reformed GST - Zero Rating and Special

Procedures23.09.2010

Details:The Federal Board of Revenue (FBR) is expected to retain sales tax special

procedure for different sectors, and zero-rating facility for the five leading exportsectors under the 'reformed general sales tax (RGST) ordinance, to be issued

before October 1, 2010. Under the federal and provincial value-added tax (VAT)

proposal has been made for withdrawal of Sales Tax special procedure and zero-

rating facility for the five major export sectors including textile, leather, surgical,carpets and sports goods.

The Sales Tax special procedures have been considered as a major distortion in the

VAT regime due to different rates of sales tax for iron / steel, retailers and othersectors specified in the Sales Tax Special Procedure Rules. Under the 'ideal' VAT

law, there are no fixed rates, reduced tax, enhanced tax, retail price-based tax or

special tax schemes. During drafting of the 'reformed GST', the FBR has notedthat the Sales Tax collection has been substantially increased following

introduction of sales tax special procedure for different sector. If the specialprocedures are abolished, there are apprehensions that the sales tax collection from

these sectors may go down. At the same time, the documentation within thesesectors may not be improved. Therefore, it is being considered to temporarily

retain the sales tax special procedures in the 'reformed GST' (RGST).

The FBR is likely to continue with the sales tax special procedure for collectionand payment of sales tax on electricity, natural gas including compressed natural

gas (CNG) and liquefied petroleum gas (LPG), oil marketing companies (OMCs),


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may enhance the sales tax registration threshold from Rs 5 million to Rs 7.5

million under the reformed GST. The registration threshold of Rs 7.5 million islikely to be proposed to ensure that the cost of documentation should not be more

for the small and medium size business entities. The units operating below the

registration threshold should not be required to bear extra cost of documentation.

The FBR is also examining the Table-II of the First Schedule of the Federal Excise

Act to transfer powers of collection of sales tax on services from the Board to

provinces. The Table-II of the First Schedule of the Federal Excise Act containslist of excisable services on which the FBR is legally empowered to collect excise

duty in VAT mode. The Table-II of the First Schedule of the Federal Excise Act

covering excisable services needs to be revised to transfer powers of collection of

sales tax from the FBR to the provinces in certain cases.

Subject:No change in Income Tax Return this year 25.08.2010

Details:The Federal Board of Revenue (FBR) has abolished the proposed income tax

returns forms for tax year 2010 and allowed companies, associations of persons

(AOPs) and individuals to file the returns on the old format. The old income taxreturn forms for Tax Year 2009 would be applicable for the Tax Year 2010. There

is no change in the format of the income tax return forms to be filed for Tax Year

2010. Taxpayers have been facilitated by allowing the old return forms to be used

without seeking additional information about the cost of assets purchased / soldand information relating to the personal expenditure. In this regard, the FBR has

withdrawn the new income tax returns forms which sought detailed informationabout the personal expenditure and cost of assets purchased/sold.

The taxpayers have started filing returns electronically from the previous year. In

case additional columns have been introduced, it would make it difficult for the

taxpayers to electronically file returns with new features. Keeping in view thehardships of the taxpayers, the FBR has allowed the companies, AOPs and

individuals to file returns notified for Tax year 2009. Therefore, the return issued

for the Tax Year 2009 could be used for Tax Year 2010.


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Subject:Flood Tax in Punjab Province 18.08.2010

Details:Punjab Chief Minister, Muhammad Shahbaz Sharif has said that flood has affected

about 8.5 million people while a damage of Rs 80 billion has been estimated sofar. The CM has announced imposition of flood tax in the province.

The CM said the worst-ever flood in the history of the country has put a heavyresponsibility on the government and there is a need for collective efforts for relief

and rehabilitation of people at this stage instead of indulging in point scoring.

He said that national unity and solidarity is essential at these testing times. We are

in a state of war and a spirit of Jehad is required to tackle this challenge.

According to him, the country is facing the heaviest flood in its history and no one

could imagine that it could cause devastation at such a large scale. As such, thereis a need for sincere and consolidated efforts for coping with this challenge.

He further said Punjab government is utilising all available resources for the relief

and rehabilitation of the victims of the flood and all-out efforts are being made inthis regard. Around 400 trucks of ration are being sent to the flood-hit areas

whereby 40,000 mineral water bottles on daily basis and medicines, as well as

treatment facilities are being offered to the affectees.

Subject:Repayment cum drawback on export of ingots

and billets18.08.2010

Details:The Federal Board of Revenue through a recently issued notification has allowed

the registered persons to avail repayment-cum-drawback of sales tax on the exportof ingots, billets and mild steel re-rolled products.

According to the notification, repayment-cum-drawback of sales tax of Rs 4,100

per metric ton (PMT) would be available on the export of ingots or billets otherthan imported or of Pakistan Steel Mills or Peoples Steel Mills. This amount of

repayment of sales tax would be applicable on exports made against invoices

issued upto June 30, 2008. The repayment-cum-drawback of sales tax of Rs 5,526

PMT would be applicable in cases where exports were made against invoicesissued from July 1, 2008.

The repayment of sales tax of Rs 4,717 PMT would be applicable on the export ofMild steel re-rolled products manufactured from ingots and billets other than

imported or Pakistan Steel Mills or of People Steel Mills. The said amount of

repayment of sales tax would be applicable on exports made against invoicesissued upto June 30, 2008. The repayment-cum-drawback of sales tax of Rs 5,960


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PMT would be applicable where exports were made against invoices issued from

July 1, 2008.

The repayment-cum-drawback of sales tax of Rs 5,460 PMT would be applicable

on the export of Mild steel re-rolled products manufactured from imported billetsor billets of Pakistan Steel Mills or People Steel Mills on exports made against

invoices issued upto June 28, 2008. The repayment of sales tax of Rs 7,308 PMT

would be applicable where exports were made against invoices issued from July 1,

2008.

Subject:Maintenance of Computerized record of

Chllans and Payment Receipts16.08.2010

Details:

The Federal Board of Revenue (FBR) is likely to issue a new procedure for LargeTaxpayers Units (LTUs) and Regional Tax Offices (RTOs) for maintenance ofcomputerised record of challans and computerised payment receipts (CPRs) issued

by the State Bank of Pakistan (SBP) and the National Bank of Pakistan (NBP). In

this regard, the FBR is expected to rescind the Income Tax Circular 6 of 1995,

Circular No 12 of 1996, and subsequent amendments through a new income taxcircular to be issued during 2010. However, the FBR instructions regarding

management of tax collection and its accounting procedure would be applicable

retrospectively with effect from July1, 2010.

Under the proposed procedure, the FBR has restricted the Regional Tax

Office/Large Taxpayers Unit from taking credit of challans received from DistrictTreasuries in cases where federal treasuries are not functioning. The FBR willestablish 'Central Statistical Branch' under the administrative control of each

LTU/RTO to maintain record of federal taxes in safe custody. The procedures

have been revised to ensure authentic maintenance of computerised record ofrevenue collection and its reconciliation with the relevant federal and provincial

government departments.

According to the draft of income tax circular, the cash collection of taxes paid

under the provisions (withholding as well as voluntary) of the Income Tax

Ordinance, 2001 shall be kept in the form of computerised printout generated by

the Data Processing Units (DPUs)/Data Processing Centre (DPCs), concerned bythe Regional Tax Offices (RTOs/Large Taxpayer Units (LTUs).

The collection received through book adjustment shall be recorded in a Monthly

Collection Register of RTOs/LTUs, the certificate issued by the withholdingauthorities shall be kept in safe custody and got reconciled with the Accountant-

General of Pakistan (AGPR) or its respective sub-office (as the case may be) and


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then accounted for by the RTOs/ LTUs. The photocopies of the challans produced

by the taxpayers do constitute an evidence of payment. However, the credit of thistax, on the basis of such evidence shall only be allowed to the taxpayer/claimant, if

CPR is verifiable by the system (Veritax) or Tax Management System (TMS) or

DPC or DPU's data.

The Enforcement Divisions/Units of RTOs/LTUs are responsible to maintain and

keep the collection records. Hard records shall be kept in safe custody and backup

of soft records shall also be prepared on monthly basis, so that the chances of lossof data are eliminated.

At the close of each month, the total of monthly collection from all sources shall

be consolidated by the Enforcement Divisions/Units concerned and alongwithprescribed MPR of collection of Enforcement Division shall be passed on to the

designated officer of RTOs/LTUs in his own hand both in figure and words.

At multiple E&C Divisions/Units, there shall be a Central Statistical Branch under

the administrative control of RTO/LTU and all computer printouts received from

Treasury/DPUs/ DPCs shall be kept by it before distribution to the E&C Division/Unit having jurisdiction upon cases. The E&C Division/Unit shall maintain their

own records of Collection and would reconcile every month as per standing

instructions of Chief Commissioner Inland Revenue, RTO/LTU with the

AGPR/Sub Office AGPR/Treasury (as the case may be).

The FBR has issued a separate procedure for stations where federal treasuries are

not functioning. The credit of collection for all challans received at a station,

where Federal Treasury is not functioning, shall be taken by the Regional TaxOffice/Large Taxpayers Unit having jurisdiction of Office receiving these challans

from District Treasuries. After taking the credit, these challans shall be marked

'Credit Taken For' and forwarded to the RTOs/LTUs having proper jurisdictionover the case for record and giving credit to the taxpayers concerned. The

RTO/LTU receiving such stamped challans shall enter these in a separate portion

of his Collection records and Credit for this shall not be taken by him in hisPerformance Statements.

Introduction to Federal Board of Revenue

Documents

Transcript of Introduction to Federal Board of Revenue