KARACHI: Three provisions in the finance bill are attracting a growing amount of ire from industry. These are the continuation of minimum tax regime, amendments that disallow deductions for business expenses for sales to unregistered persons, and an advance tax on mineral extraction that has hit the cement sector.

“The important concern of all business entities regarding the Minimum Tax Regime (MTR) has not been addressed despite clear documentary evidence that the MTR is discriminatory for organisations with large turnovers but limited profit,” the Overseas Investor Chamber of Commerce and Industry (OICCI) said in a letter sent to Finance Adviser Hafeez Shaikh on Wednesday.

The chamber “had requested for the general MTR rate to be reduced from the existing 1.5 per cent to 0.5pc and for some specific sectors to 0.2pc,” the letter states.

It also took issue with amendment in two sections of the Income Tax Ordinance that would disallow a business entity from claiming a deduction “for any expenditure attributable to sales made to persons required to be registered but not registered under the Sales Tax Act, 1990, computed according to a formula, which will further penalise the compliant taxpayers.” The chamber says this action poses a real danger to continuity of business in some cases.

The fertiliser is one example, and their association has taken up the same amendments seperately.

Brig (retd) Sher Shah Malik, Executive Director of Fertiliser Manufacturers of Pakistan Advisory Council, in a letter to Commerce Advisor Abdul Razak Dawood said the industry’s dealers are largely income tax filers but are GST unregistered persons.

Hence, the proposed provisions of section 21 together with those earlier implemented Tax Laws Amendment Act 2020 would have a disastrous effect on the industry, affecting urea prices incrementally by Rs200 per bag and DAP by Rs335 per bag.

Meanwhile, All Pakistan Cement Manufacturers Association (APCMA) informed the Budget Anomaly Committee that Section 236V of the Income Tax Ordinance has proposed the imposition of advance tax collection on extraction of minerals on active taxpayers as well.

Presently, this advance tax on mineral extraction from the licensed on leased areas of mines is confined to non-active taxpayers only.

“Many manufacturers, for instance the cement sector, extract minerals from their own mines for their in house consumption only. The new decision would create a unique situation, where a company would have to pay advance tax on an internal movement of resources within the company,” the letter states.

Published in Dawn, June 19th, 2020