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Opinion

Memorandum on the Finance (Supplementary) Bill, 2021

BACKGROUND AND HIGHLIGHTS OF THE FINANCE (SUPPLEMENTARY) BILL, 2021 The Government claims to have presented the...
Published January 6, 2022

BACKGROUND AND HIGHLIGHTS OF THE FINANCE (SUPPLEMENTARY) BILL, 2021

The Government claims to have presented the Finance (Supplementary) Bill, 2021 as part of prior actions to ensure Pakistan’s sixth review of the $6 billion Extended Fund Facility (EFF) cleared by the IMF’s Executive Board, which is scheduled to meet on January 12, 2022 to decide about the disbursement of a nearly $1bn tranche.

The Government estimates to collect revenues of Rs 375 billion through the amendments proposed in the Bill, out of which Rs 343 billion are expected to be collected from the withdrawal of sales tax concessions. The Finance Minister has emphasized that most of the sales tax exemptions proposed to be withdrawn are intended to fix the distortions in existing sales tax laws w.r.t. exemption and zero-rating. He has further claimed that substantial part of the sales tax so collected would not be passed on to the end consumers / common man especially the sales tax of Rs 160 billion expected to be collected from the pharma sector which will be refundable to pharmaceutical companies when claims for zero rating will be filed. This claim, however, raises question on the basis of additional tax collections of Rs 375 billion envisaged through the Bill if substantial amount of sums so collected are expected to be refunded / adjusted.

While removal of distortions in the sales tax regime was essential to streamline the process of collection of sales tax under the VAT mode across the board, however Government’s over reliance on indirect taxes which has been seen over a period of time, and also witnessed in higher tax collections recently, needs to be rationalised. This over emphasis on indirect taxation is perhaps due to structural imbalance of taxation system of Pakistan which does not allow optimal tax collection and promotes undocumented economy. A substantial and incremental shift is required to decrease disparity in income and reduce the burden of indirect taxes on common man.

Major sales tax concessions / exemptions withdrawn are as under:

• Zero rating of sales tax has been proposed to be withdrawn on various items including

(i) exempt goods if exported by a manufacturer;

(ii) supplies of locally manufactured plant and machinery to manufacturers in the Export

Processing Zone;

(iii) supplies to duty free shops.

• The reduced rate of 12.5% on locally manufactured or assembled motorcars has been restricted to the motorcars having engine capacity up to 850 cc only.

• Reduced rate of tax on import of specified plant and machinery is proposed to be withdrawn.

• Fixed tax on import of certain cellular mobile phones has been proposed to be replaced by the standard rate of 17% tax.

• Exemptions from sales tax on import and supplies of various goods (including capital goods) is proposed to be withdrawn including plant and machinery for export processing zones, goods imported by or supplied to hospitals, machinery and parts for renewable energy, sample or replacement goods.

Apart from the above, some other major amendments proposed through the Bill are as under:

• A clause introduced by the Tax Laws (Third Amendment) Ordinance, 2021 (through which companies were made liable to make their payments through digital modes) has been suspended until it will be notified by FBR. Since its introduction, the implementation of the clause was otherwise being kept in abeyance by FBR through circulars.

• Banks are required to provide particulars of bank accounts opened or redesignated during preceding month.

• Advance income tax on bills of internet and mobile, and on own money of locally manufactured cars has been increased. FED on import or local supply of certain vehicles has also been increased.

• Concept of SPV introduced in the REIT regulations has also been accounted for in the income tax provisions.

  • Threshold of small manufacturers (not liable to sales tax) reduced from Rs 10 million to Rs 8 million.

• Condition of providing CNIC on sale to unregistered persons waived in case payments are made through debit or credit card or digital mode.

• Scope of Tier 1 retailers has been expanded to include those subject to income tax withholding under sections 236G or 236H, beyond a threshold.

INCOME TAX PAYMENTS THROUGH DIGITAL MEANS

Through the Tax Laws (Third Amendment) Ordinance, 2021, a new Clause (la) was introduced under section 21 which requires every company to make payment for a transaction under a single account head exceeding Rs 250,000 through ‘digital means’ from their notified business bank account, subject to certain exclusions. Otherwise, the expense would become inadmissible.

Due to challenges and practical difficulties in the implementation of Clause (la), the Board deferred its implementation from time to time till December 31, 2021.

The Bill now proposes to defer its implementation indefinitely till the time it is notified by the Board.

While introducing Clause (la), the term ‘digital means’ was not defined. It was, although, ought to mean all sort of paperless mode of payments; however, due to lack of proper definition confusion persisted. The State Bank of Pakistan (SBP) in its instructions issued to banks vide PSP & OD Circular Letter No. 5 of 2021 dated October 15, 2021 listed down following digital modes of payments, which were also considered to be relevant for the purposes of Clause (la):

(a) Online portals/platforms for digital payments/receipts

(b) Online Interbank Fund Transfer services

(c) Online bill/invoice presentment and payments services

(d) Over the Counter (OTC) digital payments services/facilities

(e) Card payments using Point of Sale (POS) terminals, QR codes, mobile devices, ATMs, Kiosk and/or any other digital payments enabled devices

(f) Any other digital/online payment modes

To address this ambiguity, the Bill has proposed to define the term ‘digital means’ as “electronic or digital payments as defined by the State Bank of Pakistan”. It, therefore, appears that the above instructions of SBP or any other instructions which may be issued by SBP from time to time would be relevant for the purposes of defining ‘digital means’ whenever clause (la) would be implemented.

The introduction of clause (la) apparently disrupted the currently prevailing credit market practices where besides cheques (being a regular mode of payment), post-dated cheques are also used as instrument of security between buyers and sellers. The Government may, therefore, consider bringing innovation in the cheque clearing system as Pakistan’s credit market prefers this mode of payment. SBP has also been working on introducing QR code system in cheques for seamless same day clearing. This could be integrated with the electronic system of banks for electronic clearing of cheques; thereby, providing the same utility to the customer taxpayers and information to the revenue as any other digital means of payment.

SPECIAL PURPOSE VEHICLE UNDER THE REAL ESTATE INVESTMENT TRUST (REIT)

Prior to amendment in REIT Regulations vide SRO 724(I)/2021 dated June 7, 2021, it was mandatory that the property being developed under the REIT structure, whether developmental or rental REIT, is to be owned by the REIT, being a specific trust formed under these regulations. This inter alia required transfer of property from existing owners to the REIT.

Under the amendments in REIT Regulations (through SRO 724), REIT Scheme can own REIT Assets through Special Purpose Vehicle (SPV), which has to be a Limited Liability Company with at least 75% ownership by the REIT Scheme.

REIT Funds are considered as pass through entity since they are regulatorily obliged to pay 90% of their profits to unitholders to avail corporate tax exemption. The same concept is applied to SPVs since they are undertaking similar operations to that of a REIT scheme under direct ownership structure and are regulatorily obliged to pay 90% of their income as dividend to the REIT Scheme and other investor.

Income Tax Ordinance provides for corporate tax exemption to REIT scheme upon 90% distribution of its profits. Through the Finance (Supplementary) Bill, 2021; the said exemption is also being extended to SPV. Under the amended REIT regulations, SPV would actually earn the income from REIT assets and distribute the same to investors. In line with corporate tax exemption, SPV has also been exempted from application of tax withholding / collection under Sections 150 (Dividend), 151 (Profit on Debt), 233 (Brokerage and Commission) and Capital Gains on disposal of securities.

Distribution of income by SPV to REIT would not be taxable, as income of REIT is otherwise exempt from tax whereas distribution of income by SPV to investor other than REIT would be taxed @ 35%. The tax incidence at higher rate of 35% appears to have been kept to rationalise the overall tax incidence on income from REIT assets earned by other than REIT investors through SPV.

The existing provisions of the Income Tax Ordinance provide for exemption to the profits and gains accruing to a person on the sale of immoveable property to any type of REIT scheme up to June 30, 2023. Under the amended REIT regulations (since the REIT assets can be retained under SPV and the REIT assets is owned by REIT by acquiring the shares of SPV), it was necessary that capital gains on transfer of shares of SPV be exempted to bring the same at par with exemption provided for transfer of immovable property to REIT. The Bill, therefore, proposes to provide the exemption on income from disposal of shares of SPV to any type of REIT scheme up to June 30, 2023.

MINIMUM TAX ON CERTAIN TRANSACTIONS

Under the existing provisions of the following sections, the tax deductions on certain specified transactions are considered as ‘minimum tax’ on the income of a resident person:

(i) Section 153 (payment for goods, services, and contracts);

(ii) Section 233 (brokerage and commission); and

(iii) Section 236Q (payments to residents for use of machinery and equipment).

Due to the manner in which the law relating to minimum tax is worded in the respective sections, there was a view that such withholding would be minimum tax on the entire income of such resident person from all sources.

To remove this ambiguity, the Bill has now proposed to include an explanation in each of the respective sections which provides that withholding tax under respective sections would be minimum tax only on related income which is subject to withholding of tax in that particular section. The courts would interpret whether the proposed amendment although being introduced as explanation would actually be applied retrospectively or the amendments would be considered as prospectively applicable.

FURNISHING OF INFORMATION BY BANKS

Under the provisions of section 165A of the Ordinance, every banking company is required to make arrangements to furnish certain information to the Board in the prescribed form and manner. The Bill proposed to introduce a new Clause in the aforesaid section which requires the bank to provide a list of persons containing particulars of their business accounts opened or re-designated during each preceding calendar month.

It appears that the above change is in-line with the requirement for declaration of the business bank account

under the provisions of section 114A introduced through the Finance Act 2021 and is a step towards documentation of the economy.

DISCLOSURE OF INFORMATION BY A PUBLIC SERVANT

Under the provisions of Section 216 of the Ordinance, a public servant shall not disclose the prescribed confidential information to any person except for the specified instances / list of persons where such information can be disclosed.

A new clause in sub-section (3) is proposed to be added whereby particulars in respect of high-level public officials (defined as politically exposed persons as defined by a rule, regulation, executive order or instrument; or under any law for the time being in force) and public servants in BPS-17 and above, their spouses, children or benamidars, or any person in relation to whom the aforementioned persons are beneficial owner can also be disclosed.

It is also proposed that the said amendment is always deemed to have been added.

The proposed clause shall, however, be not applicable to those who are expressly excepted under clause (iv) of sub-section (m) of Section 5 of the National Accountability Bureau Ordinance, 1999.

ADVANCE TAX ON TV PLAYS AND ADVERTISEMENTS

The Bill proposes to introduce a new Section 236CA for the collection of advance tax on foreign TV drama serials, plays dubbed in Urdu or any other language or any commercial for advertisements featuring foreign actor for screening and viewing on any landing rights channel at the following rates:

===============================================================================================
S. No.                                Description                                   Rate of Tax
===============================================================================================
1                                     Foreign-produced                             Rs 1,000,000
                                      TV drama serial or play                       per episode
2                                     Foreign-produced                             Rs 3,000,000
                                      TV play (single episode)
3                                     Advertisement                                  Rs 500,000
                                      starring foreign actor                         per second
===============================================================================================

The licensing authority certifying the foreign TV drama serial, play dubbed in Urdu or other language or certifying the aforesaid advertisement, as the case may be, is prescribed to be a collecting agent.

The tax required to be collected under the aforesaid section shall be a minimum tax on the income arising from such drama serial, play or advertisement.

Tax withholding on foreign produced TV drama or serial was earlier introduced through Finance Act, 2013 and was later withdrawn through Finance Act, 2016.

ADVANCE TAX ON TELEPHONE AND INTERNET USERS

The Bill proposes to increase advance tax collected from mobile telephone and internet users as under:

===============================================================================================
Description                           Existing Rate                               Proposed Rate
===============================================================================================
Subscriber of internet, mobile        10% of the amount of bill                      15% of the
telephone and pre-paid                or sales price for the tax              amount of bill or
internet or telephone card            year 2022 and 8% for onwards                  sales price
===============================================================================================

ADVANCE TAX ON PURCHASE, REGISTRATION AND TRANSFER OF MOTOR VEHICLES

Every motor vehicle registration authority of Excise and Taxation Department is required to collect advance tax at the time of registration if the locally manufactured motor vehicle has been sold prior to registration by the person who originally purchased it from the local manufacturer.

The Bill proposes to enhance rates of tax under this head as under:

===============================================================================================
Engine Capacity                       Existing Rate                               Proposed Rate
===============================================================================================
Upto 1000 cc                          Rs 50,000                                      Rs 100,000
1001 to 2000 cc                       Rs 100,000                                     Rs 200,000
2001 cc and above                     Rs 200,000                                     Rs 400,000
===============================================================================================

PROFITS AND GAINS OF INDEPENDENT POWER PRODUCERS

Profits and gains derived by a taxpayer from an electric power generation project set up in Pakistan were exempt from tax subject to certain conditions. Through the Finance Act, 2021 [earlier inserted through the Tax Laws (Second Amendment) Ordinance, 2021 dated March 22, 2021], the said exemption was restricted to persons who either entered into an agreement with the Federal or Provincial Government or to whom letter of intent was issued by the Federal or Provincial Government for setting electric power generation project in Pakistan upto June 30, 2021.

The Bill now proposes to amend the restriction for persons to whom ‘letter of support’ instead of letter of intent is issued. The amendment is proposed to be applicable retrospectively.

SALES TAX PHARMACEUTICAL SECTOR

At present, pharmaceutical sector is exempt from sales tax at import as well as supply stage. The sales tax is applicable only on their packing materials as well as on certain indirect costs under provincial laws.

The Bills seeks to impose sales tax on its raw material / purchases while its sale side is being zero rated. As a result, sales tax suffered on raw and packing materials would become refundable. For that purpose, sales tax returns and refund claims would be filed. The Government has promised to process their refunds on fast-track basis like exporters. Based on that, the Government claims that this measure would not only reduce the prices of pharmaceutical products but would also document the entire supply chain, from imports till retailers.

COTTAGE INDUSTRY

Cottage industry is exempt from sales tax. The term “cottage industry” has been defined to mean a manufacturing concern, which fulfils each of the following conditions, namely:

(a) does not have an industrial gas or electricity connection;

(b) is located in a residential area;

(c) does not have a total labour force of more than ten workers; and

(d) annual turnover from all supplies does not exceed Rs 10 million rupees

Though the Bill, the limit of annual turnover, specified in (d) above, has been reduced from Rs 10 million to Rs 8 million.

TIER 1 RETAILER

The Sales Tax law requires Tier 1 retailers to be registered and to discharge their sales liability under conventional VAT mode whereas retailers other than Tier 1 are not required to be registered as they discharge their sales tax liability through electricity bills.

Presently, a retailer falling in any one or more of the following categories, is treated as Tier 1 retailer:

(a) a retailer operating as a unit of a national or international chain of stores;

(b) a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;

(c) a retailer whose cumulative electricity bill during the immediately preceding 12 consecutive months exceeds Rs 1,200,000;

(d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers;

(e) a retailer, whose shop measures 1,000 square feet in area or more or 2,000 square feet in area or more in the case of retailer of furniture;

(f) a retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by State Bank of Pakistan; and

(g) any other person or class of persons as prescribed by the Board.

The Bill proposes an additional criteria to be added by inserting clause (g) which states:

(g) A retailer whose deductible withholding tax under sections 236G or 236H of the Income Tax Ordinance, 2001 during the immediately preceding 12 consecutive months has exceeded the threshold as may be specified by the Board through notification in the official Gazette.

Under sections 236G and 236H, retailers of specified sectors (including pharmaceuticals, poultry and animal feed, edible oil and ghee, auto-parts, tyres, varnishes, chemicals, cosmetics, IT equipment, electronics, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages, paint and foam sector) are subject to income tax withholding on their purchases from importers, manufacturers, wholesalers etc.

Henceforth, retailers subject to tax withholding under sections 236G or 236H, in excess of threshold (to be notified by FBR) would be considered as Tier 1 retailer for the purposes of sales tax.

SALES TAX ON RETAIL PRICE

Goods specified in the Third Schedule are subject to sales tax on their retail price. At present, the Government is empowered to include or exclude any goods from the Third Schedule through a notification. The Bill proposes to vest such power to the Board.

Through the Finance, 2021 Sugar was included in the Third Schedule whereby sugar supplied other than as industrial raw material to pharmaceutical, beverage and confectionary industries was subject to sales tax at retail price.

Through SRO 989(I)/2021 dated August 5, 2021, sugar was taken out of Third Schedule for the period from July 1, 2021 till November 30, 2021. The Bill proposes to exclude sugar from Third Schedule w.e.f. December 1, 2021; thus, making it liable to sales tax at its value of supply across the board.

SALE TO UNREGISTERED PERSONS - CNIC

Sales tax law requires every registered person while making sales to unregistered person to provide CNIC or NTN of unregistered buyer except where supplies are made by a retailer involving transaction value not exceeding Rs 100,000.

The Bill proposes to waive the condition of providing CNIC in such cases where payment is made through debit or credit card or digital mode.

It is presently provided that where CNIC provided by buyer is not correct, liability of tax or penalty would not arise against the seller in case of sale made in good faith. The Bill proposes to withdraw the said provision, which may result in unwarranted action against the seller and litigation (as sellers are generally unable to verify the CNIC provided by buyer).

OFFENCES AND PENALTIES

The Bills seeks to amend the following three provisions relating to certain offences and penalties:

(i) Penalty provided in S. No 23 presently applicable to cigarettes, is proposed to be applicable on specified goods. (S. No. 23 provides for penalty, confiscation, destruction by any person who manufactures, possesses, transports, distributes, stores or sells the goods with counterfeited tax stamps, banderoles, stickers, labels or barcodes or without tax stamps, banderoles, stickers, labels or barcodes.)

(ii) For offence specified in S. No. 24, business premise would also be sealed in addition to imposition of penalty (Serial No. 24 provides the penalty against the offence where any person, who is integrated for monitoring, tracking, reporting or recording of sales, production and similar business transactions with the Board or its computerized system, conducts such transactions in a manner so as to avoid monitoring, tracking, reporting or recording of such transactions, or issues an invoice which does not carry the prescribed invoice number or barcode or bears duplicate invoice number or counterfeit barcode, or any person who abets commissioning of such offence).

(iii) S. No. 25A provides for increasing monetary penalties up to four defaults against the retailers who fail to get themselves registered or fail to integrate their business as required under the Sales Tax Act. At present, business promises is sealed after the fourth default if a person fails to integrate the business premises. The Bill seeks to provide that business premises would be sealed notwithstanding the number of defaults of monetary penalties as provided under S. No. 25A

ZERO RATING - FIFTH SCHEDULE

• Goods specified in the Fifth Schedule are subject to sales tax at the rate of zero percent. The proposed Bill seeks to withdraw zero rating on the supply of following goods:

============================================================================================
S. No.                                Description
============================================================================================
3                                     Supplies to duty free shops, provided that in case
                                      of clearance from duty free shops against various
                                      baggage rules issued under the Customs Act, 1969,
                                      (IV of 1969), the supplies from duty free shops
                                      shall be treated as import for purpose of levy
                                      of sales tax.
6A                                    Supplies of locally manufactured plant and
                                      machinery of the following specifications,
                                      to manufacturers in the Export Processing Zone
                                      (subject to the prescribed conditions/restrictions
                                      and procedure) namely:
                                      (i) Plant and machinery, operated by power of any
                                      description, as is used for the manufacture or
                                      production of goods by that manufacturer;
                                      (ii) Apparatus, appliances and equipments
                                      specifically meant or adapted for use in conjunction
                                      with the machinery specified in clause (i);
                                      (iii) Mechanical and electrical control and
                                      transmission gear, meant or adapted for use
                                      in conjunction with machinery specified in
                                      clause (i); and
                                      (iv) Parts of machinery as specified in
                                      clauses (i), (ii) and (iii), identifiable for
                                      use in or with such machinery.
9                                     Goods exempted under section 13, if exported
                                      by a manufacturer
12                                    The following goods and the raw materials,
                                      packing materials, sub-components, components,
                                      sub-assemblies and assemblies imported or purchased
                                      locally for the manufacture of the said goods,
                                      subject to the conditions, limitations and
                                      restrictions as prescribed by the Board:
                                      -Preparations suitable for infants, put up
                                      for retail sale (PCT Heading 1901.1000)
                                      -Bicycles (PCT heading 87.12)
15                                    Local supplies of raw materials, components,
                                      parts and plant and machinery to registered
                                      exporters authorized under Export Facilitation
                                      Scheme, 2021 notified by the Board with such
                                      conditions, limitations and restrictions.
18                                    (i) Supply, repair or maintenance of any ship
                                      which is neither;
                                      (a) a ship of gross tonnage of less than 15 LDT; nor
                                      (b) a ship designed or adapted for use for
                                      recreation or pleasure.
                                      (ii) Supply of spare parts and equipment for
                                      ships falling under (i) above.
                                      (iii) Supply of equipment and machinery for
                                      salvage or towage services.
                                      (iv) Supply of equipment and machinery for other
                                      services provided for the handling of ships in a port.
============================================================================================

• The Bill seeks to insert the below new entries in the Fifth Schedule whereby the import and local supply of such goods would be subject to zero rate of sales tax:

============================================================================================
S.No.                                 Description
============================================================================================
19                                    Drugs registered under the Drugs Act, 1976
                                      (XXXI of 1976), or medicaments as classified
                                      under chapter 30 of the First Schedule to the
                                      Customs Act, 1969 (IV of 1969) except PCT
                                      heading 3005.0000.
20                                    Petroleum Crude Oil (PCT heading 2709.0000).
============================================================================================

EXEMPTION - SIXTH SCHEDULE

Through the supplementary bill, it has been proposed to withdraw sales tax exemptions from the following items through omission of the corresponding entries in ‘Table - I (i.e., import and supply)’, ‘Table - II (i.e., local supply only)’, and ‘Table - III’ (i.e., capital goods and plant and machinery) of Sixth schedule to the Act:

============================================================================================
S. No.                                Description
============================================================================================
                                      Table I-Import and supply
1                                     Live Animals and live poultry.
2                                     Meat of bovine animals, sheep and goat, excluding
                                      poultry and offal, whether or not fresh, frozen
                                      or otherwise, preserved or packed.
3                                     Fish and crustaceans excluding live fish
                                      whether or not fresh, frozen or otherwise
                                      preserved or packed
11                                    Eggs including eggs for hatching
12                                    Live plants including bulbs, roots and the like.
16                                    Red chillies excluding those sold in retail
                                      packing bearing brand names and trademarks
20                                    Seeds, fruit and spores of a kind used for sowing.
21                                    Cinchona bark.
23                                    Sugar cane.
46                                    Goods imported by various agencies of the
                                      United Nations, diplomats, diplomatic missions,
                                      privileged persons and privileged organizations
                                      which are covered under various Acts and, Orders,
                                      rules and regulations made thereunder; and
                                      agreements by the Federal Government provided
                                      that such goods are charged to zero-rate of
                                      customs duty under Customs Act, 1969 (IV of 1969),
                                      and the conditions laid therein.
49                                    Import of all goods received, in the event
                                      of a natural disaster or other catastrophe,
                                      as gifts and relief consignments, including
                                      goods imported for the President's fund for
                                      Afghan Refugees, relief goods donated for
                                      Afghan Refugees, gifts for President's fund
                                      for assistance of Palestine and gifts received
                                      by Pakistani organizations from Church World
                                      Services or the Catholic Relief Services
                                      subject to the similar conditions as are
                                      envisaged for the purposes of applying
                                      zero-rate of customs duty under the
                                      Custom Act 1969 (IV of 1969).
50                                    Articles imported through post as unsolicited
                                      gifts, subject to the same conditions as are
                                      envisaged for the purposes of applying
                                      zero-rate of customs duty under the
                                      Customs Act, 1969 (IV of 1969).
51                                    Imported samples, subject to the same conditions
                                      as are envisaged for the purposes of applying
                                      zero-rate of customs duty under the
                                      Customs Act, 1969 (IV of 1969).
52                                    Goods imported by or donated to hospitals run
                                      by the Federal Government or a Provincial
                                      Government; and non-profit making educational
                                      and research institutions subject to the
                                      similar restrictions, limitations, conditions
                                      and procedures as are envisaged for the purpose
                                      of applying zero-rate of customs duty on such
                                      goods under the Customs Act, 1969, (IV of 1969).
52A                                   Goods excluding electricity and natural gas
                                      supplied to hospitals run by the Federal or
                                      Provincial Governments or charitable operating
                                      hospitals of fifty beds or more or the teaching
                                      hospitals of statutory universities of
                                      two hundred or more beds.
53                                    Import of all such gifts as are received, and
                                      such equipment for fighting tuberculosis, leprosy,
                                      AIDS and cancer and such equipment and apparatus
                                      for the rehabilitation of the deaf, the blind,
                                      crippled or mentally retarded as are purchased
                                      or otherwise secured by a charitable non-profit
                                      making institution solely for the purpose of
                                      advancing declared objectives of such institution,
                                      subject to the similar conditions as are envisaged
                                      for the purposes of applying zero-rate of
                                      customs duty under the Customs Act, 1969 (IV of 1969).
54                                    Educational, scientific and cultural material
                                      imported from a country signatory to UNESCO
                                      Agreement or a country signatory to
                                      bilateral commodity exchange agreement with
                                      Pakistan, subject to the same conditions as
                                      are envisaged for the purposes of exemption
                                      under the Customs Act, 1969 (IV of 1969).
55                                    Import of replacement goods supplied free of
                                      cost in lieu of defective goods imported,
                                      subject to similar conditions as are envisaged
                                      for the purposes of applying zero-rate of
                                      customs duty under the Customs Act, 1969 (IV of 1969).
57                                    Goods (including dry fruits imported from Afghanistan)
                                      temporarily imported into Pakistan, meant for
                                      subsequent exportation charged to zero-rate of
                                      customs duty subject to the similar restrictions,
                                      limitations, conditions and procedures as are
                                      envisaged for the purpose of applying zero-rate
                                      of customs duty on such goods under the
                                      Customs Act, 1969 (IV of 1969).
58                                    Import of ship stores, subject to the procedures,
                                      conditions and restrictions as may be specified
                                      by the Collector of Customs in this behalf including
                                      those consignments of such stores that have been
                                      released without charging sales tax since the
                                      1st July 1998, but excluding such consignments
                                      of ship stores as have been cleared on
                                      payment of sales tax.
60                                    Contraceptives and accessories thereof.
61                                    Goods produced or manufactured in and
                                      exported from Pakistan which are subsequently
                                      imported in Pakistan within one year of their
                                      exportation, provided conditions of section 22
                                      of the Customs Act 1969 (IV of 1969)
                                      are complied with.
63                                    Personal wearing apparel and bona fide baggage
                                      imported by overseas Pakistanis and tourists,
                                      if imported under various baggage rules and
                                      is exempt from Customs duties.
71                                    Goods and services purchased by non-resident
                                      entrepreneurs and in trade fairs and exhibitions
                                      subject to reciprocity and such conditions and
                                      restrictions as may be specified by the Board.
72                                    Uncooked poultry Meat whether or not fresh,
                                      frozen or otherwise, preserved or packed
81                                    Cotton seed
84                                    Preparation suitable for infants, put
                                      up for retail sale
92                                    Sewing machines of the household type
99                                    Compost (non-chemical fertilizer)
                                      produced and supplied locally
102                                   Machinery, equipment and materials imported
                                      either for exclusive use within the limits
                                      of Export Processing Zone or for making
                                      exports therefrom, and goods imported for
                                      warehousing purpose in Export Processing Zone,
                                      subject to the conditions that such machinery,
                                      equipment, materials and goods are imported
                                      by investors of Export Processing Zones,
                                      and all the procedures, limitations and
                                      restrictions as are applicable on such goods
                                      under the Customs Act, 1969 (IV of 1969)
                                      and rules made there under shall
                                      mutatis mutandis, apply.
104                                   Substances registered as drugs under the
                                      Drugs Act, 1976 (XXXI of 1976) and
                                      medicaments as are classifiable under
                                      chapter 30 of the First Schedule to the
                                      Customs Act, 1969 (IV of 1969) except the
                                      following, even if medicated or medicinal
                                      in nature, namely:-
                                      a) filled infusion solution bags imported
                                      with or without infusion given sets;
                                      b) scrubs, detergents and washing preparations;
                                      c) soft soap or no soap;
                                      d) adhesive plaster;
                                      e) surgical tapes;
                                      f) liquid paraffin;
                                      g) disinfectants, and
                                      h) cosmetics and toilet preparations.
105                                   Raw materials for the basic manufacture
                                      of pharmaceutical active ingredients and
                                      for manufacture of pharmaceutical products,
                                      provided that in case of import, only such
                                      raw materials shall be entitled to exemption
                                      which are liable to customs duty not
                                      exceeding 11 per cent ad valorem, either
                                      under the First Schedule or Fifth Schedule
                                      to the Customs Act, 1969 (IV of 1969) or
                                      under a notification issued under
                                      section 19 thereof.
107                                   Import and supply of iodized salt
                                      bearing brand names and trademarks
                                      whether or not sold in retail packing.
109                                   Goods imported temporarily with a view
                                      to subsequent, exportation as concurred
                                      by the Board, including passenger service
                                      item, provision and stores of Pakistani Airlines.
110                                   The following items with dedicated use
                                      of renewable source of energy like solar
                                      and wind, subject to certification by the
                                      Alternative Energy Development Board (AEDB),
                                      Islamabad for the period ending on
                                      the 30th June, 2023:-
                                      a) Solar PV panels;
                                      b) LVD induction lamps;
                                      c) SMD, LEDs, with or without ballast,
                                      with fittings and fixtures;
                                      d) Wind turbines including alternators and mast;
                                      e) Solar Torches;
                                      f) Lanterns and related instruments;
                                      g) PV modules along with related components,
                                      including invertors, charge controllers and batteries.
                                      h) Tubular day lighting device.
                                      i) Energy saver lamp and tube lights of
                                      varying voltages (operating on AC or DC).
                                      j) Invertors (off-grid/on grid/hybrid) with
                                      provision for direct connection/input from
                                      renewable energy source and with Maximum
                                      Power Point Tracking (MPPT).
113                                   High Efficiency Irrigation Equipment
                                      (If used for agriculture sector)
114                                   Green House Framing and Other Green House
                                      Equipment (If used for Agriculture Sector)
116                                   Plant, machinery and equipment imported
                                      for setting up industries in FATA up
                                      to 30th June 2019 subject to the same
                                      conditions and procedure as are applicable
                                      for import of such plant, machinery
                                      and equipment under the Customs
                                      Act, 1969 (IV of 1969).
117                                   Appliances and items required for ostomy
                                      procedures as specified in the Chapter 99
                                      of the First Schedule to the
                                      Customs Act,1969, subject to same
                                      conditions as specified therein
126                                   Machinery, equipment and tools for setting
                                      up maintenance, repair and overhaul (MRO)
                                      workshop by MRO company recognized
                                      by Aviation Division.
127                                   Operational tools, machinery, equipment
                                      and furniture and fixtures on one-time
                                      basis for setting up Greenfield airports
                                      by a company authorized by Aviation Division.
129                                   Import of plant, machinery and production
                                      line equipment used for the manufacturing
                                      of mobile phones by the local manufacturers
                                      of mobile phones duly certified by
                                      the Pakistan Telecommunication Authority.
130                                   Sodium Iron (Na Fe EDTA), and other
                                      premixes of vitamins, minerals and
                                      micro-nutrients (food grade) and subject
                                      to conditions imposed for importation
                                      under the Customs Act, 1969
131                                   Laptop computers, notebooks whether
                                      or not incorporating multimedia kit
132                                   Personal computers
134                                   Goods received as gift or donation from
                                      a foreign government or organization by
                                      the Federal or Provincial Governments
                                      or any public sector organization subject
                                      to recommendations of the Cabinet Division
                                      and concurrence by the Federal Board of Revenue.
135                                   Sunflower and canola hybrid seeds meant for sowing
136                                   Combined harvesters up to five years old
138                                   Fish Feed
139                                   Fans for dairy farms
140                                   Bovine semen
141                                   Preparations for making animal feed
142                                   Promotional and advertising material
                                      including technical literature, pamphlets,
                                      brochures and other give-aways of
                                      no commercial value, distributed free
                                      of cost by the exhibitors
146                                   Equipment imported by M/s China Railway
                                      Corporation to be furnished and installed
                                      in Lahore Orange Line Metro Train Project
                                      subject specified conditions.
149                                   Micro feeder equipment
150                                   Plant and machinery excluding consumer
                                      durable goods and office equipment as
                                      imported by greenfield industries,
                                      intending to manufacture taxable goods,
                                      during their construction and installation period.
155                                   Oil cake and other solid residues, whether
                                      or not ground or in the form of pellets
158                                   Goods temporarily imported into Pakistan
                                      by International Athletes which shall be
                                      subsequently taken by them within
                                      120 days of temporary import.
============================================================================================

Exemption presently available on import as well as on local supplies of goods mentioned under S. Nos. 1, 2, 3,11,12, 23, 72, 99,131, and 132 above has been proposed to be restricted to local supplies only with certain modifications.

(To be continued tomorrow)

AF-FERGUSON & CO Chartered Accountants

Copyright Business Recorder, 2021

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