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KARACHI: Karachi Tax Bar Association (KTBA) has proposed the Federal Board of Revenue (FBR) to re-introduce tax credits on registered sales and purchases in upcoming budget 2023-24.

The KTBA’s budget proposals, which primarily focus on the manufacturing sector and corporate entities, aim to bring about significant reforms in taxation processes and provide much-needed relief to businesses.

KTBA has recommended the re-introduction of tax credits on registered sales and purchases. According to the proposal, manufacturers who make 90% of their sales to registered persons under the Sales Tax Law would be eligible for tax credits.

This provision would also extend to individuals who make 90% of their purchases from registered entities. By providing tax incentives for engaging with registered businesses, the KTBA aims to promote transparency and compliance within the tax system.

KTBA not happy as FBR issues audit notices to taxpayers

One of the key proposals put forth by the KTBA is the deletion of the condition for Greenfield Industrial Undertakings. This condition currently mandates the use of processes or technologies not previously employed in Pakistan, which has been deemed impractical and restrictive. By eliminating this requirement, the KTBA hopes to encourage innovation and the adoption of efficient technologies in the manufacturing sector.

Additionally, the budget proposals highlight the need to restore tax credits for investment in Plant and Machinery. The KTBA suggests reinstating the credit and extending the time limit for eligibility, thereby incentivizing businesses to invest in these critical assets. Such measures would stimulate growth, foster technological advancements, and enhance overall productivity in the manufacturing sector.

In the corporate and compliant sector, the KTBA has identified several areas for reform. The proposals call for the removal of restrictions on deductibility of commission expenses, amendments to the disallowance of cash expenses, and the elimination of disallowances for payments made to unregistered persons and retirement funds. These changes aim to simplify tax compliance for businesses, reduce the administrative burden, and ensure fair treatment for taxpayers.

Furthermore, the KTBA’s recommendations include increasing the rate of initial allowance for plant and machinery, restoring the first-year allowance for industrial undertakings in rural and underdeveloped areas, and revising the maximum amortization period for intangibles without ascertainable life.

The proposed reforms also seek to provide clarity on payment of Workers Welfare Fund (WWF) and Workers Profit Participation Fund (WPPF) for trans-provincial entities and remove restrictions on setting off depreciation losses. Additionally, the KTBA suggests exempting inter-corporate services and contractual receipts from withholding tax, revising conditions for group relief, and amending capital gains on disposal of assets under a scheme of arrangement.

These budget proposals, forwarded by the KTBA, have the potential to bring significant changes to the taxation landscape in Pakistan. By addressing practical challenges, incentivizing investment, and ensuring fair treatment for taxpayers, these proposals aim to streamline processes and contribute to the economic growth.

Copyright Business Recorder, 2023

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