ISLAMABAD; Having development and growth in focus, the Pakistan Tehreek e Insaf (PTI) government on Friday presented federal budget for 2021-22, having total layout of Rs 8478 billion.
Finance minister, Shaukat Tareen, presented the budget 2021-22 in the national assembly amid opposition’s uproar.
The Pakistan Tehreek e Insaf government has allocated Rs 2135 billion for Public Sector Development Program for 2021-22. It shows 38 % increase over the outgoing fiscal year.
The federal budget 2021-22 has many encouraging features.
It has set a highest ever revenue collection target of Rs 5829 billion for the Federal Board of Revenue (FBR) for upcoming fiscal year. It has set a healthy growth rate of 4.8 %, besides
enfolding lucrative concessions for key sectors of Pakistan’s economy. It also carries relief for low income group and salaried class of Pakistan in the form of increase in salary and penshion of the federal government employees and penshioners..
The budget does brings relief to the industrial sector and businesses as duties and taxes on hundreds of items as well as raw materials have been reduced substantially.
In order to discourage import of luxurious items , the governmant has proposed to increase duty on 86 items falling under category of luxury items.
The government avoided to add in burden on salaried class by not imposing any new tax on income.
The budget 2021-22 also brings relief for small cars, trucks and agri sector machinery buyers in the form of concession in duty, taxes on import of tractors, cars upto 850 CC and other machinery used by the agriculture sector.
The joint opposition in the National Assembly rejected the new budget and claimed it was a jugglery of words and total fraud. Top leadership of PPP and PMLN declared to resist what they called anti people budget.
The buainess community, however, expressed satisfaction over the budget 2021-22 and expressed hope that the upcoming budget will ensure restoration of businesses , besides stimulating industrial activity in the country.
In his reaction Mian Zahid Hussain FPCCI president, called the new budget as very impressive and hoped it will bring back business and industrial activity to make Pakistan prosperous.
Here are salient features of 2021-22 budget.
SALIENT FEATURES
BUDGET 2021-22.
CUSTOMS ACT 1969
GUIDING PRINCIPLES
(a) Remove anomalies in cascading structure of tariff
(b) Promote and protect domestic industry by introducing targeted
interventions
(c) Enhance import-substitution by rationalizing tariffs on industrial raw
materials / intermediate goods
(d) Facilitate export-oriented manufacturing by reviewing the existing
exemption regimes & export schemes.
INDUSTRIAL RELIEF MEASURES
1. Reduction / exemption of CD, ACD & RD on import of goods falling under 589
PCT codes to incentivize the textile industry.
2. Reduction / exemption of CD, ACD & RD on import of flat rolled products of
HRC and stainless steel.
3. Reduction / exemption of CD and ACD on raw materials and intermediary
goods and point of sale machines falling under 328 tariff lines as a
consequent of tariff rationalization.
4. To incentivize the pharmaceutical sector and to keep the prices stable in the
market, –
Exemption of CD & ACD on more than 350 APIs
Plant, machinery and equipment subject to concessionary rate of 5%
Exemption of CD & ACD on raw material of auto-disable syringes and
Reduction in tariff on finished auto-disable syringes
5. Reduction / exemption on inputs / raw materials of food processing industry. 6. Reduction of CD & ACD on uncoated paper and paperboard for printing and
graphic arts industry.
7. Reduction / exemption of CD & ACD on Vaccines for veterinary medicines
and feed additives to incentivize the dairy sector.
8. Reduction / exemption of CD & ACD on goods falling under more than 100
PCT codes relating to Tourism industry.
9. Reduction of duties on raw material/inputs of footwear industry.
10. Reduction / exemption of CD & ACD on inputs for poultry industry.
11. Reduction / exemption of CD & ACD on raw material for manufacturer of
aseptic plastic packaging.
12. Exemption of ACD on import of raw materials for cables / optical fiber
manufacturers.
13. Reduction / Exemption of CD & ACD on raw materials for Paint Industry.
14. Reduction / Exemption of CD & ACD on raw materials for Chemical and
Artificial Leather Industry.
15. Reduction / Exemption of CD & ACD on inputs for Electronics Manufacturing
Industry.
16. Reduction / exemption of CD & ACD on raw materials / inputs of furniture,
coating, boiler manufacturing industry, bobbins and cops manufacturing
industry etc.
RELIEF TO COMMON MAN
17. Reduction of ACD on goods falling under 2436 tariff lines pertaining to 20%
customs duty slab from 7% to 6%.
18. Extension in exemption from customs duties on import of COVID-19 related
items for further six month.
19. Exemption of CD &ACD on Inputs of Ready-To-Use Supplementary Foods
(RUSF) and Ready-To-Use Therapeutic Food (RUTF).
20. Exemption of CD & ACD on 06 life-saving drugs. 21. Enhance the value of unsolicited gifts through post or courier from Rs.20,000
to 30,000.
22. Exemption of CD & ACD on import of grain storage hermetic bags and
cocoons.
23. Rationalization of tariff structure on auto sector.
REVIEW OF REGULATORY DUTY (RD) REGIME:
24. Rationalization of RD on import of Mobile Phones to encourage import
substitution
25. Increase in rates of RD on import of non-essential / luxury items to support
local industry.
26. Reduction of RD on import of cocoa paste, butter and powder being industrial
input goods.
EXPORT FACILITATION MEASURES:
27. To ease of doing business, a new Uniform Export Facilitation Scheme is being
proposed. The existing schemes shall be phased out in next two years.
28. Bond to Bond Transfer of goods through WeBOC without prior approval of the
Collector is being proposed to be allowed.
29. Reduction of RD on export of molasses, skin and hides to boost positive
image of the country with our important trading partners across the world.
MISCELLANEOUS
1. Establishment of Border Sustenance Markets to mitigate the problems faced
by the people residing in border areas due to fencing and counter-smuggling
measures.
LEGISLATIVE CHANGES:
1) Introduction of a concept of Common bonded warehousing to encourage
Small and Medium Enterprises.
2) Empowering Collector of customs to determine customs value there by facilitating trade. 3) Enabling the Director General Valuation to take appropriate decision on
appeal and capping the time limit for such proceedings. Facilitation of trade by
avoiding time consumed in unnecessary litigations.
4) Allowing the importers to amend manifest till berthing event without seeking
approval from custom authorities and hence ease of doing business.
5) Enable customs authorities to allow bonafide amendment in into-bonds goods
declaration and thus facilitate trade.
6) Allowing the Collector to extend warehousing period for six months. Reducing
the processing time of the requests and promoting ease of doing business.
7) Reducing the time limit allowed for decision of the cases wherein the
impugned goods are lying at sea ports, airports or dry-ports and thus
decreasing the cost of doing business.
8) Enable customs authorities to issue correction / corrigendum certificate in
case of genuine / obvious error and facilitate trade.
9) Inclusion of other law enforcement agencies for the purpose of reward and
increasing their motivation.
10) Affording opportunity of being heard to the registered users of WeBOC in
accordance with the canons of natural justice.
11) Increasing the period of validity of advance ruling from the current one year to
three years in accordance with international benchmarks and facilitating trade
thereof.
12) Provision for the classification committee to avoid unnecessary litigation on
account of classification disputes and consequently decreasing the cost of
doing business.
13) Removal of fine in case of delay in filing of goods declaration and thereby
providing ease of doing business..
ENFORCEMENT FEATURES:
1) Inclusion of master bill of lading and certificate of origin in the existing
definition of document to discourage origin fraud. 2) Inclusion of the retailing in definition of smuggling to discourage retailers from
selling smuggled goods.
3) Making shipping lines responsible for re-export of banned items imported in
commercial quantities.
4) Increasing the pitch of fine in case of non-placement of invoice and packing
list in container to inculcate compliance.
5) Discouraging smuggling by denying release of vehicles used repeatedly for
smuggling against redemption fine. SALIENT FEATURES
BUDGET 2021-22
SALES TAX ACT 1990
The proposed budgetary measures pertaining to Sales Tax for FY 2021-22 are:
REVENUE MEASURES
1. The sale of goods through online market place is proposed to be brought into
the sales tax net by deeming the online market place as supplier in respect of
third party sales through their platform.
2. For specified goods, it is proposed that it may be made mandatory for
manufacturers of such goods to obtain brand license for each separate brand
or SKU.
3. Section 56C provides for prize scheme to promote tax culture. To ensure that
the said incentive is not misused, a new sub-section is proposed to be
inserted to provide for randomize “mystery shopping”.
4. The rate of sales tax on potassium chlorate is proposed to be increased from
Rs. 80 per kg to Rs. 90 per kg in addition to 17% standard rate.
5. Zero-rating is proposed to be withdrawn from Petroleum Crude Oil,
parts/components of zero-rated plant and machinery, import of plant and
machinery by petroleum and gas sector and supply, repair and maintenance
of ships.
6. Sixth Schedule is proposed to be streamlined and exemptions other than
relating to basic food items, health and education are proposed to be
withdrawn.
7. Eighth Schedule is proposed to be streamlined and reduced rates other than
relating to basic food items, health and education are proposed to be brought
into standard regime. 8. Reclaimed lead and used lead batteries is an unorganized sector. Therefore,
entire amount of sales tax in respect of sales of such goods is proposed to be
withheld at source under Eleventh Schedule.
9. To ensure collection of due taxes, sales tax on sugar is proposed to be levied
on retail price by including the said product in Third Schedule.
RELIEF MEASURES
10. The minimum annual threshold of turnover from all supplies for cottage
industry is proposed to be increased from Rs. 3 million to Rs. 10 million.
11. The threshold of shop area in case of furniture outlet/showrooms is proposed
to be increased from 1000 square feet to 2000 square feet for inclusion in tier-
1 retailer.
12. Public limited companies are proposed to be excluded from the purview of
section 8B.
13. A separate section introduced for allowing extension of time for furnishing of
return.
14. Exemption is proposed to be granted to art and printing paper for publication
and printing of Holy Quran.
15. Exemption on import of CKD kits for electric vehicles by manufacturers
granted by Tax Laws (Amendment) Ordinance, 2021 is proposed to be
incorporated in the Sixth Schedule.
16. To facilitate international athletes, exemption to goods temporarily imported
by athletes/sportsmen granted by Tax Laws (Amendment) Ordinance, 2021 is
proposed to be incorporated in the Sixth Schedule.
17. Tax exemption to auto disable syringes granted vide Tax Laws (Second
Amendment) Ordinance, 2021 is proposed to be incorporated in the Sixth
Schedule.
18. To encourage IT industry in the country, import of plant, machinery and raw
material by Special Technology Zone is proposed to be exempted from sales
tax. 19. To facilitate farmers and encourage storage of grain, tax exemption on locally
manufactured silos is proposed to be granted till 30.06.2026.
20. Reduced rate of sales tax @ 1% on locally supply of electric vehicles granted
vide Tax Laws (Amendment) Ordinance, 2021 is proposed to be incorporated
in the Sixth Schedule.
21. In order to address litigation issue, fixed tax on SIM cards is proposed to be
deleted with effect from 1st July, 2020.
22. Exemption from value addition tax on import of electric vehicles, CKD kits for
small car, 2-3 wheelers, HCVs and all these vehicles in CBU conditions was
granted vide Tax Laws (Amendment) Ordinance, 2021 is proposed to be
incorporated in the Twelfth Schedule.
23. For facilitation purpose, the concept of constructive payment is proposed to
be introduced in section 73.
24. To provide relief to the registered persons, the benefit of compensation for
delayed payment of refund is also proposed to be extended to those persons
in whose case order under section 66 is passed.
25. For promoting ease of doing business, the concept of Common Identifier
Number is proposed to be introduced.
26. For establishment of Border Sustenance Markets, exemption from sales tax is
proposed to be granted on food related and other consumable goods.
27. In order to introduce umbrella Export Facilitation Scheme by Customs Wing,
exemption on import and zero-rating on local supplies in respect of raw
materials, components, parts and plant and machinery to authorized exporters
is proposed.
28. Rising prices of locally manufactured small cars is a major concern for low
earning families. Accordingly it is proposed that small cars upto engine
capacity of 850cc may be exempted from value added tax besides reducing
sales tax rate from 17% to 12.5%.
STREAMLINING MEASURES.
There are various provisions in the Sales Tax Act 1990 which require some
corrections or streamlining, while some changes are being proposed for the purpose
of Ease of Doing Business for registered persons. At places some drafting errors
also need to be corrected. All such measure are listed below:
S. No. Section Amendments proposed with Rationale
1 2(4AA) A new definition has been inserted to define
Commissioner (Appeals).
2. 2(37)(iii) The word “of” is inserted to correct drafting error
3. 2(43A)(g) The definition of tier-1 retailer is streamlined through
insertion of a new clause whereby a retailer who has
acquired point of sale accepting payment through
debit or credit cards from banking companies or any
other digital payment service provider authorized by
State Bank of Pakistan is also included in the
definition of tier-1 retailer
4. 3(1B)(a) The word “on” is substituted to correct drafting error.
5. 11(5) Under section 11(5), a show-cause notice can be
issued for recovery of amounts not paid or short-paid
within five years of relevant date. Since sales tax is
payable on monthly basis, the time bar also applies
on monthly basis. However, audits are undertaken on
full-6.year basis. Furthermore, audits for income tax
and sales tax for the same financial or tax year are
undertaken concurrently, the demand in case of
sales tax may get time-barred one to two years
earlier as compared to demand for income tax. In
order to streamline the said provision, the words
“relevant date”, is proposed to be changed with the
words “end of the financial year in which the relevant
date falls” 6. 25AA(2) A new sub-section is added to provide enabling
provision in the Act for prescribing rules for
determining transfer pricing of taxable supplies
between associates to reflect fair market value in
arm’s length transactions.
7. 22(1) Section 22(1) has been amended to strengthen and
streamline the requirement of record keeping.
8. 47(7) For the word “Collector”, the word “Commissioner” is
substituted to correct drafting error.
9. 48(2) Enabling provision has been inserted in respect of
request from a foreign jurisdiction under a tax treaty,
a multilateral convention, and inter-governmental
agreement or similar agreement or mechanism.
10. 50 (2) Procedure for collection, arrangement and publishing
of the rules issued under Sales Tax Act, 1990 has
been streamlined.
11. 56A Provisions regarding sharing of data with foreign
countries on reciprocal basis were introduced
through Tax Laws (Amendment) Ordinance, 2021
which is now being incorporated in Sales Tax Act,
1990. Moreover, mechanism for assistance in
recovery of taxes on request from foreign countries
on reciprocal basis is also proposed by inserting sub-
section (3).
12. 76(2) Enabling provision has been inserted for authorizing
and prescribing the manner for utilizing the fees and
service charges collected under section 76(1)
13. S. No. 18 of
Table-II of the
Sixth Schedule
S. No. 18 of Table-II of Sixth Schedule to the Sales
Tax Act, 1990 which grant exemption to marble and
granite manufacturers having annual turnover less
than Rs. 5 million, is proposed to be omitted. The
said exemption is already available under section
2(5AB) of the Sales Tax Act, 1990. 14. S. No. 19 and 20
of Table-II of the
Sixth Schedule
Exemption on bricks and crush stones has already
expired on 30th June, 2018. Accordingly, these serial
numbers are proposed to be omitted being
FEDERAL EXCISE ACT 2005
The proposed budgetary measures pertaining to Federal Excise Duty (FED) for FY
2021-22 are:
REVENUE MEASURES
1. In order to reap reasonable revenue from this sector, federal excise on mobile
phone calls exceeding three minutes @ Re 1 per call, SMS message @ Re.
0.1 per SMS, and internet data usage @ Rs. 5 per GB is being proposed. This
will result into mild taxation of a broad spectrum of population.
2. Electronically heated tobacco products are also proposed to be brought into
the tax net by inserting new S. No. 8c of Table-1 of the First Schedule to the
Federal Excise Act, 2005.
RELIEF MEASURES
3. In order to facilitate the people of tribal area and encourage investment and
economic growth in these areas, exemption is being given from levy of FED to
the industrial units located in FATA and PATA.
4. The provision to revise return without prior approval of the Commissioner-IR
which is available in Sales Tax Act, 1990 is now proposed to be made
available in Federal Excise Act, 2005.
5. Exemption from federal excise duty to 4-wheelers granted vide granted vide
Tax Laws (Amendment) Ordinance, 2021 is proposed to be incorporated in
the Federal Excise Act.
6. The rate of federal excise duty on telecommunication is proposed to be
reduced from 17% to 16%.
7. Payment on account of Merchant Discount Rate (MDR) is proposed to be
excluded from the purview of FED. 8. For establishment of Border Sustenance Markets, exemption from federal
excise duty is proposed to be granted on food related and other consumable
goods.
9. Rising prices of locally manufactured small cars is a major concern for low
earning families. Accordingly it is proposed that small cars upto engine
capacity of 850cc may be exempted from federal excise duty.
10. In order to introduce new Export Facilitation Scheme, 2021, exemption on
import and zero-rating on local supplies in respect of raw materials,
components, parts and plant and machinery to registered persons is
proposed.
11. Federal excise duty on fruit juices was imposed vide Finance Act, 2019 and
resultantly, prices of juices were increased. Moreover due to pandemic, this
sector is faced with adverse situation. In order to provide relief to this sector, it
is proposed to withdraw federal excise duty on juices.
STREAMLINING MEASURES
There are various provisions in the Federal Excise Act, 2005 which require some
corrections or streamlining, while some changes are being proposed for the purpose
of Ease of Doing Business for registered persons. At places some drafting errors
also need to be corrected. All such measure are listed below:
S. No. Section Amendments proposed with Rationale
1. 14(4) Enabling provision has been inserted in respect of
request from a foreign jurisdiction under a tax treaty, a
multilateral convention, and inter-governmental
agreement or similar agreement or mechanism.
2. 47A Provisions regarding sharing of data with foreign
countries on reciprocal basis were introduced through
Tax Laws (Amendment) Ordinance, 2021 which is now
being incorporated in Federal Excise Act, 2005.
Moreover, mechanism for assistance in recovery of
taxes on request from foreign countries on reciprocal
basis is also proposed by inserting sub-section (3).3. 49(2) Enabling provision has been inserted for authorizing and
prescribing the manner for utilizing the fees and service
charges collected under section 49(1)
4. S. No. 56 of
Table-1 of the
First Schedule
to the Federal
Excise Act,
2005
To correct drafting error, PCT heading for filter rod has
been substituted.
5. Heading of
column (2) of
Table-2 of the
First Schedule
to the Federal
Excise Act,
2005
To correct drafting error, the word “Services” has been
substituted for the word “Goods”.
ISLAMABAD CAPITAL TERRITORY (TAX ON SERVICES)
ORDINANCE, 2001
RELIEF MEASURES
In order to promote and encourage IT sector, it is proposed that export of services
may be zero-rated.
INCOME TAX
REVENUE MEASURES
Special regime for export of services at par with export of goods to be taxed
@ 1% under final tax regime.
Elimination of block taxation of property income and shift to normal tax
regime.
Reduction of block taxation on capital gain on disposal of immoveable
properties if gain exceeds Rs. 20 million.
Reduction in block taxation on interest income, if it exceeds Rs. 5 million.
Tax on “on” money on vehicles, if vehicle is disposed without registration.
Expansion of scope of withholding tax collection from supply chain below
manufacturers and importers of specified sectors (sections 236G and 236H).
Reduction in threshold of monthly electricity bill for withholding tax on
electricity consumption from 75,000 to 25,000 from domestic users not
appearing on Active Taxpayers’ list.
Removal of requirement of issuance of separate notice in concealment cases.
Withholding of tax on rental income of sub-lessee.
Broadening of scope of withholding agents for the purpose of collection of
withholding tax on commission income (section 233).
Streamlining withholding tax collection on sale and purchase of immoveable
property (section 236C and 236K).
Rationalization of withholding tax regime for exporters.
Taxability of profit on debt component of GP fund and other such funds. Withdrawal of personal income tax exemptions.
During the current financial year, Tax Laws (Second Amendment) Ordinance,
2021was promulgated to implement corporate income tax reforms to provide
level playing field to all businesses. Certain tax credits, concessions and
exemptions were withdrawn. The provisions of the Ordinance have been
made part of the Finance Bill.
RELIEF MEASURES
Deletion of 12 withholding taxes
Provision Description
153B Collection of tax on payment of royalty to residents.
231A Collection of tax on cash withdrawal.
231AA Collection of tax on banking instruments.
236P Collection of tax on banking transactions other than through
cash.
236Y Collection of tax from persons remitting amounts abroad
through credit or debit or prepaid cards.
236B Collection of tax on domestic air travel.
236L Collection of tax on international air travel.
236V Collection of tax on extraction of minerals.
233A Collection of tax from members by a stock exchange
registered in Pakistan.
233AA Collection of tax on marginal financing by NCCPL.
234A Collection of tax from CNG stations.
236HA Collection of tax on certain petroleum products. Merging of 3 withholding taxes with other existing provisions
Provision Description Merged with
150A Deduction of tax on return
on investment in Sukuks.
Proposed to be merged in
section 151 for residents and in
section 152 for non-residents
which deal with such payments.
152A Deduction of tax on
payments for foreign
produced commercials.
To be merged with section 152
which deals with payments to
non-residents.
236S Collection of tax on dividend
in specie.
To be merged with section 150
which deals with dividend.
Reduction in generalized rate on Minimum Tax on Turnover basis and
increase in threshold for individuals and AOPs for chargeability of minimum
tax.
Broadening of scope of IT services by inclusion of cloud computing and data
storage services.
Exemption to Special Economic Zone Enterprises from payment of minimum
tax.
Ten year tax exemption for Special Technology Zone Authority, Zone
Developers and Zone Enterprises.
Tax exemption on the import of capital goods and dividend income of private
funds from investment in special technology zone enterprise.
Introduction of special tax regime for manufacturing SMEs.
Exemption from tax on income of deep conversion new refineries and BMR
projects of existing refineries for 10 years. Reduced rate of withholding tax of 3% on oilfield services, warehousing
services, logistic services, collateral management services and
telecommunication services.
Inclusion of telecommunication services in definition of industrial undertaking.
Exemption to Electronic warehousing receipts traded on Pakistan Mercantile
Exchange.
Allowance of provincial WWF and WPPF as a deductible allowance while
calculating income.
Adjustment of business loss against property income.
Unconditional grant of exemption from tax to certain organizations.
Withdrawal of power of Commissioner to reject advance tax estimates
presented by taxpayer.
Non recognition of gain/loss on disposal of assets to non-residents under gift
from relative, inheritance and agreement to live apart.
Reduction in tax rate on capital gain tax on disposal of securities from 15% to
12.5%.
Withdrawal of power of tax authorities to conduct inquiry under section
122(5A).
Inclusion of live animals, raw hides and unpackaged meat in definition of
agriculture produce.
Reduction in tax liability by 25% for women entrepreneurs.
Exemption from tax on import of books and agriculture equipment.
Exemption from tax for bagasse fired power generating units and reduced rate
of tax on dividend income from such projects.
Extension in time limits for availing tax benefits under section 100D and
Eleventh Schedule vide Income Tax (Amendment) Ordinance 2021 dated
21.02.2021 made part of the bill. Tax exemptions and concessions for Roshan digital accounts and
implementation of electric vehicles and mobile phone policy implemented vide
Tax Laws (Amendment) Ordinance, 2021 dated 11.02.2021 made part of bill.
STREAMLING MEASURES
Strengthening mechanism of Alternate dispute resolution.
Elimination of requirement of filing of application for automated issuance of
refund.
Introduction of time limitation for disposal of show cause notices.
Recording of e-hearing to be admissible evidence.
Automated issuance of exemption certificates if application is not disposed by
Commissioner within 15 days.
Removal of requirement of updating tax profile.
Clarity regarding taxation of income of co-operative societies from sale and
services to its own members.
Delegation of power of Federal Government to Board with the approval of
Federal Minister in-charge.
Extension of time limitation for issuance of notice for filing of return in case of
foreign income or foreign assets.
Time limitation for completion of assessment in pursuance of orders of the
Commissioner.
Streamlining measure for monitoring of withholding taxes requiring taxpayers
to file online statement along with reconciliation.
Establishment of Directorate of compliance Risk Management in FBR.
DOCUMENTATION MEASURES
Tax credit on installation of point of sale machines.
Notification of business bank accounts made mandatory. Measures for the documentation of business of used cars.
Harmonization of
procedure for investigation and prosecution of offences
under domestic tax laws.
