Amendment In Sales Tax,Federal Excise Duty ans Customs' Sections In Budget Flash 2018-19

Sales tax

Further Tax - Section 3(1A)

Rate of further tax is proposed to be increased from 2% to 3%.

Powers to issue notification - Various Sections

The powers of the Federal Government to issue notifications under various sections of the Sales Tax Act, 1990 (the ST Act) are sought to be restored which are presently vested with the Board.

Assessment giving effect to an order - Section 118

Concept of appeal effect order has been proposed to be introduced in the ST Act whereby the Commissioner or the Officer Inland Revenue shall be required to issue the order within one year from the end of the financial year in which the appellate order was served to the Commissioner or the Officer Inland Revenue.

Access to record, documents etc. - Section 25

It is proposed to insert a proviso whereby audit shall be conducted only once in every three years.

Default surcharge - Section 34

Default surcharge is proposed to be fixed at 12% per annum. Presently it is KIBOR plus 3% per annum.

Alternative Dispute Resolution - Section 47A

The proposed substituted section may have far reaching effects. The most significant are that the ADRC shall only hear the case after the withdrawal of appeals filed by either party pending before any appellate authority and that the decision of the ADRC shall be binding on both the parties i.e. the Board and the aggrieved person.

Recovery of arrears of tax - Section 48

Automatic stay, where appeal is pending before the Commissioner Inland Revenue (Appeals), is sought to be allowed on payment of 10% of the amount of tax due whereas the existing condition is payment of 25% of the amount of tax due.

Tax credit not allowed - Section 8

It is proposed to restrict the adjustment of input tax paid on import of scrap compressor.

Exemptions - Section 13 - Sixth Schedule

It is proposed to grant exemption on import of parts by computer manufacturer certified by the Engineering Development Board. In order to align with the provisions of the Special Economic Zone Act, 2012, it is proposed to grant exemptions to import of plant and machinery.

Zero rating - Section 4

• ·        Zero rating on stationery items is proposed to be restored.
•      Rate of further tax on zero rated domestic supplies of finished goods covered under SRO 1125 is proposed to be reduced to 1%.
•       Adjustment of input tax on packing material is proposed to be allowed to five export oriented sectors covered under SRO 1125.

Sales tax on LNG

The rate of sales tax is intended to be reduced to 12% on import of LNG by P50 and PLL and further supply of RLNG to SNGPL by these companies which is currently taxable at 17%. It is also intended to waive off the value addition tax of 3% on import of LNG.

Sales tax on Fertilizer Sector

Following amendments are intended to be introduced-

·        

•      Reduction in the rate of sales tax to 3% on all fertilizers.
•      Reduction in sales tax rate to 5% on supply of natural gas to fertilizer plants.
•      Exemption of sales tax on import of LNG by fertilizer manufacturer for use as feedback stock.

Rate of sales tax on leather and textile sector

The rate of sales tax on import and supply of finished articles of leather and textile sector is intended to be increased to 9%, however the rate of sales tax of 6% is intended to apply on the branded outlets which are integrated with the online system of the Board.

Federal Excise Duty

Powers to issue notifications - Various Sections

The powers of the Federal Government to issue notifications under various sections of the Federal Excise Act, 2005 (the FE Act) are proposed to be restored which are presently vested with the Board.

Assessment giving effect to an order - Section 148

Concept of appeal effect order has been proposed to be introduced in the FE Act whereby the Commissioner or the Officer Inland Revenue shall be required to issue the order within one year from the end of the financial year in which the appellate order was served to the Commissioner or the Officer Inland Revenue.

Default surcharge - Section 8

Default surcharge is sought to be fixed at 12% per annum. Presently it is KIBOR plus 3% per annum.

Deposit, pending appeal, of duty demanded or penalty - Section 37(3)

Automatic stay, where appeal is pending before the Commissioner Inland Revenue (Appeals), is sought to be allowed on payment of 10% of the amount of duty due whereas the existing condition is payment of 25% of the amount of duty due.

Alternative Dispute Resolution - Section 38

The proposed substituted section may have far reaching effects. The most significant are that the ADRC shall only hear the case after the withdrawal of appeals filed by either party pending before any appellate authority and that the decision of the ADRC shall be binding on both the parties i.e. the Board and the aggrieved person.

Access to records and posting of excise staff - Section 45

It is proposed to withdraw the powers of the Chief Commissioner and Commissioner to post an Officer of Inland Revenue to the premises of the registered persons for monitoring of production, removal or sale of goods and the stock position or the maintenance of records.

Audit - Section 46

It is proposed to insert sub-section (10) in Section 46 whereby audit shall be conducted once in every three years.

Change in rates of excise duty - Section 3- First Schedule

The rate of federal excise duty on tobacco and cement is proposed to be increased.

Exemptions - Section 16- Third Schedule

It is proposed to grant exemption to:

• ·         Equipment imported by China Railway Corporation for Lahore Orange Line Metro Train Project.
•       Construction materials and goods imported by China State Construction Engineering Corporation Limited for Sukkur-Multan Motorway.
•         Commission paid by the State Bank of Pakistan to National Bank or any other banking company, acting as agents for handling banking services of federal and provincial governments.

Health levy on tobacco

• It is proposed to introduce health levy on tobacco at the rate of ten rupee per kg on every purchaser of tobacco including manufacturers of cigarettes.

Mobile handset levy

• It is proposed to introduce mobile handset levy ranging from zero to five thousand rupees on smart phones.

Customs

Proposed changes in the rate of customs duty

• ·           Additional customs duty is increased from 1% to 2%.
•        Customs duty on more than 100 Pakistan Customs Tariff (PCT) headings relating to import of raw materials/inputs is withdrawn and on more than 25 PCT headings is reduced with the avowed objective to encourage and incentivize exports.
•       Reduction in customs duty has been proposed on aluminum foil for liquid food packaging industry, pre- fabricated structures for hotels, input material for dairy sector, poultry sector, manufacturing of optical fiber cables, equipment for cinema industry, manufacturing of LED lights, import of coal, electric vehicles etc. Fixed duty of USS 5,000 on import of vintage or classic cars and jeeps is envisaged.
•        Increase in duty on import of rickshaw tyres, soya bean oil, aluminum auto parts scrap is proposed.
•       New PCT codes introduced for radial tyres, CKD/SKD kits for home appliances, mobile phones etc.
•       Review of regulatory duty on non-essential and luxury items.

Jurisdiction of customs enforcement activities is extended

• ·         Scope of Customs enforcement activities in the sea is proposed to be extended to 24 nautical miles from existing 12 nautical miles

Amendments in certain powers

• ·         The Bill seeks to restore powers of the Federal Government to issue notifications under the customs law and regulations.
•       The Chief Collector is now empowered to take over imported goods.
•        Any data obtained through mutual assistance agreements can now be officially used for the purpose of assessment and valuation.
•       The Collector (Appeals) is now empowered to grant stay against recovery of duty/taxes for a maximum period of 30 days where an appeal has been filed.

Relief measures

• ·         It is proposed that no proceedings be initiated, if voluntarily payment of short paid duties, taxes or other charges is made before the audit inquiry is initiated.
•       It is proposed to dispose off refund claim within 180 days subject to extension of further 90 days.
•       Confiscated imported goods will be provisionally released on payment of related duties and taxes and furnishing of bank guarantee or pay order against monetary penalties involved thereof.
• Draft rules are proposed to be provided to public for offering their comments before notifying.

Penalties

• ·         Penalties in case of non-compliance of electronic notices issued for requisition of documents have been introduced.
• ·         Penalties for pilferage, replacement en-route or in case transshipped goods failed to reach the port of destination have been enhanced.
• ·         It is proposed to provide legal cover to regulatory duty introduced in fiscal year 2018 which has been held ultra vires to Constitution by Superior Courts.
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Islamabad Capital Territory (Tax on Services) Ordinance, 2001

Sales tax on services - Section 3

It is intended to enhance the scope of services taxable under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001.

This Budget/ modifications are full Part of Sales Tax,Federal Excise Duty & Customs' Point of View.

Reported, Written and Edited By "Umair Badshah"