Finance Act 2020 | FBR Budget Salient Features | Tax Year 2021 |

Budget_FBR_2021

Finance Act 2020 | FBR Budget Salient Features | Tax Year 2021 |

Industrial Relief Measures

  1. Exemption of additional custom duties on those tariff lines which are now @ 0%
    customs duty in tariff.
  2. Reduction of custom duty on 40 raw materials of various industries.
  3. Tariff rationalization under National Tariff Policy 2019, by reducing customs duty on
    90 tariff lines from 11% to 3% and 0%.
  4. Allowing the exemption on import of raw material to those Nashiran-e-Quran also
    who do not have their own in-house printing facility.
  5. Reduction in regulatory duty from 12.5% and 17.5% to 6% and 11%, respectively
    on Hot Rolled Coils (HRC) of Iron and steel falling under PCT codes 7208 and
    7225& 7226, respectively.
  6. On the request of various local industries, a number of their inputs/intermediary raw
    materials are being allowed concessional import under new serial number of the
    fifth schedule through IOCO quota determination.
    • Exemption of custom duties on import of raw materials by manufacturers
    of Butyl Acetate.
    • Exemption of custom duty on import of raw material by manufacturer of
    syringes and saline infusion sets.
    • Exemption of customs duties on import of raw material by manufacturers
    of buttons.
    • Reduction in custom duty on import of raw material by manufacturers of
    interlining/buckram.
    • Reduction of custom duty and exemption of additional custom duty and
    regulatory duty on import of raw materials by manufacturers of Wire rod
    • Exemption of custom duties and regulatory duty on import of machinery,
    equipment and other project related items for setting up of internet cable
    landing stations.
    2
    • Exemption of custom duties on import of raw material by beverage can
    manufacturers.
    • Reduction in Custom duty and exemption from Additional custom duty on
    import of raw material by food packaging industry.
    Relief to Common Man
  7. Exemption from customs duties on import of 61 COVID19 related items, which was
    due to expire on 20th June has been extended due to the continuation of pandemic.
  8. Exemption from 2% ACD on import of edible oils and oil seeds under PM’s
    COVID19 Relief Package has been extended.
  9. Exemption of duties & taxes on import of Dietetic Foods for Children with inherited
    metabolic disorders.
  10. Exemption of all duties & taxes on import of Diagnostic Kits for Cancer and Corona
    Virus.
  11. Exemption of Customs duties on inputs of Ready to use Supplementary Foods
    (RUSF).
  12. Exemption of Customs duties on import of life saving drug Meglumine Antimonite
    for treatment of leishmaniasis.
  13. Extension up to 2023, in exemption of customs duties on imports for setting up new
    industries in erstwhile FATA area.
    Miscellaneous
  14. Reduction in regulatory duty on smuggling prone items to bring these items under
    legal imports
  15. Regulatory duty on several industrial inputs is also being reduced to decrease their
    cost of doing business
  16. Tariff protection for domestic industry by increasing/levy of regulatory duty on
    import of those items which are also locally manufactured
  17. Incentivizing soap manufacturing industry by reducing rate of Additional customs
    duty on Palm Stearin
  18. Enhancing scope of concessions available to Special Economic Zone
 
 
SALIENT FEATURES – SALES TAX
 
  1. The proposed budgetary measures pertaining to Sales Tax for FY 2020-21 are:
  2. RELIEF MEASURES
  3. 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;
  4. In wake of COVID-19, the Federal Government granted exemption to health
    related items and equipment through SRO 237(I)/2020 dated 20-3-2020 which
    is going to expire on 19-6-2020. In the present circumstances vis-à-vis
    COVID-19, the said period is being extended for another three months
    starting from the 20th June 2020.
  5. Exemption allowed on import of dietetic foods intended for special medical
    purposes for the children suffering from Inherited Metabolic Syndrome;

  6. MEASURES FOR REMOVAL OF ANOMALIES
    3(a) In order to encourage documentation, it has been decided to provide relief to
    organized 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%

  7. STREAMLINING MEASURES
  8. Concept of conducting audit proceedings through electronic means
    introduced;
  9. Ninth Schedule is proposed to be amended in line with Mobile Manufacturing
    Policy approved by the ECC of the Cabinet;
    4
  10. Insertion of the Tax Laws Amendment Ordinance 2019, relating to tax
    concessions and exemptions to Gawadar Port and Gawadar Free Zone, in the
    Finance Bill 2020;
  11. To strengthen the Alternate Dispute Resolution process and to make it more
    taxpayer-friendly, it is proposed that the taxpayer is allowed to withdraw his
    case from any court of law or any appellate authority after decision of ADRC.
    Furthermore, the decision of ADRC, once it is conveyed by the taxpayer to the
    tax authorities, is binding upon the tax authorities;
  12. The scope of section 73 is proposed to be widened to cover all registered
    persons supplying taxable goods;
  13. Board is empowered to fix minimum production on the basis of single or more
    inputs and for fixation of wastage;
  14. Real-time access to information and databases to the Board by various
    authorities such as NADRA, FIA, provincial excise & taxation departments etc
  15.  
  16. SALIENT FEATURES
  17. FEDERAL EXCISE DUTY
    The proposed budgetary measures pertaining to Federal Excise Duty (FED) for FY
    2020-21 are:
    HEALTH RELATED MEASURES
  18. Increase in the rate of FED on cigars, cheroots , and cigarillos and cigarettes
    from 65% to 100% of retail price; increase in the rate of FED on filter rods
    from Rs 0.75 to Rs 1 per filter rod;
  19. Levy of FED on e-liquids of electric cigarettes @ Rs 10 per ml.
  20. Levy of FED on caffeinated energy drinks @ 25%;
    MEASURES FOR REMOVAL OF ANOMALIES
  21. Levy of FED @ 7.5% ad valorem in case of locally manufactured double cabin
    (4×4) pick-up vehicles and @ 25% in the case of imported ones.
    4(a) In the wake of worsening affect of COVID-19 and reduction in production of
    cement, it has been proposed to reduce FED on cement from Rs. 2 per kg to
    Rs. 1.75 per kg.
    STREAMLINING MEASURES
  22. Board is empowered to fix minimum production on the basis of single or more
    inputs and for fixation of wastage;
  23. The scope of seizure of non-duty paid goods is extended to all products
    subject to FED besides cigarettes and beverages;
  24. Real-time access to information and databases to the Board by various
    authorities such as NADRA, FIA, provincial excise & taxation departments etc.
    6

 

 

  1. SALIENT FEATURES
  2. BUDGET 2020-21
    INCOME TAX

    RELIEF MEASURES
    • Deletion of Withholding Taxes
    To augment efforts towards simplification of the withholding tax regime, the
    following withholding tax provisions are being deleted:
    Section Short Description
    236R Collection of advance tax on education related expenses remitted
    abroad
    235B Tax on steel melters and composite units
    156B Withdrawal of balance under pension fund
    148A Tax on local purchase of cooking oil or vegetable ghee by certain
    persons
    236D Advance tax on functions and gatherings
    236F Advance tax on cable operators and other electronic media
    236J Advance tax on dealers, commission agents and arhatis etc.
    236U Advance tax on insurance premium
    236X Advance tax on tobacco
    This measure would reduce the cost of the compliance of taxpayers, enhance the
    control of FBR over the withholding tax regime and would be pivotal in promoting
    ease of doing business.
    7
    • Enhancement of Threshold for Becoming Prescribed Person for
    Withholding of Tax on Supplies, Services and Contracts from fifty to
    hundred million rupees and a similar threshold of hundred million rupees is
    being prescribed for a sales tax registered person to become a withholding
    agent.
    • Reduction in Holding Period and Tax Rates for Capital Gain on Immoveable
    Property
    to incentivize and propel economic activity in the real estate sector, the
    bifurcation of plots and constructed property for determining holding period of
    capital gains is being done away with i.e. the holding period for taxation of
    capital gains on disposal of immovable property is being restricted to 4 years.
    In addition, rates are also being reduced on capital gains emanating from
    disposal of immoveable property.
    • Increase in Threshold of Section 21(l) per transaction delineated under
    section 21(l) is being increased from Rs. 10,000/- to Rs. 25,000/-. Similarly,
    the threshold of payments under a single from Rs.50,000/- to Rs.250,000/-.
    • Increase in Threshold of Section 21(m) from Rs. 15,000/- per month to Rs.
    25,000/- per month.
    • Enabling Adjustability of Property Expenses for All Individuals/AOPs
    • Exempting Withholding Tax on Cash Withdrawal to the extent of Foreign
    Remittances
    • Promoting Investment in Government Debt Instruments through a foreign
    bank account, a non-resident rupee account repatriable or a foreign
    currency account.
    • Issuance of Centralized Income Tax Refunds
    • Hajj Operators to be Exempted from Withholding Tax on Payments to NonResidents
    8
    • Explanation for excluding Vehicles Up to 200cc from the Ambit of Advance
    Tax
    • Advance Tax on Auction of Immovable Property to be Collected in
    Installments
    • Prompt Issuance of Exemption Certificates to Public Listed Companies
    within 15 days
    • Collection of Advance Tax by Educational Institutions not to Apply to
    Persons on the ATL
    • Rationalizing Tax on Imports
    by shifting from person-specific rates to goods specific rates cascaded according
    to the type of goods, with tax @1% for capital goods, 2% for raw materials and
    5.5% for finished goods irrespective of status of the importer. However, the
    prevailing concessional rates on certain items such as remeltable scrap of iron
    and steel, potassic and urea fertilizers, LNG, Gold, Cotton, goods that were
    importable by manufacturers under the rescinded SRO 1125(I)/2011 dated
    31.12.2011, mobile phones etc. are being maintained.
    • Agreed Assessment through arbitration by Assessment Oversight
    Committee
    • Strengthening Alternate Dispute Resolution Mechanism
    • Taxation Of Resident Shipping Companies as per latest marine policy
    PROCEDURAL MEASURES
    • Taxpayer’s Profile
    Automated Adjusted Assessment to rectify computational errors and
    wrongly claimed credits
    • Real-Time Access to Databases of Certain Organizations
    • Audit on the Basis of Benchmark Ratios
    • Enabling E-Audit
    9
    • Strengthening Compliance Regime of Non-Profit / Welfare Organizations
    • Electricity Expense to be Treated as an Inadmissible Business
    Deduction subject to non-disclosure of name of actual user from 01.01.2021
    • Disallowance of Business Expenditure Proportionate to Sales Made to
    Sales Tax Unregistered Persons
    • Rationalizing Depreciation Deduction based on the Half Year Rule
    • Limiting Interest Deductibility to Foreign Affiliates
    TECHNICAL MEASURES
    • Rationalization of Cost of Transport Vehicle for Claiming Deduction on
    Account of Lease Rentals
    • Filing of Withholding Statements under section 165 on Quarterly Basis
    • Incentivizing and Promoting the Construction Industry
    • Tax Exemptions and Concessions for the Gwadar Port and the Gwadar Free
    Zone
    • Incorporation of Relief measures provided through SROs during the COVID
    pandemic
 

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