ISLAMABAD: The Federal Board of Revenue (FBR) has expanded the scope of the definition of IT and IT-enabled services, raised the advance tax rate from two to four percent for commercial importers and reduced the turnover tax for Oil Marketing Companies (OMCs) from 0.75 percent to 0.5 percent through amendment in the Finance Bill, 2022.
According to the comments of a leading tax expert, Ashfaq Tola on the amended Finance Bill 2022, the IT Services and IT-enabled Services Clauses (30AD) and (30AE) define IT services to include software development, software maintenance, system integration, web design, web development, web hosting and network design.
While IT-enabled services are defined to include inbound or outbound call centres, medical transcription, remote monitoring, graphics design, accounting services, Human Resource (HR) services, telemedicine centers, data entry operations, cloud computing services, data storage services, locally produced television programs, and insurance claims processing.
The amended bill has now provided that the definition of IT and IT-enabled services shall not be limited to above-mentioned services only. This means any other like service shall also be deemed to be covered under the definition of IT and IT-enabled Services.
The Section 148 provides for the deduction of taxes at different rates on different specified products. Moreover, Section 148 also provides that taxes that are required to be deducted by industrial undertakings at the rates of one per cent and two per cent shall be adjustable.
The bill proposed that the tax required to be collected by an industrial undertaking under section 148 will be adjustable irrespective of the rate at which such collection is required.
The bill also proposed that the tax required to be collected on the import of following items will be treated as minimum tax including edible oil; packaging material; paper and paper board; or plastics. The bill also proposed to increase the advance tax rate from two per cent to four per cent for commercial importers. The bill also proposed that tax deducted at import stages in case of importers other than Industrial Undertaking shall be final tax instead of minimum tax.
The amended bill has withdrawn the proposed amendment with respect to final tax and has again made it minimum tax.
Tola added that the section 21(l) of ITO provides that a business expense of any person shall not be allowed if paid through any means other than through crossed banking instrument from business bank account of the taxpayer.
The bill proposed to amend the above clause and has also introduced another clause (la), whereby, payments of business expenses by companies through digital means from business bank account of the taxpayer notified to the Commissioner have been made compulsory for claim of such expenses.
All other exceptions to the above restrictions are still proposed to be applicable. The exceptions are as under: Expense under a single account head does not exceed Rs1,000,000 in aggregate in a year; expenditures on account of utility bills; freight charges; travel fare; postage and payment of taxes, duties, fee, fines or any other statutory obligation.
The amended bill has reduced the threshold of the aggregate expense under one single account head from Rs1 million to Rs250,000. The amended bill has also excluded expenditures not exceedingRs25,000 from these provisions.
Clause (9A) provides that the amount of tax payable on income chargeable under the head, “Capital Gains”on disposal of immovable property shall be reduced by 50 per cent on the first sale of immovable property (75 per cent in case of after three years) acquired or allotted to ex-servicemen and serving personnel of Armed Forces orex-employees or serving personnel of federal and provincial governments, being original allottees of the immovable property, duly certified by the allotment authority.
The bill proposed to withdraw the above exemption. However, the amended bill has restored the exemption, Tola added.
Copyright Business Recorder, 2022