Budget Summary 2020-2021

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The information contained in this briefing is based on the Finance Bill 2021. The given
information is correct to the best of our knowledge. The briefing is intended to provide
a general outline of the subject covered which includes the important changes proposed
through the Finance Bill 2021. The Memorandum includes comments on the highlights of
the changes brought forward through by the Bill in Income Tax Ordinance 2001, Sales Tax
Act 1990, Custom Act 1969 and Federal Excise Act 2005.

INCOME TAX

  1. Enhancement of threshold for becoming prescribed person for withholding of tax on supplies, services and contracts from 50 to 100 million.
  2. Reduction in holding period and tax rates for capital gain on immovable property restricted to 4 years.
  3. Increase in threshold of paying salaries through crossed cheque from Rs. 15,000/- per month to Rs. 25,000/- per month.
  4. Exempting withholding tax on cash withdrawal to the extent of foreign remittances.
  5. Issuance of centralized income tax refunds automatic payment of refunds directly into the bank accounts of the taxpayers.
  6. Hajj operators to be exempted from withholding tax on payments to non-residents.
  7. Explanation for excluding vehicles Up to 200cc from the ambit of advance tax.
  8. Prompt issuance of exemption certificates to public listed companies within 15 days of filing of application.
  9. Collection of advance tax by educational institutions not to apply to persons on the ATL
  10. Rationalizing tax on imports with tax @1% for capital goods, 2% for raw materials and 5.5% for finished goods.
  11. Withholding tax rate on toll manufacturing reduced to 4% for Companies and 4.5% in other cases.
  12. Reduction in tax withheld from offshore supplier under an EPC contract to pay only 20% instead of 30% of their actual tax liability.
  13. Taxpayer’s profile in case of any change in particulars.
  14. Automated adjusted assessment initially processed within 6 months.
  15. Real-time access to databases of certain organizations as land record departments, excise and taxation departments, utility companies, visa and immigration offices, and others is made available to the Board.
  16. Strengthening compliance regime of non-profit/welfare organizations to file a statement of voluntary contributions and donations received.
  17. Advance tax on extraction of minerals to extend to persons on the active taxpayers list.
  18. Uniformity in tax rate for profit on debt rate of 15%
  19. Pre-condition of payment of 10% tax for filing appeal before the appellate tribunal.
  20. Permission of The commissioner required for revising wealth statement.
  21. Simplifying declaration through filling of return u/s 114 instead of filling statements under section115(4).
  22. Revision of prescribed fee structure for appeals filed to commissioner (appeals) for companies increased to Rs. 5,000/- to Rs. 2,500/- other cases Rs. 1000/-.
  23. Revision of prescribed fee structure for appeals filed before the appellate tribunal Rs. 2,000/- to Rs. 5,000/- in case of companies Rs. 2,500/- in all other cases.
  24. It is made compulsory for taxpayers to file the said profile and update it by the due date. To ensure compliance, penalty of Rs 2,500/- shall be proposed.
  25. Filing of withholding statements under section 165 on quarterly basis.

SALES TAX

  1. The minimum threshold of supplies by retailers for obtaining CNIC of the buyers is proposed to be increased from Rs 50,000 to 100,000.
  2. Federal government granted exemption to health related items and equipment through SRO 237(I)/2020 upto 20th Sep, 2020.
  3. Retail sector which is integrated online with FBR through point of sale system. Their existing sales tax rate is proposed to be reduced from 14% to 12%.
  4. Eleventh schedule (withholding tax) is proposed to be amended to provide for deduction of the entire sales tax by the purchaser if the supplier is a non-active taxpayer.
  5. Real-time access to information and databases to the board by various authorities such as NADRA, FIA, provincial excise & taxation departments etc.
  6. Who fails to file (quarterly) three consecutive monthly sales tax return treated as in-active taxpayer.

CUSTOM

  1. Exemption from custom duties on import of COVID-19 related items
  2. Exemption from 2% ACD on import of edible oils and oil seeds under COVID-19 relief
  3. package has been extended.
  4. Exemption of customs duties on inputs of ready to use supplementary foods
  5. Exemption of customs duties on import of life saving drug
  6. Reduction of custom duty on 40 raw materials of various industries

FEDERAL EXCISE DUTY (FED)

  1. Increase in the rate of FED on filter rods from Rs 0.75 to Rs 1 per filter rod.
  2. Levy of FED on caffeinated energy drinks @ 25%.
  3. Levy of FED @ 7.5% is in proportion for locally manufactured double cabin (4×4) pick-up vehicles and @ 25% in the case of imported ones.
  4. It has been proposed to reduce FED on cement from Rs. 2 per kg to Rs 1.75 per kg.