President has promulgated Tax Laws (Third Amendment) Ordinance 2021 to legally bound the National Database and Registration Authority (NADRA) to share Pakistani citizens’ data with the Federal Board of Revenue (FBR) for broadening of the tax base.
The government has given ample powers to the Federal Board of Revenue (FBR) to disable mobile phones/SIMS, disconnect electricity and gas of non-filers of income tax returns under the new set of enforcement measures taken to expand the tax base.
The President has promulgated the Tax Laws (Third Amendment) Ordinance 2021 to also given powers to the FBR to discontinue gas and electricity connections of persons, including tier-1 retailers who are either not registered, or if registered, not integrated in terms of section 3(9A) of the Sales Tax Act 1990.
The FBR has been empowered to issue an Income Tax General Order in respect of persons who are not appearing on ATL but are liable to file a return under the provisions of this Ordinance. The Income Tax general order may entail any or all of the following consequences for the persons mentioned therein: Disabling of Mobile Phones or Mobile Phone Sims; discontinuance of electricity connection; and the discontinuance of gas connection.
Under the new Tax Laws (Third Amendment) Ordinance 2021, the National Database and Registration Authority shall, on its motion or upon application by the Board, share its records and any information available or held by it, with the Board, for broadening of the tax base or carrying out the purposes of this Ordinance.
The NADRA may submit proposals and information to the Board to broaden the tax base and identify in relation to any person, whether a taxpayer or not. The Board may use and utilize any information communicated to it by the NADRA and forward such information to an Income Tax authority having jurisdiction in relation to the subject matter regarding the information, who may utilize the information.
The penalty for non-filers has been increased to Rs. 1,000/- per day of default. The government has increased the amount of penalty for tier-1 retailers who are not integrated with the FBR. The government has also imposed an additional advance tax on the rates ranging from 5 percent to 35 percent on professionals using domestic electricity connections. The professionals covered accountants, lawyers, doctors, dentists, health professionals, engineers, architects, IT professionals, tutors, trainers, and other persons engaged in the provision of services.
The government has also enhanced Extra Tax rates on industrial and commercial gas and electricity connections to unregistered persons. The government has granted sales tax zero-rating to fat-filled milk, including those sold in retail packing under a brand name or a trademark, and also withdrawn exemption on import of fruit from Afghanistan. Any expenditure in excess of Rs. 0.25 million by the corporate sector to be inadmissible if not paid through digital mode. The salaries in excess of Rs. 25,000/- per month if paid through digital mode to be admissible expense along with paid through other banking channels.
Under the Ordinance, the reduced rate of 16 percent sales tax would be applicable on supplies made by POS integrated outlets where payment is made through digital mode; reduced rate of 14 percent on remeltable scrap imported by steel melters; reduced rate of 5 percent on import of electric vehicles on CBU condition and reduced rate of 16.9 percent sales tax on business to business transactions, where payment is made through digital mode. Moreover, the government has excluded steel and edible oil sectors from the charge of Further Tax u/s 3(1A) of the Sales Tax Act, 1990.
The government has introduced an enabling provision for making facilitator of the online marketplace as a withholding agent under Eleventh Schedule to the Sales Tax Act, 1990, and the requirement of integration for specified persons to integrate the invoice issuing machines with the Board’s Computerized System.
Through the Tax Laws (Third Amendment) Ordinance 2021, the government has introduced a mechanism of appeal against the order of Director General Valuation by amending section 25D. An appeal may be filed with Member (Customs Policy). Further appeal may be filed with the High court against the order of Member (Customs Policy). Consequential changes in sections 194A and 196 are also proposed. The mechanism of reassessment of already assessed GD is proposed to be streamlined. The corporate guarantee is to be included in the definition of security instrument for provisional clearance. This will facilitate and avoid high financial costs for industrial importers.
The Ordinance has granted an exemption to certain raw materials for auto-disabled syringes and exemption on import of POS machines granted to all persons.
The government has also clarified that the remittance through Money Service Bureaus (MCBs), Exchange Companies (ECs), and Money Transfer Operators (MTOs) such as Western Union, Money Gram, and Ria Finance or other like entities shall be deemed to constitute foreign exchange remitted from outside Pakistan through normal banking channels, Ordinance added.