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ISLAMABAD: The government has made it mandatory for the manufacturers of cigarettes to obtain brand licence for each brand or Stock Keeping Unit (SKU) in such manner as may be prescribed by the board.

According to the Finance Bill 2021-22, the manufacturers of the specified goods shall be required to obtain brand licence for each brand or SKU in such manner as may be prescribed by the board.

Any specified brand and SKU found to be sold without obtaining a licence from the Board shall be deemed counterfeit goods and liable to outright confiscation and destruction in the prescribed manner and such destruction and confiscation shall be without prejudice to any other penal action which may be taken under this Act, the FBR added.

Through the Finance Bill 2021-22, the telecommunications companies operating under licence from the Pakistan Telecommunication Authority will now be treated as an "Industrial Undertaking".

The benefits and privileges under the Income Tax Ordinance will be extended to all telecom companies.

A tax expert explained that under the Finance Bill 2021-22, the definition of "amalgamation" as given in Section 2 (1B) of the Ordinance was referring to the Companies Ordinance, 1984, whereas the law relating to companies was replaced with Companies Act, 2017; therefore, the expression has now been amended to read as Companies Act, 2017 with regards to amalgamation and also where ever the expression so appears in the Ordinance.

A new definition clause 10A is being introduced to define "business bank account".

This bank account will have to be made part of the tax profile by amending the same.

All business transactions ordinarily will be expected to be routed through this account. Definition of "concealment of Income" has been inserted in Section 2 of the Ordinance by inserting Section 2(1)(13AA) which means suppression of any item of receipt liable to tax in whole or part or failure to disclose income chargeable to tax.

Claiming of any deduction or expenditure not actually incurred and any act referred to in Section 111(1) of the Ordinance. The definition clause will hopefully take away the discretionary power of the taxation officer.

The explanation has also been added to clarify that concealment has to be proved and mere declaration or non-declaration will not be a base for application of the definition.

Collection of advance tax from the commission of the members of the Stock Exchange u/s 233A of the Ordinance was made non-applicable from July 2019. The definition of income as given in Section 2(29) now excludes the provisions of Section 233A of the Ordinance.

The definition of Information Technology Services and IT-enabled services has been added to definition Section by adding Section 2(1)(30AD) and (30AE). This was required to be explained as the matters of e-business had increased and also with the Covid situation, the business had shifted to IT-enabled services.

This will open avenues for collection of revenue as business is shifting to this mode with payments also on digital basis. The definition of "small and medium enterprise" has also been inserted to mean a person who is engaged in manufacturing as defined in clause (iv) of sub-section 153(7) of the Ordinance and his business turnover does not exceed Rs250 million in a tax year.

In case it exceeds the limit then the same shall not qualify as a small and medium enterprise in that year or a subsequent year. The conditions relating to "start up" as provided in Section 2(1)(62A) of the Ordinance were subject to approval of the federal government; however, this is now being amended to read as from board with the approval of the Federal Minister in Charge.

In short, this power is now within the domain of the board and also to avoid the judgment of the Supreme Court of Pakistan where the SROs/notifications issued by FBR were held to be without lawful authority.

The profit on debt charged to tax u/s 7B is proposed to have a maximum limit of Rs5 million as against Rs36 million with a tax charge of 15 percent. An explanation to Section 12 (2)(c) has been added to clarify that the allowances solely expended in the performance of employee's duty does not include an allowance which is paid in monthly salary on fixed basis or percentage of the salary, and an allowance which is not wholly or exclusively spent on behalf of employer.

This is likely to open the examination of salary structure of private and public-sector employees. Also the employers monitoring may expose the past transactions as this amendment is being made by way of insertion of an explanation that may be applied retrospectively.

The provisions of Sub Section 6 and 7 of Section 15 of the Ordinance shall be omitted. This means persons having rental income of less than Rs200,000 and no other income under other head will also be chargeable.

An explanation has been added to Section 18(1)(b) of the Ordinance, which covers taxability of co-operative societies by way of sale of goods or immovable property or providing of services shall be taxable. The provisions of Section 23A of the Ordinance are proposed to be deleted which means that First Year Allowance will not be available.

The capital gains from immovable property u/s 37 of the Ordinance is proposed to be rationalise and amendments by way of explanations to the terms is being added to avoid the issue of prospective or retrospective charge. Similarly, the avoidance of taxation by way of gift/transfer has been brought into the domain of examination of the commissioner.

The allowance of Workers Welfare Fund or Workers Profit Participation Fund paid to provinces after the 18thAmendment shall be an allowable expense provided the taxpayer is not a trans-provincial entity. This means that the federal Law will govern the trans-provincial entity; thus, any provincial amount, if paid will not be allowed.

The claim of rebate on donations will also be available now on voluntary contributions u/s 61 of the Ordinance. Tax credit for giving employment to fresh graduates is being withdrawn and whereas to promote banking or credit card transactions.

This means joining the real-time integration of boards computerised system for real-time reporting. Section 65F is being introduced to allow 100 percent tax credit to certain taxpayers, i.e., coal mining for power projects; income from export of computer software, IT services or IT-enabled services upto June 30th 2025.

Section 100C is being re-introduced with elaborate changes to make the issues clear and elaborate. Section 100E is being introduced to cover the small and medium enterprises as defined in Section 2 (59A) of the ordinance also introduced in the budget.

The condition of turn over for payment of minimum tax has been enhanced from 10 million to 100 million. The provisions of Section 114A of the Ordinance asking for filing of tax profile is proposed to be deleted.

The provisions of Section 122(5A) of the Ordinance are also amended to direct that the amendment be only amended if it is erroneous and prejudicial from the record, without going for any further inquiry. This may take away the discretion of the department and a step towards reliance on record only.

It is proposed that demand after appeal effect is to be paid immediately and process of giving time by following the other provisions and conditions for recovery are not applicable.

Copyright Business Recorder, 2021


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