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Further tax is required to be charged on supply of taxable goods to person who has not obtained registration or not an active taxpayer, subject to certain exclusions.

=======================================================================================================
Description                                                                                     Heading
=======================================================================================================
Contraceptive and accessories thereof                                                         3926.9020
                                                                                              4014.1000
Bovine semen                                                                                  0511.1000
=======================================================================================================
Saplings                                                                                     Respective
                                                                                                Heading
=======================================================================================================
Combined Harvester -Thresher                                                                  8433.5100
Dryer for agricultural products                                                               8419.3400
No-till-direct seeder, planters, trans-planters and other planters                            8432.3100
                                                                                              8432.3900
Import of goods as mentioned under S. No. 159 of Part III of Fifth  Schedule      7471.3010, 8471.3020,
the Customs Act, 1969 (IV of 1969) chargeable to customs duty at the rate of      8471.3090, 8471.4110,
percent, subject to the conditions, restrictions and limitations mentioned        8471.6010, 8471.6020,
therein, by the software exporters registered with the Pakistan Software Expo     8471.6090, 8471.7040,
Board.                                                                            8471.9020, 8471.7020,
                                                                                   8471.5000, 8517.6270
=======================================================================================================

The FA has increased rate of further tax from 3% to 4%.

PREPARATION SUITABLE FOR INFANTS – ZERO RATING

Amendments enacted by Finance Act, 2023 vis-à-vis those proposed in Finance Bill 2023–I

At present, supply of ‘preparation suitable for infants’, put up for retail sale not exceeding Rs 500 per 200 grams as well as raw materials, packing materials, components etc. used in manufacturing thereof are subject to sales tax at the rate of 0%.

FA has enhanced the threshold of ‘Rs 500 per 200 grams’ to ‘Rs 600 per 200 grams’.

EXEMPTIONS

==============================================================
Description                         HS Code           Proposed
                                                          duty
==============================================================
Imported and locally              Respective           Rs 2000
manufactured energy                 heading            per fan
inefficient fans which
do not comply with
the MEPS, notified
by PSQCA
Imported and locally               8539.2200               20%
manufactured                       8539.2990        ad valorem
incandescent bulbs
==============================================================

Through the FB, import or supplies of following goods were proposed to be exempted from levy of sales tax:

The exemptions proposed have not been adopted in the FA. As a result, the above goods shall remain taxable at applicable rates.

DIAMMONIUM PHOSPHATE (DAP)

Import or supplies of DAP are exempt from sales tax. FA has withdrawn the exemption and made it taxable at reduced rate of 5% with no refund of excessive input tax.

PHARMA SECTOR

==========================================================================
Description                                   Existing      Proposed in FB
                                                 (%)       but not adopted
                                                                       (%)
==========================================================================
PET scrap, if imported for the manufacture
of polyester filament yarn                       20                     11
Import of specified raw materials/inputs by
 manufacturers of Capacitors                     16                      5
Printed Composite Packaging of Aluminum
Foil backed with Paper and Plastic               10                      5
==========================================================================

Through FB, while specifying reduced rate of sales tax at 1% on ‘drug’, registered under Drugs Act, 1976, and ‘medicaments’ classifiable under Chapter 30 of the First Schedule to the Customs Act, 1969, it was proposed that input tax on such supplies would not be available in case of importer and manufacturer only. Now, through the FA, it has been provided that input tax adjustment would not be available to any person in the supply chain of such drugs/ medicaments.

================================================================================================
PCT Code      Description                                                Rate of Regulatory Duty
================================================================================================
2849.1000     Calcium (Carbides)                                                              5%
3824.9980     Chloroparaffins liquid                                   10% till Dec 31, 2023 and
                                                        5% from January 1, 2024 to June 30, 2024
7002.3200     Tubes of other glass having a linear                                           10%
              coefficient ofexpansion not
              exceeding 5x10-6 per Kelvin within a
               temperature of 0 C to 300 C
================================================================================================

Further, through the FB, reduced rate of sales tax at 1% was restricted on raw materials/ingredients, including excipients, which are liable to customs duty not exceeding 11% ad valorem. The said restriction was made effective from July 1, 2022. As a result, the standard rate of sales tax had become applicable on aforesaid goods subject to customs duty above 11% retrospectively.

The FA has removed the retrospective application of aforesaid amendment. Further, bar on adjustment of input tax relating to these supplies, earlier specified by reference to importer and manufacturer only, has been made applicable in case of all the persons in the supply chain.

FEDERAL EXCISE DUTY

DUTIES OF EXCISE TO BE LEVIED

=======================================================================================================
PCT code     Description                                                        Existing       Proposed
                                                                                    %         in FB but
                                                                                            not adopted
                                                                                                    (%)
=======================================================================================================
2710.1995    Liquid paraffin                                                       3                  0
3206.4100    Ultramarine and preparations basedthereon                             16                11
3823.7000    Industrial fatty alcohols                                             16                11
3920.4910    Polyvinyl Chloride (PVC) Rigid film                                   20                16
3920.9900    Plates, sheets, films, foils and strips of plastics                   20                16
4805.2500    Testliner (recycled liner board) weighing more than 150 g/m²          20                16
             Other uncoated paper or paperboard weighing 150 g/m² having di-
4805.9190    electric strength less than 0.5 Kv per milimeter                      20                16
4806.2000    Greaseproof papers                                                    20                16
             Centrifuges, including centrifugal dryers filtering or purifying
8421.9990    machinery and apparatus for liquid or gases                           20                16
             Parts for use with the machines of headings 8501.5340, 8501.5390,
8503.0020     8502.1110, 8502.1390 & 8502.2000                                     11                 3
=======================================================================================================

Through the FB, a new clause (e) was proposed to be added to sub-section (1) of section 3 to read as under:

“(e) any item specified in the First Schedule”

It was statedly not a revenue measure but introduced as a streamlining measure, to further elaborate the chargeability of FED on goods and services. The FA has finally corrected clause (e) as under;

“(e) any item not covered in clause (a) to (d) above and specified in the First Schedule”

The amendment seems to cover imposition of FED on items which are neither goods (imported or manufactured) nor services, specified in the First Schedule.

FIRST SCHEDULE DUTIABLE GOODS

=================================================================================
Description                                      Existing                Proposed
                                                  Rate of                 Rate of
                                                   duty                      duty
=================================================================================
Tobacco mixture in an electrically heated        Rs 5,200        Rs 16,500 per kg
tobacco product by whatever name called,          per kg
intended for consumption by using a
tobacco heating system without
combustion
Sugary Fruit juices, syrups and squashes,        10% of                    20% of
waters whether or not containing added         retail price          retail price
sugar or artificial sweeteners excluding
mineral and aerated waters
=================================================================================

(a) The FA has increased FED on following goods which were not proposed in the FB:

(b) The FA has imposed FED on Fertilizers at the rate of 5% ad valorem.

(c) The levy of FED on following dutiable goods has been made effective from January 1, 2024:

CUSTOMS DUTY

FIRST SCHEDULE TO THE CUSTOMS ACT

Reduction in customs duty on import of following goods proposed through the FB has not been adopted in the FA:

In addition to above, changes have been made in various PCT heading as well as description to rationalize the duty structure.

FIFTH SCHEDULE TO THE CUSTOMS ACT (CONCESSION / EXEMPTION)

Exemption from Customs Duty on import of following goods proposed through the FB has not been accepted in the FA.

(i) Certain machinery, equipment, and inputs for manufacturing of solar panels, inverters and batteries by local assembler / manufacturer of renewable energy sector.

(ii) Seeds for sowing.

(iii) Raw materials imported by manufacturers of diapers & sanitary napkins;

(iv) Organic composite solvents and thinners for manufacture of Butyl Acetate and Dibutyl Orthophthalates.

(v) Roasted peanuts for manufacturing of Ready to Use Supplementary Foods (RUSF) & Ready to Use Therapeutic Foods (RUTF).

(vi) Specified raw materials/inputs by manufacturers of Adhesive Tapes, Moulds and Dies, Mining machinery, Machine Tools and Rice mill machinery.

(vii) Baby shrimp/prawns/juvenile for breeding in commercial fish farms and hatcheries.

(viii) Active Pharmaceutical Ingredients (APIs) Dextrose Anhydrous Injectable Grade (Pyrogen Free) USP

(ix) Gefitnib, Caspian (Caspofungin 50 mg and 70 mg injection) and Bovine Lipid Extract Surfactant

(x) Flavouring powders for food preparation.

Reduction in Customs Duty on import of following goods proposed through the FB has not been adopted in the FA:

The FA has not adopted reduction in the assessed value of the IT related equipment proposed through the FB for the purpose of levying customs duty, in case of imports by the software exporters registered with Pakistan Software Export Board.

Regulatory Duty (RD)

RD has been imposed on the following goods through the FA:

ISLAMABAD CAPITAL TERRITORY (SALES TAX ON SERVICES) ORDINANCE, 2001 (‘ICTO’)

The following amendments in the ICTO proposed through the FB have not been adopted in the FA:

(i) Reduction in sales tax rate applicable on IT services and IT enabled services to 5%; and

(ii) Exemption from sales tax registration granted to Freelance exporter.

FOREIGN INVESTMENT (PROMOTION AND PROTECTION) ACT, 2022

In December 2022, ‘Foreign Investment (Promotion and Protection) Act, 2022 [‘FIPPA’] was passed with a view to attract, encourage, and protect, large scale investments in Pakistan.

FB proposed amendments in the following fiscal laws to address procedural issues arising out of implementation of the exemptions and tax concessions provided in the FIPPA:

  • Income Tax Ordinance, 2001

  • Sales Tax Act, 1990

  • Federal Excise Act, 2005

The amendments relating to the Customs Act not proposed through the FB has now been made through the FA.

PETROLEUM PRODUCTS (PETROLEUM LEVY) ORDINANCE, 1961

Through the FA, the maximum petroleum levy rate as specified in the Fifth Schedule to the Petroleum Products (Petroleum Levy) Ordinance, 1961 has been increased from Rs. 50 to Rs. 60 for High Speed Diesel Oil and Motor Gasoline.

(Concluded)

Copyright Business Recorder, 2023

Comments

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Truth Jun 29, 2023 09:29am
so all incentives for the IT and ITES have been withdrawn. all exemptions on solar and related inverters and batteries also withdrawn. these measures were meant to increase exports and reduce energy costs. the authorities have no vision of how to make pakistan progressive and growth oriented. extremely poor decisions.
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