The government, through Finance Act 2019, has reduced the rate of tax credit to 5 percent from 10 percent for investment in purchase of plant & machinery for extension, expansion, balancing, modernizing & replacement for Tax Year 2019. This was stated by Asif Haroon, former vice president Karachi Tax Bar Association (KTBA) and partner A.F Ferguson & Co during his electronic presentation on "the changes in the Income Tax Ordinance, 2001 through Finance Act, 2019" at a seminar on "Implication of Finance Act, 2019" organized by KTBA held at local hotel here.
He said that Final Tax Regime (FTR) was now converted into Minimum Tax Regime (MTR) for commercial imports, brokerage and commission, non-resident persons for certain services, local supply of goods, execution of contracts (residents as well as non-residents) and income from CNG stations; adding that the concept of carry forward of minimum tax over actual tax liability was not envisaged, which he considered as very harsh.
Furthermore, he said that the concept of 'filer' and 'non-filer' has been abolished in Finance Act 2019 and the government had introduced tenth schedule whereby rate of tax withholding was enhanced by 100% for persons, not appearing in Active Taxpayers' List (ATL).
He said that a mechanism had been placed whereby a withholding agent or the person from whom tax was required to be collected or deducted, were empowered to furnish a notice to the commissioner to allow payment without the enhanced rate of deduction or collection of tax where such a person not appearing in ATL had no requirement to file a return of income or a statement of final taxation and added that the tenth schedule provided the procedure for provisional assessment and penalty proceedings if a person failed to file return of income for the respective tax year.
Asif said that any income beyond imputed income was now subjected to tax under section 111 of Income Tax Ordinance 2001 and the concept of further amendment of provisional assessment had also been introduced in this budget.
He said that the late filers could now become part of ATL by paying surcharge at the applicable rates and on filing of returns, the taxpayers could claim refund of tax withheld in excess of the actual tax liability; adding that the period during which the names of such persons did not appear in ATL, refund would not be issued during that period and, this period would also not be considered for the purposes of additional compensation for delayed refund.
The non-monetary gifts, which had not received from grandparents, parents, spouse, brother, sister, son or a daughter, will be considered as 'other income' for recipient and the commission paid or payable in excess of 0.2 % of the gross amount of supplies of third schedule products would not be disallowed, if the person to whom such commission was paid or payable was not appearing in ATL, he maintained. Asif further said that the government had slashed the immunity limit to Rs 5 million from Rs 10 million worth of foreign remittance through banking channels under section 111(4) of the Ordinance and added that displaying of business license by every person engaged in any business, profession or vocation was now mandatory even where they were not required to obtain NTN. M. Zeeshan Merchant, former VP KTBA, who gave presentation on sales tax said that a new sub-section (6) has been inserted at section 8B providing that if tier-1 retailer failed to get its system integrated with FBR in prescribed manner during a tax period or part thereof, the admissible input tax for the period of default would be reduced by 15%.
He said that the condition of CNIC had been waived where retailers supply goods to ordinary consumers for own consumption with transaction value not exceeding Rs 50,000 (including sales tax).
Zeeshan said that collection of CNICs of unregistered buyers had also been postponed till August 1, 2019 and the supplier would not be penalized for the wrong declaration of CNIC number by the buyer in case of sales made in good faith.
Saud ul Hassan Director - Tax EY Ford Rhodes, who gave presentation on Sales Tax on services, said that exemption available to life insurance services provided to individuals for insurance policy coverage up to Rs 500, 000 and group life insurance services had been withdrawn and now group life insurance services are taxable at 13% whereas insurance policies coverage up to Rs 500, 000 were now taxable at 3 percent.
Moreover, he said that the advertisement in newspaper and periodicals, except colour advertisement and black and white advertisement occupying specified space in newspaper or periodicals. Such advertisement shall now be chargeable at the rate of 3%. Similarly, internet services, up to 4 mbps and other such services are now taxable at 19.5 percent.
Furthermore, he said that service provided or rendered by banking companies and non-banking financial companies in respect of Hajj and Umrah, Cheque Book issuance and Musharika and Modaraba financing are now taxable @ 13%; adding that the construction and repair services of roads, ports, airports, railways, transport terminals and bridges provided to government including local government and cantonment board buildings are now taxable at 5 percent.
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