ISLAMABAD: The government has introduced 30 amendments to the Finance Bill 2020, most of them related to income tax measures.

Of all the recommendations, 16 are related to income tax, 10 to sales tax, and four to federal excise duty (FED). These amendments will come into effect from July 1.

However, the revised rate of excise duty on cement and cigarettes will come into effect on the next day of assent given by President Dr Arif Alvi.

Through the Act, the government has included three institutions in the list of tax exemptions. No one will ask questions about the income of these institutions in the case of government. Through the Act, the government extended this status to the Shaukat Khanum Memorial Trust, Sindh Institute of Urology & Transplantation (SIUT) Trust and Society for the Welfare of SIUT and National Endowment Scholarship for Talent.

Big incentives for construction, electric vehicles

The Shaukat Khanum has emerged as the only private institution which will enjoy this status. The SIUT is already being run by the Sindh government. Under the ordinance, all the private institutions can only get a certificate of non-profit organisation status after fulfilling conditions laid down in 100C of Income Tax Ordinance.

Through the Act, a resident company engaged in the hotel business is included in the definition of the industrial undertaking. The loss of hotel business after July 1, will be allowed to carry forward for eight years.

The taxation on the shipping of resident persons under the final tax regime is further extended until 2030. The Act has further relaxed the disallowance limit up to 10 per cent only for the industrial undertaking, from the proposed 20pc. The Act has also deferred application of this disallowance till Sept 30.

The government has withdrawn the proposed amendment of prior approval from the commissioner for revision of the wealth statement. However, the commissioner can render the revision void in case of wrongdoing. The government has done away with a condition of depositing a 10pc tax amount before admission of Appeal by Appellate Tribunal.

The Act empowered the Federal Board of Revenue to specify goods imported and place capital goods in Part-1, raw materials in Part-II, and others in Part-III of 12th Schedule of Income Tax Ordinance (2001) . The government restored the reduced rate of 3pc withholding tax on engineering services. New services included in the list of reduced rate of 3pc are warehousing services, services rendered by asset management companies, data services provided under a license issued by the Pakistan Telecommunication Autho­rity and telecommunication infrastructure (tower) services.

The income tax is exempted from a recipient of payment from unregistered individuals for supply of sand, bricks, grit, gravel, crushed stone, soft mud, clay. Similarly, the following person will also be exempted in respect of services provided to the construction sector: artisans, plumbers, electricians, surface finishers, carpenters, painters, and daily wagers.

Sales Tax Amendments

Through the Act, a change has been made to claim input tax adjustments. In the case of electronic vehicles, the input tax can be adjusted up to 100pc of output tax, however, if input tax exceeds the output tax, no refund or carry forward of excess tax shall be allowed.

The detail from the Federal Investigation Agency and Bureau of Emigration and Overseas Employment regarding persons has now been restricted to only international travel for the broadening of the tax base.

The sales tax exemption related to import and supply of ships and all floating craft etc was further extended to 2030.

The government has exempted from sales tax oil cake and other solid residues, whether or not ground or in the form of pellets; import of completely knocked down kits by local manufacturers of electric vehicles: road tractors for semi-trailers (electric prime movers); electric buses; three-wheeler electric rickshaw; three-wheeler electric loader; electric trucks and electric motorcycle.

Similarly, through Act, sales tax is exempted on plant and machinery for the assembly or manufacturing of electric vehicles, subject to a condition that the exemption will be admissible on a one-time basis for setting up the new assembly and/or manufacturing facility of the vehicles and expansion in the existing units to the extent of electric vehicles specific plant and machinery, duly approved/certified and determined by the Engineering Development Board (EDB).

On the local supply of locally-manufactured electric vehicles, sales tax at the rate of 1pc will be charged.

The Act fixed tax rate on cement or concrete blocks with no input tax adjustment: Rs2 per square feet on paver; Rs3 per piece on hollow block (volume less than 1 cubic ft); Rs3 per piece on solid block (volume less than 1 cubic ft); Rs5 per piece on kerb stone (volume less than 1 cubic ft); and Rs10 kerb stone (volume less than 1 cubic ft).

Federal Excise Amendments

The government has withdrawn the 25pc FED on retail price of caffeinated energy drinks.

Through the Act, the duty imported cigarettes of tobacco or tobacco substitutes are 65pc of the retail price. For cigars, cheroots, and cigarillos of tobacco and tobacco substitute the rate of duty will be 65pc of the retail price or Rs10,000 per kg whichever is higher.

The FED on cement was further reduced to Rs1.50 per kilogram from earlier proposed Rs1.75 in the budget.

As per Finance Bill 2020, government imposed levy of FED at the rate of 7.5pc ad valorem in case of locally-manufactured double cabin (4x4) pick-up vehicles and 25pc in the case of imported ones. Now Act has restricted this lower rate availing to vehicles booked on or before the June 30 subject to the restriction or conditions specified by the FBR.

Published in Dawn, June 30th, 2020