To encourage corporatisation of individual stock exchange membership, the exemption of income tax would be applicable on the gain derived by an individual from transfer of membership rights or shares of a stock exchange including a room in the exchange by an individual to a company, between July 1, 2006 and June 30, 2007.
The explanatory circular 1 of 2006 issued on Monday has specified that one-time exemption on income from transfer of individual membership to a company was allowed up to June 30, 1999. This incentive had improved quality of intermediation in capital market transactions; therefore, another one-time exemption was provided up to June 30, 2006.
In order to encourage further corporatization, the gain derived by an individual from transfer of membership rights or shares of a stock exchange in Pakistan along with a room in a stock exchange in Pakistan by an individual to a company at any time between July 1, 2006 and June 30, 2007 will be exempted from income tax, it added. The circular has further clarified that the withholding tax (WHT) on profit on government securities has been reduced from 20 percent to 10 percent.
Profit on debt received by a person on account of a deposit/certificate under the National Savings Scheme or Post Office Savings Account, or an account/deposit maintained with a bank or a financial institution is subject to withholding tax @ 10 percent of the yield or profit paid. However, profit paid on other securities by the federal government, a provincial government or a local authority attracts 20 percent WHT, which placed the said investors at a disadvantageous position. Therefore, WHT on profit on Government Securities has been reduced from 20 percent to 10 percent. Under the previous regime, certain imports enjoyed total exemptions, whereas others were subject to a reduced rate of withholding tax. In the first category, it included imports of wheat, sugar, mobile telephone sets and plant, machinery, equipment and parts and in the second category were gold and silver which were subject to a withholding tax of Rs 2 per tola and Rs 5 per kg, respectively. Likewise, import of re-rollable and re-meltable scrap, which is a raw material for steel industry, was liable to withholding tax @1 percent at the import stage.
These concessions have now lost relevance and there was a need to rationalise the rate structure. The CBR has also clarified that the government has levied one percent withholding tax on import of capital goods, cement, coal, gold, mobile telephone sets, silver, sugar, wheat, raw wood, trucks in CBU condition having gross vehicle weight (GVW) exceeding 5 tons classified under PCT headings 8704.3290 and 8704.9090, dump trucks classified under PCT heading 8704, buses and tractors classified under PCT heading 87.01, 8702.1090.
The levy would also be applicable on import of the following items covered by SRO 567(I)/2006 under the Customs Act, 1969: Disinfectants used in poultry business, prefabricated structures for poultry farms and livestock and raw materials and intermediaries goods as used in the manufacture of packing material for the packing of dairy products, medicines for cancer, drugs used for kidney dialysis and kidney transplant, all type of vaccines for Hepatitis, Interferon and other medicines for Hepatitis, all vaccines/anti-sera, cardiac medicines, injection anti-D Immunoglobulin, blood bags CPDA.1, all medicines for HIV/AIDS and all medicines for Thalassemia and news print.
The levy would also be applicable on the following items covered by SRO 575(I)/2006 dated 05.06.2006 under the Customs Act, 1969: medical, surgical, dental or veterinary machinery/equipment, fixtures, fittings, furniture and diagnostic kits (not manufactured locally), equipments relating to call centres (not manufactured locally), ripening chambers, hot water treatment plant, vapour hot treatment plant, modern cold storage, packing machinery, power generating sets of 10 - 25 KVA and battery-operated forklift trucks used in horticulture and floriculture business, processing and packing machinery/equipment required for fish farming, broadcasting equipment and computer hardware, parts and accessories of items classified under PCT heading 8471. According to the circular, Clause (13H), Part II of the Second Schedule has been added to collect reduced rate of WHT @ 2 percent on the following items, on import value as increased by customs duty and sales tax, (if any leviable thereon): raw material for steel industry including re-meltable; and re-rollable scrap; raw material for manufacture of poultry feed; and stationery.
For the purpose of section 148, an explanation has been added to define the expression 'capital goods' as below:
'Explanation: Capital goods mean any plant, machinery, equipment, spares and accessories, classified in Chapters 84, 85 or any other Chapter of the Pakistan Customs Tariff, required for,-
(i) the manufacture or production of any goods, and includes refractory bricks and materials required for setting up a furnace, catalysts, machine tools, packaging machinery and equipment, refrigeration equipment, power generating sets and equipment, instruments for testing, research and development, quality control, pollution control and the like;
(ii) use in mining, agriculture, fisheries, animal husbandry, floriculture, horticulture, livestock, dairy and poultry industry and service sector as defined in Customs Act, 1969.
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