Budget Briefing 2023

This Memorandum is correct to the best of our knowledge and belief at the time of publication. It is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. The Firm and Ernst & Young do not accept any responsibility for any loss arising from any action taken or not taken by anyone using this publication.

This Memorandum has been prepared as a general guide for the benefit of our clients and is available to other interested persons upon request. This should not be published in any manner without the Firm’s consent. This is not an exhaustive treatise as it sets out interpretation of only the significant amendments proposed by the Finance Bill, 2023 (the Bill) in the Income Tax Ordinance, 2001 (the Ordinance), the Sales Tax Act, 1990 (the ST Act), the Customs Act, 1969 (the Customs Act), the Federal Excise Act, 2005 (the FE Act), The Islamabad Capital Territory (Tax on Services) Ordinance, 2001 (the ICT Ordinance) in a concise form sufficient enough to amplify the important aspects of the changes proposed to be made.

Changes of consequential, administrative, procedural or editorial in nature have either been excluded from these comments or otherwise dealt with briefly.

The amendments proposed by the Bill after having been enacted as the Finance Act, 2023, shall, with or without modification, become effective from the Tax Year 2024, unless otherwise indicated.

It is suggested that the text of the Bill and the relevant laws and notifications, where applicable, be referred to in considering the interpretation of any provision. Since these are only general comments, no decision on any issue be taken without further consideration and specific professional advice should be sought before any action is taken.

SIGNIFICANT PROPOSALS

1. Bonus Shares to be treated as Income and Taxed in the hands of the Shareholders

The Bill seeks to tax issuance of bonus shares in the hands of the shareholders. A consequential amendment has also been sought whereby the list of income to be taxed under the head “Income from Other Sources” has been expanded to include “income arising to the shareholder of a company from the issuance of bonus shares”. A listed company issuing bonus shares would be obliged to collect tax from its shareholders @ 10% of the value of the bonus shares determined on the basis of day-end price on the first day of closure of books. Any company, other than a listed company, shall collect tax @ 10% on the value determined on the basis as prescribed by the FBR. The tax paid shall be a final tax on the income of the shareholder arising from issuance of bonus shares.

2. Additional Tax on Certain Incomes, Profits and Gains

The Bill proposes to insert a new concept whereby an additional tax shall be imposed on every person or class of persons who has any income, profit or gains that have arisen due to any economic factor or factors that resulted in unexpected income, profits or gains whether or not disclosed in the financial statements. The tax is leviable in addition to any tax charged, paid or payable under any provision of the Ordinance. Further, such additional tax will be imposed for any of the preceding five tax years from the tax year 2023 and onwards.

3. Super Tax on High Earning Persons

The Bill proposes to enhance the slabs of income and prescribes various rates in the range of 1% to 10% for the tax year 2023 and onwards as compared to 1% to 4% provided earlier for the tax year 2022. The basic limit of PKR 150 million remains the same for non-applicability of super tax.

The Bill further seeks to propose to collect the levy as part of advance tax in installments at the time of discharge of advance tax liability under Section 147 of the Ordinance.

4. Unexplained Income or Assets - Threshold Increased

The Bill proposes to enhance the monetary limit of PKR 5 million to an amount of rupee equivalent of US$ 100 thousand from probe from the tax authorities. This seems to be an exorbitant increase in the threshold limit of foreign remittance which is perhaps owing to the current depleting foreign exchange reserves of the country. However, at the same time this would also enable the undocumented money to enjoy the legal cover without any question being raised on its source.

5. Minimum Tax

The general rate of minimum tax under Section 113 is currently 1.25% of the gross turnover. The Bill proposes a reduced rate of 1% in case of companies which are listed on Pakistan Stock Exchange.

6. Scope of Associates Broadened

Currently, as a general rule, two persons are considered as associates where the relationship between the two is such that one may reasonably be expected to act in accordance with the intentions of the other, or both persons may reasonably be expected to act in accordance with the intentions of a third person.

The Bill seeks to expand the concept of ‘associates’ by including within the scope of an ‘associate’ the following:

• a person who sufficiently influences the other person, either alone or together with an associate or associates. It has also been explained that two persons shall be treated as sufficiently influencing each other, where one or both persons, directly or indirectly, are economically and financially dependent on each other and, decisions are made in accordance with the directions, instructions or wishes of each other for common economic goal; and

• a resident of a jurisdiction with zero tax regime will be considered as an associate of a person who enters into a transaction with such non-resident, either directly or indirectly. The term ‘jurisdiction with zero tax regime’ would mean the jurisdiction as may be prescribed.

7. Tax on Imports

The Bill proposes to enhance the rate from 5.5% to 6% to apply on import by a commercial importer of items listed in Part III of the Twelfth Schedule. The rate would apply on the import value as increased by custom duty, sales tax and FED.

8. Payments to Residents and PE of a Non-Resident

The Bill seeks to propose an increase in withholding tax rates for making payments on account of goods, services and contracts to a resident person or a PE of a non-resident person. The proposed rates have been increased by 1% across all types of payments covered under Sections 152(2A) and 153 (1) of the Ordinance.

9. Exemption on Import of Goods such as Laptop, Computers, Notebooks etc.

The Bill seeks to grant exemption from sales tax on import of goods (such as laptop, computers, notebooks, personal computers etc.) chargeable to customs duty at the rate of 0%, subject to certain conditions, by the software exporters registered with the Pakistan Software Export Board.

10. Reduced Rate on Supplies made from Integrated Retail Outlets

The Eighth Schedule to the ST Act inter alia, provides reduced rate of 12% on supplies made from retail outlets as are integrated with FBR’s computerized system for real-time reporting of sales subject to prescribed conditions. The Bill seeks to enhance the above rate to 15%.

11. Introduction of FED on Royalty and Fee for Technical Services

The Bill proposes to levy FED on royalty and fee for technical services at the rate of 10%.

12. Introduction of Sales Tax on Electric Power Transmission Services

The definition of the terms ‘goods’ and ‘supply’ under the ST Act currently includes the expression ‘production, transmission and distribution of electricity’. This has created a dispute between the Federal and Provincial tax authorities on the transmission/distribution of electricity. In order to resolve this controversy, the Bill seeks to omit the above expression from the definition Clause of the ST Act, and proposes to empower the ICT Ordinance to tax “Electric Power Transmission Services” @ 15%.

Budget Financials

The following table depicts key budget financials.

Break-up of Tax Revenue

Income Tax

• Additional tax (maximum of 50%) to be imposed on any income, profit and gains for any of the preceding five tax years from the tax year 2023 arising due to economic factors as determined and notified by the Federal Government

• Collection of adjustable tax @0.6% to apply on cash withdrawal exceeding PKR 50 thousand in a day by persons not appearing in ATL

• Advance tax @ PKR 200,000 to be collected from the agency, sponsor or an employer hiring the services of a foreign domestic worker

• Non-resident individual holding POC, NICOP or CNIC exempted form collection of advance tax on purchase of immovable property if such property is acquired through SBP notified FCVA and NRVA

• CIR empowered to recover any outstanding liability under any other statue or law identified as income tax arrears in that law

• Rate of super tax and the corresponding income slabs revisited with the highest being 10% on income exceeding PKR 500 million

• NCCPL also required to collect super tax, as advance tax from capital gain taxable under section 37A

• Super tax under section 4C also to be paid as part of advance tax under section 147

• The rate of collection of tax by Banks on foreign currency transactions executed through debit/ credit and prepaid cards enhanced from 1% to 5%

• Reduction in the rate of minimum tax under section 113 for companies listed on PSX from 1.25% to 1%

• Commercial importers importing goods falling under Part III of the Twelfth Schedule to pay income tax @ 6% instead of 5.5%

• Rate of withholding tax increased by 1% each on account of sale of goods, rendering of services and execution of contracts by resident persons or PE in Pakistan of a non-resident person

• Scope of PE expanded

• Threshold for eligibility as SME increased from PKR 250 million to PKR 800 million

• IT services or IT enabled services included in the definition of SME, subject to fulfillment of specified criteria

• Pre-requisite condition of filing sales tax returns (Federal and Provincial) not to apply to exporters of computer software or IT services or IT enabled services under section 154A

• SME setup exclusively for agro based industry in the rural area exempted from tax

• Immunity from probe in respect of foreign exchange remitted from outside Pakistan through normal banking channels increased from PKR 5 million to US$ 100,000

• Bonus shares issued by a company deemed as income of the shareholder and subjected to collection of tax @ 10% treated as a final discharge of tax liability

• Scope of the term ‘associates’ expanded to include a person who sufficiently influences the other person, or a resident person entering into a transaction with a person resident of a jurisdiction with zero taxation regime

• Approval for payment to non-resident person without tax deduction to be issued within thirty days of filing of application otherwise IRIS shall automatically process the application

• Applicability of reduced rates under Rules 7D, 7E and 7F for income earned from providing additional advances to micro, small and medium enterprises, low cost housing and farm credits by a banking company extended to tax years 2024 and 2025

• Reduced rate of 20% to apply on taxable income earned by a banking company for the tax year 2024 and 2025 from providing additional advances to entities engaged in rendering IT and IT enabled services

• Exemption from tax to a non-resident banking company, as approved by the federal government, earning profit on debt and capital gain from federal government’s sovereign debt/ sovereign debt instruments

• Taxable income attributable to investment in the federal government securities earned by a banking company for the tax year 2024 made taxable at the normal rate of 39% as against enhanced rates

• To operationalize the incentives and exemption under the Foreign Investment (Promotion and Protection) Act, 2022, the Bill has proposed to appropriately amend the provisions of the Ordinance, ST Act and the FE Act

Sales Tax

• Production, Transmission and Distribution of Electricity removed from the definition of Goods and Supply

• Jewellers and Retailers registered on the basis of covered area only excluded from definition of Tier-1 Retailers

• Harsh penalties and confiscation on movement of counterfeited cigarettes extended to other specified goods

• Zero rating on imports and supplies by/ to QI under the FIA

• Local supplies of commodities also zero rated for registered exporters authorized under Export Facilitation Scheme, 2021

• Exemption available to branded red chillies, ginger and turmeric withdrawn

• Exemption available to Tribal Areas on supply of electricity and imports of plant and machinery extended upto 30 June 2024

• Exemption restored on contraceptives, bovine semen, saplings, harvester, dryer for agriculture, No-till-direct seeder

• Exemption on import of laptops, notebooks and personal computers in line with CD subject to certain conditions

• Exemption available on local supply of certain branded dairy products withdrawn

• Exemption available on local supply of certain branded meat of bovine animals and poultry etc. withdrawn

• Reduced rate of 12% on supplies made from integrated retail outlets enhanced to 15%

• Medicaments would also be subject to a reduced rate of 1% along with substances registered as drugs

• Reduced rate of 1% available on imports of Active Pharmaceutical Ingredients and raw materials restricted to applicability of CD rate of upto 11%

Islamabad Capital Territory Tax

• The Bill proposes to introduce a concept of Cottage Industry restricted to freelance exporters exclusively dealing in export of IT and IT enabled services whose annual turnover does not exceed PKR 8 million

• The Bill proposes to provide exemption on the services provided or rendered by, for or to Reko Diq project as specified in the FIA

• The Bill proposes a reduced rate of 5% on services provided by restaurants where payment against such services is received through debit/credit cards, mobile wallets or QR scanning subject to the condition that no input tax adjustment/refund shall be admissible

• The Bill proposes to harmonize the rate of services provided by software or IT based system development consultants at 15%

• The Bill proposes to insert a service category of “Electric Power Transmission Services” subject to sales tax at the rate of 15%

• The Bill proposes to substitute description of service category of “Services provided by software or IT based system development consultants” with “IT services and IT enabled services” in Table-II and also proposes to insert a condition that no input tax or refund shall be admissible

Federal Excise Act

(i)The Bill proposes to levy FED on:

(ii)Energy inefficient fans at a fixed rate of PKR 2,000 per fan

(iii)Incandescent bulbs at the rate of 20% ad valorem

• The Bill proposes to amend the description of S.No.11 of Table II of First Schedule to levy FED on royalty and fee for technical services at the rate of 10%

• The Bill proposes exemptions (a) on the import or supply of goods made by, for, or to the Reko Diq project, and (b) on the services provided or rendered by, for, or to the Reko Diq project, as specified in the First Schedule to the FIA

Customs

• It is proposed to clarify that the act of carrying, transportation, removing, depositing, harboring, keeping, concealing, retailing, or enroute pilferage of transit goods in the term "Smuggle" is in relation to the territorial jurisdiction of Pakistan

• Name of the “Pakistan Customs Academy” is proposed to be changed to "Customs Academy of Pakistan "

• The Provincial Levies and Khasadar Force is proposed to be included in the list of departments, who are required to provide assistance to the Customs department to discharge its functions

• It is proposed that to determine the customs value of any goods, the Director of Customs Valuation, instead of adopting, may only consult the values available in internationally acclaimed publications, periodicals, bulletins or official websites of manufacturers or indenters of goods

• Mandatory time of filing of GD in the land Customs Stations at border is proposed to fix to three days of arrival of goods

• It is proposed that the perishable goods may remain in the warehouse for a period of three months

• A representative is proposed to file baggage declaration on behalf of the persons travelling as a group

• Penalty on contravention of placement of invoice and packing list in the containers is proposed to be deleted

• Progressive penalty rates are proposed to be replaced with a fixed penalty for persons who fail to attach or electronically upload mandatory documents

• It is proposed to introduce the minimum value of penalty up to the value of goods for persons involved in smuggling of goods

• It is proposed that the respondent may opt the adjudication through the Customs Computerized System

• It is proposed that the FBR can authorize its subordinate offices to use the confiscated equipment

• It is proposed that the FBR can issue directions at any stage of investigation to transfer the investigation from one field formation to another

• Appeal before the ATIR is proposed to be allowed against an appellate order or a quasi-judicial order passed by the Chief Collector of Customs, which shall be heard by a Special Bench of two members

• It is proposed that the FBR may notify rules for the eligibility criteria of a person for self-filing of GD

• It is proposed that advance ruling may not be sought on the applicability of notifications issued in respect of duties and taxes collected under the Customs Act

• Exemption from CD is proposed on import of certain raw materials, machinery and equipment by the manufacturers of solar PV modules, solar inverters, lithium batteries, mining machinery and implements and rice mill machinery manufacturers

• Exemption from CD is proposed on import of different types of computers and peripheral devices by Software Exporters

• Exemption of CD on the import of plant, machinery and equipment for setting up of industries in erstwhile FATA Areas is proposed to be extended from 30 June 2023 to 30 June 2024

• Reduced rate of CD of 3% is proposed to be extended till 30 June 2024 on import of flavoring powders by the manufacturers of snacks

Income Tax

1. Bonus Shares to be Treated as Income of the Shareholders Section 2 Clause (29), Section 39, Section 236Z

Under the scheme of taxation that has prevailed in Pakistan historically, the face value of bonus shares or the amount of any bonus declared, issued or paid by a company to its shareholders (bonus shares) was excluded from the definition of ‘income’. Non-taxability of bonus shares at the time of their issuance was based on the simple principle that the shareholder does not derive any real income from the receipt of bonus shares and consequently income, if any, was taxed as capital gain at the time when the bonus shares were actually disposed-off by the shareholder.

However, through the Finance Act, 2014, bonus shares were declared as income of the recipient and corresponding amendments were made in the Ordinance to tax receipt of bonus shares in the hands of the recipients. These tax amendments were widely disliked. In reality, this measure did not generate tax as per the original estimates of the FBR, and at the same time the practice of issuance of bonus shares also declined substantially, hampering capital accumulation, which is essential for expansion in the corporate sector.

After considerable persuasion by the capital market, business and professional forums, taxation of bonus shares was abolished through the Finance Act, 2018.

Now, after six years, the Bill again seeks to tax issuance of bonus shares in the hands of the shareholders and accordingly, amendment has been proposed in the definition of the term ‘income’ as provided under Section 2(29) of the Ordinance. A consequential amendment has also been sought whereby the list of income to be taxed under the head “Income from Other Sources” has been expanded to include “income arising to the shareholder of a company from the issuance of bonus shares”.

The Bill also seeks to introduce a new Section 236Z whereby:

• A listed company issuing bonus shares is obliged to collect tax from its shareholders at 10% of the value of the bonus shares, determined on the basis of day-end price on the first day of closure of books. Any company, other than a listed company, shall collect tax at 10% on the value determined on the basis as prescribed by the FBR.

• The company will be required to deposit the tax within fifteen days of closure of books whether such tax has been collected by the company or not. However, the company depositing such tax would be entitled to recover the same from the shareholder before issuance of bonus shares.

• Where the shareholder fails to pay tax and collect its bonus shares within fifteen days of issuance, the company may dispose of such shares to the extent of tax paid on behalf of the shareholder.

• Tax collected and paid by the company or bonus shares disposed off and tax so paid, whatever the case may be, shall be treated to be paid on behalf of the shareholder.

• The tax paid shall be a final tax on the income of the shareholder arising from issuance of bonus shares. Consequential amendments have also been proposed in Sections 168 and 169 of the Ordinance dealing with ‘credit of taxes deducted’ and ‘treatment of tax deducted as final tax’.

It would not be out of place to mention that in terms of Section 76(9) of the Ordinance, where acquisition of an asset by a person is the derivation of an amount chargeable to tax, the amount so charged is considered as the cost of such asset in the hands of the acquirer. Accordingly, in case of receipt of bonus shares, the value on which tax has been paid, would become the cost in the hands of the shareholder and will be considered for the purpose of computing capital gain at the time of actual disposal of such shares.

2. Super Tax on High Earning Persons Sections 4C and 147, Division IIB Part I of the First Schedule, Clause 4A of the Eight Schedule

The Finance Act, 2015 introduced super tax for rehabilitation of temporarily displaced persons under Section 4B of the Ordinance. The tax was originally proposed to be a onetime levy for tax year 2015 but, like any other revenue generator for the Government, was extended year after year. The rate of super tax was 0% for the tax year 2022 for general public and 4% for banking companies.

The Finance Act, 2022, introduced a new Section 4C as Super Tax on High Earning Persons for the tax year 2022 and onwards. Such tax was applicable to all persons where the income exceeds the threshold of PKR 150 million and the rate of tax varied from 1% to 4% depending on the income slabs. The rate of super tax was prescribed @ 10% for fifteen industries where the income exceeds PKR 300 million for the tax year 2022.

The levy of super tax was challenged before the various High Courts of Pakistan on grounds including retrospective application for tax year 2022 and discriminatory nature of such levy for the fifteen industries.

The Supreme Court of Pakistan, in its short judgement, allowed the FBR to collect tax but only to the extent of 4% which implies that the discriminatory nature of charge of 10% on the fifteen industries has been considered.

The Bill has now proposed to enhance the slabs of income and prescribes various rates ranging from 1% to 10% for the tax year 2023 and onwards. The existing and proposed slabs of income and rate of tax are as under (the basic limit of PKR 150 million remains the same):

The Bill further seeks to propose to collect the levy as part of advance tax from all persons at the time of discharging their advance tax liability under Section 147 of the Ordinance. Accordingly, necessary amendments are proposed in Sections 4C and 147 of the Ordinance.

Additionally, as per Section 100B read with the Eighth Schedule to the Ordinance, capital gain tax on disposal of listed securities shall be computed, collected and deposited on behalf of taxpayer, by NCCPL in the prescribed manner. The Bill seeks to propose that NCCPL shall also collect super tax in relation to capital gains.

3. Additional Tax on Certain Incomes, Profits and Gains Section 99D, Fourth, Fifth and Seventh Schedules

The Bill proposes to insert a new, non obstante, section whereby an additional tax shall be imposed on every person or class of persons who has any income, profit or gains that have arisen due to any economic factor or factors that resulted in unexpected income, profits or gains whether or not disclosed in the financial statements. The tax is leviable in addition to any tax charged, paid or payable under any provision of the Ordinance. Further, such additional tax will be imposed for any of the preceding five tax years from the tax year 2023 and onwards.

For the purposes of the above, the Federal Government would provide/ specify by notifying in the Official Gazette: - Economic factor or factors including but not limited to international price fluctuation which would have bearing on any commodity price in Pakistan or any sector of the economy or difference in income, profit or gains on account of fluctuation in foreign currency - The rate of the above levy which would not exceed 50% of such income, profits or gains - The scope, time and payment of the tax payable and the manner and conditions for payment of such tax - Exempt any person or classes of persons, any income or classes of income from the above levy, subject to the condition as may be specified

While the above provision would, in our view, largely affect exporters, currency dealers, sugar, cement, steel sectors and OMCs etc., enabling provisions have also been proposed in the Fourth, Fifth and Seventh Schedules to the Ordinance. Such schedules contain specific regulations for taxation of entities engaged in insurance business, exploration and production of petroleum, and banking business.

It appears that the notification issued by the Federal Government would provide a complete code in itself for assessment and recovery of tax and other ancillary matters.

As the suggested amendment aims to include five prior years from the tax year 2023 within its scope, it is likely to cause rise in litigation on account of amended assessment proceedings that would be undertaken in the guise of Section 99D.

As a closing comment, introduction of such a tax appears to be a harsh proposal as efforts should instead be directed towards broadening the tax base rather than burdening the persons that are already in the tax net.

4. Unexplained Income or Asset Sub-section (4) of Section 111

In terms of Section 111 of the Ordinance, if a taxpayer fails to provide adequate explanation in respect of the nature and source of the amount credited or the investment made, money or valuable article owned or funds from which the expenditure was made, the tax authorities have the power to treat the unexplained amount as income of the taxpayer. Sub-section (4) of the said section however, provided an exception to this general principle, whereby foreign currency not exceeding PKR 5 million remitted from outside Pakistan through normal banking channel and encashed into PKR by a scheduled bank and a certificate from such bank is produced to that effect.

The Bill proposes to amend this monetary limit of PKR 5 million to an amount of foreign exchange PKR equivalent to US$ 100,000. This seems to be an exorbitant increase in the threshold limit of foreign remittance which is perhaps owing to the current depleting foreign exchange reserves position of the country. However, at the same time this would also enable the undocumented money to enjoy the legal cover without any question being raised on its source.

5. Advance Tax on Cash Withdrawal Section 231AB

It would be recalled that cash withdrawal from banks was subject to collection of tax pursuant to Section 231A of the Ordinance. This section was however done away with by the Finance Act, 2021.

The Bill proposes to reintroduce such collection of tax (which would be adjustable in nature) by inserting a new Section 231AB, whereby banking companies would be required to collect tax @ 0.6% of the amount of cash withdrawn from persons who are not appearing in ATL. The collection of such tax will be triggered when the cash withdrawal exceeds PKR 50,000 in a single day.

6. Exemptions under Foreign Investment (Promotion and Protection) Act, 2022 Section 44A

It would be recalled that the FIA was enacted by the Federal Government on 13 December 2022 paving way for the promotion and protection of certain qualified foreign investments in order to ensure sustainable economic activity and growth and improve the investment climate in Pakistan by providing incentives in direct and indirect taxes, as well as ease of transfer and repatriation. Under principal offerings streamlined by the FIA, the Federal Government, Provincial Governments, local governments, and other relevant authorities will be able to collaborate and work together to ensure the provision of incentives and protection to QI.

The FIA applies to all QIs, as specified in the First Schedule to the FIA. A QI means the investments, sectors, industries or projects as may be chosen, approved and duly notified by the FG. An investment would be treated as a QI if the amount of investment (whether equity or debt) in Pakistan exceeds US$ 500 million or its equivalent PKR amount. However, the Federal Government has powers to notify an investment as QI even if the investment amount criteria is not met. For now, only Reko Diq project in the province of Baluchistan is designated as QI.

The Second Schedule and Third Schedule of the FIA provides categories of incentives granted to the investors of QI and the QIs itself. These include:

• Exemption from tax on income including turnover tax, final tax, capital gain tax, dividend tax and withholding tax;

• Provisions of anti-avoidance may not be applicable to the QIs;

• Exemption from Federal and Provincial sales tax;

• Exemption from FED;

• Exemption from CD on import of all capital goods required to perform functions of enterprises located in an export processing zone or related QI for use by an investor;

• Exemption from capital value tax or any other tax similar in nature;

• Exemption from any export duty or similar duty, cess or levy on the export from Pakistan by an investor in connection with the Qis;

• Exemption from property taxes;

• Exemption from stamp duty and / or registration fees levied by the Federal Government, a Federal Government entity or a Provincial Government;

• The project area of a QI may be declared as an export processing zone entitled to the exemptions available to export processing zones;

• Stabilizing a royalty rate negotiated and agreed with the Provincial Government;

• Exemption from application of Federal and / or Provincial labor and social welfare laws including laws pertaining to workers’ participation in companies’ profits and workers welfare fund;

• Exemption from levy of Federal and / or Provincial development and / or infrastructure development cess;

• Permission for opening, maintaining and operating foreign currency bank account outside Pakistan or within Pakistan, subject to certain conditions;

• Access to non-discriminatory rates of foreign exchange transactions, if deemed appropriate; and

• Exemption from any Federal or Provincial or local charges, cesses, duties, fees, levies, taxes or tolls.

Section 14(1) of FIA provides that protected benefits including the Second Schedule and Third Schedule, shall have overriding effect on any other law and in the event of any conflict whether enacted prior to or subsequent to FIA, the provisions of FIA shall prevail unless the subsequent law expressly provides that it overrides FIA. Section 14(5) of the FIA further enforces that the statutes affected by the Second Schedule shall stand amended in accordance with the provision of the Second Schedule to the FIA.

Keeping in view the dynamics of the FIA, the Bill proposes to suitably amend the provisions of the Ordinance, the ST Act, the FE Act and the Customs Act as follows:

It would not be out of place to mention that Section 54 of the Ordinance provides that in respect of income tax matters, any exemption /reduction in tax rates /liability shall not have any legal effect unless it is provided for in the Ordinance. Although the provisions of FIA have provided for an overriding effect over all other legislation, insertion of section 44A has laid to rest any potential litigation.

7. Exemption Certificate for Non-Withholding of Tax Section 152(5A)

Sub-section (5A) of Section 152 of the Ordinance empowers the CIR to issue an exemption certificate for non-deduction of tax while making payment to a non-resident person pursuant to an application submitted by the payer identifying the name and address of the non-resident person to whom payment is being made, the nature and amount of the payment and other prescribed particulars.

The above Sub-section also requires the CIR to pass an order within thirty days of receipt of notice by the taxpayer making payment. The Bill has now proposed to insert a proviso under Sub-section (5A) which states that incase the exemption certificate is not issued by the CIR within the stipulated thirty days (excluding any adjournments taken by the applicant), it shall be deemed to be issued by the CIR and automatically processed by IRIS upon expiry of thirty days. However, it is also proposed to empower the CIR to modify or cancel the certificate issued automatically by IRIS on the basis of reasons to be recorded in writing after providing an opportunity of being heard to the taxpayer.

The above proposed change is a positive shift and would require the CIR to take prompt action on applications made by the taxpayers.

  8. Scope of Associates Broadened Section 85

Currently, as a general rule, two persons are considered as associates where the relationship between the two is such that one may reasonably be expected to act in accordance with the intentions of the other, or both persons may reasonably be expected to act in accordance with the intentions of a third person.

The Bill seeks to expand the concept of ‘associates’, by including the following relationships within the scope of an ‘associate’:

• A person who sufficiently influences the other person, either alone or together with an associate or associates. It has also been explained that two persons shall be treated as sufficiently influencing each other,

• Where one or both persons, directly or indirectly, are economically and financially dependent on each other and, decisions are made in accordance with the directions, instructions or wishes of each other for common economic goal.

• A resident of a jurisdiction with zero tax regime will be considered as an associate of a person who enters into a transaction with such non-resident, either directly or indirectly. The term ‘jurisdiction with zero tax regime’ would mean the jurisdiction as may be prescribed.

It is important to note that Section 108 of the Ordinance empowers the tax authorities to examine the transactions between associates on the arm’s length principle and to recharacterize the same by distributing, apportioning or allocating income, deductions or tax credits between the persons, if the transactions are not executed on arm’s length. It appears that by amending the definition of the term ‘associates’ to include transactions with non-residents in jurisdictions with zero tax regime, the legislature intends to tax such transactions in the hands of Pakistan resident persons which would otherwise not be taxable in the foreign jurisdiction. This seems to be a harsh proposal for compliant taxpayers who enter into genuine transactions with non-residents without having any relationship with such non-residents.

It would also not be out of place to mention that enhancement in the scope of the term ‘associates’ may also have consequential effect in relation to Thin Capitalization and restriction on deduction of profit on debt payable to associated enterprises.

9. Seventh Schedule Rule 7CA

Through the Finance Act, 2022, super tax on high earning persons was levied by inserting a new Section 4C to the Ordinance. The provisions of Section 4C were inapplicable in case of banking companies for the tax year 2022, however, corresponding amendment was not made in Rule (7CA) of the Seventh Schedule to the Ordinance, which provided that provisions of Section 4C would apply to banking companies for the tax year 2022 and onwards. This appeared to be an omission since the charging section i.e. Section 4C explicitly excluded banking companies from the levy for the tax year 2022.

The Bill now proposes to remove such anomaly by substituting the reference to ‘tax year 2022’ with the phrase ‘tax year 2023’. Consequently, super tax under Section 4C will be applicable on banking companies from the tax year 2023 and onwards.

  Rules 7D, 7E and 7F

Finance Supplementary (Second Amendment) Act, 2019 introduced certain incentives for banking sector to contribute in accomplishment of the Government’s goals to promote economic growth in the country by providing financial support to small businesses involving low and medium capital structure. Accordingly, Rules 7D, 7E and 7F were introduced which provided relief in tax rate in respect of taxable income earned from providing additional advances to micro, small and medium enterprises, low cost housing and farm credits. Such reduced tax rates were applicable from the tax year 2020 to 2023.

The Bill now proposes to extend the applicability of reduced rates under Rules 7D, 7E and 7F for the tax years 2024 and 2025.

Rule 7G

Similar to reduced rate of tax in respect of taxable income earned by a banking company from providing additional advances to micro, small and medium enterprises, low cost housing and farm credits under Rules 7D, 7E and 7F respectively, in order to encourage banking sector to contribute in the field of Information Technology, the Bill proposes a reduced rate of tax in respect of taxable income earned from funding provided to entities engaged in providing IT and IT Enabled Services, as defined in Section 2 of the Ordinance. The salient features of the Rule are as under:

• The relief in tax rate will be available in respect of taxable income earned from providing additional advances. The term ‘additional advances’ has been defined as average advances in addition to average amount of such advances made in such sector by the bank for the immediately preceding tax year

• The rate of tax would be 20%

• The reduced rate will be applicable for the tax years 2024 and 2025

• The reduced rate would be applicable subject to furnishing a certificate from external auditor along with the audited accounts while filing return of income certifying the amount of such advances made in the preceding tax year, additional advances made for the tax year and net mark-up earned from such additional advances

• The taxable income arising from additional advances shall be computed in accordance with the following formula:

Taxable income = A x B/C

Where –

A = taxable income of the banking company

B = net markup earned from such additional advances

C = total of the net markup, non-markup income

Rule 8

• Through SRO 213(I)/2023 dated 22 February 2023, exemption from tax was provided in respect of profit on debt and capital gains earned by a non-resident banking company, approved by the Federal Government, from debt and debt instruments as approved by the Federal Government. The Bill now proposes to adopt the amendments made through the above SRO by inserting Sub-rule (4) in Rule 8 of the Seventh Schedule. In terms of the proposed Sub-rule (4), profit on debt and capital gains earned from Federal Government’s sovereign debt /sovereign debt instruments will be exempt from tax in the hands of a non-resident banking company approved by the Federal Government under a sovereign agreement for the purpose of the aforesaid Sub-rule.

• Prior to the Finance Act, 2021, in terms of Rule 6C, taxable income arising from additional income earned from additional investment in Federal Government securities was subject to tax at an enhanced rate of 37.5% for the tax year 2020 and onwards.

Through the Finance Act, 2021, such enhanced rate on additional income was restricted to the tax years 2020 and 2021 only. Moreover, in terms of Sub-rule (6A), for the tax year 2022 and onwards taxable income attributable to investment in Federal Government securities was subjected to tax at varied rates depending upon the ratio of advances to deposits that existed on the last day of the tax year.

Through SRO 226(I)2023 dated 27 February 2023, provisions of Sub-rule (6A) of Rule 6C were made inapplicable for banking companies for the tax year 2024. Consequently, for the tax year 2024, taxable income attributable to investment in the Federal Government securities was made taxable at the normal rate of 39% as against the enhanced rates.

The Bill now proposes to adopt the amendments made through the aforesaid SRO by inserting Sub-rule (5) in Rule 8 of the Seventh Schedule.

- Small and Medium Enterprises Clause (59A) of Section 2, Clause (154), Part I of the Second Schedule, and Fourteenth Schedule

It would be recalled that the Finance Act, 2021, introduced the Fourteenth Schedule to the Ordinance, whereby Rules for computation and profit and gains of a SME were provided. The expression SME, for the purposes of the Ordinance, was defined to mean a person who is engaged in manufacturing as defined in Clause (iv) of Sub-section (7) of Section 153 of the Ordinance and his business turnover thereof does not exceed PKR 250 million.

The Bill proposes to enhance the scope of taxation for SME by increasing the threshold of business turnover in a tax year from PKR 250 million to PKR 800 million. The Bill further proposes to include persons engaged in rendering IT or IT enabled services as defined in Clause (30AD) and (30AE) of Section 2 of the Ordinance, within the meaning of SME.

It is also clarified that if a manufacturer or the provider of IT or IT enabled services crosses an annual turnover of PKR 800 million, it would fall outside the ambit of SME in that tax year and for all subsequent tax years.

The following amendments have also been proposed in the Fourteenth Schedule to the Ordinance:

• IT or IT enabled services qualifying for the scheme would require registration and certification by the Pakistan Software Export Board, in addition to registration with Small and Medium Enterprises Development Authority on its SME registration portal;

  • The rate of tax applicable on the taxable income of an SME falling under NTR, would be as follows:

• The rate of tax applicable on SME opting for FTR would be as follows:

The Bill also proposes amendment in the Second Schedule to the Ordinance, by way of insertion of a new Clause (154) to exempt profits and gains of an SME setup exclusively for agro based industry in a rural area. It is also proposed that such exemption would be available to such enterprises that are setup on or before 01 July 2023 and are not formed by the splitting up or reconstitution of an undertaking already in existence.

It would not be out of place to highlight that, as per Rule 6 of the Fourteenth Schedule to the Ordinance, the export proceeds of SMEs shall be subject to tax as per the above prescribed rates under FTR. Conversely, Section 154A of the Ordinance, continues to provide taxation for export of IT or IT enabled services @ 0.25%, as a final discharge of tax liability, in the form of collection of tax by the AD in foreign currency.

A question, however, arises that why would an exporter of IT or IT enabled services categorize/ register itself as an SME in the presence of provisions of Section 154A of the Ordinance, where being an exporter of such services, it would be taxed @ 0.25%, irrespective of any threshold of turnover.

- Recovery of Liability Outstanding Under Other Laws Section 146D

The Bill proposes to introduce a new section which empowers the CIR to recover any outstanding liability in or under any other statue or law in respect of any default which is treated as income tax arrears in that law. Further, the CIR shall deposit the recovery of said liability in the designated account specified in that law.

By inference, it would mean that amounts outstanding, such as CVT, WPPF and WWF can now be recovered as income tax in arrears.

- Tax on Debit and Credit Cards Division XXVII, Part IV of the First Schedule

Section 236Y requires every banking company to collect advance tax at the time of transfer of any sum remitted outside Pakistan, on behalf of any person who has completed a debit, credit or a prepaid card transaction with a person outside Pakistan. The rate of such collection of tax is currently 1% in case of person appearing in ATL and is an adjustable tax.

The Bill proposes to increase the rate from 1% to 5% in case of person appearing in ATL. Accordingly, for a person not appearing in ATL, the rate of withholding tax would be doubled (i.e. 10%) pursuant to the Tenth Schedule to the Ordinance. Whilst at one end the Government is all out to document the economy, introduction of such a high rate on payments via debit card, credit card and prepaid card may prompt the users to use secondary means for making payment outside Pakistan. Additionally, in our view, certain transactions should be ousted from the ambit of this collection of tax, such as, payments for education, medical expenses etc. 

- Minimum Tax Section 113 and Division IX, Part I, First Schedule

Presently, minimum tax paid during the year is available for carry forward for adjustment against taxes paid in subsequent three tax years. The Ordinance allows adjustment of the carried forward minimum tax against the tax paid under Part I of the First Schedule to the Ordinance. Part I of the First Schedule not only contains rates of taxes for individual, AOP’s and Companies but also contains rates of super tax, minimum tax and various rates for income taxed under special rates like dividend, profit on debt, capital gains etc. Therefore, it was a view that the carried forward minimum tax is available for adjustment against taxes paid in subsequent tax years under all the taxes covered in Part I of the First Schedule to the Ordinance.

The Bill now seeks to add an explanation after the second proviso to Clause (c) of Sub-section (2) of Section 113 of the Ordinance to clarify that carry forward of minimum tax will be available only against taxes calculated for individuals and AOP’s based on slab rates and against taxes paid by Companies at full corporate tax rates.

Moreover, the rate of minimum tax under Section 113 in the case of listed companies is proposed to be reduced from 1.25% to 1%. No change has been proposed for other taxpayers.

- Tax on Imports: Section 148, Sub-sections (7) and (7A)

The rate of collection of advance tax under Section 148 of the Ordinance in respect of goods not covered in Table I and II of the Twelfth Schedule to the Ordinance is 5.5% which is applicable for all importers including commercial importer.

The Bill now proposes to introduce a rate of 6% to apply on import by a commercial importer of items listed in Part III of the Twelfth Schedule to the Ordinance. This rate would apply on the import value as increased by CD, sales tax and FED.

- Payments to Non-Residents Section 152, Sub-section (2A)

The Bill seeks to propose an increase in withholding tax rates for making payments on account of goods, services and contracts to a PE of a non-resident person. The proposed rates in comparison to the existing rates are as under:

- Advance Income Tax on Payment to Resident on Payments for Goods, Services and Execution of Contract Section 153, Sub-section (1)

The Bill seeks to propose an increase in withholding tax rates for making payments on account of goods, services and contracts to a resident person. The proposed rates in comparison to the existing rates are as under:

The proposed change is in line with the various revenue driven measures undertaken by the Federal Government to collect revenue and meet targets for the next fiscal year. However, it may increase the tax cost of the taxpayer where the above withholding tax constitutes minimum tax instead of adjustable tax.

- Exemption to Recognized Institutions Table I of Clause (66), Part I of the Second Schedule

Clause (66), Part I of the Second Schedule to the Ordinance provides exemption from tax to any income of certain charitable and other institutions specified therein. Table I provides a list of institutions which are fully exempt from tax without any condition.

The Bill has proposed addition of the following institutions in Table I -

• The Prime Minister's Relief Fund for Flood, Earthquake and Other Calamities with effect on and from the 05 August 2022

• Film and Drama Finance Fund

• Export-Import Bank of Pakistan

• Shaheed Mohtarma Benazir Bhutto Institute of Trauma, Karachi

• Shaheed Zulfikar Ali Bhutto Institute of Science and Technology

The Prime Minister's Relief Fund for Flood was inserted in Table I, Clause (66), Part I to the Second Schedule via SRO 1590(i)/2022 dated 23 August 2022.

 - Exemption to REIT Scheme on Profit and Gain on Sale of Immovable Property or Shares of SPV Clause (99A), Part I of the Second Schedule

The above Clause provides exemption from tax on profits and gains to a person on the sale of immovable property or shares of SPV to any type of REIT scheme which was previously allowed up to 30 June 2023.

The Bill has proposed to extend the above exemption till 30 June 2024.

- Exemption to Income of Persons Resident in Tribal Area forming part of the Provinces of KPK and Baluchistan. Clause (145A), Part I of the Second Schedule

The above Clause provides exemption from tax on income of individual domiciled or company and AOPs resident in the Tribal Area forming part of the Provinces of KPK and Baluchistan under paragraph (d) of Article 246 of the Constitution (Twenty-Fifth Amendment) Act, 2018. This was previously allowed from 01 June 2018 to 30 June 2023.

The Bill has proposed to extend the above exemption till 30 June 2024.

- Exemption to an institution Clause (150), Part I of the Second Schedule

Clause (150) provides exemption from tax to any income derived by Siyahkalem Engineering Construction Industry and Trade Company Limited from contract dated 23 May 2017 with Earthquake Reconstruction and Rehabilitation Authority, financed by the Saudi Fund for Development with effect from the tax year 2017.

The Bill has proposed to extend this concession to another entity namely Alteraz Engineering Consultant.

- Exemption from application of Minimum Turnover Tax under Section 113 Clause (11A), Part-IV of the Second Schedule

Clause (11A), Part-IV of the Second Schedule to the Ordinance prescribes the persons who are exempt from the levy of minimum turnover tax under Section 113 of the Ordinance. The Bill now seeks to introduce the following new entry in the said Clause:

• The Prime Minister's Relief Fund for Flood, Earthquake and Other Calamities with effect on and from the 5 August 2022.

The Prime Minister's Relief Fund for Flood was inserted in Clause (11A), Part IV to the Second Schedule via SRO 1590(i)/2022 dated 23 August 2022.

- Exemption from Applicability of Withholding tax Clause (100), Part IV of the Second Schedule

Clause (100), Part-IV of the Second Schedule to the Ordinance was inserted though Finance Act, 2011 wherein the provisions of Section 236U of the Ordinance did not apply to an insurance company collecting premium under:

• Crop loan insurance scheme

• Livestock insurance Scheme

Since the withholding of tax under Section 236U of the Ordinance was deleted vide the Finance Act, 2020, the Bill now proposes to delete the exclusion provisions being infructuous. 

- Inclusion of Recognized Institutions Section 61

Currently, individuals and companies are entitled to claim tax credits under Section 61 of the Ordinance against tax liability in respect of the donations made to specified entities, organizations and funds mentioned in the Thirteenth Schedule to the Ordinance.

The Bill has proposed to include the following in the list:

• The Prime Minister's Relief Fund for Flood, Earthquake and Other Calamities with effect on and from the 05 August 2022;

• Film and Drama Finance Fund

The Prime Minister's Relief Fund for Flood was inserted in Twelfth Schedule via SRO 1634(i)/2022 dated 30 August 2022.

- Permanent Establishment Section 2(41)

The moot point for determining whether the business income of a foreign enterprise is taxable in Pakistan or not, is the existence of its PE. What constitutes a PE has been defined in Section 2(41) of the Ordinance and means “a fixed place of business through which the business of the person is wholly or partly carried on”. This definition is well understood and accepted in international tax parlance and, globally, the following three tests are stated to apply to determine whether a PE of a foreign enterprise exists in the other jurisdiction or not:

(i)Place-of-business test;

(ii) Permanence test; and

(iii) Business-activity test

The Bill proposes to remove the word “fixed” from the general definition of the term PE, thereby removing the permanence test from the scope. By virtue of such an amendment, even if the foreign enterprise has a temporary place of business in Pakistan, the same would now render the non-resident as having a PE in Pakistan.

Whilst it can be appreciated that the tax man intends to harness tax avoidance measures adopted by multinational organizations through fragmenting their business operations in a manner that permanence is avoided in the creation of a place of business, it would appear that Pakistan would, again, stand itself out from the international tax arena. The above proposed amendment would now, appears to render a single/ isolated activity of a non-resident person, which otherwise lacks endurance or permanency, to taxation. This proposed amendment would, in our experience, further deter the non-residents in venturing into Pakistan.

It would not be out of place to mention that all the Treaties that Pakistan has signed with other jurisdictions also defines the term PE within the scope and, for that purposes, a PE would continue to remain a “fixed place of business” through which the business of the person is wholly or partly carried on. Therefore, the definition of PE under the Treaty would continue to prevail over the provisions of the Ordinance, where applicable.

Additionally, in terms of Section 2(41)(d), a service PE is considered to exist where a non-resident provides services, including consultancy services, in Pakistan through its employees or other personnel. Since the definition used the expression “personnel” there were arguments that if the non-resident engaged an entity in Pakistan to provide the said services, the same should not constitute a PE as both the expression “employee” and “personnel” would connote to individuals. The Bill proposes to further expand the scope of a service PE where the non-resident renders the services under an agreement with an “entity” in Pakistan.

- Tax credit for Construction of House Section 65I

To incentivize housing construction, the Bill has proposed to introduce a tax credit on construction of a new house (means a residential house, whose layout plan is approved by the concerned authority on or after the 01 July 2023) by an individual. The tax credit will be allowed in the tax year in which the construction is completed and a completion certificate is furnished along with the income tax return. This benefit is proposed to be available for the tax years 2024 to 2026. The tax credit shall be allowed at the lesser of:

• 10% of tax assessed to the person for the tax year; or

• PKR 1 million.

  - International Centre of Tax Excellence Section 230J

With a view to bring reforms to the existing tax system and policies, specially aiming to enhance the capabilities of the existing tax administration, the Bill proposes to establish an Institute to be known as International Centre of Tax Excellence. The broad functions of the Institute are proposed to include the following:

In order to discharge its obligations, it is proposed that the FBR may provide anonymized data to the Institute for processing and analysis and for discharging its obligations. The particulars of the taxpayers shall be kept confidential and provisions of Sub-section (7) of Section 216 of the Ordinance concerning disclosure of information by a public servant are proposed to apply accordingly.

The Institute is proposed to be governed by an Executive Director who shall be the Chief Executive of the Institute and also act as Secretary of the Executive Committee. The Executive Committee shall comprise of Chairman FBR, Member (IR-Policy), Member (IR-Operations) and two independent members to be appointed by the Federal Government. A Nominating Committee comprising the Minister-in-Charge, Secretary Revenue Division and Secretary Finance shall be responsible for recommending a panel to the Federal Government for the appointment of Executive Director and independent members of the Executive Committee by applying the prescribed criteria. At least 50% of the employees of the Institute are proposed to be serving or retired Inland Revenue Officers having at least 5 years of experience of tax policy or tax administration.

While this may be a right step moving forward towards a better tax administrative system and policy reforms, the efforts can only be fruitful through proper engagement and representation of external stakeholders, business representatives as well as tax specialists.

 - Tax Reduction for certain Builders Clause (21), Part III, Second Schedule

The Bill proposes to introduce a new Clause (21) in Part III of the Second Schedule to the Ordinance, which provides for tax reduction in tax payable on profits and gains derived from a new building construction project by a builder registered with Directorate General of Designated Non-Financial Business and Professions, which is chargeable to tax under the head “Income from Business”.

The tax payable is proposed to be reduced, by 10% or PKR 5 million, whichever is lower, for the tax year in which the builder furnishes a completion certificate issued by the concerned regulatory authority along with the income tax return. This benefit is proposed to be available for the tax years from 2024 to 2026.

For this purpose, ‘New building project’ is defined as a project for the construction of building, excluding a land development project, whose layout plan is approved by the concerned authority on or after the 01 July 2023.

- Tax reduction for Youth Enterprise Clause (22), Part III, Second Schedule

In order to encourage young entrepreneurs and to provide tax incentive, the Bill seeks to insert Clause (22) in Part III of the Second Schedule to the Ordinance. The incentive in the shape of tax reduction shall be available in case of a youth enterprise from the tax year 2024 to 2026 on profit and gains derived from business chargeable to tax under the head “Income from Business” in the following manner:

For the purpose of this Clause, ‘Youth Enterprise’ is defined as a startup established on or after 01 July 2023 and may take any of the following three forms:

• a sole proprietorship owned by a youth individual;
• an AOP all of whose members are youth; or
• a company whose 100% shareholding is held or owned by youth individual(s).

Youth individual is also defined as a natural person up to the age of 30 years on the beginning of the relevant tax year. It is also provided that the benefit under the proposed Clause will not be available to a startup that is formed by the transfer or reconstitution or reconstruction or splitting up of an existing business.

It is pertinent to mention here that in order to empower women and to introduce a rather friendlier tax environment for an enterprise entirely owned by women, the Finance Act, 2021 had introduced a concept of ‘women enterprise’ and provided a tax reduction of 25% on profits and gains derived from business chargeable to tax under the head ‘Income from Business’. The Bill proposes that the benefit available under the proposed Clause (22) will not apply in case of a women enterprise which has availed benefit under Clause (19) of Part III of the Second Schedule to the Ordinance.

 - Exemption to Prime Minister’s Relief Fund for Flood Clauses (121), (122), (123) and (124), Part IV of the Second Schedule

The Bill seeks to insert following Clauses in Part-IV of Second Schedule to the Ordinance as a relief measure to the Prime Minister’s Relief Fund for Flood, Earthquake and other calamities:

The Clauses (121), (122), (123) and (124) were inserted in Part IV of the Second Schedule to the Ordinance were inserted via aforesaid SRO’s. However, the Bill has now proposed to insert the same in Part IV of the Second Schedule to the Ordinance.

- Export of Computer Software or IT or IT enabled services Section 154A, Division IVA Part III First Schedule

Currently, persons deriving income from exports of computer software or IT services or IT enabled services, after fulfillment of certain conditions are charged to tax at the rate of 0.25% as a final discharge of tax liability.

One of the condition for subscribing to this scheme of taxation was the requirement to file the Federal or Provincial sales tax return. The Bill proposes to remove this requirement.

Further, the Bill proposes the scheme to apply only from the tax years 2024 to 2026. Previously, there was no time limit for such an application.

- Advance tax on foreign domestic workers Section 231C

The Bill seeks to insert a new section whereby any authority responsible for issuing or renewing domestic aide visa to a foreign national as a domestic worker, would be required to collect tax of PKR 200,000 from the agency, sponsor, or the person employing the services of such foreign national.

The aforesaid tax would be an adjustable advance tax for the relevant tax year of the agency, sponsor, or person employing the services of the foreign national.

 - Advance tax on purchase or transfer of immovable property Section 236K

Presently, tax collected from a non-resident individual holding a POC, NICOP or a CNIC at the time of registration of immovable property where the property was acquired through a FCVA or an NRVA maintained with the authorized banks in Pakistan, as per the Foreign Exchange Regulations issued by the SBP, is treated as a final tax.

The Bill proposes to exempt such non-resident individual from collection of the above discussed tax provided the other conditions governing acquisition of property through foreign exchange remain the same. The exemption is, however, subject to the submission of a prescribed certificate issued by the SBP.

SALES TAX

SALES TAX ACT, 1990

AMENDMENTS IN THE ST ACT VIA THE FINANCE BILL, 2023

- Production, Transmission and Distribution of Electricity Section 2(12) and Section 2(33)

Through the Finance Act, 2022 the expression ‘Production, Transmission and Distribution of Electricity’ was added in the definitions of “Goods” and “Supply” under Section 2(12) and under Section 2(33) of the ST Act, respectively. The said insertion has created dispute between the Federal and Provincial tax authorities on the transmission/ distribution of electricity which may fall within Provincial domain. The Bill now seeks to omit the expression “Production, Transmission and Distribution of Electricity” from the definitions of Goods and Supply.

The above proposal has been introduced in accordance with the decision of National Tax Council for the resolution of the tax disputes between the Federal and Provincial tax authorities.

- Tier-I Retailer Section 2(43A)

Section 2(43A) defines the term Tier-1 Retailer. Now, the Bill seeks to omit the following categories from the scope of Tier-1 Retailer:

• 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.

• A person engaged in supply of articles of jewellery, or parts thereof, of precious metal or of metal clad with precious metal.

  - Directorate General of Digital Initiatives Section 30CA

The Bill seeks to rename the existing “Directorate General of Digital Invoicing and Analysis” with “Directorate General of Digital Initiatives”. The Directorate shall consist of a Director General, and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and other Officers as FBR may appoint by notification in the official gazette.

- Offences and Penalties S.No.23 of the Table in Section 33

Sr,No.23 of the Table in Section 33 of the ST Act stipulates the offense on cigarette packs manufactured, possessed, transported, distributed, stored or sold with counterfeited tax stamps, banderoles, stickers etc., whereas the column which provides the penalties also covered specified goods.

The Bill now seeks to streamline the offense with the penalty by replacing the expression “cigarette packs” with “goods or class of goods as specified by the FBR under Sub-section (1) of Section 40C”.

As a result, the scope of the above offense which was previously confined to cigarette packs will also be applicable on other specified goods i.e. tobacco products, beverages, sugar, fertilizer, cement, petroleum products, steel sector and goods specified in the Third Schedule

 - Fifth Schedule Section 4

Import or Supplies - the Foreign Investment (Promotion and Protection) Act, 2022

The Fifth Schedule of the ST Act deals with levy of zero rate of sales tax. The Bill seeks to insert the following S.No.8A in the Fifth Schedule in line with the relief provided to Reko Diq project under the FIA for 30 years:

Detailed comments on tax amendments in relation to FIA are given in the income tax portion.

Other Drawing, Marking Out etc.

The Bill seeks to substitute Clause (xxv) of S.No.12 of the Fifth Schedule as following:

Local Supplies to Registered Exporters Authorized under Export Facilitation Scheme, 2021

S.No.21 of the Fifth Schedule provides zero rating on local supplies of raw material, components, parts and plant and machinery to registered exporters authorized under Export Facilitation Scheme, 2021. The Bill seeks to amend the description of S.No.21 to enhance the scope of zero rating on local supplies of “commodities” also in the following manner:

- Sixth Schedule Section 13

The Sixth Schedule deals with exemptions of goods from levy of sales tax.

Table I (on Import and Local Supplies)

S.No.16, 17 and 18 exempt the import and supply of red chillies, ginger and turmeric, however, the said exemption do not apply on the aforesaid goods if sold in “retail packing bearing brand names and trademarks”.

The Bill seeks to remove the expression “in retail packing bearing” from the above serial numbers. As a result, such goods would be taxable that are imported and/or locally supplied under brand names and trademarks whether sold in retail packing or otherwise.

S.No.121 is providing exemption to import and supply of Blood Bag CPDA-1 with blood transfusion set pack in aluminum foil with set. The Bill seeks to add an explanation in S.No.121 to the effect that such exemption is also available to blood transfusion sets not packed in aluminum foil but imported with blood bags CPDA-1, in corresponding quantity in same consignment.

S.No.151(b) provides exemption on imports of plant, machinery, equipment for installation in tribal areas and of industrial inputs by the industries located in tribal areas, as defined in the Constitution of Islamic Republic of Pakistan as made till 30 June 2023. The Bill proposes to extend the above exemption till 30 June 2024.

S.No.152 provides exemption on supplies of electricity, as made from the day of assent to the Constitution (Twenty-fifth Amendment) Act, 2018, to all residential and commercial consumers and to such industries in tribal areas which were set and started their industrial production before 31 May 2018 (excluding steel and ghee or cooking oil industries) till 30 June 2023. The Bill proposes to extend the above exemption till 30 June 2024.

S.No.159 and 160 exempts the import of auto disable syringe and raw material for their manufacturing till 31 December 2021. The Bill seeks to omit the above serial numbers being redundant.

The Bill seeks to insert the new serial numbers from 175 to 181 for granting exemption on imports and local supplies of the following listed goods:

Table II (Local Supplies)

S.No.32, 34, 35, 36, 37, 39, 41 and 42 exempt the local supply of yogurt, butter, desi ghee, cheese, processed cheese, products of meat, meat of bovine animals, sheep, goats and uncooked poultry meat, fish and crustaceans; however, the said exemption do not apply on the aforesaid goods sold in “retail packing under a brand name”. The Bill seeks to remove the expression “in retail packing” from the above serial numbers. As a result, local supply of following goods under a brand name would be taxable whether sold in retail packing or otherwise.

- Eighth Schedule Section 3(2)(aa)

The Eighth Schedule lists down the goods that are subject to sales tax at reduced rate or specified rate subject to such conditions and limitations as specified therein.

S.No.66 provides reduced rate of 12% on supplies made from retail outlets as are integrated with FBR’s computerized system for real-time reporting of sales subject to the prescribed condition. The Bill now seeks to enhance the rate of sales tax from 12% to 15%.

- Pharma Sector S.No.81 and 82 of the Eighth Schedule

S.No.81 (Drugs and Medicaments)

Medicaments as are classifiable under Chapter 30 of the First Schedule to the Customs Act previously enjoyed zero rating vide S.No.19 of the Fifth Schedule of the ST Act along with substance registered as drugs under the DA. However, through the Finance Act, 2022 S.No. 81 had been introduced in Table 1 of the Eighth Schedule to levy sales tax at 1% on the substances registered as drugs under the Drugs Act, 1976 only, subject to the prescribed conditions. As a result, medicaments became subject to sales tax at the standard rate.

The Bill now seeks to include medicaments classifiable under Chapter 30 of the Customs Act in S.No.81 of the Table I of the Eighth Schedule with certain exclusions. As a result, the treatment and the reduced rate of 1% applicable on substances registered as drugs is now proposed to be applicable upon medicaments.

Further, the proposed amendment is intended to have retrospective effect from 01 July 2022. This means medicaments, which were subject to standard rate from July 2022 to June 2023, would be treated to be taxed at reduced rate of 1%. Resultantly, importer or supplier of medicament may claim for refund of excess tax payments in certain situations and subject to prescribed limitations/ conditions.

S.No.82 (Raw Material for Pharma)

S.No.105 of the Sixth Schedule earlier exempted import and supply of raw materials for the basic manufacture of APIs and for manufacture of pharmaceutical products. However, exemption on imported raw material were only available where their corresponding CD was not exceeding 11% ad valorem.

Subsequently, such exemption was withdrawn, vide the Supplementary Act, and all raw materials meant for manufacturing of APIs and registered drugs had become taxable at standard rate.

Currently, APIs, excluding excipients, for manufacture of registered drugs or raw materials for the basic manufacture of APIs are subject to reduced rate of 1% subject to the prescribed conditions. The Bill seeks to substitute Serial No.81 of the Eighth Schedule as under:

Apparently, the legislature is intending to provide benefit of 1% on all pharma raw material, including excipients, as earlier provided in S.No.105. Further, it seems that the word “exemption” has inadvertently been used as the Eighth Schedule stipulates reduced rate of sales tax.

On review of the above proposed substitution of S.No.82, it appears that the aforesaid imported pharma raw materials, having CD rate above 11%, would be proposed to be taxed to standard rate of 18%.

Additionally, the Bill seeks to enact above proposed amendment with retrospective effect from 01 July 2022. This could lead to dispute for collection of sales tax at standard rate on previously imported raw materials, having CD exceeding 11% ad valorem, whereas taxpayers would claim that excess sales tax that may not be recovered on past and closed transactions. Further the excess sales tax, that may have been paid on supplies of excipients, may be claimed as refundable in certain situations and subject to prescribed limitations/ conditions.

ISLAMABAD CAPITAL TERRITORY TAX

- Scope of Tax Section 3(2A)

Section 3(2A) provides that provisions of the ST Act shall apply mutatis mutandis to the services rendered or provided under the ICT Ordinance. The ST Act contains the concept of a Cottage Industry, which is applicable on the manufacturers who: (a) do not have industrial or electricity connections; (b) are located in residential areas; (c) do not have a total labor force of more than ten workers; and (d) whose annual turnover from all supplies does not exceed PKR 8 million.

The Bill seeks to introduce the above concept of Cottage Industry in the ICT Ordinance, as defined in Section 2(5AB) of the ST Act, but limits it to freelance exporters who are exclusively dealing in the export of IT and IT enabled services. Under the proposed amendment, freelance exporters shall be considered as a Cottage Industry if their annual turnover does not exceed PKR 8 million.

The Bill also seeks to insert an explanation wherein it is defined that freelance exporters mean persons who work on per job on a self-employed basis, without being attached to or under the employment of any other person, and have the liberty to work on various tasks simultaneously.

The Bill also seeks to give the effect of zero rating on services provided by, for and to QI in the Reko Diq project in pursuance of the FIA.

Amendment in the Schedule Section 3

Table-I

S. No.1

The services of hotels, motels, guest houses, farmhouses, marriage halls, lawns, clubs and restaurants are subject to sales tax at the rate of 15% in pursuance of S. No.1 of the Table-I.

The Bill now seeks to divide such services into two categories i.e., restaurants and services other than restaurants. No change is proposed in the rate of sales tax on non-restaurant services, however, the rate of sales tax on restaurant services is proposed to be reduced to 5% if the payment is made through debit or credit card, mobile wallet or QR scanning, subject to the condition that no adjustment of input tax or refund shall be admissible.

S. No.11

Through the Finance Act, 2022, rate of sales tax on services was reduced to 15%, however, such reduction was not made on the services provided by “Software or IT-based system development consultants”. The Bill now seeks to apply a rate of 15% on such services.

S. No.60

Through the Finance Act, 2022 the expression ‘production, transmission and distribution of electricity’ was added in the definitions of “Goods” and “Supply” as provided in the ST Act. The above insertion had created a dispute between the Federal and Provincial tax authorities on the transmission/ distribution of electricity, which may fall within the Provincial domain. The Bill now seeks to omit the expression “production, transmission and distribution of electricity” from the definitions of Goods and Supply in the ST Act and proposes to insert S.No.60 in the Table-I to tax Electric Power Transmission Services at the rate of 15%. The above proposal has been introduced in accordance with the decision of the National Tax Council for the resolution of tax disputes between the Federal and Provincial tax authorities.

Table-II

S. No.11

IT and IT enabled services were subject to sales tax at the rate of 5% in pursuance of S.R.O 495(I)/2016, dated 04 July 2016, which was subsequently rescinded vide S.R.O 251(I)/2022, dated 16 February 2022. Through the Finance Supplementary Act, the aforesaid services were added at S. No.11 of Table-II subjected to sales tax at the rate of 5% without any condition. Inconsistent with other services of Table-II, the description of IT and IT enabled services did not correspond with the description of services provided at S. No.11 of Table-I, i.e., “Services provided by software or IT based system development consultants”. However, this anomaly was removed through the Finance Act, 2022 when the description of the service category of Table-II was also changed in accordance with S. No.11 of Table-I.

The Bill now seeks to replace the said category in Table-II by “IT and IT enabled services” and also proposes to add a condition that no input tax adjustment or refund shall be admissible for such services. However, the corresponding change has not been proposed in Table-I. This may lead to anomaly that Table-I, which provide the list of all taxable services, applies 15% sales tax on “Services provided by software or IT based system development consultants”, whereas if the foregoing amendment is approved, Table-II will be providing reduced rate of 5% on IT and IT enabled services. In this view, there is a need to remove the said anomaly by making the corresponding amendment in the description provided in the Table-I.

FEDERAL EXCISE DUTY

Duties specified in the First Schedule to be levied Section 3(1)

Section 3(1) of the FE Act provides that FED shall be levied and collected on goods produced/ manufactured in Pakistan, goods imported into Pakistan, such goods as notified by Federal Government which are produced/ manufactured in non-tariff areas and are brought to tariff areas for sale/ consumption therein and services provided/ rendered in Pakistan at the rate of 15% ad valorem on all such goods and services; except the goods and services specified in the First Schedule to the FE Act which shall be charged to FED at the rates specified therein.

The Bill proposes insertion of a new Clause (e) in Section 3(1) of the FE Act, to levy and collect FED on any item specified in the First Schedule at the rate of 15%. The purpose of the foregoing proposed amendment is not clear as the goods and services specified in the First Schedule to the FE Act are already subject to FED at the rates specified therein. The said proposal needs to be revisited in order to avoid any irrational interpretation for scope enhancement that may give rise to undue litigation.

- Appointment of Federal Excise Officers and delegation of powers Section 29(2)(d)

The Bill proposes the establishment of a “Directorate General of Digital Initiatives” which shall be headed by a Director General, and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and other Officers, as the FBR may appoint, by a notification in the official gazette.

- Power to make rules Section 40(4)

Section 40 empowers the FBR to make rules and establish related procedures and protocols. The Bill seeks to insert a new Sub-section (4) to Section 40, whereby the FBR will be empowered to collect, arrange and publish rules alongwith general orders and departmental instructions and ruling if any, at appropriate intervals. Further the FBR may sell these publications to the public at a reasonable price, or place on the FBR’s official web-site.

- Amendments in the First Schedule Section 3, First Schedule, Table I and Table II

Table I (Goods)

The Bill proposes to insert the following goods in Table I of the First Schedule to the FE Act:

Table II (Services)

The Bill proposes to amend the description and heading of services listed at S.No.11 of Table II of the First Schedule to the FE Act, without any change to the related rate of duty, which shall remain at 10% of the charges:

The franchise services are currently subject to FED at the rate of 10% in pursuance of S. No.11 of Table II of the First Schedule, read with Section 2(12a) of the FE Act.

The definition of franchise provides that any fee or consideration, including royalty or technical fee against an authority given by a franchiser under which the franchisee is contractually or otherwise granted any right to produce, manufacture, sell or trade in, or engage in any other business activity, in respect of goods; or to provide services or to undertake any process identified with the franchiser shall be subject to FED.

Multiple cases, relating to the scope of this section, are pending at various fora, which the tax department is contesting on the grounds that all kinds of technical services are covered under the purview of such franchise services. The Islamabad High Court, while disposing a reference on a similar matter, held that only such consideration shall be subject to FED under the purview of franchise services, as is based on an authority given by the franchisor to the franchisee.

The concept of “fee for technical services” is neither defined in the FE Act nor in the ST Act(s) on services. Further no such specific category of service is defined in Chapter 98 of the First Schedule to the Customs Act. In this view, there is a risk that any service may end up being categorized as a fee for technical service. In addition, technical services may also be subject to sales tax within the territorial jurisdiction of Islamabad under the ICT Ordinance, and this raises the risk of imposition of additional FED on such services.

Further, it can be inferred that the FED charged by the department, prior to the enactment of the proposed amendments, by stretching the definition of franchise on all kind of technical services—particularly in the scenarios where local subsidiaries obtained services from non-resident entities—may not sustain. Moreover, through the proposed amendment, all technical services provided/ rendered from out of Pakistan to the recipient of such services in Pakistan would also be subject to FED in the ICT.

- Amendments in the Third Schedule Section 16(1),Table I and Table II

The Bill proposes to insert a new category in Table-I & Table-II to give effect to the relevant provisions of tax exemption for the Reko Diq project, provided in the FIA.

Table I

Table II

The aforesaid exemptions would be available for thirty (30) years. Detailed comments on tax amendments in relation to FIA are given in the income tax section.

CUSTOMS

- Definition - Smuggle Section 2(s)

The definition of "Smuggle" means;

• to bring into or take out of Pakistan in breach of any prohibition or any restriction; and

• the act of carrying, transportation, removing, depositing, harboring, keeping, concealing, retailing, or enroute pilferage of transit goods.

Now, the Bill seeks to clarify that the term "Smuggle" as defined above is in relation to the territorial jurisdiction of Pakistan.

- Pakistan Customs Academy Section 3C

It is proposed to rename the “Pakistan Customs Academy” to " "Customs Academy of Pakistan ".

- Assistance to the Officers of Customs Section 7

The Bill seeks to include the Provincial Levies and Khasadar Force in the list of departments, who are required to provide assistance to the Customs department to discharge its functions.

- General Powers to Exempt Customs Duties Section 19(1), 19(5)

This section empowers the Federal Government to provide exemption from the applicable CD, under abnormal circumstances, implementation of bilateral and multilateral agreements and to any other international financial institution. The Bill seeks to enhance this exemption to entities having agreements with the Government of Pakistan.

Sub-section (5) of Section 19 states that all notifications issued after 01 July 2016, if not rescinded earlier and placed before the National Assembly, shall be continued and enforced up to 30 June 2023. Now, it is proposed to extend the period of enforcement up to 30 June 2024.

- Power to determine the Customs Value Section 25A(1)

The Director of Customs Valuation, while determining the customs value of any goods imported into or exported out of Pakistan, may incorporate values from internationally acclaimed publications, periodicals, bulletins or official websites of manufacturers or indenters of goods.

It is now proposed that instead of incorporating the values from aforementioned sources, the Director of Customs Valuation may only consult these sources to determine the customs value of any goods.

- Declaration and Assessment for Home Consumption or Warehousing or Transshipment Section 79(1)

Section 79 provides that the owner of imported goods may file the GD of goods for home consumption, warehousing, transshipment or for any other approved purposes, within ten days of arrival of the goods. The Bill seeks to add third proviso in Sub-section (1) of Section 79 to fix the mandatory time of filing of GD at the land Customs Station at border within three days of arrival of goods.

- Period for which Goods may remain in Warehouse Section 98(1)

The perishable goods may remain in a warehouse for a period of one month. It is now proposed to enhance the period to three months.

- Declaration by Passenger or Crew of Baggage Section 139(1)

It is proposed to facilitate the passengers travelling as a group to file baggage declarations on their behalf by a representative.

- Punishment for Offences Section 156

The Bill proposes to delete the penalty mentioned at S.No.1(i) of the Table on contravention of placement of invoice and packing list in the containers. The penalty was earlier levied vide Finance Act, 2021.

The Bill also seeks to replace the progressive penalty rates with a fixed penalty on persons who fail to attach or electronically upload mandatory documents as mentioned in S.No.1(iii) stated below.

S.No. 8(i), 9, 89(i) and 90 of the Table provides maximum penalty for persons involved in smuggling of goods, evasion of duty and taxes and breach of prohibitions or restrictions. It is now proposed to fix the minimum value of penalty upto the value of goods.

- Power of Adjudication Section 179(2)

This section provides the power of adjudication and jurisdiction of officers of customs for the cases involving confiscation of goods, recovery of duty and other taxes not levied, short levied or erroneously refunded, imposition of penalty, or any other contravention. To facilitate the taxpayers, it is now proposed that the respondent may opt for adjudication through the Customs Computerized System.

 - Vesting of Confiscated Property in the Federal Government Section 182

This section provides that when any goods are confiscated, they shall forthwith vest in the Federal Government. Further, the FBR can authorize its subordinate offices to use the confiscated vehicles for operational purposes. It is now proposed to enhance the scope of use for 'conveyance and any other confiscated equipment'.

- Transfer of Cases Section 185D(3)

The Bill seeks to propose that in criminal cases, the FBR may at any stage of investigation issue directions to transfer the investigation from one field formation to another.

- Appeals to the Appellate Tribunal Section 194A(1)

Sub-section (1) of Section 194A provides a list of orders against which any person or an officer of Customs can file an appeal before the ATIR. In addition, it is now proposed that appeal before the ATIR can also be filed against an appellate order or a quasi-judicial order passed by the Chief Collector of Customs which shall be heard by a Special Bench consisting of one Technical Member and one Judicial Member.

- Person to Produce Authority if Required Section 208(2)

Any person can transact business with the customs authorities through an authorized customs agent. In addition, the person can choose to transact business with the customs authorities by himself or through authorized employee or representative. It is now proposed that the FBR may notify rules for the eligibility criteria of a person for self-filing of GD.

- Advance Ruling Section 212B(2)(iii)

Sub-section (2) of Section 212B provides a list of questions on which advance ruling can be sought by an applicant. The Bill seeks to delete Clause (iii) of the said Sub-section by virtue of which the advance ruling cannot be sought on applicability of notifications issued in respect of duties or taxes collected by the customs authorities.

- Amendments in First Schedule

CD on following goods is proposed to be changed as per rates given below;

For the following goods, specific PCT codes have been created to charge the CD;

Description of following PCT Codes is proposed to be changed;

- Amendments in Fifth Schedule

The Bill seeks to reduce the rate of duty to 0%/ 5% on following goods (raw materials), if imported by the local assembler/ manufacturer registered under the ST Act and subject to annual quota determination by the IOCO;

The Bill seeks to reduce the rate of duty to 0% on following goods, if imported by the local assembler/ manufacturer registered under the ST Act and subject to annual quota determination by IOCO along with certification by the EDB that the imported goods are not manufactured locally.

The Bill seeks to reduce the duty to 0% on following goods (machinery and equipment), if imported by the local manufacturing units subject to the fulfillment of conditions mentioned below:

• Ministry of Industries and Production, shall certify that the goods are bona fide project requirement.

• The goods shall not be sold or otherwise disposed of without prior approval of the FBR and payment of CD and taxes leviable as prescribed by FBR.

• Other conditions mentioned in Clause (iv) of the preamble of Part I of Fifth Schedule.

The Bill seeks to reduce duty to 0% on following goods imported by software exporters registered with Pakistan Software Export Board subject to the conditions mentioned below;

• Pakistan Software Export Board shall certify that the imported goods are bona fide requirements for their own use of the software exporter;

• Export proceeds shall also be certified by the Pakistan Software Export Board

• Such exporters may avail concession on the assessed value of the imported goods (one or more consignments) equivalent to 1% of their export proceeds of the previous financial year.

The Bill also seeks to reduce the CD on the following goods;

The following amendments have also been proposed:

• Exemption of duty on the import of plant, machinery and equipment for setting up of industries in erstwhile FATA Areas to be extended from 30 June 2023 to 30 June 2024.

• Exemption from duty on import of specific paper, art card and board, as provided below for printing of Holy Quran.

• Reduced rate of duty of 11% on import of PET scrap by manufacturers of Polyester Filament Yarn in addition to Polyester Staple Fiber.

• Reduced rate of duty of 3% on import of flavoring powders for food preparation by manufacturers of snacks applicable till 30 June 2023 to be extended till 30 June 2024.

• PCT Codes of electric motors under Part V(A) to be rectified.

The Bill also seeks to withdraw capping of fixed duties and taxes on import of old and used vehicles of Asian Makes above 1300 CC, under SRO 577(I)/2005, by omitting S.No.4, 5 and 6 of the said SRO, which may result in increase in taxes and duties and prices of these vehicles.

- Regulatory Duty

The following measures have been mentioned in the salient features of the Budget 2023-24 in respect of RD; however, no such notification(s) have been issued in this regard;

• Withdrawal of RD on import of second hand clothing, IT related equipment, synthetic filament yarn of polyester not manufactured locally, parts for flat panels/ monitors/ projectors, silicon steel sheets, special steel round bars and rods of non-alloy steel exceeding diameter 50 mm

• Reduction of RD on 151 PCT codes pertaining to second hand clothing, fish, tiles, sports goods

• Increase/ levy of RD on import of articles of glass to protect the local industry

• Imposition of 20% RD on import of tungsten filament incandescent bulbs and their parts

• Increase in RD on export of molasses from 10% to 15%.