FBR Explains Changes in Minimum Turnover Tax

Minimum Tax alternative Tax Changes

The minimum turnover tax of 0.75 percent would be applicable on the oil marketing companies, Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited, Pakistan International Airlines Corporation and poultry industry from July 1, 2021.

0.5% Minimum Tax

According to the explanation of the Finance Act 2021 issued by the Federal Board of Revenue (FBR) on the issue of minimum tax on turnover, 0.5 percent minimum tax as percentage of the person’s turnover would be applicable on the oil refineries and motorcycle dealers registered under the Sales Tax Act, 1990.

0.25% Minimum Tax

Under the Finance Act 2021, the minimum tax on turnover at the rate of 0.25 percent would be applicable on the distributors of pharmaceutical products, fast moving consumer goods and cigarettes; Petroleum agents and distributors who registered under the Sales Tax Act, 1990; rice mills and dealers; Tier-1 retailers of fast moving consumer goods. Who integrated with Board or computerized system for real time reporting. Person’s turnover from supplies through e-commerce including from running an online marketplace as defined in clause (38B) of section 2, persons engaged in the sale and purchase of used vehicles and flour mills.

1.25% Minimum Tax

In all other cases, 1.25 percent minimum tax on turnover would be applicable, FBR stated.

Previous Year Minimum Tax

Previously, minimum tax on turnover at the rate of 1.5 percent of turnover was payable by all companies and individuals/ AOPs having turnover exceeding Rs. 10 million. This is an alternative tax. It is payable when the normal tax liability in cases of exemption, loss, tax credits or for any other reason, is less than tax payable on turnover basis. It can be carried forward for adjustment against next year’s tax liability. However it cannot be carried forward if person has sustained a loss for a year.

0.75 percent minimum tax on turnover

The 0.75 percent minimum tax on turnover will applicable on the oil marketing companies, Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited (for the cases where annual turnover exceeds rupees one billion.) PIAC and poultry industry including poultry breeding, broiler production, egg production and poultry feed production;

Changes in Finance Act 2021 relating to Minimum / Turnover Tax

Four different types of changes made in this regime through the Finance Act 2021: (1); Generalized reduction in minimum turnover tax paid from 1.5 percent to 1.25 percent. (2) Enhanced threshold for individuals and association of persons (AOPs) from Rs10 million to Rs 100 million to pay minimum tax. (3) Allowing carrying forward of minimum tax for adjustment against normal tax liability. Even in cases of loss to provide relief to businesses sustaining loss. (4) To maximize equity Division-IX of Part-I of First schedule has been substituted, FBR added.

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