ISLAMABAD: The government has announced relief measures of Rs 49.3 billion in budget (2020-21) including abolition of Additional Customs Duty (ADC) on the import of 1640 items, reduction of customs duty on 90 items from 11 percent to 3 percent and zero percent, reduced sales tax from 14 to 12 for big retailers, withdrawn nine types of withholding taxes; reduced holding period and tax rates for Capital Gain on immoveable property and exempted withholding tax on cash withdrawal to the extent of foreign remittances.
During the technical briefing of the Federal Board of Revenue (FBR) on Friday, Chairperson FBR Nausheen Javaid Amjad along with Muhammed Javed Ghani, Member Customs Policy, Dr Hamid Ateeq Sarwar, Member IR Policy and Bakhtiar Muhammed, Member FATE briefed media on taxation and relief measures on budget (2020-21).
Officials said that the customs duty relief measures stood at Rs25 billion.
Inland Revenue (sales tax, income tax and federal excise duty) relief measures amounted to Rs26 billion; Inland Revenue taxation measures stood at Rs 1.7 billion and the net impact of Inland Revenue measures comes to Rs24.3 billion.
Therefore the total net impact of relief measures totalled at Rs49.3 billion for 2020-21.
The FBR high-ups estimated that the tax machinery could generate Rs 200 to Rs 300 billion through effective enforcement and broadening of narrowed tax base in 2020-21.
"With restoration of economic activities and increased imports the FBR will be able to achieve its envisaged target" the FBR's Chairperson Nausheen Javaid said.
The FBR waived off additional custom duty on around 1640 items of raw material and this one step will have negative revenue impact of Rs 11 billion in the upcoming budget.
Dr Hamid Ateeq Sarwar stated that the revenue impact of withdrawal of withholding taxes comes to around Rs 7 billion. To augment efforts towards simplification of the withholding tax regime, the withholding tax provisions are being deleted: Collection of advance tax on education related expenses remitted abroad; tax on steel melters and composite units; withdrawal of balance under pension fund; tax on local purchase of cooking oil or vegetable ghee by certain persons; advance tax on functions and gatherings; advance tax on cable operators and other electronic media; advance tax on dealers, commission agents and arhatis etc.; advance tax on insurance premium; advance tax on tobacco. This measure would reduce the cost of the compliance of taxpayers, enhance the control of FBR over the withholding tax regime and would be pivotal in promoting ease of doing business.
The reduction of Federal Excise Duty (FED) on cement from Rs. 2 per kg to Rs. 1.75 per kg would cause revenue loss of Rs 13 billion to the national kitty.
To incentivize and propel economic activity in the real estate sector, the bifurcation of plots and constructed property for determining holding period of capital gains is being done away with i.e. the holding period for taxation of capital gains on disposal of immovable property is being restricted to 4 years.
The FBR also proposed reduction into Capital Gains Tax (CGT) on real estate from possessing period of 8 years to 4 years and the rates also reduced from 5 to 2.5 percent, from 10 to 5 percent and 12.5 to 7.5 percent.
One of the major enforcement measures introduced by the government in the budget 2020-21 is empowering the FBR to have real-time access to information and databases to the Board by various authorities such as NADRA, FIA, provincial excise & taxation departments etc. In case of non-compliance the FBR will be empowered to impose penalty against these departments and individuals after six months meaning after December 31, 2020. In order to comply with FATF requirements, the FBR has proposed to get details of those who are providing donations to Non- Profit Organizations (NPOs) so strengthening of compliance regime is proposed.
The FBR has imposed 7.5 percent Federal Excise Duty ad valorem in case of locally manufactured double cabin (4X4) pick-up vehicles and 25 percent in case of imported ones, increase FED on cigar, cheroots, and cigarillos and imported cigarettes from 65 percent ton 100 percent of retail price, increase in rate of FED on filter rods from Rs 0.75 to Rs 1 per filter rod, levy of FED on e-liquids of electric cigarettes @ Rs 10 per ml and levy of FED on caffeinated energy drinks at rate of 25 percent.
For major relief measures, the minimum threshold of supplies by retailers for obtaining CNICs of the buyers is proposed to be increased from Rs 50,000 to 100,000.
The FBR also reduced GST rate from 14 to 12 percent for tier-1 retailers who will connect with Point of Sale (POS) software. The FBR hopes that 20,000 retailers will be connected with POS software in next fiscal year.
The FBR also reduced regulatory duty on 400 to 500 smuggled prone items and enhanced scope of concession available to Special Economic Zones (SEZs).
On customs side, the FBR reduced custom duty on 40 raw materials of various industries, rationalized tariff under National Tariff Policy 2019, by reducing customs duty on 90 tariff lines from 11% to 3% and 0% and allowed the exemption on import of raw material to those Nashiran-e-Quran who do not have their own in-house printing facility.
The FBR reduced regulatory duty from 12.5% and 17.5% to 6% and 11%, respectively on Hot Rolled Coils (HRC) of Iron and steel falling under PCT codes 7208 and 7225& 7226, respectively. The revenue impact of the said relief measures would be Rs 3.5 billion.
On the request of various local industries, a number of their inputs/intermediary raw materials are being allowed concessional import under new serial number of the fifth schedule through IOCO quota determination and granted exemption of custom duties on import of raw materials by manufacturers of Butyl Acetate.
The FBR granted exemptions of custom duty on import of raw material by manufacturer of syringes and saline infusion sets, import of raw material by manufacturers of buttons and reduced custom duty on import of raw material by manufacturers of interlining/buckram.
The FBR reduced custom duty and exemption of additional custom duty and regulatory duty on import of raw materials by manufacturers of Wire rod, exemption of import of machinery, equipment and other project related items for setting up of internet cable landing stations. The FBR exempted customs duties on import of 61 COVID19 related items, which was due to expire on 20th June has been extended due to the continuation of pandemic till September 30, exemption from 2% additional customs duty on import of edible oils and oil seeds under PM's COVID19 Relief Package has been extended up to September 30, 2020, granted exemption of duties & taxes on import of Dietetic Foods for Children with inherited metabolic disorders and exemption of all duties & taxes on import of Diagnostic Kits for Cancer and Corona Virus. The government granted exemption of Customs duties on inputs of Ready to use Supplementary Foods (RUSF) and exempted Customs duties on import of life saving drug Meglumine Antimonite for treatment of leishmaniasis. The government granted extension up to 2023, in exemption of customs duties on imports for setting up new industries in erstwhile FATA area.
The scope of section 73 certain transduction not admissible is proposed to be widened to cover all registered persons supplying taxable goods.
The FBR enhanced threshold for becoming Prescribed Person for Withholding of Tax on Supplies, Services and Contracts from Rs 50 million to Rs 100 million and a similar threshold of hundred million rupees is being prescribed for a sales tax registered person to become a withholding agent.
The government exempted Withholding Tax on Cash Withdrawal to the extent of Foreign Remittances, promoting Investment in Government Debt Instruments through a foreign bank account, a non-resident rupee account repatriable or a foreign currency account, issuance of Centralized Income Tax Refunds and Hajj Operators to be exempted from Withholding Tax on Payments to Non-Residents.
The FBR excluded Vehicles Up to 200cc from the ambit of Advance Tax such as motorcycle Rakshaw, advance Tax on Auction of Immovable Property to be Collected in Installments , prompt Issuance of Exemption Certificates to Public Listed Companies within 15 days and collection of Advance Tax by Educational Institutions not to Apply to Persons on the ATL (Active Taxpayer List). The government allowed e auditing in the budget, rationalize Cost of Transport Vehicle for Claiming Deduction on Account of Lease Rentals, filing of Withholding Statements under section 165 on quarterly basis, incentivizing and promoting the Construction Industry package as legal cover, tax exemptions and Concessions for the Gwadar Port and the Gwadar Free Zone and incorporation of relief measures provided through SROs during the COVID pandemic.