Income Tax Ordinance, 2001 Experts concerned over proposed amendment

KARACHI: Tax experts have expressed concerns over the proposed amendment (section 214A) in the Income Tax Ordinance, 2001, saying that if it is made, it may lead to the taxpayer being at the mercy of the tax officer and FBR. These views were expressed by the tax experts at a post-budget seminar organized by the Karachi Tax Bar Association held at a local hotel here on Wednesday.

Anwar Kashif Mumtaz former president of KTBA in his presentation termed the said proposed amendment as a naked sword to the FBR, which might be used to overcome the shortcomings on the part of the field officer and may lead to the taxpayer being at the mercy of the tax officer and FBR.

He said that all amnesties and benefits provided to the industries through the Ordinance IV of 2022 had been proposed withdrawn vide the Finance Bill, 2022, raising serious concerns about the position of the persons who have already availed of the amnesty or have taken steps to implement it.

Furthermore, he said that as per the pressure of the International Monterey Fund, all exemptions - SECTION 59C, SECTION 60C, SECTION 62, SECTION 62A, SECTION 63 & SECTION 65F. Therefore, the credit allowed for the export of IT services has been omitted and now they will be taxed at the reduced rate of 0.25% of the export proceeds under section 154A of the Ordinance.

Anwar said that the amendment proposed to Section 92 clarified that if the income of the AOP is exempted and no tax is payable under the Ordinance, the share received in the capacity as a member out of the income of the association shall also be exempted.

The sub-section (4) has been expanded by way of insertion of the proposed clarification to bring remittance received through other services to constitute foreign exchange remitted to Pakistan through normal banking channels. A sub-section (5) has been replaced to clarify that a separate notice u/s 111 of the Ordinance shall not be required to be issued for any information where a notice u/s 122(9) of the Ordinance has already been issued seeking or confronting that specific information, he added.

The facility of carrying forward of minimum tax paid on turnover in excess of normal tax has been withdrawn hence now the excess tax is neither adjustable nor can be carried forward, he said; terming the proposed amendment in section 164A as a step to plug revenue the leakage in withholding taxes by appointing specific agent(s) with the synchronized payment withholding system (SWAPS).

He said that the proposed omission of section 216A is to safeguard the officers from any proceedings initiated against them in maladministration and malpractice as the current government was of the view that the existing Section 216A of the Ordinance may instill fear of retribution in officers to take any action against the non-compliant taxpayer, because they may feel that if anything went wrong, they might be prosecuted under the section.

Meanwhile, Saud Ul Hassan in his presentation on indirect tax said that the Bill has now sought to withdraw IT services and IT-enabled services from Table 2 and after the proposed amendments, the rate of sales tax on services provided by software or IT-based system development consultants would be 15%. He said that the import of electric vehicles in CBU conditions, which was subjected to the reduced rate of 12.5%, was proposed to be taxed at a standard rate of tax.

Moreover, he said that a proviso was inserted in Sub-section 3(7), to clarify that in case of sale of third-party goods through an online marketplace, the liability to withhold sales tax on goods shall be on the operator of such marketplace, at the rate provided under the Eleventh Schedule to the ST Act.

Copyright Business Recorder, 2022