Budget 2020 21 Highlights Comments Deloittepk Noexp

Budget 2020 - 21 | Highlights & Comments
Budget 2020-21
Highlights & Comments
Deloitte Yousuf Adil
Tax
Chartered Accountants
Member
1 of Deloitte Touche Tohmatsu Limited
Foreword
This memorandum contains an economic review, highlights

of fiscal proposals and explanatory description of the
significant changes in the Income Tax, Sales Tax, Federal
Excise and Customs Duty laws proposed through Finance
Bill, 2020. It also contains our comments on the
amendments introduced through the Tax Laws
(Amendment) Ordinance, 2020, which are now covered
under the Finance Bill.
Amendments proposed in the Finance Bill, 2020 will take

effect from July 01, 2020, unless stated otherwise, once it
is approved by the Parliament. The memorandum is aimed
at providing general guidance with the objective of keeping
our clients and staff abreast of the changes in the
aforementioned laws.
Deloitte Yousuf Adil accepts no duty of care or liability for

any loss occasioned to any person acting or refraining from
action as a result of any material in this publication. The
users are therefore advised to seek professional advice
before exercising any judgment, interpretation of any legal
provision and acting thereupon.
The memorandum can also be accessed on our Website.
www.deloitte.com/view/en_PK/pk/index
Karachi
June 13, 2020
2
Contents
Budget at a Glance 04
Economic Review 05
Highlights of Important Fiscal Proposals 17
Significant Amendments Proposed In
Income Tax Ordinance, 2001 28
Sales Tax Act, 1990 59
Customs Act, 1969 67
Federal Excise Act, 2005 86
Comments on Tax Laws (Amendment) Ordinance, 2020 89
Petroleum Products Surcharge Ordinance, 1961 97
3
Budget at a glance
(Budget) (Revised Budget)

Rupees in billion Rupees in billion
2020-21 2019-20
Tax revenue 5,464 4,208
Non-tax revenue 1,108 1,296
Gross revenue receipts 6,572 5,504
Public account receipt – net 215 421
Total receipts 6,787 5,925
Less: Provincial share in Federal taxes (2,873) (2,402)
Net revenue receipts 3,914 3,523
Expenditure
Current expenditure (7,836) (7,586)
Development expenditure (950) (759)
(8,786) (8,335)
Deficit 4,872 4,822
Capital receipts 1,327 756
Credit from banking sector 979 1,724
External receipts 2,224 2,272
Privatization proceeds 100 150
Cash balance built up by provinces 242 (80)
Financing of deficit 4,872 4,822
Source: Annual Budget Statement, 2020-21
Source: Annual Budget Statement, 2019-20
4
Economic Review 2019-20
The year 2020 will go down in history as a turning point in terms of how the world operates.
Most of the world is or has been on lockdown for much of the last quarter of fiscal year 2019-
20, and most and in some cases, all of the workforce has been working from home. Recession
is certain and work-from-home is the new normal for most workforce. Yet there are innovative
sectors which were game changers only a quarter ago which find no place in the new world
and are laying off workers by the thousands. There are economies which could never have
imagined their tourism based economy can ever see a complete shut-down apart from cyclical
crests and troughs in response to business cycles and yet it has been months since they have
had a tourist. Pakistan is no exception.
One Pakistani citizen dies every fifteen minutes and by the time you finish reading this
sentence, 40 new Covid-19 cases would have been identified. Pakistan’s economy had already
been suffering before the COVID-19 outbreak but it was in no imminent danger of a recession;
the pandemic has dealt a significant blow.
Pakistan’s economy before COVID-19 was undergoing stabilization efforts and on the road to
recovery as per government estimates. International Monetary Fund (IMF) in October 2019
estimated that Pakistan’s economy would slow down to 2.4 per cent in 2020 and pick up
quickly after that as stabilisation measures bear result. In January 2020, the Finance Ministry
issued a statement that the economy was “progressively along the adjustment path and
stabilization process and economic recovery is expected towards the end of FY2020.”i The
statement noted several achievements in the first five months of FY 2020: the Current
Account Deficit dropped by nearly 73%; the “primary balance” was positive, at 0.3% of the
GDP; the credit rating had improved from negative to stable; and the country’s rank on the
Ease of Doing Business Index had improved from 136 to 108.
Many analysts including Moody and Citibank lauded the government on taking measures to
stabilize the economy. Credit Suisse also released a report titled: “Pakistan: On the Path to
Recovery,” noting that the fundamentals of the economy had improved significantly as a result
5
of the IMF package, fiscal consolidation and the 8 necessary reforms being undertaken by the
government.
However, the gains accumulated pre-Covid-19, as with the rest of the world’s economies, were
lost in Q4 as the pandemic spread. Exports suffered due to cancelled orders from buyers and
slow demand, production and logistics suffered due to slow economic activity and domestic
demand plummeted. The Federal and Provincial Governments took several immediate
measures and responded with a multi-pronged strategy to ensure availability of basic goods
and groceries, slow down the spread of the virus, provide immediate cash safety net support
to the most deprived sections of society and other relief efforts. Central bank also stepped in
to provide support to financial institutions and borrowers with a relief package and gradual
decline in policy rate. Yet, as the year 2019-20 closes, the virus spread has still not peaked,
the short-term future remains uncertain and global forecasts continue to be negative for at
least in the next fiscal year.
Real GDP
7
5.8 Real GDP Growth 5.8
6 5.5
5.3
5.0
5 4.5
4.1 4.1
3.8 3.7 Budget vs
4 3.6
3.3
Percentage %
Actual
3 2.6
6.0
2
Percentage %
5.0
1 0.4
-0.38 4.0
0 3.0 2.4
FY-06 FY-07 FY-08 FY-09 FY-10 FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 FY-18 FY-19 FY-20
-1 2.0
‘’-2
1.0 -
0.0 0.3
8
-1.0
-2.0
FY-19P
Source: Economic Survey 2019-20, Ministry of Finance
6
Pre-COVID
The affirmations of the government’s success in stabilizing the economy and laying a foundation
for robust growth were reassuring. However, a closer look at Pakistan’s pre-COVID economy
reveals a bleaker picture. The 73% fall in Current Account Deficit and depreciation of Pakistani
Rupee came at the cost of the economic growth. The Real GDP growth fell to 3.3% in FY 2019
from 5.5% in FY 2018 and fell even lower to -0.38% in FY 2020. COVID-19 was a contributor to
this decline in the GDP, however, pre-Covid-19 the Government had initially estimated at the
time of developing budget for the fiscal year 2019-20 that GDP Growth rate will fall to 2.4%.
During COVID
These were uncharted waters for even the seasoned experts who were unable to predict the
extent of shocks that the pandemic will have on the economy.
Moody’s has been constantly revising its projections for Pakistan. In Dec 2019, Pre-COVID
Pakistan’s economic growth was projected to be 2.4%. This was slashed down to 2% by March-
end when the government had announced a lock-down.
However, the Economic Survey revealed that the GDP for FY 2020 was -0.38%, which was largely
due to negative growth in the Services Sector that roughly contributes around 61% to the GDP.
Covid-19 disruption has also presented a conundrum over the entire process of forecasting which
relies on data compilation of the last three quarters to project the annual results. Q4 of the fiscal
year 2019-20 is disrupted to such a greater extent that the numbers currently projected might
also require revision as more actual data continues to emerge. The Finance Minister also
suggested in his speech that it is not easy to quantify the impact of Covid and that the economic
numbers for the next fiscal year are subject to change.
7
Current Account Deficit

Trade Deficit (USD billion) [*Based on July-April month data]
60 35
50 30
25
40
20
30
15
20
10
10 5
0 0
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20*
Import Export Trade Deficit
Source: Economic data, SBP
8
Pre-COVID
With aggressive slashes in imports and massive devaluation of PKR, the country managed to
reduce the current account deficit (CAD) by 73% in the first seven months of Financial Year (FY)
2019-20. However, despite a nearly 30% depreciation in the value of the Pakistani Rupee,
exports increased only marginally. In the first nine months of the current fiscal year, exports rose
by only 2.2% in dollar terms. This phenomenon has been observed historically as well, where
currency devaluation did not yield favorable effects on the trade balance. According to Dr. Ishrat
Husain, close to 60% inputs of export-oriented industries are imported, hence devaluation raises
their costs and renders them non-competitiveii.
Imports during the period dropped 14.4% to $34.8 billion. In absolute terms, imports contracted
$6.2 billion, which provided some relief to the government.
During COVID
On a month-on-month basis, exports fell 15.6% in March over February while imports contracted
21.2%. The month-on-month trade deficit shrank 27%. Since Petroleum products constitute
around 30 percent of Pakistan’s total imports, the sharp fall in oil prices provided some relief to
the Current Account Balance. However it is likely to be dampened by a fall in worker’s
remittances from oil producing countries where thousands of Pakistan’s are employed may be at
risk to lose their jobs.
Public Debt
Public Debt and Debt to GDP Ratio
40 90
Amount in PKR Trillion
35 80
70
Percentage %
30
11.7 60
25 11.1
50
20 8.5
6.1 6.6 40
15 5.1 5.2 30
4.8 20.7 22.5
10 5.1 20
4.4 4.8 13.6 14.9 16.4
5 2.9 3.9 9.5 10.9 12.2 10
4.7 6.0 7.6
3.3 3.9
- -
FY-08 FY-09 FY-10 FY-11 FY-12 FY-13FY-14 FY-15FY-16 FY-17 FY-18FY-19 FY-20
(BE)
Domestic Currency Debt Foreign Currency Debt Debt to GDP Ratio
9
Pre-COVID
According to the Debt Policy Statement issued by the government earlier this year, Pakistan’s
debt has increased by almost 40% since the new government assumed office. The total debt and
liabilities increased from PKR 29.9 trillion in FY18 to PKR 41.5 trillion in September 2019. This
was largely due to a sharp rise in domestic interest rates and exchange rate depreciation (that
escalated the debt-servicing burden). Additionally, public debt as a percentage of revenue went
up from 447% to 667% in the span of one year, and debt servicing as a percentage of revenue
increased from 37.3% to 62.5% between FY18 and FY19. According to the IMF’s estimates,
Pakistan’s external debt would reach US$ 113 billion by the end of FY20 and that the country
would need over US$ 27 billion to finance its external requirements.
During COVID
Pakistan’s public finances were already in a parlous state. The COVID19 crisis has made it even
more difficult for Pakistan to service its mountain of debt. In FY19, the net revenue of the Federal
government was less than the debt servicing incurred by the government, i.e. much of the
government’s expenditure was incurred through debt. In the 18 months since the previous PML-N
government demitted office, Pakistan’s total debt and liabilities have gone from PKR 30 trillion to
PKR 41 trillion. The federal government’s debt has surged from 74% of the GDP in FY 19 to 84%
in FY 2020. While the Government lauds its efforts towards the Medium Term Debt Management
Strategy and the related steps taken for the development of debt capital markets and explains a
portion of the surge as attributable to devaluation of Pak Rupee, it concedes that the public debt
burden increased owing to lower revenue collection and rise in current expenditure attributable to
higher interest payments.
The pandemic gave Pakistan an opportunity to obtain the G-20 debt relief, particularly for its
external debt that has piled up at US$ 107 billion or 38% of the GDP. So far, Pakistan has
managed to obtain a Rapid Financing Initiative loan worth US $1.4 billion from the IMF to meet
its balance-of payments needs to tide over the pandemic. The World Bank and the ADB have also
pledged around US$ 2.5 billion in assistance. Much of this comes from funds that had been
allocated for projects already under execution but were either moving slowly or were stalled, and
are now being diverted for COVID-19 assistance.
Monetary Policy
20.0
Monetary Policy Analysis
15.0
Percentage %
10.0
5.0
-
FY-20
FY-07 FY-08 FY-09 FY-10 FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 FY-18 FY-19
(BE)
Interest rates 9.5 10.8 14.0 12.6 13.5 12.3 9.7 9.8 7.3 5.8 6.0 6.5 12.3 8.0
Inflation CPI 7.8 12.0 17.0 10.1 13.7 11.0 7.4 8.6 4.5 2.9 4.8 4.7 6.8 11.2
Source: Economic Survey 2019-20, Ministry of Finance and SBP
10
Pre-COVID
The data released by the Pakistan Bureau of Statistics shows that the year-on-year inflation in
January 2019 was 5.6%, however, by January 2020 the percentage had spiked up to 14.6%,
recording at the highest inflation in 12 years.
As part of the IMF agreement and to control inflation, the SBP had been steadily raising interest
rates. From 6.5% at the time when the previous government demitted office in May 2018, the
SBP’s benchmark interest rate increased to 13.25% in July 2019. The high interest rate was also
meant to attract ‘hot money’ into Pakistan. Around US$ 3 billion flowed into Pakistan in the form
of purchases of short-term treasury bonds, but it started to flow back as soon as the COVID-19
crisis started to unfold in the West. Despite significant domestic pressure, SBP did not change the
increased policy rate of 13.25% till March 2020 after the worsening Covid-19 impacts
exacerbated the demand pressure for fiscal relief. However, even then, much to the dismay of all
stakeholders, SBP proceeded languidly with the rate cuts issuing four monetary policy statements
from March 2020 through May 2020 eventually settling the policy rate at 8%.
During COVID
After inflation reached a peak of 14.6% in January, May marked the fourth consecutive month of
deceleration. After large month-on-month drops between February and April, the decline in the
growth rate for consumer prices during May was less steep. The disinflationary trend for overall
consumer prices was driven primarily by the pass-through effects of falling global oil prices. Oil
prices are expected to remain weak in the near term, as uncertainty over the timing of a global
recovery persists; for a petroleum importer like Pakistan, this will result in significant cost savings
and downward pressure on prices. Although the economy has been largely re‑opened, aggregate
demand is likely to stay depressed during most of this year, which will have a dampening effect
on prices.
In line with market expectations, Pakistan’s central bank has cut the benchmark interest rate
through several notifications to 8% to help its people, businesses and the economy fight against
the coronavirus pandemic. The interest rate is a tool available with SBP to create a balance
between the rate of inflation and economic activities in the country. The decision to reduce the
policy rate was in line with the view that the inflation outlook has improved further in light of the
recent cut in domestic fuel prices. As a result, inflation could fall closer to the lower end of the
previously announced ranges of 11-12% this fiscal year and 7-9% next fiscal year.
11
Fiscal Policy
Pre-COVID
The ambitious tax target of PKR 5.5 trillion set for the Federal Board of Revenue (FBR) became
impossible to achieve after the sharp fall in economic growth and backlash and protests from the
business community against paying due taxes. In December 2019, at the time of the second
review of the EFF program, Pakistan requested the IMF for a lower tax target of PKR 5.23 trillion.
By February 2020, however, Pakistan was forced to demand a further reduction to PKR 4.8
trillion. This steep fall in revenue targets came before the pandemic, even as the expenditures
remained static, foreshadowing a fiscal deficit that would breach the target set in the 2019–20
budget.
During COVID
Even before COVID-19, economic activity in Pakistan had slowed down to a point that the
government was simply unable to collect its tax target. Post COVID19, the IMF has conceded that
Pakistan will only be able to collect PKR 3.9 trillion in FY20, a shortfall of PKR 1.6 trillion.
Moreover, the latest tax target of PKR 3.9 trillion means that in the last three fiscal years, i.e.
FY18, FY19 and FY20, the revenue collected by Pakistan’s FBR has remained almost identical,
even as expenditure has increased by PKR 2.6 trillion.
Pakistan incurred 7.5% Fiscal Deficit as a percentage of GDP in FY 2020. Moreover, factoring in
the PKR 1.2 trillion stimulus package to combat the COVID-19 crisis would push the fiscal deficit
to double digits in FY20.
For FY21, the IMF has projected a tax revenue of PKR 5.1 trillion, which is PKR 1.2 trillion more
than what the FBR is expected to collect in FY20. However, this target seems unachievable in an
economy expected to grow by only 2%, by IMF’s own calculation.
Fiscal Analysis
16.0
14.0
12.0
Percentage %
10.0
8.0
6.0
4.0
2.0
-
FY-
FY- FY- FY- FY- FY- FY- FY- FY- FY- FY- FY- FY- FY-
20
07 08 09 10 11 12 13 14 15 16 17 18 19
(BE)
Tax Revenue to GDP Ratio 9.6 9.9 9.1 9.9 9.3 10.2 9.8 10.2 11.0 12.4 12.9 12.9 11.8 14.6
Fiscal Deficit as % of GDP 4.1 7.3 5.2 6.2 6.5 8.8 8.2 5.5 5.3 4.6 5.8 6.5 9.1 7.5
12
In conclusion, any economic review at this stage has to be a live document due to the inherent
limitations of gathering economic data during the end of a fiscal year and with the time period of
missing data in the fourth quarter so pervasively affected by an unprecedented global disruption,
the revisions are unlikely to be insignificant. The Government and international experts so far
continue to see the affects impact 2021 primarily with the growth prospects continuing to pre-
Covid estimations from 2022. However, any credibility to these forecasts highly depend upon the
developing situation of the country which has so far not peaked its Covid-19 infection rate.
13
Budget overview 2020-21
The federal budget 2020-21 has been presented in the backdrop of a complex and unprecedented economic
situation. The Minister of Industries and Production has reiterated in this budget that Pakistan must strive for
fiscal stability, measured as stabilization of the debt-to GDP ratio, by moderating spending as a share of GDP
and reducing of the overall spending. However, the budget numbers laid down by the minister seems like a
far cry from striving for economic stability, nor does it outline any significant measure to stimulate growth.
The total outlay of budget 2020-21 is Rs 7,294.9 billion. This size is 11% lower than the size of
budget estimates 2019-20. The government has targeted an unrealistic economic growth of 2.1%
growth in FY 21 which seems to be a distant dream given the negative growth of -0.38% for FY
20 and the uncertainty surrounding the country due to the coronavirus pandemic.
To meet the expenditures, the government has not made any satisfactory commitments to
increase revenue. While it is some economic relief to introduce a Rs. 1 trillion stimulus package
and the fact that no new taxes have been introduced for the upcoming year, it is also concerning
how the government will be able to meet its targets. The Budget does not reflect any concrete
plans made by the government to overcome or even combat the economic pressures mounting
the country. Even though the government has targeted to reduce its expenditure and increase its
revenue, the budget does not reflect any innovative strategies to do so.
In the incoming year, debt servicing and the defence budget comprise around 60% of the
government’s expenditure. This means the government has to revisit its spending policy. In the
last decade, Pakistan spent more than 2.5% of the GDP (3% in the last two years) on defence,
slightly above the world average for the same period. Its spending on health as a percentage of
the GDP was less than 1% for most of the same period, much below the international average of
9%.
All in all, the government failed to demonstrate a proactive and holistic policy approach, one
which would lend confidence to investors and the markets. There was no clear message on how
the government would endeavor to maintain a stable economic environment without any
upheavals. There were no plans on how that the national currency will be defended to protect
people’s wealth and to aid long-term sustainability on development and growth, provide for the
much needed fair allocations on health, education and food security in order to effectively combat
inequality and poverty.
To meet the challenge of the economic downturn, the country must initiate sweeping economic,
political and security reforms, which may require support from international donors and friendly
countries. However, Pakistan will have to strategize the policies towards becoming self-reliant as
most donor countries have to provide huge stimulus packages to kickstart their own economies,
leaving little fiscal space to assist other countries.
14
15
Key highlights of budget FY21

 The size of Public Sector Development Programme (PSDP) for 2020-21 is Rs 1,324 billion.
Out of this, Rs 676 billion has been allocated to provinces.
 To provide relief to the people, there is no new tax in the 2020-21 budget.
 The sales tax rate for big retailers has been decreased from 14 to 12%. The decision was
taken to facilitate them because of the coronavirus outbreak.
 130.55% higher allocation for Hospital Services, in response to the COVID-19 outbreak.
 The government has allocated Rs. 208 billion for the Ehsaas Programme for the alleviation
of poverty and helping the poor.
 The funds for higher education have been earmarked at Rs. 34 billion, while Rs 180 billion
will be spent on energy, food and other sectors.
 Funds worth Rs. 30 billion will be spent on the Naya Pakistan Housing Scheme which aims
to build 10 million houses for the poor in Pakistan.
 Rs. 40 billion have been earmarked for Pakistan Railways
 Rs. 13 billion have been allocated for the federal government-run hospitals in Karachi and
Lahore.
 Pakistan’s Defence budget for 2020-21 is Rs 1.289 trillion (almost 12% higher than last
year’s).
 The government reduced the price of petrol by Rs42 per litre and of diesel by Rs. 47 per
litre.
16
Highlights of Important
Fiscal Proposals
Income tax of Pakistan after November 15, 2019 is

introduced.
1. Simplifying the withholding tax
4. Individuals and AOPs can now opt for
regime, withholding tax on following
taxation of income from house
transactions is no more applicable:
property after deduction of expenses
irrespective of any threshold of
(a) Collection of advance tax on
income. Further, limit of 6% of rent to
education related expenses
claim expenditure including
remitted abroad;
administration and collection charges
is reduced to 2%.
(b) Tax on steel melters and
composite units;
5. Current threshold for disallowance of
any expenditure for a transaction, paid
(c) Tax on local purchase of cooking
or payable under single account head,
oil or vegetable ghee by certain
made other than crossed cheque, bank
persons;
draft or pay order or any other crossed
banking instrument is enhanced from
(d) Advance tax on functions and
Rs.50,000 to Rs.250,000. Further, this
gatherings;
condition will not apply for
expenditures not exceeding Rs.25,000
(e) Advance tax on cable operators
as compared to current limit of
and other electronic media;
Rs.10,000.
(f) Advance tax on dealers,
6. Salary payments other than through
commission agents and arhatis
crossed cheque or direct transfer to
etc;
employee’s bank account is now
allowable deduction upto Rs.25,000 as
(g) Advance tax on insurance
compared to current threshold of
premium;
Rs.15,000.
(h) Advance tax on tobacco.
7. Expenses on account of utility bills in
excess of certain limits and violation of
2. Bifurcation of immoveable property
conditions to be prescribed will not be
into open plot and constructed
allowed as deduction.
property for computation of capital
gains introduced last year is done
8. Any expenditure attributable to sales
away with. Limit of taxable capital
made to persons required to be
gains from disposal of immoveable
registered but not registered under
property is further reduced, whereby
Sales Tax Act, 1990 by an industrial
no tax will be levied in respect of
undertaking, will now be disallowed
capital gain on disposal of property
subject to certain limits.
held for more than 4 years. The tax
rates for capital gains on disposal of
9. Depreciation claim for first year the
immoveable property have also been
asset is brought into use is restricted
reduced by 50%.
to 50%. The persons using an asset in
deriving business income can now
3. Tonnage tax for a Pakistan resident
claim 50% tax depreciation in the year
ship owning company registered with
of disposal.
Securities and Exchange Commission
17
10. Threshold of Rs.2.5 million is return, where such revision is because

introduced for deduction on account of of bona fide omission or misstatement
lease rentals paid to prescribed in the return.
institutions on account of a passenger
transport vehicle not plying for hire. 19. It is now mandatory to obtain
Commissioner’s approval for the
11. Tax credit limit on account of revision of the wealth statement. No
donations to associated persons is such revision is allowed after the expiry
limited to 50% of the limit for of five years from the due date of filing
donations to non-associated persons. of return of income of the concerned
tax year.
12. Tax credit on account of enlistment on
Pakistan Stock Exchange will now be 20. Return filed by the taxpayer shall be
available for only those companies subject to automated adjustment
opting for enlistment by June 30, assessment to rectify computational
2022. errors or wrongly claimed credits,
losses or deductions within six months
13. Additional requirement for submission of filing of return of income.
of a statement of voluntary
contribution and donations is 21. Assessment under section 122(5) can
introduced to claim tax credit under also be amended based on the Audit,
section 100C by non-profit thus, doing away with the requirement
organizations. Restricted Funds that of having definite information.
are not treated as taxable surplus, will
not include amounts donated by 22. Alternate mechanism of agreed
associated persons. assessment by an Oversight Committee
has been introduced to fast track the
14. Foreign profit on debt payable to settlement of assessment proceedings
associates entities will not be allowed with concurrence of the involved
as deduction if it exceeds 15% of the parties. No further assessment
taxable income before interest, proceedings will be conducted in
depreciation and amortization. respect of issues decided by the
Committee.
15. Minimum tax under section 113 will
now be applicable for a permanent 23. Fee for the filing of appeals before the
establishment of a non-resident Commissioner Appeals and Appellate
person. Tribunal is enhanced by 5 times of
existing fee.
16. Every person whose income is subject
to final taxation is required to file 24. It is now mandatory for the
return of income instead of statement Commissioner (Appeals) to specify the
of final taxation. amount upheld in the order before
serving it to the concerned taxpayer.
17. Prescribed persons are now required to
submit taxpayer’s profile in prescribed 25. In order to file appeal before Appellate
manner stating prescribed particulars, Tribunal, taxpayer is required to pay
within prescribed time limit. Failure to 10% of the demand upheld by the
timely file / update profile may attract Commissioner (Appeals).
monetary penalties as well as
exclusion from Active Taxpayers’ List. 26. Revamped Alternate Dispute Resolution
Committee (ADRC) is introduced. The
18. The Commissioner shall be required to taxpayer is allowed to withdraw his
grant the approval for revision of case from any court of law or any
18
appellate authority after decision of 34. The Board is now empowered to make
ADRC. Furthermore, the decision of rules for expeditious processing and
ADRC, once it is conveyed by the automatic payment of refunds through
taxpayer to the tax authorities, the centralized processing system.
same is binding upon the tax
authorities, subject to certain 35. The Commissioner is now empowered
conditions. to gain real time electronic access to
the company documents and records of
27. Recovery measures as provided under the taxpayer.
clauses (a), (ca) and (d) of section
4B(1) of the Sales Tax Act, 1990 shall 36. Automated case selection system will
be applicable for recovery of income tax be introduced to bring transparency in
liabilities. audit selection, setting-out audit
jurisdictions and assignment of tax
28. Tax deductible from payment made to officer to audits. Further, audit
a permanent establishment (PE) of proceedings can be conducted through
non-resident person on account of electronic video links and through real
purchase of goods, services received time electronic access to taxpayer’s
and execution of contract will be records.
minimum tax with the exception of
payment received on account of sale of 37. The Commissioner is empowered to
goods by PE being manufacturer of assess default surcharge for the period
goods. of default against a person liable to
pay tax, where the tax due or a part
29. The rate of withholding tax on payment thereof is unpaid.
against the supply of goods under
cohesive business operation has been 38. Advance tax collection exemption is
reduced from 2.1% to 1.4%. introduced for rickshaw, motorcycle-
rickshaw and any other motor vehicle
30. Payment for toll manufacturing services having engine capacity upto 200cc.
would be subject to withholding tax as
applicable for supply of goods under 39. The Commissioner is now empowered
section 153. to issue exemption certificate from
collection of tax on electricity bills to a
31. Commissioner is required to issue person who has discharged his
exemption certificate to public listed advance income tax liability for the tax
companies within 15 days of date filing year.
of application. Failure to issue
exemption certificate will lead to 40. Advance tax shall be collected in
automatic issuance of certificate on installments, where the payment in
IRIS. respect of a sale by public auction or
auction by a tender is received in
32. Turnover threshold increased from installments.
Rs.50 million to Rs.100 million for
individual and AOP to be treated as 41. Tax deduction from income earned by
withholding agents. a resident person from rental for use
of machinery and equipment will now
33. The minimum turnover threshold of be treated as minimum tax.
Rs.100 million and registration with the
Board have been prescribed for 42. No changes in tax rates for individuals,
qualifying as a withholding agent. AOPs and corporate sector have been
introduced.
19
43. Existing tax rates for capital gains on 15%), if recipient furnished a
disposal of listed securities prescribed certificate to the payer of yield or
till tax year 2020 have been extended profit certifying that the yield or profit
for subsequent years. during the tax year shall upto
Rs.500,000.
44. Collection of advance tax at import
stage will be at the rate of 1% for 52. The rate of deduction of tax under
capital goods, 2% for raw materials section 150A has been increased from
and 5.5% for finished goods 15% to 25% in case the Sukuk-holder
irrespective of status of the importer. is a company.
Twelfth Schedule to the Ordinance is
introduced providing for the list of 53. Reduced rate of withholding tax at 3%
goods under each category. in respect of various services currently
applicable for resident persons is now
45. Minimum tax is abolished for goods on applicable for services rendered by
which tax is required to be collected at permanent establishments of a non-
the rate of 1% or 2% at Customs resident.
stage and are imported by an
industrial undertaking for its own use. 54. Toll manufacturing is now to be
Tax collected at import stage for these treated at par with ‘sale of goods’ for
goods will be adjustable. the purpose of deduction of
withholding tax under section 153.
46. Minimum tax regime is abolished for
the edible oil, packing material and 55. “Engineering services’ is excluded from
plastic raw material and ships and the list of specified services attracting
therefore, the tax collected at import reduced withholding tax rate of 3% in
stage shall be considered as advance the case of a resident person providing
tax. such services.
47. The definition of ‘value of goods’ for 56. The rate of collection of tax on the sale
collection of advance tax at import of property or goods by auction is
stage has been amended. reduced from 10% to 5% of the gross
sale price in case of sale of immovable
48. Prescribed withholding agents are now property.
required to file withholding tax
statement on quarterly basis instead 57. The collection of tax on extraction of
of biannual basis, within 20 days after minerals at 5% of the value of
end of quarter. minerals, applicable for persons not
appearing in the active taxpayers’ list
49. Banks are now required to furnish list is now extended for all persons,
of all persons receiving profit on debt whether or not appearing in the active
and tax deductions thereon during taxpayers’ list.
preceding financial year, as compared
to current threshold of profit on debt 58. Applicability of the enhanced rates of
exceeding Rs 500,000 in preceding withholding tax for payments to
financial year. permanent establishment of a non-
resident person, not appearing in the
50. The Board is now empowered to active taxpayers’ list, is restricted to
receive information from different sale of goods, rendering of or providing
agencies for tax purposes only. services and execution of the contracts.
51. The payer of profit on debt will deduct 59. Enhanced withholding tax rates under
tax at reduced rate of 10% (instead of Tenth Schedule are now not applicable
20
in respect of payments to non-resident 65. Exemption from income tax to the

person for royalty, fee for technical Federal Government Employees
service, insurance premium or re- Housing Authority has been granted for
insurance premium and payment to the tax year 2020 and the following
individual in respect of profit on debt four tax years.
earned from a debt instrument fulfilling
certain conditions. 66. Payment of profit on debt to a non-
resident individual shall be subject to a
60. Withholding of tax on withdrawal of reduced rate of 10%. The tax so
balance from pension fund as specified deducted shall be a final tax on the
under section 156B has been revoked. income of the non-resident derived
However, the withdrawal in excess of from profit on debt.
fifty percent before the retirement age,
or at the time of or after the retirement 67. Reduced rate of 1.5% shall be deducted
age is to be taxed as salary income at on gross amount of payment received
normal rate of tax or, at the option of for supply to utility store corporation of
the eligible person, at average rate of Pakistan upto 30th day of September
tax. Pension fund manager is made 2020 under section 153 of the
responsible for deduction of this tax. Ordinance.
61. Exemption of profit and gains on 68. Modaraba qualifying exemption criteria,
disposal of immovable property to a PM COVID 19 Pandemic Relief Fund-
development REIT has been extended 2020 and Federal Government
to cover period till June 30, 2021. Employees Housing Authority shall be
exempt from provisions of minimum
62. Income of a co-developer as defined in tax under section 113.
Special Economic Zone Rules 2013 shall
be exempt subject to the provision of 69. Importing specified medical supplies
required certification. and pulses are exempted from
collection of advance tax under section
63. The benefit of exemption from tax in 148.
respect of profit on debt relating to
foreign lender or any local bank having 70. Exemption granted to Ehasaas
more than 75% of shareholding of the Emergency Cash Transfer Programme
Government or SBP for a period of 23 from the withholding provision of
years under clause 126AB has been advance tax on brokerage and
extended to Gwadar Marine Services commission payment.
Limited and Gwadar Free Zone
Company. 71. Exemption granted to the Prime
Minister’s COVID-19 Pandemic Relief
64. The benefit of exemption to Gwadar Fund-2020 from the provisions of
Port is provided in clause (126A) and section 151, 231A, 231AA and 236P.
(126AC) for a period of twenty three
years commencing from February 06, 72. The exemption provided vide SRO
2007 and twenty years with effect from 586(I)/91 have been incorporated in
July 01, 2016 respectively. By inserting the Second Schedule.
Gwadar Free Zone, the Bill proposes to
extend the tax concessions and 73. The list of businesses and institutions
exemptions to Gwadar Free Zone as that are excluded from the ambit of
well, which shall be deemed to have section 148 had been extended.
been inserted with effect from June 1,
2020.
21
74. Exemption granted to Hajj Operations

from withholding tax provisions of 82. Dividend income paid to a person by a
payments to non-residents. builder or developer, being a company
out of the profits and gains derived
75. Exemption from collection of tax under from a project, shall be exempt from
sections 231A, 231AA and 236P in income tax and tax withholding
respect of foreign remittances credited obligations under section 150.
to Pak Rupee Account is introduced.
83. Reduced rate of advance tax of 5% has
76. Exemption from enhanced deduction of been introduced for sales of immovable
tax from dividend payments to non- property through auction.
resident persons, not appearing in
Active Tax Payers List has been 84. Any tax payable on income, profits or
granted. gains of project of low cost housing
under NAYA Pakistan Housing &
77. Exemption is provided from provisions Development Authority or EHSAAS
of section 236P to non-resident rupee programme shall be reduced by 90%.
account repatriable or a foreign
currency account in Pakistan. 85. Capital gains derived by resident
individual on residential property not
Amendments introduced through Tax exceeding 500 sq. yards in case of
Laws (Amendment) Ordinance, 2020, house or 4000 sq. feet in-case of flat
now covered under the Finance Bill shall be exempt subject to certain
conditions.
78. The definition of Industrial Undertaking
has been amended to include 86. No questions to be asked under section
Construction sector, which will enable 111 of the Ordinance from the
the sector to avail tax benefits available investors, regarding source of funds,
to an industrial undertaking. making capital investment in new
construction projects in the form of
79. An optional ‘Fixed tax regime’ from tax money or land, either as an individual,
year 2020 and onwards for eligible as an association of persons or a
builders and developers on a project by company, subject to certain conditions.
project basis has been introduced on
the income, profits and gains derived 87. First purchaser of building or unit of
from the sale of buildings or sale of building shall also be immune from the
plots, from a new or an incomplete provisions of section 111 where subject
existing project to be completed by the to fulfilment of other conditions, the
30th day of September, 2022. payment is routed through crossed
banking instrument for both new and
80. A builder or developer opting for fixed existing incomplete projects.
tax regime including profit and gains 88. No questions shall be asked from the
accruing from a low cost housing purchaser of plot for building
project shall not be allowed to construction where the purchase, the
incorporate profits and gains accruing payment thereof and commencement
from such projects in excess of ten of construction has been made on or
times of the tax paid under this regime. before December 31, 2020 subject to
construction completion by September
81. Eligible Developers and Builders shall 30, 2022 and subject to registration of
be exempted from withholding taxes on such purchaser with FBR on IRIS portal.
purchase of building materials under
section 153, subject to certain 89. Eleventh Schedule to the Income Tax
exclusions. Ordinance, 2001 has been introduced
22
to prescribe the mechanism for unregistered persons, the invoices of

eligibility of fixed tax regime, rates of which not bearing NIC number or NTN,
taxes, registration and certification has been extended to include
requirements. services’ input tax.
Sales Tax 8. Provision identical to Section 124A of

the Income Tax Ordinance, 2001
1. Criteria of Active Taxpayers’ List binding the Commissioner to follow the
regarding filing of two consecutive decision of High Court or Tribunal in
income tax withholding statements case of question of law, has been
streamlined with proposed statements proposed to be introduced in sales tax
filing requirement on quarterly basis. law.
2. Definition of output tax is proposed to 9. Threshold for registered retailers

be rectified to replace sales tax making taxable supplies to un-
charged on provincial services with registered persons, whose name,
sales tax charged under the Islamabad address and NIC or NTN are to be
Capital Territory (Tax on Services) included in the sales tax invoice, has
Ordinance, 2001. been proposed to be enhanced from
Rs.50,000 to Rs.100,000.
3. Definition of value of supply of
electricity under section 2(46)(h) 10. Commissioner to be granted power to
amended to include WAPDA along with conduct audit proceedings
independent power producer to restore electronically through means of video
the value of supply as per the repealed links or any other facility as prescribed
Sales Tax Special Procedure Rules, by the Board.
2007 which was restricted to the
extent of amount received on account 11. Returns are to be ‘complete’ along
of energy purchase price. with being ‘true’ and ‘correct’.
4. Value of supply of used vehicles on 12. Time limit for integration of business
which sales tax has already been paid of registered person with the Board
at the time of import/manufacture has without penalty under clause 25 of
been defined to be the difference section 33, has been proposed to be
between the sale and purchase price. reduced from 6 months to 2 months.
5. Section 3(7) to be amended to include 13. Failure to provide real-time access by

recipient of services as withholding the registered person to the Board for
agent in order to make it consistent information and databases has been
with the rules for withholding sales proposed to be subject to fine up to
tax. Rs.25,000 for first default and
Rs.50,000 for each subsequent
6. The Board is to be empowered to default.
impose restrictions on admissibility of
input tax on wastage of material in 14. Officer, on behalf of the Board or the
respect of goods or classes of goods. Commissioner, will be authorized to
access real-time electronic data
7. Disallowance in respect of input tax belonging to any registered persons, a
attributable to supplies made to person liable to be registered or
23
person whose business activities are raw material and intermediary good
covered under the relevant provisions for in-house consumption, has been
of the Act. proposed to be restored.
15. Documentary material or evidence not

provided before the Officer Inland Federal Excise Duty
Revenue is not to be taken into
1. The Board is now empowered to
consideration by the Commissioner
restrict adjustment of input FED on
(Appeals) with an exception where the
materials wastages.
appellant was prevented from
sufficient cause from producing such
2. The judgment of High Court and
material or evidence before the Officer
Appellate Tribunal deciding a question
Inland Revenue.
of law in case of a registered person
will now be binding on Commissioner
16. ‘Registered manufacturer’, making
by virtue of insertion of new proposed
taxable supplies of value exceeding Rs.
section 14C.
100 million in the financial year and
value exceeding Rs. 10 million per
3. Un-manufactured tobacco now shall
month, is to be substituted with
not be liable to seizure in terms of
‘registered persons’ in order to restrict
proposed amendment in section 26(1).
input tax adjustment to every
Powers of custom officer have also
registered person making supplies to
been enhanced to seize all dutiable
unregistered persons in excess of
goods besides existing specified goods.
prescribed threshold.
4. The Board is to keep the parameters

17. Withholding provisions currently
confidential with regard to selection of
applicable in respect of payments
audit through random parametric
made to unregistered suppliers, now
computerized balloting.
proposed to be applicable on payments
made to registered persons not falling
5. Registered persons can now be
in ATL.
selected for audit every year instead of
once in every 3 years as per current
18. The existing sales tax rate for
provisions.
organized retail sector integrated
online with FBR through point of sales
6. Notices and documents which are
system, is proposed to reduce from
currently served electronically only to
14% to 12%.
public and private limited companies
will now be served to every registered
19. Fixed sales tax of Potassium Chlorate
person.
has been proposed to increase from
Rs. 70 to Rs. 80 per kg.
7. FED on caffeinated energy drinks is to
be levied at 25% of the retail price.
20. Sales tax on import of dietetic foods
for children suffering from inherent
8. FED on e-liquids for electric cigarette
metabolic disorder is proposed to be
kits is to be levied at Rs.10 per ml.
exempt.
21. Exemption from value addition tax of

3% for manufacturers on import of
24
9. FED on filter rod for cigarettes is

proposed to be enhanced from Rs. 4. Current open ended period of
0.75/filter rod to Rs. 1/per filter rod. detention/ confiscation of goods by the
authorized officer has been proposed to
10. FED on cigars, cheroots, cigarillos and be restricted to 15 days with powers to
cigarettes of tobacco and tobacco Chief Collector and Director General to
extend such period for further 15 days.
substitutes is proposed to be enhanced
from 65% of retail price to 100% of
5. Currently cumulative amount of duties
retail price. and taxes on a GD are not demanded
under the Customs law, now no amount
11. FED on double cabin (4x4) pick-up of duty or taxes shall be demanded if
vehicles is to be levied at the rate of value of the imported goods does not
25% ad val. and 7.5% ad val. for exceed Rs.5,000.
imported and locally manufactured
vehicles respectively. 6. Goods imported in new condition shall
not be allowed for scrapping and
12. FED on Portland cement, aluminous mutilation at the request of owner and
cement, slag cement, super sulphate are proposed to be classified and
chargeable to duty and taxes as new
cement and similar hydraulic cements,
goods.
whether or not colored or in the form of
clinkers is proposed to be reduced from
7. The scope of fiscal fraud has been
Rs. 2/kg to Rs. 1.75/kg in the wake of proposed to be broadened to include
worsening affect of COVID-19 and declaration of value of goods by a
reduction in production of cement. person which is significantly higher or
lower than the actual price.
13. As per salient features the Board is
empowered to fix minimum production 8. Customs officer to issue a notice to the
on the basis of single or more inputs importer, through Customs
and for fixation of wastage. Computerized System in case of
reassessment of goods declaration
under section 80, for providing the
The Customs Act, 1969 importer an opportunity of being heard,
if so desired by the importer.
1. The definition of ‘Advance Ruling’ has
been revised and the applicant has 9. The time period for deciding show
been allowed to obtain a binding cause notice by customs officer in
‘Advance Ruling’ in respect of certain respect of cases involving smuggling
questions including classification of has been reduced to 30 days from
goods, determination of origin of goods current 90 days.
etc.
10. The burden of proof now also lies on
2. The scope of the term ‘smuggle’ has person allegedly committed offence
been enhanced to also include those under Customs Act to prove that any
being concerned in any ways in property owned by him in his name or
transporting, keeping and concealing someone else’s name was not acquired
such goods. from the proceeds of such crime.
3. Related penalties are proposed to be 11. The time period for deciding appeal by
more rationalized with reference to Appellate Tribunal has been reduced
threshold of the value of smuggled from existing 60 to 30 days in respect
goods. of cases involving smuggling.
25
interlining/buckram, wire rod and

12. Residual amount from the sale food packaging industry.
proceeds of goods sold through auction,
tender etc. (other than confiscated  Exemption of additional
goods) has been restricted to the custom duty – on import of raw
extent of declared value of goods to materials by manufacturers of
discourage mis-declaration of goods. Wire rod and food packaging
industry.
13. Legal cover has been provided to the
benefits granted to the Authorized  Exemption of regulatory duty –
Economic Operations (AEOs), on import of raw materials by
prescribed under the relevant rules and manufacturers of Wire rod and
to fulfill Pakistan’s category-C import of machinery, equipment
commitment under WTO, Trade and other project related items for
Facilitation Agreement (TFA) by setting up of internet cable landing
inserting a new sub-section (3) under stations
section 212A.
18. The exemption of custom duty,
14. The additional customs duty of 2% regulatory duty and additional custom
applicable on import of goods falling duty granted on import of 61 COVID-19
under tariff slab of 0% under SRO related medical items by virtue of SRO
670(I)/2019 is proposed to be 235(I)/ 2020 which is due to expire on
exempted as per salient features. June 20, 2020, is proposed to be
extended as per salient features due to
15. Tariff has been rationalized by reducing the continuation of pandemic.
customs duty on different tariff lines
from 11% to 3% and 0%. 19. As per salient features 2% additional
custom duty on import of edible oils
16. Regulatory duty on Hot Rolled Coils and oil seeds is proposed to be
(HRC) of Iron and steel is proposed to exempted under Prime Minister’s
be reduced from 12.5% and 17.5% to COVID19 relief package.
6% and 11% as per salient features.
20. The Bill seeks to exempt duties on
17. Concessional rate or exemption on import of dietetic foods for children with
imports are being allowed to various inherited metabolic disorders,
local industries, subject to the IOCO diagnostic kits for cancer & coronavirus,
quota determination, through the life saving drug Megalumine Antimonite
following proposed measures: and Ready to use Supplementary Foods
(RUSF).
 Exemption of custom duty – on
import of raw materials by 21. The exemption of customs duties on
manufacturers of Butyl Acetate, imports for setting up new industries in
syringes & saline infusion sets, erstwhile FATA area which was
buttons, beverages can available till year 2020 has been
manufacturers and import of proposed for extension up to 2023.
machinery, equipment and other
project related items for setting up 22. The scope of concessions available to
of internet cable landing stations. Special Economic Zones has been
enhanced for co-developers to avail
 Reduction of custom duty – on same incentives and exemptions as
import of raw material by available to the Developer subject to
manufacturers of condition that the Developer of the SEZ
relinquishes its rights to the incentives
26
and exemptions in favour of the Co-

developer.
23. As per salient features, reduction in

regulatory duty is proposed for the
smuggling prone items to bring these
items under legal imports and several
industrial inputs to reduce cost of doing
business.
24. To provide protection to domestic

industry, Regulatory Duty (RD) has
been proposed to be increased/ levied
on import of such items which are also
locally manufactured.
25. Salient features indicate reduction in

rate of additional customs duty on Palm
Stearin for incentivizing soap industry.
27
Budget 2020-21 | Highlights & Comments
Income Tax Ordinance, 2001
1. Integrated enterprise Finance Act, 2018, necessary amendments

under sub-section 2 to the Ordinance
[Sections 2] inadvertently were not made.
“Integrated enterprise” means a person

integrated with the Board through approved 3. Tax on shipping of a resident
fiscal electronic device and software, and person [Sections 7A]
who fulfills obligations and requirements for
integration as may be prescribed. The Bill proposes to introduce new clause,
whereby Pakistan resident shipping company
“IRIS” means a web based computer registered with the Securities and Exchange
programme for operation and management Commission of Pakistan after the November
of Inland Revenue taxes administered by the 15th, 2019 and having its own sea worthy
Board. vessel registered under Pakistan Flag shall
pay tonnage tax of an amount equivalent to
“Local Government” shall have the same US 75 cent per ton of gross registered
meaning for respective provisions and tonnage per annum.
Islamabad Capital Territory as contained in
the Baluchistan Local Government Act, 2010 The Bill further proposes to extend the
(V of 2010), the Khyber Pakhtunkhwa Local existing presumptive tax regime for resident
Government Act, 2013 (XXVIII of 2013), the shipping companies from June 30, 2020 to
Sindh Local Government Act, 2013 (XLII of June 30, 2023.
2013), the Islamabad Capital Territory Local
Government Act, 2015 (X of 2015) and the 4. Deductions in Computing
Punjab Local Government Act, 2019 (XIII of
2019). Income Chargeable Under
the head “Income from
2. Tax on certain payments to Property”
non-residents [Section 15A]
[Sections 6]
Presently, expenses incurred to the extent of
As per existing provision, fee for offshore 6% of rent chargeable wholly and
digital services is subject to tax under exclusively for deriving rent are admissible
section 6 to the Ordinance at the rate of as deduction against rental income. The Bill
15% as prescribed under the Division IV of propose to reduce the limit from 6% to 2%.
Part I of the First Schedule.
We do not see any rationale for further
However, sub section 2 of section 6 of the reducing such limit, which would deprive a
Ordinance, which provides that payment is taxpayer for claiming a legitimate expense
liable to tax on the gross amount does not incurred solely for deriving taxable income
cover fee for offshore digital services. The and would ultimately lead to higher tax
Bill proposes to include fee for offshore payable by the taxpayer. It may encourage
digital services under sub-section 2. taxpayers to underreport their taxable
income on the grounds that their legitimate
The above insertion is an editorial change as expenses are disallowed.
the fee for offshore digital services is taxable
on the gross amount under the Final Tax Presently, income from property derived by
Regime as per section 8 of the Ordinance. an individual or an Association of Persons is
However, at the time of insertion of “fee for subject to tax at the specified slab rates and
offshore digital services” through the treated as a separate block of income.
However, individuals or AOPs whose income
28
from property exceeds Rs 4 million per  Clause (q), an expense claimed by

annum can opt to claim deductions under an industrial undertaking against the
section 15A of the Ordinance and pay tax at sales made to the person who is
normal rates specified in Division I of Part I required to register under Sales Tax
of the First Schedule. Act, 1990 but not registered. The
expense under the said head shall be
The Bill proposes to abolish such limit of Rs. disallowed as per following formula.
4 million and therefore an individual or AOP
can now opt for claiming tax deductions and (A/B) x C
pay tax at normal rates irrespective of
amount of income derived from property. where—
5. Deductions not allowed A is the total amount of

deductions claimed under
[Section 21] this Part;
The threshold limit for disallowance of B is the turnover for the tax
expenditure for a transaction, paid or year; and
payable under single account head, made
other than crossed cheque, bank draft or C is the total amount of sales
pay order or any other crossed banking exclusive of sales tax and
instrument is enhanced from Rs 50,000 to federal excise duty to
Rs 250,000. Further, this condition will not persons required to be
apply for expenditures not exceeding Rs registered but not registered
25,000 as compared to current limit of Rs under the Sales Tax Act,
10,000. 1990 where sales equal or
exceed rupees one hundred
The disallowance threshold for salary million per person.
payments if paid other than by a crossed
bank draft or crossed pay order or any other Rupees in
crossed banking instrument is enhanced Illustrations 1
Millions
from Rs 10,000 to Rs 25,000.
A 1,000
This is long due amendment considering the
inflationary trend in the country and will B 1,500
facilitate the industry to make routine C 500
nominal payments in cash.
Disallowance Limit (20% of A) 200
The Bill also proposes to insert following new
clauses: Disallowance as per formula 333
 Clause (p), whereby any expenditure Hence, the total disallowance shall be Rs
of utility bill in excess of limits and in 200 million, as the disallowance calculated
violation of condition as may be as per formula of Rs 333 million exceeds
prescribed shall be disallowed. 20% of the total deductions claimed.
The amendment does not prescribe

any conditions under the proposed
clause, therefore, it appears necessary
guideline would be issued through
separate notification under the Rules.
29
Rupees in The Bill proposes to restrict the claim of

Illustrations 2
Millions depreciation to 50% in the year asset is
brought to use in business, for the assets
used in person’s business for the first time in
A 1,000 a tax year commencing on or after July 1,
B 1,500 2020. The remaining depreciation would be
allowed over the useful life of assets and at
C 150
prescribed rates. This would affect the cash
flows of the investors in the first year due to
Disallowance Limit(20% of A) 200
increase in tax liability attributed to
restricted tax depreciation.
Disallowance as per formula 100
Hence, the total disallowance under the
The Bill also proposes to allow claim of tax
section shall be Rs 100 million
depreciation in the year of disposal equal to
50% of tax depreciation computed using
The disallowance shall not exceed 20% of
applicable rates given in the Third Schedule.
total deductions claimed under the said
head:
7. Profit on debt, financial cost
Thus doing business with unregistered and lease payments [Section
persons would be more costly to the
Companies thereby forcing Companies to
28]
make sales to registered person and to
persuade their existing customers to obtain Under existing law, a deduction is allowed
for any lease rental incurred by a person in
sales tax registration. Further, the wording
the tax year to a scheduled bank, financial
in the Bill suggests that 20% disallowance
institution, an approved modaraba, an
limit is applicable for all the expenses
approved leasing company or a Special
covered under Part IV of Chapter III of the
Purpose Vehicle on behalf of the Originator
Income Tax Ordinance, 2001, including
depreciation, amortization, profit on debt, for an asset used by the person for the
etc. Such huge disallowance of expense purposes of business. The Bill proposes to
limit the claim of lease rentals upto Rs 2.5
would adversely affect the business in an
million on account of a passenger transport
environment where substantial economic
vehicle not plying for hire.
activity is carried on by undocumented
sector. The government needs to revisit
sudden introduction of harsh provisions 8. Capital Gains
without creating conducive atmosphere for [Section 37 (3A) & (3B)]
incentivizing businesses to get registered.
Such provisions are also likely to attract Through Finance Act, 2019 taxability on
agitation from the business community. account of gain arising on disposal of open
plot as well as constructed property was
6. Depreciation changed depending on holding period and
[Section 22] structure as under:
Under the existing provisions of law, full S.No. Holding Holding Gain
year’s tax depreciation is allowed as period in period in case
deduction for computing taxable income, in case of of constructed
the year of purchase, even when the asset is open plot property
used for in person’s business for a single 1. Upto one Upto one year 100%
day. However, no tax depreciation is allowed year
in the year of disposal.
2. Exceeding Exceeding 75%
one year one year and
30
S.No. Holding Holding Gain S. Amount of Rate of tax

period in period in case No. gain Existing Proposed
case of of constructed 1. Where the
open plot property gain does not
5% 2.5%
and upto upto four exceed Rs.5
eight years years million
2. Where the
3. Exceeding Exceeding 0% gain exceeds
eight years four years Rs.5 million
10% 5%
but does not
In order to incentivize real estate sector, the exceed Rs.10
Bill proposes to abolish such amendment by million
introducing taxability of capital gains on 3. Where the 15% 7.5%
disposal of all kinds of immoveable property gain exceeds
as under: Rs.10 million
but does not
S.No. Holding Period Taxable exceed Rs.15
Capital million
Gains 4. Where the 20% 10%
1 Where the holding period 100% gain exceeds
of an immoveable gains Rs.15 million
property does not exceed
one year
9. Charitable donations
2 Where the holding period 75% of
of an immoveable the gains [Section 61]
property exceeds one
year but does not exceed Under the existing provisions of law, a
two years person is entitled to tax credit on account of
3 Where the holding period 50% of charitable donation paid in cash or in kind.
of an immoveable the gains Currently such credit is allowed to the extent
property exceeds two of lesser of:
years but does not
exceed three years (a) Total amount donated in the year,
4 Where the holding period 25% of including fair market value of any
of an immoveable the gains property given; or
property exceeds three
years but does not (b) Where the person:
exceed four years
5 Where the holding period 0% (i) an individual or association of
of an immoveable person, 30% of the taxable
property exceeds four income of the person the year; or
years
(ii) a company, 20% of the taxable
income of the person the year.
The Bill also seeks to reduce the tax rates by
50% on capital gains arising on disposal of The Bill proposes to reduce the limit of credit
immovable property. This is in line with the by 50% in case of donations made to an
Government’s vision to promote construction associate as under:
industry and to provide stimulus for the
growth in economy as construction sector (a) Total amount donated in the year,
provide employment to a number of sub- including fair market value of any
sectors. property given; or
31
(b) Where the person: 12. Restriction on deduction of

(i) an individual or association of person, profit on debt payable to
15% of the taxable income of the associated enterprise
person for the year; or [Section 106A]
(ii) a company, 10% of the taxable income Under existing law, section 106 provides for
of the person for the year. disallowance of profit on debt for a foreign
controlled resident company (other than a
10. Tax Credit for enlistment financial institution or a banking company or
[Section 65C] a branch of foreign company operating in
Pakistan), where foreign debt to foreign
Under existing law, tax credit is allowed for a equity ratio is in excess of three to one at
company opting for enlistment on Pakistan any time during a tax year.
Stock exchange for the year of enlistment
and following three years, without stating The Bill now proposes to introduce
any time limit of enlistment. The Bill disallowance of profit on debt payable to
proposes to restrict the time limit for foreign affiliates which exceeds 15% of the
enlistment on or before June 30, 2022. taxable income before interest, depreciation
and amortization. It appears that such
disallowance is in addition to disallowance
11. Tax Credit for Certain under section 106, however, no guidance is
Persons [Section 100C] provided as to any adjustment of
disallowance under section 106 from the
The Bill propose to make following changes: disallowance under this newly introduced
section. Sub-section (4) of the Section 106A
 Additional condition of filing of appears to cater such adjustment, however,
statement of voluntary contributions the drafting is incomplete, which needs to be
and donations received in the rectified in the Finance Act.
immediately preceding tax year in the
prescribed form and manner to claim Disallowance under this section is applicable
tax credit under section 100C of the for foreign controlled resident company (as
Ordinance. defined under section 106), but does not
apply to an insurance company or a banking
 Surplus funds of trusts and welfare company. This section is not applicable
institutions will also be taxed. where total foreign profit on debt is less than
Rs. 10 million in a tax year. This section is
Currently Surplus funds includes funds which applicable in respect of foreign profit on debt
are not part of restricted funds. Restricted accrued with effect from July 1, 2020 even if
funds have been defined to mean any fund debts were contracted before July 1, 2020.
received by the organization but could not
be spent and treated revenue during the In case, where foreign profit on debt cannot
year due to any obligations placed by the be deducted due to this provision for a tax
donor. The Bill now proposes that such year, the excessive profit on debt shall be
donor should not be an associate of the added to foreign profit on debt for following
organization. Accordingly, any funds tax year and shall be treated as deduction
received from associated entities and could for that following year. If there is no foreign
not be spent due to obligations placed by the profit on debt for following tax year, such
associated donor will not be treated as excessive profit on debt not claimed as
restricted fund and therefore will be treated deduction in previous year shall be treated
as taxable surplus fund. as deduction for that subsequent year and
so on for three tax years.
32
person, therefore, the same should be liable

"Foreign profit on debt” means interest paid to tax under head of Income from Business.
or payable to a non-resident person or an Consequent to proposed amendments, the
associate of the foreign-controlled resident relevant expenses incurred would then be
company and includes- allowable.
(i) interest on all forms of debt; However, the amount credited, value of the
(ii) payments made which are investment, money, value of the article, or
economically equivalent to interest; amount of expenditure shall still be included
(iii) expenses incurred in connection with in the person’s income chargeable to tax
the raising of finance; under the head "Income from Other
(iv) payments under profit participating Sources” to the extent it is not adequately
loans; explained.
(v) imputed interest on instruments such
as convertible bonds and zero coupon 14. Minimum tax on the income
bonds;
(vi) amounts under alternative financing of certain persons [Section
arrangements such as islamic finance; 113]
(vii) the finance cost element of finance
lease payments; Currently minimum tax under section 113 is
(viii) capitalized interest included in the not applicable to permanent establishment
balance sheet value of related asset, or of a non-resident company. The Bill
the amortisation of capitalised interest; proposes to enhance the scope of section
(ix) amounts measured by reference to a 113 to such permanent establishment to
funding return under transfer pricing streamline the provisions with resident
rules; persons.
(x) where applicable, notional interest
amounts under derivative instruments 15. Return of Income for Persons
or hedging arrangements related to an
entity's borrowings; subject to Final Taxation
(xi) certain foreign exchange gains and [Section 114 &
losses on borrowings and instruments 115(4)(4A)(5)(6)]
connected with the raising of finance;
(xii) guarantee fees with respect to Pursuant to section 115(4), persons whose
financing arrangements; and income is subject to final tax under the
(xiii) arrangement fee and similar cost Ordinance are required to submit a
related to the borrowing funds.” “Statement of Final Taxation” instead of the
normal return of income. In order to
13. Unexplained Income streamline the return filing process, this
[Section 111] statement is proposed to be replaced with
the normal return of income to be filed
As per existing law, suppressed amount of under section 114.
production, sales or any amount chargeable
to tax or of any item of receipt liable to tax In this regard, FBR may prescribe separate
shall be included in the person’s income return forms for different classes of income
chargeable to tax under head “Income from or persons including persons subject to final
Other Sources” to the extent it is not taxation.
adequately explained.
In accordance with the above amendment,
The Bill proposes to tax such amount under all references to section 115(4) is proposed
head of “Income from Business”. Since, such to be deleted in other sections of the
items pertain to business activities of a Ordinance.
33
Subsequently, any change in information

16. Revision of Return provided in the profile shall be updated
within 90 days of the change.
[Section 114(6)]
Furthermore, any non-compliance of the
The Bill proposes that the Commissioner above will attract monetary penalties and
shall be required to grant the approval for will lead to non-inclusion of the taxpayer’s
revision of return, where such revision is name in the ATL.
because of bona fide omission or
misstatement in the return.
However, the Bill has not explained or 18. Wealth Statement
defined what is to be treated as a bona fide [Section 116]
omission or misstatement. This may again
generate more disputes. Presently, revision of wealth statement is
allowed without a requirement to obtain
17. Taxpayer’s Profile approval of the Commissioner, as is
otherwise required for revision of return of
[Section 114A] income. It is now proposed that such
revision of wealth statement shall be
Presently, every person filing return of contingent upon the similar approval of the
income is required to furnish information Commissioner, which shall be granted, in
about their business operations including case of bona fide omission or misstatement.
bank accounts, utilities etc. on annual basis. However, no such revision is allowed after
In order to simplify the return filing process the expiry of five years from the due date of
and avoid repetition, taxpayer is now filing of return of return of concerned tax
required to submit taxpayer’s profile once, year.
instead of provision of information along
with the return of income on annual basis.
19. Assessments
The taxpayer’s profile shall contain [Section 120 (1) & (2A)]
prescribed information regarding bank
accounts, utility connections, business Currently, where a taxpayer has furnished a
operation including business type, return of income, the Commissioner shall be
manufacturing and storage facilities or retail treated to have made an assessment of
outlets operated or leased business premises taxable income and tax due thereon equal to
by the taxpayer etc. The profile is to be amounts specified in the return. Further,
submitted electronically in the prescribed such return shall be taken for all purposes to
format and to be accompanied by such be an assessment order issued by the
documents and annexures as may be Commissioner.
prescribed by the Board. The profile shall be
signed by the taxpayer or his authorized In order to ensure accuracy of the returns
representative. filed by taxpayers, automated adjusted
assessment mechanism is being proposed.
This profile is required to be submitted: Under this mechanism, the return filed shall
be subject to an automatic review and
 latest by December 31, 2020, where adjustment within six months of filing of
the person has obtained registration return for rectification of any numerical
under section 181 of the Ordinance errors or incorrect claims, losses, deductible
before September 30, 2020, or allowances or tax credit, or wrongful carry
forward of losses that are apparent from the
 in any other case, within 90 days of return of income. In this regard, a notice
registration. shall be issued to the taxpayer before the
adjustments are effected in the return,
34
which is required to be responded within 30

days of the date of notice. 20. Amendment of Assessment
Further, where no such adjustments are based on Audit [Section 122]
made within the specified period of six
months, the return filed shall be deemed to Presently, the assessment order can only be
have been automatically adjusted on the day amended based on the definite information
the return is filed and automatic intimation acquired from audit or otherwise. The Bill
through IRIS shall be forwarded to the proposes to introduce enabling provisions in
taxpayer. section 122 of the Ordinance, whereby
assessment under section 122(5) can also
The existing provisions as to deemed be amended based on the Audit thus doing
assessment order will now apply to adjusted away with the requirement of having definite
return rather than the original return filed by information. Apparently this amendment is
the taxpayer. to counter the plethora of decisions of the
courts on the necessity of “definite
For the purposes of this section, the information” for amending a completed
following definition are proposed to be assessment. Thus the Tax Officer would now
introduced vide Finance Bill 2021: be at liberty to amend an assessment
without having to prove that such
“Arithmetical Error” includes any wrong or amendment is being made on the basis of
incorrect calculation of tax payable including definite information available with him
any minimum or final tax payable
21. Agreed assessment in certain
“An incorrect claim apparent from any cases [Section 122D]
information in the return" shall mean a
claim, based on an entry, in the return The Bill proposes to introduce a new
mechanism under section 122D for
i. of an item, which is inconsistent with settlement of assessment proceedings. A
another entry of the same or some taxpayer, in response to notice under
other item in such return; section 122(9), if intends to settle case, may
file an offer of settlement before the
ii. regarding any tax payment which is assessment oversight committee in
not verified from the collection prescribed form, in addition to filing reply
system; or with the Commissioner. The objective of
such settlement is to conclude the
iii. in respect of a deduction, where assessment proceedings within a shorter
such deduction exceeds specified time period with concurrence of both the
statutory limit which may have been parties.
expressed as monetary amount or
percentage or ratio or fraction. The assessment oversight committee for the
said purpose will comprise of Chief
The amended provision does not cater for Commissioner Inland Revenue and
situations where the tax payers have to Additional Commissioner Inland Revenue.
make adjustments in the return due to
inability of the online return form to cater to The Committee after receiving settlement
unique circumstances of the business of the offer from taxpayer will call record and after
taxpayer. Application of this automated providing necessary opportunity may decide
adjustment mechanism may create problems to accept or modify the offer of the taxpayer
for the tax payers unless the online return is and communicate the same to the taxpayer.
amended to cater for all situations that a tax If the taxpayer is satisfied with Committee’s
payer may face in line with the provisions of decision, he shall deposit the tax payable
law.
35
alongwith any penalty and default surcharge

as per Committee’s decision. The 23. Decision in appeal
Commissioner will amend the assessment as
per Committee’s decision after receipt of [Section 129]
payment of tax demand from the taxpayer.
Currently, there is no specific requirement to
The taxpayer will waive the right to prefer include the amount of tax demand upheld in
the appeal against such assessment. No the Order of the Commissioner Appeals while
further assessment proceedings will be deciding a case. The Bill proposes to bound
conducted in respect of issues decided by the Commissioner Appeals to specify the
the Committee, unless the taxpayer fails to upheld amount in his order before serving it
deposit the tax. on taxpayer or Commissioner.
Where the Committee is unable to arrive at 24. Appeal to Appellate Tribunal

consensus or where the taxpayer is not [Section 131]
satisfied with the Committee’s decision, the
matter will be referred back to A new requirement is proposed in the Bill for
Commissioner for decision on the basis of filing of appeal before the Appellate Tribunal
reply submitted by the taxpayer. for challenging the order of Commissioner
Appeals. Proof of payment by the taxpayer
This section however shall not apply in cases of ten percent of the amount of tax upheld
involving concealment of income or where by the Commissioner Appeals is required to
interpretation of question of law is involved be submitted along with the appeal
having effect on other cases. documents. Currently, no such payment
requirement exists for filing of appeal before
22. Appeal to the Commissioner the appellate tribunal. No appeal shall be
(Appeals) [Section 127] admitted unless 10% of amount upheld by
the Commissioner Appeals is deposited. The
The Bill proposes to provide opportunity to proposed amendment is against the principle
file an appeal before the Commissioner of natural justice and would create cash flow
Appeals against the automated adjustment problems for the tax payers considering the
in the return of income introduced vide illegal tax demands that are generally
section 120(2A). created through assessment proceedings
Further, the Bill also proposes the following and are mostly upheld at Commissioner
revision in fee for filing of appeal before the Appeal’s level.
Commissioner Appeals:
Further, fee for filing of appeal has also been
revised from Rs 2,000 to Rs 5,000 in case of
Appeal against assessment order
a company and Rs 2,500 in case of an
Existing Proposed individual or AOP.
(Rs) (Rs)
Company 1,000 5,000 25. Alternate Dispute Resolution
Other than Co. 1,000 2,500 [Section 134A]
The Bill proposes to modify the Alternate
Appeal against other cases Dispute Resolution process, earlier
Existing Proposed revamped vide Finance Act, 2018 for making
(Rs) (Rs) it further amicable for the taxpayers.
Company 1,000 5,000 The Bill proposes that in Alternate Dispute

Other than Co. 200 1,000 Resolution process an aggrieved person may
apply to the Board for the appointment of a
36
committee for the resolution of any hardship within 60 days of the service of decision of
or dispute mentioned in detail in the the Committee upon the aggrieved person,
application, which is under litigation in any otherwise decision of the Committee shall
court of law or an appellate authority. This is not be binding on the Commissioner.
not applicable in case where criminal The Committee will be dissolved by the
proceedings have been initiated or where Board if it fails to decide the dispute within
interpretation of question of law having the period of one hundred and twenty days
effect on identical cases is involved having by an order in writing and the matter will be
effect on other cases. decided by the court of law or the appellate
authority where the dispute was pending.
The Board, after examination of application
will appoint a committee within sixty days of The Board is required to communicate the
receipt of application. order of dissolution to the court of law or the
appellate authority and the Commissioner.
The Bill also proposes change in the The aggrieved person, on receipt of the
composition of the Alternate Dispute order of dissolution, shall communicate it to
Resolution Committee (the Committee). It the court of law or the appellate authority,
will now comprise of Chief Commissioner where the dispute is pending.
Inland Revenue, having jurisdiction over the The aggrieved person may make the
case and two persons from a panel notified payment of income tax and other taxes as
by the Board comprising of chartered decided by the Committee and all decisions
accountants, cost and management and orders made or passed shall stand
accountants, advocates, having minimum of modified to that extent.
ten years’ experience in the field of taxation The Board will have the power to prescribe
and reputable businessmen. the amount to be paid as remuneration for
Under the proposed Bill, the Board is also the services of the members of the
required to communicate the appointment of committee, except for Chief Commissioner
the Committee to the Commissioner and Inland Revenue.
court of law or the appellate authority where
the dispute is pending. 26. Recovery of tax out of
The Committee will examine the issue and if property and through arrest
it deemed necessary, will conduct inquiry, of taxpayer [Section 138]
seek expert opinion, direct any officer of the
Inland Revenue or any other person to For facilitating FBR in recovery of
conduct an audit and decide the dispute outstanding taxpayers’ liabilities, the Bill
through consensus, within 120 days of its proposes to include the following additional
appointment. methods in the aforesaid section as
enumerated in section 48 of the Sales Tax
The Committee in case of hardship, stay Act, 1990:
recovery of tax payable in respect of dispute
pending before it for a period not exceeding I. deduct the amount from any money
120 days in aggregate or till the decision of owing to person from whom such
the committee or its dissolution, whichever amount is recoverable and which may be
is earlier. at the disposal or in the control of such
officer or any officer of Income Tax,
Further, the Bill also proposes a condition for Customs or Central Excise Department.
making the decision of the Committee
binding on the Commissioner. It requires the II. require by a notice in writing any person
aggrieved person to withdraw the appeal to stop clearance of imported goods or
pending before the court of law or any manufactured goods or attach bank
appellate authority and communicates the accounts.
order of withdrawal to the Commissioner
37
III. seal the business premises till such The Bill proposes to abolish minimum tax on
time the amount of tax is paid or- goods on which tax is required to be
recovered in full. collected at the rate of 1% or 2% and are
imported by an industrial undertaking for its
27. Advance tax paid by the own use. Advance tax collected at the rate
of 1% or 2% on import of specified goods by
taxpayer [Section 147] an industrial undertaking for its own use
would be adjustable.
For the calculation of advance tax liability of
a taxpayer, the Bill proposes that the Board
may prescribe procedure for filing and 30. Abolishment of minimum tax
calculation of turnover for the quarter regime for edible oil, packing
through an automated system.
material and plastic raw
28. Shifting advance tax at material and ships [Section
import stage from person- 148(8) / (8A)]
specific rates to goods The Bill proposes to delete sub-sections (8)
specific [Section 148(1)] and (8A) of section 148 of the Ordinance,
which would result in abolishment of
The Bill proposes to rationalize tax on minimum tax regime for the edible oil,
imports by shifting from person-specific packing material and plastic raw material
rates to goods specific rates cascaded and ships. Therefore, the tax collected at
according to the type of goods. The Bill import stage would be considered as
proposes to collect advance tax at rate of advance tax
1% for capital goods, 2% for raw materials
and 5.5% for finished goods irrespective of 31. Determination of value of
status of the importer. Twelfth Schedule to
the Ordinance is proposed to be introduced goods to levy advance tax at
providing for the list of goods under each import stage [Section
category. 148(9)]
The Bill also proposes to empower the Board Under the existing law, for levying of
to add, omit or amend any entry in the advance tax on imports, value of the
Twelfth Schedule. imported goods is determined under
Customs Act, 1969 as if the goods were
Through the proposed amendments, subject to ad valorem duty increased by the
prevailing concessional rates on certain customs-duty, federal excise duty and sales
items such as remeltable scrap of iron and tax, if any, payable in respect of import of
steel, potassic and urea fertilizers, LNG, the goods.
Gold, Cotton, goods that were importable by
manufacturers under the rescinded SRO The Bill proposes to change definition of
1125(I)/2011 dated 31.12.2011, mobile value of goods as value of goods means:
phones etc. are being maintained.
a) in case of goods chargeable to tax at
29. Shifting from minimum tax to retail price under the Third Schedule
adjustable in case of certain of the Sales Tax Act, 1990, the retail
price of such goods increased by
goods imported by industrial sales tax payable in respect of the
undertaking for its own use import and taxable supply of the
[Section 148(7)] goods; and
38
b) in case of all other goods; the value person shall be minimum tax on the income
of the goods as determined under of non-resident person arising out of such
the Custom Act, 1969 (IV of 1969), payment.
as if the goods were subject to ad
valorem duty increased by the However, it would be a challenging task to
custom-duty, federal excise duty and calculate net taxable income arising out of
sales tax, if any, payable in respect such income of non-resident media person
of the import of the goods. who are relaying advertisement from outside
Pakistan and have no physical and legal
32. Abolishment of final tax on presence in Pakistan.
local purchase of cooking oil Under the Pakistan tax law, the non-resident
or vegetable ghee by certain person are subject to tax in Pakistan on only
persons [Section 148A] Pakistan source income. By virtue of
aforesaid proposed changes in law, the non-
Currently, manufacturers of cooking oil or resident person shall be required to calculate
vegetable ghee or both are chargeable to tax normal taxable Pakistan source income after
at 2% on purchase of locally produced edible deduction of expenses allocated to the
oil. Tax charged on purchase of locally income derived from Pakistan.
produced edible oil is final tax in respect of
income accruing from locally produced edible 34. Introducing parity between
oil. resident person and PE of a
The Bill proposes to abolish final tax of 2% non-resident person
on purchase of locally produced edible oil. [Section 152(2B)]
Resultantly, the income of manufacturers of
cooking oil or vegetable ghee or both would Under the provisions of current law, every
be chargeable to tax at normal tax rates. prescribed person making a payment in full
or part including a payment by way of
33. Abolishment of Final Tax advance to a permanent establishment (PE)
in Pakistan of a non-resident person is
Regime for advertisement required to withhold tax from the payment
services rendered by a non- on account of goods purchased, services
resident media person received and execution of contract. Tax is
deducted on the same lines as for payment
relaying from outside made to a resident person for purchase of
Pakistan goods, services received and execution of
[Section 152(IAAA)] contract.
Under the existing law, tax deducted from a Currently, tax deducted from payment to a
payment made for advertisement services to resident person is minimum tax. Exception is
a non-resident media person relaying from only provided where sale or supply of goods
outside Pakistan is final tax. is made by a company being a manufacturer
or company being listed on a registered
The Bill proposes to add a new sub-section stock exchange in Pakistan.
(1BBB) under section 152 to change the final
tax regime to minimum tax regime in case of Whereas, in case of PE of a non-resident
payments made for advertisement services person, tax deductible from payments made
to non-resident media person. By virtue of on account of services received only is
insertion of new sub-section, the tax minimum tax.
deductible from payment made for
advertisement services to a non-resident The Bill proposes to create parity between
39
resident person and PE of a non-resident 7% of tax under section 152(1A)] is required

person and by virtue of proposed to be deducted by the payer. The credit of
amendment, tax deductible from payment tax so deducted is available to the PE of the
made to a PE of non-resident person on non-resident person accounting for overall
account of purchase of goods, services profits arising on overall cohesive business
received and execution of contract will be operations.
minimum tax. Exception has been proposed
for payments received on account of sale of The Bill proposes to reduce the rate of tax
goods by the PE of non-resident company, deduction from 30% to 20% of the tax
being a manufacturer of such goods, which chargeable under section 152(IA).
would be liable to tax under normal tax Resultantly, tax at 1.4% [20% of 7% of tax
regime. under section 152(1A)] would be required to
be deducted by the payer after obtaining
35. Exemption certificate order in writing from the Commissioner.
application by non-resident
37. Exemption application for
person having PE in Pakistan
non-deduction of withholding
[Section 152(4A)]
tax on payment to non-
By virtue of provisions of sub-section (4A) of resident [Section 152(5)]
section 152, a non-resident person having
PE in Pakistan may apply for exemption from The proposed amendment seeks to authorize
withholding tax from the payment subject to the Commissioner to ask for any particulars
withholding tax under sub-section (1A) or that may be prescribed, for issuing the
sub-section (2A). However, currently, as exemption certificate for non-withholding of
such no form has been prescribed and there tax while making payment to a non-resident
are no specified procedures to file the person.
application.
Currently, the taxpayer is required to set out
The Bill proposes to add the word “in the following particulars in application to obtain
prescribed form” as a procedural exemption certificate from the
requirement. After insertion of aforesaid Commissioner:
word in sub-section 152(4A), the taxpayer a) the name and address of the non-
would be required to file application in the resident person; and
manner as may be prescribed by the Board. b) the nature and amount of the
payment.
36. Withholding tax on payment
The proposed new clause gives indication
that constitutes part of an that such particulars may be prescribed in
overall arrangement of a the Rules to be included in the application
cohesive business operation for obtaining exemption certificate.
[Section 152(4B)]
38. Withholding tax on toll
Under the provisions of existing law, the manufacturing
Commissioner is empowered to issue an [Section 153(1)(a)]
order in writing in response to an application
filed in writing by a person intending to The Bill proposes to add the words “including
make a payment on account of cohesive toll manufacturing” after the word “goods” in
business operations, to make such payment clause (a) of sub-section (1) of section 153
after deduction of tax at 30% of the tax of the Ordinance.
chargeable under section 152(IA) on such
payment. Accordingly, tax at 2.1% [30% of
40
Under the current law, payment for toll deduction certificate within 15 days of filing
manufacturing is subject to withholding tax of application, the certificate shall be
at the rates applicable for payments for automatically processed and issued by IRIS.
services received under clause (b) of sub- The Commissioner shall then be deemed to
section (1) of section 153. By virtue of have issued the exemption certificate upon
proposed amendment, payment for toll the expiry of fifteen days to the applicant
manufacturing services would be subject to public listed company.
withholding tax as applicable for supply of
goods. This would resolve classification The Commissioner may modify or cancel the
disputes between the taxpayers and tax certificate issued automatically by IRIS on
authorities. There have been litigations on the basis of reasons to be recorded in
this issue and courts have issued decisions writing after providing an opportunity of
in this regard. being heard.
39. Procedure for issuance of Aforesaid amendment seems to ease the

procedure for obtaining exemption and to
certificate for non-deduction reduce inordinate delays to issue exemption
of withholding tax under order.
section 153 to Public Listed
Companies [Section 153(4)] 40. Withholding Agent
[section 153(7)]
Under current law, where tax deductible
under section 153(1) is not minimum, The Bill proposes to increase the threshold of
recipient of payment may apply to the turnover from Rs.50 million to Rs.100 million
Commissioner to allow making payment for individual and AOP to be treated as
without deduction of tax or to deduct tax at withholding agents. This amendment has
reduced rate. The Commissioner is been made in line with the agreement
empowered to issue order in writing allowing signed between traders / business
any person to make payment without community and the Board.
deduction of tax or deduction of tax at a
reduced rate. However, there are no Currently, every person registered under the
specified procedures for any type of Sales Tax Act, 1990 is a withholding agent.
taxpayer. The Bill also proposes that only those
persons who have turnover of Rs.100 million
The Bill proposes to add new proviso to and above in any of the preceding tax years
prescribe procedure for issuance of and are registered with FBR for sales tax
certificate for non-deduction of withholding purses shall be treated as withholding agent.
tax under section 153 to a public company
listed on registered stock exchange in This will reduce the cost associated with
Pakistan subject to the condition that withholding tax requirements for small
advance tax liability has been discharged. businesses.
By virtue of proposed proviso to section 41. Withdrawal of withholding

153(4), the Commissioner shall issue
certificate for payment for supply of goods tax provisions on withdrawal
without deduction of tax within 15 days of of balance under Pension
filing of application to a public company Fund [Section 156B]
listed on a registered stock exchange in
Pakistan, subject to the condition that Under existing law, a Pension Fund Manager
advance tax liability has been discharged. making payment from individual pension
accounts, maintained under any approved
Where the Commissioner does not issue the Pension Fund, is required to deduct tax at
41
average rate of ‘total tax paid to total prescribed form” as a procedural

taxable income for three proceeding tax requirement. After insertion of aforesaid
years’ from any payment: word in section 159(1) and 159(1A), the
taxpayer shall be required to file application
a) withdrawn before the retirement age in the manner as may be prescribed the
b) withdrawn, if in excess of fifty per cent Board.
(50%) of his accumulated balance at or
after the retirement age. The Bill proposes to insert the word “in the
prescribed form” after the word “application”
The Bill proposes to withdraw provisions in section 159(2) of the Ordinance whereas
requiring Pension Fund Manager to withhold there is no such a word in section 159(2). It
taxes from withdrawal of balance under seems that regulator intended to insert
Pension Fund. Resultantly, there will be no aforesaid words in 159(1A) and this anomaly
withholding tax from payment of balance may be removed in the Finance Bill.
under Pension Fund.
43. Filing of withholding tax
The Bill, however, proposes to tax
withdrawal in excess of fifty percent before statement [Section 165]
the retirement age, or at the time of or after
the retirement age as salary income at Under the existing law, every person
normal rate of tax or, at the option of the collecting / deducting tax under provisions of
eligible person, at average rate of tax. the Ordinance is required to file withholding
Pension fund manager is made responsible statement on biannual basis.
for deduction of this tax.
The Bill proposes to file withholding tax
statement on quarterly basis instead of
42. Exemption or lower rate biannual basis. The deadline to file quarterly
certificate [Section 159] statement would be as per below:
By virtue of provisions of section 159, in a) in respect of quarter ending on the 31st

response to an application in writing day of March, on or before the 20th day
submitted by the person, the Commissioner of April;
is empowered to issue the person with an b) in respect of quarter year ending on the
exemption or lower rate certificate if 30th day of June, on or before the 20th
income: day of July;
c) in respect of quarter ending on the 30th
a) is exempt from tax; or day of September, on or before the 20th
b) is subject to tax at a rate lower; or day of October; and
c) is subject to hundred percent tax d) in respect of quarter ending on or
credit under section 100C. before the 31st day of December, on or
before the 20th January.
Further, on receipt of application from a
person whose income is not likely to be The Bills also proposes to insert new sub-
chargeable to tax, the Commissioner is also section (1A) in section 165 whereby a
empowered to issue exemption certificate for person engaged in economic transaction as
the profit on debt referred to in clause (c) of prescribed by the Board may also be
sub-section (1) of section 151. required to furnish quarterly statement in
the prescribed form and manner. Aforesaid,
Currently, neither there is any prescribed proposed amendment empower the Board to
form to file application nor there are require a specified economic sector to file
specified procedures to file the application. the statement declaring prescribed details /
information.
The Bill proposes to add the word “in the
42
44. Furnishing of information by 47. Power to enter and search

Banks [Section 165A] premises [Section 175]
By virtue of provisions of section 165A, The Commissioner and any officer
amongst other information as stated therein, authorized by Commissioner is empowered
the banks are required to furnish to the to enter, retain or search the documents,
Board list of persons receiving profit on debt records or the premises of the taxpayer
exceeding Rs 500,000 and tax deductions without prior notice at any time.
thereon during preceding financial year.
The proposed amendment seeks to empower
The Bill proposes to remove threshold of the Commissioner to have real time
profit on debt of Rs 500,000 and resultantly, electronic access also.
the banks would be required to furnish a list
of all persons receiving profit on debt and The Bill also proposes to insert new sub-
tax deductions thereon during preceding section enabling the Board to make rules for
financial year. real time electronic access to the information
of the taxpayer for audit or survey of the
45. Credit for tax collected or persons liable to tax.
deducted [Section 168]
48. Real-time access to
Payment to non-resident, for foreign information and databases
produced commercial and capital gain [Section 175A]
arising on the disposal of debt instruments
and Government securities including The Bill proposes to insert new section 175A
treasury bills and Pakistan investment bonds requiring other agencies and describing
invested through SCRA of non-resident procedures for such other agencies to
person, is already subject to Final tax under furnish information to the Board.
relevant sections. The Bill now proposes to
insert reference of these sections under The Bill proposes to empower the Board to
section 168 (3), applicable for transactions make arrangements for laying the
covered under final tax regime. infrastructure for real-time access to
information and database held with other
46. Refunds [Section 170] agencies and aligning it with its own
database in the manner as may be
The Bill proposes to insert new sub-section prescribed.
(6) in section 170 whereby the Board is
empowered to make rules regulating By virtue of proposed section, arrangement
procedure for expeditious processing and shall be made to provide real-time access of
automatic payment of refunds through information and database in the prescribed
centralized processing system. form and manner by:
The Board is already processing and making a) the National Database and Registration
payment of refunds through centralized Authority with respect to information
processing systems. The Bill now proposes pertaining to National Identity Card,
to add new sub-section in section 170 for Pakistan Origin Card, Overseas Identity
reference to rules regulating procedure for Card, Alien Registration Card, and other
expeditious and automatic payment of particulars contained in the Citizen
refund through centralized processing Database;
system. b) the Federal Investigation Agency and the
Bureau of Emigration and Overseas
Employment with respect to details of
43
international entry and exit of all

persons and information pertaining to 49. Electronic audit
work permits, employment visas and
immigration visas; [Section 177(2A)]
c) the Islamabad Capital Territory and Under the existing law, no power is vested
provincial and local land record and with the Commissioner to conduct audit
development authorities with respect to proceedings electronically nor is prescribed
record-of-rights including digitized by the Board.
edition of record-of-rights, periodic
record, record of mutations and report of The Bill proposes to empower the
acquisition of rights; Commissioner to conduct audit proceedings
electronically through video links or any
d) the Islamabad Capital Territory and other facility as prescribed by the Board.
provincial Excise and Taxation
Departments with respect to information The Bill also proposes to empower the
regarding registration of vehicles, Commissioner to determined taxable income
transfer of ownership and other on the basis of sectoral benchmark ratio to
associated record; be prescribed by the Board. The Bill
proposes that it would be construed that
e) All electricity suppliers and gas taxable income has not been correctly
transmission and distribution companies declared and the Commissioner would
with respect to particulars of a determine taxable income on the basis of
consumer, the units consumed and the sectoral benchmark ratios to be prescribed
amount of bill charged or paid; by the Board, if a taxpayer:
f) any other agency, authority, institution a) has not furnished record or documents
or organization notified by the Board including books of accounts;
It has also been clarified that where the b) has furnished incomplete record or
connection is shared or is used by a person books of accounts; or
other than the owner, the name and CNIC of
the owner and the user shall also be c) is unable provide sufficient explanation
furnished by all electricity suppliers and gas regarding the defects in records,
transmission and distribution companies. documents or books of accounts,
Provided further that all electricity suppliers
and gas transmission and distribution Further, the expression “sectoral benchmark
companies shall make arrangements by the ratios” has been defined to mean as
1st day of January, 2021 for allowing standard business sector ratios notified by
consumers to update the ratio of sharing of the Board on the basis of comparative cases
a connection or the particulars of users, as and includes financial ratios, production
the case may be. ratios, gross profit ratio, net profit ratio,
recovery ratio, wastage ratio and such other
It has also been proposed that until real- ratios in respect of such sectors as may be
time access to information and database is prescribed.
made available, such information and data
shall be provided periodically in such form 50. Offences and penalties
and manner as may be prescribed. [Section 182]
The provisions of the proposed section The Bill proposes to delete penalties
ensures that all information received from pertaining to filing of statement of income
other agencies would be used only for tax subject final tax which is in consequence of
purposes and kept confidential.
44
amendment of removing the requirement to list if he fails to update his profile and for
file statement of income subject to final tax inclusion in the list after filing his profile
under section 115 rather a return is to be along with payment of surcharge.
filed under section 114 by all persons
irrespective of income stream. By virtue of proposed sub-section, a person
who fails to furnish or update taxpayer’s
The Bill also proposes to introduce new profile within the due date or within the date
penalties for non-furnishing or late as extended by the Board under section
furnishing of taxpayer’s profile and for a 214A, such person shall not be included in
person who contravenes the provisions of the active taxpayers’ list for the latest tax
section 181AA. Table providing proposed year ending prior to the aforesaid due date
penalties is as under: or extended date.
The Bill also proposes that the taxpayer,

S. filing the taxpayer’s profile after the due
Offence Penalty Section
No date or extended date, shall be included in
4A Any person Such a 114A the active taxpayer list upon payment of
who is person surcharge as follows:
required to shall pay a
furnish or penalty of Type of Taxpayer Surcharge
update a Rs. 2,500 (Rs)
taxpayer’s for each  Company 20,000
profile but day of  Association of Persons 10,000
fails to default  Individual 1,000
furnish or from the
update due date This surcharge shall be payable without
within the subject to prejudice to any other liability applicable
due date. a under the Ordinance.
minimum
penalty of 52. Default Surcharge
Rs. [Section 205]
10,000.
A new sub-section is proposed to be added
4B Any person Such a 181AA”; to grant discretionary powers to the
who person Commissioner to assess default surcharge
contravene shall
duty, pay a for the period of default against a person
s the penalty
whicheverat liable to pay tax, where the tax due or a part
provisions the rate of
is higher. thereof is unpaid. This is likely to cause
of section Rs. 10,000 hardships to the taxpayers, especially where
181AA. for each the cases involving the due tax are pending
connection before the appellate authorities. This would
provided also defeat the Government’s intentions of
to an easing out the assessment process and
unregister would increase the litigation cost of the
ed person. taxpayers to avoid coercive recovery of the
default surcharge computed under the
proposed sub-section.
51. Profile not filed within due
date [Section 182A] 53. Jurisdiction of income tax
authorities [Section 209]
The Bill proposes to insert a new sub-section
in section 182A prescribing procedure for Currently, the Board or the Chief
exclusion of taxpayer from active taxpayer Commissioner may by an order delegate or
45
assign to any Officer of Inland Revenue all or Commissioner could issue the certificate
any of the powers and functions conferred where the income of a person was exempt
upon or assigned to the Commissioner in from tax.
respect of any persons/ classes of persons or
areas as may be specified. 57. Advance Tax on Steel
The Bill proposes to empower the Board to melters and composite units
confer or assign any such powers and [Section 235B]
functions and make rules for such
conferment or assignment of powers and The Bill proposes to withdraw the collection
functions through the “Automated Case of advance tax from steel melters and
Selection System”. The “Automated Case composite steel units. This tax is non-
Selection System” has been defined as an adjustable and its withdrawal would provide
algorithm for randomized allocation of cases relief to this sector and help achieve
via suitable technological modes. Government the revival of construction
industry.
54. Delegation [Section 210]
58. Advance tax at the time of
An order issued under section 161 can be sale by auction
amended or further amended if the
Commissioner considers the order to be Section 236A]
erroneous in so far as it is prejudicial to the
The Bill seeks to insert an explanation to
interest of revenue. The Bill seeks to restrict
section 236A to include renewal of a license
the delegation of the powers by the
previously sold by public auction or auction
Commissioner to a person not below the
by a tender in the ambit of sale by public
rank of the Additional Commissioner.
auction or auction by a tender. It also
clarifies that where the payment in respect
This proposal is at par with the delegation of
of a sale by public auction or auction by a
the powers for the amendment of
tender is received in installments, advance
assessment under section 122(5A).
tax shall also be collected in installments.
55. Advance Tax on private 59. Advance tax on sale or

motor vehicles
transfer of immoveable
[Section 231B] property [Section 236C]
The Bill seeks to exempt rickshaw,
motorcycle-rickshaw and any other motor A person responsible for registering,
vehicle having engine capacity upto 200cc recording, or attesting transfer of immovable
from collection of advance tax by adding an property is required to collect advance tax
explanation. This tax is collectible at the from seller of such property. Such advance
time of registration or transfer of registration tax is not collected where the immovable
of a motor vehicle. property is held for a period exceeding 5
years. The Bill proposes to reduce this time
limit of 5 years to 4 years.
56. Advance tax on electricity
Consumption [Section 235 60. Payment to residents for use
(1) and 235 (3)] of machinery and equipment
The Bill seeks to empower the Commissioner [Section 236Q]
to issue exemption certificate to a person
who has discharged his advance income tax Income earned by a resident person from
liability for the tax year. Previously, the rental for use of machinery and equipment is
46
chargeable to tax under the final tax regime.

The Bill proposes to treat the tax deduction
under this section as minimum tax instead of
final tax.
61. Collection of advance tax by

educational institutions
[Section 236I]
The Bill seeks to withdraw collection of
advance tax on tuition fee by educational
institutions from persons appearing in the
active taxpayers’ list. Henceforth, only the
persons not appearing in the active
taxpayers’ list shall be subject to collection
of advance by the education institutions.
62. Withdrawal of advance tax

provisions
The Bill proposes to withdraw the following
provisions related to collection of advance
tax:
 Advance Tax on Functions Section

and gatherings 236D
 Advance Tax on Cable Section

operators and other 236F
electronic media
 Section
Advance tax on dealers, 236J
commission agents and
arhatis
 Collection of advance tax Section

on education related 236R
expenses remitted abroad
 Section
Advance tax on insurance 236U
premium
 Section
Advance tax on tobacco 236X
47
The First Schedule

Division VII (Capital gains on disposal of securities)
Rate of tax on capital gains were prescribed upto the tax year 2020. The bill now proposes to
extend the applicability of the rate of tax for the tax year 2020 to subsequent tax years as well.
Division VIII (Tax on Capital Gains on disposal of Immovable Property)
The Bill seeks to reduce the tax rates by 50% on capital gains arising on disposal of immovable
property. This is in line with the Government’s vision to promote construction industry and to
provide stimulus for the growth in economy as construction sector provide employment to a
number of sub-sectors.
S. No. Amount of gain Rate of tax

Existing Proposed
1. Where the gain does not exceed Rs.5 million 5% 2.5%
2. Where the gain exceeds Rs.5 million but does not exceed
10% 5%
Rs.10 million
3. Where the gain exceeds Rs.10 million but does not exceed 15% 7.5%
Rs.15 million
4. Where the gain exceeds Rs.15 million 20% 10%
Part II
Rates of Advance Tax
The bill proposes a paradigm shift in tax regimes of imports from person-specific rates to goods-
specific rates. These rates shall apply irrespective of the status of the importer. This is a welcome
move and shall serve to provide level playing field to commercial importers and the
manufacturers. A new schedule is also proposed to be introduced to categorize the imports into
raw material, capital goods and finished goods.
S. No. Persons Rate

1. Persons importing goods classified in 1% of the import value as increased by
Part I of the Twelfth Schedule customs-duty, sales tax and federal excise
duty.
2. Persons importing goods classified in 2% of the import value as increased by
Part II of the Twelfth Schedule customs-duty, sales tax and federal excise
duty.
3. Persons importing goods classified in 5.5% of the import value as increased by
Part III of the Twelfth Schedule customs-duty, sales tax and federal excise
duty.
Rates of advance tax on import of the following materials shall remain unchanged.
48
 Advance tax collection in case of manufacturers covered under Notification No. S.R.O
1125(I)/2011 dated December 31st, 2011 as it stood on the June 28th, 2019 on import of
items covered under the aforementioned S.R.O. shall remain 1%; and
 Advance tax collection on import of finished pharmaceutical products that are not
manufactured in Pakistan and are certified by the Drug Regulatory Authority of Pakistan shall
remain 4%.
The Finance Bill also seeks to categorize and revise the rates of advance tax on value of import of
mobile phone (including smart phones) on the basis of PCT Headings as under:
S. C & F Value of mobile phone Tax (in Rs.)

No. (in US Dollar) In CBU In CKD/SKD
condition PCT condition under
Heading PCT Heading
8517.1219 8517.1211
1. Up to 30 except smart phones 70 0
2. Exceeding 30 and up to 100 and smart phones up
100 0
to 100
3. Exceeding 100 and up to 200 930 0
4. Exceeding 200 and up to 350 970 0
5. Exceeding 350 and up to 500 3,000 5,000
6. Exceeding 500 5,200 11,500
Part III (Deduction of tax at source)

Division I (Advance Tax on Dividend)
Currently, tax rate of deduction of tax on dividend under section 150 and 236S is:
 7.5% in case of Independent Power Producers where such dividend is a pass through item
under an Implementation Agreement or Power Purchase Agreement or Energy Purchase
Agreement and is required to be reimbursed by Central Power Purchasing Agency or its
predecessor or successor entity.
 15%, in all other cases.
To align the rate of tax chargeable and tax withholding, the Bill proposes to provide for tax
withholding at the rate of 25% on dividend paid by a company where no tax is payable by such
company, due to exemption of income or carry forward of business losses or claim of tax credits.
There is a drafting mistake in the bill as it does not cater for exclusion of the new proposed
category from the general category of all other companies that are liable to tax withholding at
15%.
Division IA (Profit on Debt)
General rate of advance tax withholding on yield or profit on debt is 15%. However, this rate is
reduced to 10%, where the yield or profit is upto five hundred thousand rupees.
49
The Bill seeks to ask the taxpayer to furnish a certificate to the payer of yield or profit certifying
that the yield or profit during the tax year shall be five hundred thousand rupees or less. Thus the
payer shall be bound to withhold tax at reduced rate only if such certificate is provided by the
recipient of profit on debt.
Division IB (Return on Investment in Sukuks)
The Bill proposes to increase the rate of deduction of tax under section 150A from 15% to 25% in
case the Sukuk-holder is a company.
Division II (Payments to non-residents)
To provide a level playing field to permanent establishments of non-residents and promote ease
of doing business, as in case of some other sectors, the Bill proposes to provide for the reduced
rate of withholding tax at 3% in respect of various services rendered by permanent
establishments of non-residents. These services are:
 transport services;  tracking services;

 freight forwarding services;  advertising services (other than by
 air cargo services; print or electronic media);
 courier services;  share registrar services;
 manpower outsourcing services;  car rental services;
 hotel services;  building maintenance services;
 security guard services;  services rendered by Pakistan Stock
 software development services; Exchange Limited and Pakistan
 IT services and IT enabled services Mercantile Exchange Limited;
as defined in clause (133) of Part I  inspection and certification; and
of the Second Schedule;  testing and training services.
In case of resident persons, aforesaid services are currently liable to tax withholding at 3%.
Consequent to this amendment taxation of resident and non-resident person having a permanent
establishment in Pakistan shall be at par.
Division III (Payments for Goods and Services)
The Bill seeks to treat ‘toll manufacturing’ at par with ‘sale of goods’ for the purpose of deduction
of withholding tax under section 153. This is a welcome move and would lay to rest the
classification controversy between the taxpayers and tax collectors for the purpose of withholding
tax.
The Bill proposes to exclude ‘engineering services’ from the list of specified services attracting
withholding tax at the rate of 3% in the case of a resident person providing such services.
Part IV (Deduction or Collection of Advance)
Division VIII (Advance tax at the time of sale by auction)
The rate of collection of tax on the sale of property or goods by auction is 10% of the gross sale
price. This rate is now proposed at 5% of the gross sale price in case of sale of immovable
property.
50
Various Advance taxes proposed to be excluded
To simplify the withholding tax regime and reducing the cost of compliance with the withholding
tax provisions, the Bill proposes to withdraw the following advance tax provisions:
 Advance tax on functions and gatherings,

 Advance tax on cable operators and other electronic media,
 Advance tax on dealers, commission agents and arhatis etc.,
 Advance tax on education related expenses remitted abroad,
 Advance tax on insurance premium,
 Advance tax on Tobacco.
Division XXVI (Advance tax on extraction of minerals)
The rate of collection of tax on extraction of minerals is 5% of the value of minerals for persons
who are not appearing in the active taxpayers’ list. The Bill proposes to collect this tax from all
persons whether or not appearing in the active taxpayers’ list.
51
Second Schedule
Part I
Withdrawal of accumulated balance before retirement

[Clause 23A]
Withdrawal from the voluntary pension system offered by a fund manager under the Voluntary
Pension Rules, 2005 at the time of eligible person’s retirement, disability rendering him unable to
work or death is exempt from tax upto 50% of the accumulated balance. The Bill proposes to tax
the withdrawal of funds, in excess of fifty percent before the retirement age, or at the time of or
after the retirement age, as salary income at normal rate of tax or, at the option of the eligible
person, at average rate of tax. Pension fund manager is made responsible for deduction of this
tax.
New non-profit charitable institutions included

[Clause 61]
In order to encourage people and organizations paying charity to documented non-profit

institution, the Bill proposes to include the following organizations within the scope of
exemptions:
(i) The Prime Minister’s COVID-19 Pandemic Relief Fund-2020

(ii) Ghulam Ishaq Khan Institute of Engineering Sciences and Technology (GIKI)
(iii) Lahore University of Management Sciences
(iv) Dawat-e-Hadiya, Karachi
(v) Baitussalam Welfare Trust
(vi) Patients’ Aid Foundation
(vii) Alkhidmat Foundation
Donations paid to these organizations would now be available for deduction from taxable income
of the payer.
The Bill proposes to limit the donations made by associates at 15% of the taxable income, in case of
an individual or an association of persons and 10% of taxable income, in case of a company. These
limits of 15% and 10% are 50% of the limits provided if the donor and the donee were not
associates.
The Bill also proposes to donate through a crossed cheque drawn on a bank to qualify for
deduction from taxable income.
Non-profit charitable institutions included

[Clause 66]
The Bill seeks to substitute Clause (66). Entities listed in the existing clause and the ones
proposed for insertion in clause (61) above have been bifurcated into two tables, Table 1 and
Table 2. Whilst Entities in Table 1 remain exempt from tax without any condition, exemption to
other set of entities is made conditional on fulfilling the conditions laid down under section 100C.
52
TABLE 1
S. No. Name
(i) International Islamic Trade Finance Corporation.
(ii) Islamic Corporation for Development of Private Sector.
(iii) National Memorial Bab-e-Pakistan Trust.
(iv) Pakistan Agricultural Research Council.
(v) The corporatized entities of Pakistan Water and Power Development Authority from the
date of their creation upto the date of completion of the process of corporatization i.e.
till the tariff is notified.
(vi) The Prime Minister’s Special Fund for victims of terrorism.
(vii) Chief Minister’s (Punjab) Relief Fund for Internally Displaced Persons
(IDPs) of NWFP.
(viii) The Institutions of the Agha Khan Development Network (Pakistan) as contained in
Schedule 1 of the Accord and Protocol, dated November 13, 1994, executed between the
Government of the Islamic Republic of Pakistan and the Agha Khan Development Network.
(ix) Pakistan Council of Scientific and Industrial Research.
(x) The Pakistan Water and Power Development Authority established under the Pakistan
Water and Power Development Authority Act, 1958 (W. P. Act XXXI of 1958).
(xi) WAPDA First Sukuk Company Limited.
(xii) Pension of a former President of Pakistan and his widow.
(xiii) State Bank of Pakistan and State Bank of Pakistan Banking Services Corporation.
(xiv) International Finance Corporation established under the International Finance
Corporation Act, 1956 (XXVIII of 1956) and provided in section 9 of Article VI of Articles
of Agreement 1955 as amended through April 1993.
(xv) Pakistan Domestic Sukuk Company Ltd.
(xvi) ECO Trade and Development Bank.
(xvii) The Islamic Chamber of Commerce and Industry under the Organization of Islamic
Conference (OIC).
(xviii) Commission on Science and Technology for Sustainable Development in the South
(COMSATS) formed under International Agreement signed on 5th October, 1994.
(xix) WAPDA on issuance of twenty billion rupees TFC’s/SUKUK certificates for consideration
of DiamerBhasha Dam Projects.
(xx) Federal Board of Revenue Foundation.
(xxi) WAPDA Second Sukuk Company Limited.
(xxii) Pakistan International Sukuk Company Limited.
(xxiii) Second Pakistan International Sukuk Company Limited.
(xxiv) Third Pakistan International Sukuk Company Limited.
(xxv) Asian Infrastructure Investment Bank and persons as provided in Article 51 of Chapter
IX of the Articles of Agreement signed and ratified by Pakistan and entered into force on
the 25th December, 2015.
(xxvi) Supreme Court of Pakistan – DiamerBhasha & Mohmand Dams – Fund.
(xxvii) National Disaster Risk Management Fund.
(xxviii) Deposit Protection Corporation established under sub-section (l) of section 3 of Deposit
Protection Corporation Act, 2016 (XXXVII of 2016).
(xxix) SAARC Energy Centre.
53
S. No. Name
(xxx) The Asian Development Bank established under the Asian
Development Bank Ordinance, 1971 (IX of 1971).
(xxxi) The Prime Minister’s COVID-19 Pandemic Relief Fund-2020.
(xxxii) Saarc Arbitration Council (SARCO).
(xxxiii) International Parliamentarians’ Congress.
TABLE 2
S. No. Name
(i) Abdul Sattar Edhi Foundation.
(ii) Al-Shifa Trust.
(iii) Bilquis Edhi Foundation.
(iv) Fatimid Foundation.
(v) Pakistan Engineering Council.
(vi) The Institution of Engineers.
(vii) Liaquat National Hospital Association.
(viii) The Citizens Foundation.
(ix) Sindh Institute of Urology and Transplantation, SIUT Trust and Society for the Welfare
of SIUT.
(x) Greenstar Social Marketing Pakistan (Guarantee) Limited.
(xi) Indus Hospital, Karachi.
(xii) Gulab Devi Chest Hospital.
(xiii) Pakistan Poverty Alleviation Fund.
(xiv) National Academy of Performing Arts.
(xv) Pakistan Sweet Homes Angels and Fairies Place.
(xvi) National Rural Support Programme.
(xvii) Pakistan Bar Council.
(xviii) Pakistan Centre for Philanthropy.
(xix) Pakistan Mortgage Refinance Company Limited.
(xx) Aziz Tabba Foundation.
(xxi) Shaukat Khanum Memorial Trust.
(xxii) Layton Rahmatullah Benevolent Trust (LRBT).
(xxiii) The Kidney Centre Post Graduate Training Institute.
(xxiv) Pakistan Disabled Foundation.
(xxv) Forman Christian College.
(xxvi) Habib University Foundation.
(xxvii) Begum AkhtarRukhsana Memorial Trust Hospital.
(xxviii) Al- Khidmat Foundation.
(xxix) Dawat-e-Islami Trust.
(xxx) Sardar Trust Eye Hospital, Lahore.
(xxxi) Akhuwat.
(xxxii) Audit Oversight Board.
54
S. No. Name
(xxxiii) Patient’s Aid Foundation.
(xxxiv) Al-Shifa Trust Eye Hospital.
(xxxv) Saylani Welfare International Trust.
(xxxvi) SARMAYA-E-PAKISTAN LIMITED.
(xxxvii) Lahore University of Management Sciences, Lahore.
(xxxviii) Dawat-e-Hadiya, Karachi.
(xxxix) Ghulam Ishaq Khan Institute of Engineering Sciences and Technology.
(xl) Society for the Promotion of Engineering Sciences and Technology in Pakistan
(SOPREST).
(xli) Businessmen Hospital Trust.
(xlii) Baitussalam Welfare Trust.
Profit and gains on sale of immovable commencing from July 01, 2016 under a
property to a Developmental REIT financing arrangement with China Oversees
Scheme Ports Holding Company Limited.
Clause [99A] The Bill seeks to include China Overseas Ports
Holding Company Pakistan (Private) Limited,
The Bill seeks to extend exemption of profit Gwadar International Terminal Limited,
and gains on sale of immovable property to a Gwadar Marine Services Limited and Gwadar
Developmental REIT scheme from June 30, Free Zone Company Limited in the list of the
2020 to June 30, 2021. financing agreement companies. This
amendment shall be deemed to have been
Tax concessions and exemptions to inserted with effect from June 1, 2020.
Gwadar Port and Gwadar Free Zone
Clauses [126A, 126AC] Tax concessions and exemptions to Co-
Developers of Special Economic Zone
The benefit of exemption to Gwadar Port has (SEZ)
been provided in clause (126A) and (126AC) Clauses [126E]
for a period of twenty three years
commencing from February 06, 2007 and The Bill proposes to extend the tax exemption
twenty years with effect from July 01, 2016 to a Co-Developer as defined in the Special
respectively. By inserting Gwadar Free Zone, Economic Zone Rule 2013 subject to the
the Bill proposes to extend the tax condition that a certificate has been furnished:
concessions and exemptions to Gwadar Free
Zone as well, which shall be deemed to have - By the developer that he has not claimed
been inserted with effect from June 1, 2020. any exemption under this clause and has
relinquished his claim in favor of the co-
Tax concessions and exemptions to Profit developer and
on Debt - By the Special Economic Zone Authority
Clauses [126AB] validating that the developer has not
claimed exemption under this clause and
The benefit of exemption from tax in respect has relinquished claim in favor of the co-
of profit on debt is provided to a foreign developer.
lender or any local bank having more than 75
per cent of the shareholding of the Tax concessions and exemptions to
Government of the State Bank of Pakistan for Federal Government Employees Housing
a period of twenty three years Authority
Clauses [147]
55
The Bill proposes to allow exemption from section 113. The bill seeks to include the
income tax to the Federal Government following in this list.
Employees Housing Authority for the tax year
2020 and the following four tax years. - A modaraba qualifying for exemption
under clause (100) of Part I of the
Part II Second Schedule.
Reduction in tax rate to non-resident - The Prime Minister’s COVID-19 Pandemic

individual on account of Profit on debt to Relief Fund-2020.
non-resident individual - The Federal Government Employees
[Clauses 5AA] Housing Authority for the tax year 2020
and the following four tax years.
The bill proposes to introduce reduced rate of
withholding tax of 10% under sub-section (2) A Modaraba registered under the Modaraba
of section 152, in respect of payments to an Companies Ordinance and Modaraba
individual, on account of profit on debt earned (Floatation and Control) Ordinance, 1980 is
from a debt instrument, whether conventional excluded from this list.
or shariah compliant, issued by the Federal
Incorporation of Relief measures
Government under the Public Debt Act, 1944
provided through SROs during the COVID
and purchased exclusively through a bank
pandemic
account maintained abroad, a non-resident
[Clauses 12B, 12C, 102A, 116, 117]
Rupee account repatriable (NRAR) or a foreign
currency account maintained with a banking Through the insertion of above mentioned
company in Pakistan. The tax so deducted clauses, the Bill seeks to incorporate relief
shall be a final tax on the income of the non- measure provided during COVID pandemic.
resident individual derived from profit on debt. Following measures were incorporated
through these insertions:
Incorporation of Relief measures
provided through SROs during the COVID - Importing specified medical supplies and
pandemic pulses exempted from collection of
[Clauses 24CA] advance tax under section 148.
- Exemption to Ehasaas Emergency Cash
The new insertion is introduced for tax Transfer Programme from the withholding
deduction under section 153 at reduced rate provision of advance tax on brokerage
of 1.5% of the gross amount of payment and commission payment.
received for supply utility store corporation of - Exempting the Prime Minister’s COVID-19
Pakistan upto 30th day of September, 2020. Pandemic Relief Fund-2020 from the
provisions of section 151, 231A, 231AA
Part IV and 236P.
Non-Applicability of 153(1)(a) to steel Transactions and institutions absolved
melters and composite steel units as from application of Section 153
payers [Clause 46A]
[Clauses 9A]
The Bill seeks to omit this clause in line with The Bill proposes to incorporate the tax
the deletion of Section 235B. exemptions provided in SRO 586(I)/91 dated
June 30, 1991, into the main law. A new
Additional Institutions absolved from clause is proposed to be introduced providing
application of Section 113 exemption from deduction of tax under
[Clause 11A] section 153 to the following:
This clause contains the list of businesses and - Provincial Government;

institutions that are absolved from the - a local authority;
application of minimum tax provisions of
56
- persons who are residents of Azad government or a local government and

Kashmir and execute contracts in Azad produces a certificate from that
Kashmir only and produce a certificate to government
this effect from the concerned income tax - companies importing high speed diesel
authority; oil, light diesel oil, high octane blending
- persons receiving payments from a component or kerosene oil, crude oil for
company or an association of persons refining and chemical used in refining
having turnover of fifty million rupees or thereof in respect of such imports
more or from an individual having - Petroleum (E&P) companies covered
turnover of fifty million rupees or more under the Customs and Sales Tax
exclusively for the supply of agriculture Notification No. S.R.O.678 (I)/2004,
produce including fresh milk, fish by any dated the 7th August, 2004, except motor
person engaged in fish farming, live vehicles imported by such companies.
chicken, birds and eggs by any person
engaged in poultry farming and by an Corrective measure
industrial undertaking engaged in poultry [Clause 56C, 56D, 56E, 56G & 63]
- processing which has not been subjected Through Finance Act, 2019, final tax regime
to any process other than that which is was replaced with the minimum tax regime.
ordinarily performed to render such The Bill proposes to make corrective measure
produce fit to be taken to market; by deleting the options previously available to
- companies receiving payments for the the taxpayers for final tax regime.
supply of electricity and gas;
- companies receiving payments for the Hajj Operators absolved from Section 152
supply of crude oil; [Clause 72AA]
- hotels and restaurants receiving
payments in cash for providing The Bill seeks to introduce a new clause to
accommodation or food or both, as the provide exemption to Hajj Operators from
case may be; and withholding tax provisions on payments to
- shipping companies and air carriers non-residents.
receiving payments for the supply of Withdrawal of exemption for Import
passenger tickets and for the cargo [Clause 72B]
charges of goods transported.
The Bill seeks to omit clause (72B) for
Additional Institutions Absolved from issuance of exemption certificate for import of
application Section 148 good. This is a consequential change to curb
[Clause 56] import and stimuli local manufacturing of raw
material and other goods.
This clause contains the list of businesses and
institutions that are exempted from the Exemption to foreign remittance
application of section 148 (withholding of [Clause 101A]
income tax at import stage). The bill seeks to
extend the list of such institutions by The Bill seeks to add a new clause to provide
including the following institutions: exemption from collection of tax under section
231A, 231AA and 236P to for Pak Rupee
- the Federal Government Account in a tax year to the extent of foreign
- a Provincial Government remittances credited into such account. This is
- a Local Government to promote foreign remittance through
- a foreign company and its associations banking channels and curb non-banking
whose majority share capital is held by a means of inward foreign remittances.
foreign government
- a person who imports plant and Non-resident payment of dividend
machinery for execution of a contract with absolved from Active Taxpayer
the Federal Government or a provincial [Clause 111A]
57
The Bill seeks to add a new clause to provide Section 4B was inserted vide the Finance
exemption from deduction of tax at enhanced Act, 2015 to provide for imposition of super
rate on dividend payment to non-resident tax for rehabilitation of temporarily
persons not appearing in the active taxpayers’
displaced persons. Division IIA of Part of
list. This will provide a relief to the foreign
First Schedule prescribed the rate of super
companies paying dividend to their parent
companies. tax for banking companies for the tax year
2021. On the other hand, Rule 7C of
Non-resident individual absolved from Seventh Schedule provided for imposition
advance tax on banking transactions of super tax upto the tax year 2020. In
[Clause 112A]
order to remove this anomaly, Rule 7C of
The Bill seeks to add a new clause exempting the Seventh Schedule is proposed to be
a non resident individual, investing in debt amended to protect imposition of super tax
instrument, conventional or Shariah compliant upto tax year 2021.
through non-resident rupee account
repatriable (NRAR) or a foreign currency
account in Pakistan, from provisions of section
236P, requiring collection of advance tax at
The Tenth
0.6% where the name of the person is not
appearing on Active Tax Payers List.
Schedule
Incentive to Non-resident Individual Rules relating to persons not
[Clause 114A] appearing in the Active
This clause seeks to exempt a non-resident Taxpayers’ List
individual from the application of newly
Pursuant to doing away with filing of the
inserted clause (ae) of sub-section 114 and
statement of final taxation under section
section 181 requiring filing of return and levy
115(4), reference to that statement in the
of penalty for non-filing of the return, where
schedule is proposed to be removed.
the only source of income was from profit on
debt earned from a debt instrument whether The bill proposes to restrict the applicability of
conventional or Shariah compliant and the enhanced rates of withholding tax for
purchased exclusively from a bank account payments to permanent establishment of a
maintained abroad, non-resident rupee non-resident persons, not appearing in the
account repatriable (NRAR) or a foreign active taxpayers’ list, to sale of goods,
currency account in Pakistan. This is to rendering of or providing services and
provide relief to non-resident individual from execution of the contracts.
penalty provision and filing of return only
being receiving profit on debt from banking The bill also proposes to exclude the
company. payments to non-resident person on the
account of royalty payment, fee for technical
service, insurance premium or re-insurance
The Seventh premium and payment to Individual in respect
of profit on debt earned from a debt
Schedule instrument, whether conventional or Shariah
compliant, issued by the Federal Government
under the Public Debt Act, 1944 and
Rules for the Computation of the purchased exclusively through a bank account
Profits and Gains of a Banking maintained abroad, a non-resident Rupee
Company and Tax Payable account repatriable (NRAR) or a foreign
thereon currency account maintained with a banking
company in Pakistan from enhanced rate of
withholding tax under this Schedule.
58
Sales Tax Act, 1990
1. Active Taxpayer 3. Value of Supply

[Section 2(1)(a)&(d)] [Section 2(46)(h)&(j)]
An editorial change has been proposed Reduction in base amount of
in the definition of Active Taxpayer by electricity charges for levy of sales
removing the term ‘blocked’ status of tax by WAPDA – clause (h)
registration as no such concept exists
under the law.
 Through Finance Act, 2019, the
In line with the newly proposed definition of term ‘value of supply’ was
requirement of filing quarterly income amended to make said definition in
tax withholding statements through line with Sales Tax Special Procedure
the Bill as against the existing Rules, 2007. As per amended clause
requirement of filing bi-annual (h) of the said definition , the value of
statement under section 165 of the supply in case of supply of electricity
Income Tax Ordinance, 2001, the Bill by an independent power producer
proposes to amend the ATL criteria was restricted to the extent of amount
connected with filing of income tax received on account of energy
withholding statements by replacing purchase price only and the amount
the existing condition therein for filing received on account of capacity
“two consecutive monthly statements” purchase price, energy purchase price
to “two consecutive quarterly premium etc. was excluded from the
statements”. This would also address value of supply for sale tax purposes.
the existing inconsistency which arose WAPDA was previously omitted from
due to non- existence of corresponding inclusion in said definition, accordingly,
amendment in the definition of ATL the Bill proposes to extend the scope
when the income tax withholding of power producer companies for the
statement filing requirement was purpose of this clause to include
changed from monthly to biannually in therein Water & Power Development
2019. Authority (WAPDA). This amended has
been proposed to take effect
retrospectively from July 01, 2019.
2. Output Tax
[Section 2(20)(c)] Value of supply of used Vehicles –
clause (j)
At present, the scope of output tax as
per clause (c) of section 20(2)
The Bill also proposes to introduce a new
erroneously includes sales taxes levied
clause (j) whereby the value of supply of
on services rendered or provided by a
used vehicles, purchased by a registered
person at every Provincial jurisdiction
person from the general public is to be the
which is the sole domain of the
difference between sale and purchase price
respective provincial revenue
of the said vehicle where:
authorities. The Bill has proposed to
rectify this flaw in the scope of output
 sales tax had already been paid at the
tax by substituting the aforesaid
time of import or manufacturing of such
clause (c) to restrict the output tax on
vehicle; and
services to the extent of sales tax
levied on services under Islamabad
 such registered person sales such
Capital Territory (Tax on Services)
vehicle in the open market after making
Ordinance, 2001.
further value addition.
59
4. Withholding of Sales Tax 7. Power to Tax Authorities to

[Section 3(7)] Modify Orders, etc.
[Section 11C]
The Bill proposes to amend Section 3(7) by
extending the scope of person responsible to Unlike section 124A of the Income Tax
withhold sales tax to include therein both Ordinance, 2001, currently there is no
purchaser of goods or recipient of services. parallel law available in the sales tax law
This proposition is being made in line with whereby the judgments of a High Court or
the Rule 150ZZH of the Sales Tax Rules Appellate Tribunal deciding a question of law
regarding withholding sales tax, introduced in case of taxpayer, are binding on the
last year whereby the scope of withholding Commissioner.
rules was extended to apply on such
services which are subject to levy of Federal The Bill now proposes to introduce a new
Excise Duty or ICT service tax. section 11C in the Sales Tax Act, 1990,
identical to section 124A of the Income tax
5. Determination of tax liability Ordinance, 2001 whereby, in case of a
registered person, if a question of law has
[Section 7] been decided by a High Court or the
Appellate Tribunal on or after July 1, 1990,
At present, registered person is entitled to the Commissioner or an officer of Inland
adjust input tax from the output tax subject Revenue may follow the said decision in the
to certain conditions, limitations or/and case of the said taxpayer so far as it applies
restrictions as may be specified by the to an identical question arising in any case
relevant authority. The Bill now seeks to pending before him until the decision of the
empower the Board to impose restrictions on High Court or of the Appellate Tribunal is
admissibility of input tax on wastage of reversed or modified subsequently. This
material in respect of goods or classes of proposition has been introduced
goods, as may be notified by the Board. notwithstanding that the Commissioner or
the officer of Inland Revenue has preferred
Such restriction would adversely impact the to file an appeal against the decision of the
registered person as the input tax, on High Court or made an application for
wastage of materials restricted by the Board, reference against the order of the Appellate
or exceeds the wastage limit prescribed by Tribunal, as the case may be.
the Board, may no longer be available for
adjustment. The Bill has further proposed that in case the
decision of High Court or the Appellate
6. Tax Credit Not Allowed Tribunal is reversed or modified, the
[Section 8] Commissioner or officer of Inland Revenue
may give effect of the order reversed within
By virtue of insertion of new clause (m) in a period of one year from the date of receipt
section 8 through Finance Act, 2019, if the of decision, notwithstanding the expiry
invoice does not bear the NIC number or period of limitation of 5 years, as prescribed
NTN, the input tax on goods is not claimable under section 11(5) of the Act, for making
against the supplies attributable to un- any assessment or order.
registered persons, on pro-rata basis. The
Bill has now proposed to extend such 8. Tax Invoices [Section 23]
disallowance in respect of input related to Pursuant to amendment introduced vide
service as well. Finance Act, 2019, registered retailers
making taxable supplies of Rs.50,000 or
more to un-registered person are required to
include name, address and NIC or NTN, as
60
the case may be in the sales tax invoice. The The Bill has proposed to shrink the aforesaid
Bill has proposed to enhance this threshold limit from 6 months to 2 months with the
from Rs.50,000 to Rs.100,000. business to remain sealed till the time he
integrates his business with the Board.
9. Access to Records, However, the condition of placing an
Documents, etc. embargo on the sales has been proposed to
be withdrawn.
[Section 25]
As a step towards use of technology in 12. Authorized Officers to have
conducting proceedings and considering the
current circumstances of COVID-19, the Bill Access to Premises,
has proposed to introduce a new subsection Accounts and Records
in Section 25 whereby the Commissioner has [Section 38]
been empowered to conduct audit
proceedings electronically through means of With the introduction of section 56AB, the
video links or any other facility as prescribed Bill has proposed to authorize any officer on
by the Board. behalf of the Board or the Commissioner to
also have real-time electronic access
10. Returns [Section 26(1)] belonging to any registered persons, a
person liable to be registered or a person
Presently, returns that are to be furnished whose business activities are covered under
within the stipulated time are to be true and the relevant provisions of the Act. For this
correct in the prescribed form in accordance purpose, the Bill has also proposed to
with section 26 of the Sales Tax Act. The Bill empower the Board to make rules relating to
has proposed to also associate the term electronic real-time access for audit or
‘complete’ with return in order to highlight survey of persons liable to tax.
that the return are not only to be true and
correct but should also present complete
information to the Board. 13. Appeals [Section 45B]
11. Penalties [Section 33] The Bill has proposed to introduce the
following provisions regarding filing of
The Bill has proposed two changes in the appeals and its related matters:
penalty section which are as follows,
namely:  Sub-section (1A) has been proposed to
be inserted whereby the form,
Non-integration of business with FBR –
manner, statement of grounds,
(S. No. 25)
prescribed fees and to whom the
As per serial number 25 inserted vide Tax aforesaid information is to be lodged
Laws (Second Amendment) Ordinance, with, as the such information is not
2019, a registered person would be liable to presently described in section 45B;
pay penalty up to Rs. 1,000,000 if he fails to
integrate his business for monitoring,  The prescribed fee mentioned in sub-
tracking, reporting or recording of sales, section (1A), has been proposed to be
production and similar business transactions enhanced from existing Rs. 1,000 to
with the Board or its computerized system. following amounts;
After imposition of such penalty the Board
has the power to seal the business premises Appellant Assessment Other than
of such person after a period of 6 months if Assessment
the said person continues to be non- Company 5,000 5,000
compliant with placing embargo on his sales. Other 2,500 1,000
than
Company
61
 A new sub-section (5) has been sub-section, the term non-resident person
proposed to be inserted whereby the shall have the same meaning as the one
Commissioner (Appeals) would be defined under Income Tax Ordinance, 2001.
restricted from accepting any
documentary material or evidence 15. Certain Transactions not
which were not produced previously by
the appellant before the Officer Inland Admissible [Section 73]
Revenue. The Commissioner (Appeals)
shall only accept such material or By virtue of sub-section (4) introduced vide
evidence if he is satisfied that the Tax Laws (Second Amendment) Ordinance,
appellant was prevented by sufficient 2019, if a registered manufacturer makes
cause from producing such material or taxable supplies to an un-registered person
evidence before the Officer Inland of the values exceeding the below
Revenue. thresholds, the registered manufacturer shall
not be entitle to claim attributable input tax
adjustment against its output tax:
14. Representatives
[Section 58A]  Value exceeding Rs. 100 million in a
financial year; and
By virtue of sub-section (3) of Section 58A,
a representative of a non-resident person  Value exceeding Rs. 10 million in a
shall be any person in Pakistan for a tax month.
year for the purposes of fulfilling the
requisite duties and obligations on behalf of The Bill has proposed to broaden the scope
such non-resident person. The Bill seeks to of applicability of the above condition of
amend the said sub-section by stating that monetary threshold by substituting the word
such persons are to be the representative of ‘manufacturer’ from ‘person’ consequent to
the non-resident person for the financial which the above inadmissibility of input tax
year in which the relevant tax period falls. will be applicable on every person registered
The Bill has further proposed to introduce person under the Act.
the explanation of the non-resident person
whereby, for the purpose of the aforesaid
Fifth Schedule (Zero rated goods)

The Bill has proposed zero rating of sales tax on of the following entries which had already been
made part of the Schedule through the Tax Laws (Amendment) Ordinance 2019 dated October
09, 2019. The amendments are to be retained through the Bill and applicable with effect from
June 01, 2020:
Sr. No. Description

13. Supplies of raw materials, components and goods for further manufacture of
goods in the Gwadar Free Zone and export thereof, provided that in case of
supply to tariff area of Pakistan, tax shall be charged on the value assessed on the
Goods Declaration for import
14. Supplies of locally manufactured plant and machinery of the following

specifications, to manufacturers in the Gwadar Free Zone, subject to the
conditions, restrictions and procedure given below, namely:-
(i) Plant and machinery, operated by power of any description, as is used for the
manufacture or production of goods by that manufacturer;
62
Sr. No. Description
(ii) Apparatus, appliances and equipment specifically meant or adapted for use in
conjunction with the machinery specified in clause (i);
(iii) Mechanical and electrical control and transmission gear, meant or adapted for
use in conjunction with machinery specified in clause (i); and
(iv) Parts of machinery as specified in clauses (i), (ii) and (iii), identifiable for use
in or with
such machinery.
Conditions, restrictions and procedures:-
(a) the supplier of the machinery is registered under the Act;
(b) proper bill of export is filed showing registration number;
(c) the purchaser of the machinery is an established manufacturer located in the

Gwadar Free Zone and holds a certificate from the Gwadar Port Authority to that
effect;
(d) the purchaser submits an indemnity bond in proper form to the satisfaction of
the concerned Commissioner Inland Revenue that the machinery shall, without
prior permission from the said Commissioner, not be sold , transferred or
otherwise moved out of the Gwadar Free Zone before a period of five years from
the date of entry into the Zone;
(e) if the machinery is brought to tariff area of Pakistan outside Gwadar Free
Zone, sales tax shall be charged on the value assessed on the Goods Declaration
for import; and
(f) breach of any of the conditions specified herein shall attract legal action under
the relevant provisions of the Act, besides recovery of the amount of sales tax
along with default surcharge and penalties involved.
Sixth Schedule (Exempt Goods)

Table 1
The Bill has proposed certain explanatory words in entry no. 100A and its conditions which had
already been inserted through the Tax Laws (Amendment) Ordinance 2019 dated October 09,
2019. The amendments are to be retained through the Bill and applicable with effect from June
01, 2020:
The Bill has also proposed exemption of sales tax through insertion of the following entry which
has already been inserted through the Tax Laws (Amendment) Ordinance 2019 dated October 09,
2019. The amendments are to be retained through the Bill and applicable with effect from June
01, 2020:
63
Sr. No. Description

100D Machinery, equipment, materials and goods imported either for exclusive use
within the limits of Gwadar Free Zone, or for making exports therefrom, subject to
the conditions that such machinery, equipment, materials and goods, are
imported by investors of Gwadar Free Zone, and all the procedures, limitations
and restrictions as are applicable on such goods under the Customs Act, 1969 (Act
IV of 1969) and rules made thereunder shall, mutatis mutandis, apply. Provided
also that if any of such goods is taken out of the Zone for purpose other than the
export, the tax on the same shall be paid by the importer.
Exemption period extended (Table-1)
The Bill seeks to enhance the scope of time limit of exemption from the year 2020 to the year
2023 by amending entry no. 103 regarding import and supply of ships and all floating crafts
including tugs, dredgers, survey vessels and other specialized crafts purchased or bare-boat
chartered by a Pakistan entity and flying the Pakistan flag, except ships or crafts acquired for
demolition purposes or are designed or adapted for use for recreation or pleasure purposes,
subject to certain conditions
New Items Exempted (Table 1)
The Bill proposes to exempt sales tax on import of dietetic foods for children who are suffering
from inherent metabolic disorder by inserting following entry no. 154 in Table 1 of the Sixth
Schedule to the Act:
Sr. Description
No.
154 Dietetic foods intended for consumption by children suffering from inherent metabolic
disorder subject to the conditions that the importer shall acquire approval and quota
from Ministry of National Health Services, Regulations and Coordination.
Revisions in description of Items conditionally exempt (Table 3)
The Bill proposes to substitute description of items specified under entry no 15A of Table 3 as
under:
Sr.
Existing description Proposed description
No.
15A Parts and Components for Parts and Components for manufacturing
manufacturing LED lights:- LED lights:-
i. Aluminum Housing /shell for LED i. Housing /shell. Shell cover and base
(LED Lights Fixture) cap for all kinds of LED lights and
ii. Metal Clad Printed Circuit Boards bulbs
(MCPCB) for LED ii. Bare and stuffed Metal Clad Printed
Circuit Boards (MCPCB) for LED
iii. Constant Current Power Supply for
of LED Lights and Bulbs (1-300W) iii. Constant Current Power Supply for of
LED Lights and Bulbs (1-300W)
64
Sr.
Existing description Proposed description
No.
iv. Lenses for LED lights and bulbs iv. Lenses for LED lights and bulbs
Eighth Schedule (Goods subject to Specified rates)

Revision of sales tax rates - Table 1
The Bill has proposed to revise sales tax rates in respect of the following items in the serial no. 56
and 66 as under:
Entry. Description Sales Tax Rate

No. Existing Proposed
56 Potassium Chlorate 17% along with 17% along with
(KCLO3) Rs.70/KG Rs.80/KG
66 Supplies as made from retail outlets as are 14% 12%
integrated with Board’s computerized system for
realtime reporting of sales
Ninth Schedule
Modification in the description of goods/ specification of goods
 The Bill has proposed to revise description of the following categories of cellular mobile
phones or satellite phones as under:
Sr. Description Existing Proposed Description Sales tax on

No. Description of of Category import/ supply
Category and on IMEI
registration
2. Cellular mobile phones A. Not exceeding A. Not exceeding US$
or satellite phones to US$ 30 30 excluding smart Rs.130
be charged on the phones
basis of import value
per set, or equivalent B. Exceeding US$ B. Exceeding US$ 30
value in rupees in 30 but not but not exceeding Rs.200
case of supply by the exceeding US$ US$ 100 including
manufacturer, at the 100 smart phones
rate as indicated valuing upto US$ 30
against each category
65
Eleventh Schedule (Withholding of Sales Tax)

The Bill proposes to make amendments in Eleventh Schedule to the Sales Tax Act, 1990 by
amending description of suppliers’ categories. Through the proposed amendments, a registered
supplier not appearing in the Active Taxpayer’s list (ATL), shall be subject to 100% withholding
which is currently applicable only in case of unregistered supplier. The comparison of the change
in schedule is explained in the table below:
Sr. Withholding agent Existing Proposed Rate or extent of

supplier supplier deduction
category category
1. Federal and provincial government
departments; autonomous bodies; and
public sector organizations
Registered Active 1/5th of Sales Tax
(b) Companies as defined in the Income persons Taxpayers as
Tax Ordinance, 2001 (XLIX of 2001) shown on invoice
2. (a) Federal and provincial government
departments; autonomous bodies; and Person Active 1/10th of Sales Tax
public sector organizations registered Taxpayer as shown on invoice
as a registered as
(b) Companies as defined in the Income wholesaler, a wholesaler,
Tax Ordinance, 2001 (XLIX of 2001) dealer or dealer or
distributor distributor
3. Federal and provincial government Whole of the tax

departments; autonomous bodies; and involved or as
public sector organizations applicable to
supplies on the
basis of gross value
Persons other of supplies
Unregistered than Active
4. Companies as defined in the Income Tax Persons Taxpayers 5% of gross value
Ordinance, 2001 (XLIX of 2001) of supplies
6. Registered persons purchasing cane Whole of sales tax
molasses. applicable
Twelfth Schedule (Value Addition Tax)

The Bill seeks to substitute clause I of Twelfth Schedule for availing exemption against
applicability of Value Addition Tax (VAT) on import of raw materials and intermediary goods in the
following manner thereby eliminating the limit of maximum rate of customs duty of less than
16% and to restore such exemption for manufacturers for in-house consumption:
Existing clause Proposed substitution

Raw materials and intermediary goods meant for Raw materials and intermediary goods imported
use in an industrial process which are subject to by a manufacturer for in-house consumption
customs duty at a rate less than 16% ad valorem
under First Schedule to the Customs Act, 1969
66
Customs Act, 1969
1. Advance Ruling detention/confiscation has been

prescribed under the said section.
[Section 2(ai)]
Through insertion of proviso to the
At present, the definition of advance section 17, the Bill now proposes to
ruling refers to the classification as prescribe the period of
determined by the Board, any officer detention/confiscation whereby such
or a committee authorized by the period shall not exceed 15 days. The
Board for the assessment of goods Bill also proposes to grant powers to
intended to be imported or exported. the Chief Collector and Director
General who may extend the aforesaid
The Bill has proposed to substitute the period for further 15 days.
definition whereby the Advance Ruling
would now refer to a decision, to be
made in writing by the Board or any 4. Minimal duties not to be
officer or a committee authorized by demanded
Board, on the request by the applicant [Section 19C]
for determination of classification,
origin or applicability of a particular At present, Section 19C provides that
relief or exemption on goods prior to no duty shall demanded in case of
their importation or exportation, which imports where cumulative amounts of
would be valid for specified time. all duties and taxes on a Goods
Declaration are equal to or less than
2. Smuggle Rs. 100. The Bill seeks to revamp the
[Section 2(s)] threshold where value of imported
goods does not exceed Rs 5,000 then
Presently, the term ‘smuggle’ includes no duties and taxes shall be demanded
bringing into or taking out of Pakistan subject to certain conditions and
the prescribed goods in breach of any restrictions as prescribed by the Board
prohibition or restriction for the time under the rules.
being in force. The Bill proposes to
enhance the scope of the term 5. Allowing mutilation or
‘smuggle’ by virtue of which, carrying, scrapping of goods
transporting, removing, depositing,
harbouring, keeping and concealing of [Section 27A]
goods, would also be treated as
‘smuggle’. At present, goods those are imported,
at the request of the owner, can be
mutilated and scrapped as notified by
3. Detention, seizure and the Board and duty shall be charged at
confiscation of imported such rates as applicable on goods as if
goods which are prohibited they were imported in mutilated form
and as scrapped goods.
or restricted [Section 17]
The Bill proposes to insert a proviso
Section 17 provides for detention/ in the said section which provides
confiscation of goods imported in that goods imported in new condition
violation of provisions regarding shall not be allowed scrapping and
prohibition and restrictions, with the mutilation and shall be classified and
approval of the officer not below the chargeable to duty and taxes as new
rank of Assistant Collector. However, goods.
no time period for such
67
6. Fiscal Fraud whereby it requires the customs officer

to issue a notice to the importer
[Section 32A] through Customs Computerized
System in case of reassessment and
The Bill has proposed to enhance the provide the importer an opportunity of
scope of Fiscal fraud by introducing a being heard if importer so desires.
new clause whereby a person who
declares the value significantly higher
or lower than the actual price, that is, 8. Declaration by passenger or
the price actually paid or payable for crew of baggage
the goods when such goods are sold [Section 139]
for export to Pakistan, shall be treated
as guilty of fiscal fraud and that
proceedings may be initiated against A passenger or member of the crew
such person under this section subject being owner of the baggage is
to such conditions and limitations as required to make a verbal or written
prescribed by the Board under the declaration of contents of baggage in
rules. the prescribed manner to the
appropriate officer.
The Bill also proposes that in case of
an offence having no revenue Currently, under subsection (2) of the
implications but covered in the list of aforementioned section, in case of
offences provided in the section recovery or seizure subsequent to
37A(1), the person committing such false declaration or failure to declare,
offence shall be served with show offence is to be treated at par with
cause notice within a period of 180 smuggling.
days of detection of such fraud for
penal action. In order to differentiate general
passengers or crew at airport from
unscrupulous elements with the intent
7. Checking of goods of smuggling, the Bill proposes to
declaration by the Customs substitute the said subsection (2) as
[Section 80] per which now a passenger or a
member of the crew will be said as
guilty of an offence under Customs
Section 80 requires customs officer to Act, 1969 if he makes a false
satisfy himself regarding the declaration or fails to make such
correctness of the particulars of declaration.
imports, including declaration,
assessment, and in case of the The Bill also seeks to insert a new sub-
Customs Computerized System, section (3), with overriding effect over
payment of duty, taxes and other above substituted subsection (2).
charges thereon upon receipt of the According to the new sub-section, a
goods declaration which may be person shall be guilty of an offence of
reassessed in case of any document or smuggling who attempts to bring into
declaration filed is subsequently found or takes out of Pakistan, currency
incorrect. gold, precious metals or stones, in any
form, through concealment in baggage
Considering the requirement of “fair or circumventing customs controls at
notice” in dispensation of natural airports, sea-ports and land border
justice, the Bill seeks to insert a customs-stations.
proviso under the aforesaid section
68
9. Punishment for offences 11. Burden of proof as to lawful

[Section 156] authority etc.
[Section 187]
The Bill proposes to substitute sub-
serial (i) against serial no.8 in the
Table of section 156 through which Section 187 provides that where any
penalties for the offence of smuggling person who is alleged to have
of goods into or out of Pakistan have committed an offence under the Act
now been prescribed with reference to and in case any question arises
threshold of the value of goods (from whether he did any act or was in
Rs.150,000 to the amount in excess of possession of anything with lawful
Rs.10,000,000) besides confiscation of authority or under a permit, license or
the said goods in order to rationalize other document, the burden of proving
the punishments for smuggling of that he had such authority, permit,
goods in a cascading manner and to license or other document shall lie on
make them consistent with the COVID- him.
19 (Prevention of Smuggling)
Ordinance, 2020. The Bill proposes to insert a proviso
under the above section whereby
The Bill also seeks to substitute burden of proof is further imposed on
penalty for offence of smuggled or a person alleged to have committed an
prohibited goods comprising currency offence that any property owned by
and other precious items. him in his name or someone else’s
name, was not acquired from the
proceeds of such crime.
10. Power of adjudication
[Section 179 (3)] Further, the Bill also seeks to empower
the Board to prescribe rules for
forfeiture of such property by insertion
Currently, subsection (3) of section of second proviso to the section.
179 requires a customs officer to
decide cases involving confiscation of
goods or recovery of duty and other 12. Orders of Appellate Tribunal
taxes not levied, short levied or [Section 194B (1)]
erroneously refunded within a period
of 90 days of the issuance of show In terms of existing provisions of the
cause notice or within such extended above mentioned section, the
period of time not exceeding 60 days. Appellate Tribunal has to decide a case
within a period of 60 days of the filing
The Bill seeks to make an exception by of appeal or within such extended
inserting a proviso to the subsection period as the Tribunal may, for
(3). The new proviso curtails period of reasons to be recorded in writing, fix.
90 days for deciding the show cause
notice in cases where provisions of By inserting second proviso to the
smuggling are invoked, which is to be section, the Bill seeks to decrease the
decided within 30 days of the issuance aforesaid time of deciding the appeal
of show cause notice without any from 60 to 30 days for cases involving
powers to extend such period which is charges of smuggling for expeditious
currently available with the Collector disposal of smuggling cases.
for further 60 days.
69
13. Alternative Dispute Operations (AEOs), prescribed under

the relevant rules and to fulfill
Resolution Pakistan’s category-C commitment
[Section 195C] under WTO, Trade Facilitation
Agreement (TFA).
The Bills seeks to bring changes in
above law in similar lines as proposed 16. Advance ruling [Proposed
in income tax, sales tax and federal
excise law. section 212B]
14. Procedure for sale of goods In consonance with the proposed

amendment in the definition of the
and application of sale term ‘advance ruling’ and to define the
proceeds scope of “Advance Ruling”, the Bill
[Section 201 (3)] seeks to insert new section 212B
whereby an applicant desirous of
Where any goods (other than advance ruling may make an
confiscated goods) are to be sold in application stating any of question on
terms of the provisions of the Customs which advance ruling is sought in
Act, section 201 deals with procedure respect of:
for sale of such goods by public
auction or by tender or by private offer i. classification of goods under First
or, with the consent of the owner Schedule to the Act;
along with application of the sale
proceeds in the given order as ii. determination of origin of the
provided in the law with the residual goods under the rules of origin
amount of which paid to the owner of notified for bilateral and
the goods. multilateral agreements;
The Bill seeks to restrict the share of
importer (owner of the goods) in the iii. applicability of notifications issued
sale proceeds of such goods to the in respect of duties under this Act
extent of the declared value so as to or any tax or duty chargeable
discourage mis-declaration of value. under any other law for the time
being in force in the same manner
as duty of customs leviable under
15. Authorized economic this Act; or
operator programme
[Section 212A] iv. any other matter as the Board may
specify by notification in the official
This section empowers Federal Gazette.
Government to devise authorized
economic operator programme to The advance ruling shall be binding on
provide facilitations relating to secure the applicant and in case of customs
supply chains of imported and collectorates, such ruling shall be
exported goods through simplified binding for the period specified by the
procedures with regard to regulatory Board.
controls applicable thereon.
The Bill seeks to insert a non-obstante

subsection (3) under the above section
to provide legal cover to the benefits
granted to the Authorized Economic
70
First Schedule
1. The Bill proposes to introduce 0% Customs Duty on import of raw Tax
materials/industrial inputs. These items are listed as under:
CD (%)
PCT Code Description
(Existing) (Proposed)
2529.1000 Feldspar 3 0
2803.0030 Acetylene black 3 0
2827.1000 Ammonium chloride 3 0
2915.3200 Vinyl acetate 3 0
2917.1200 Adipic acid, its salts and esters 3 0
3806.1010 Gum Rosin 3 0
Pickling preparations for metal surfaces; soldering
brazing or welding powders and pastes consisting of 3 0
3810.1000 metal and other materials
Preparations of a kind used as cores or coatings for
3810.9010 welding electrodes or rods 3 0
Styrene acrylonitrile (SAN) copolymers
3903.2000 Other 3 0
3910.0000 Silicones in primary forms. 3 0

Refrigerated vessels, other than those of subheading
8901.3000 8901.20 11 0
Fishing vessels; factory ships and other vessels for
8902.0000 processing or preserving fishery products. 11 0
9013.8000 Other devices, appliances and instruments 3 0

9028.2000 Liquid meters 20 0
2. The Bill proposes to reduce Customs duty on following items.
CD (%)
2530.9030 Earth colours 11 3
2801.2000 Iodine 11 3
2801.3000 Fluorine; bromine 11 3
2811.1100 Hydrogen fluoride (hydrofluoride acid) 11 3
2811.1200 Hydrogen cyanide (hydrocyanic acid) 11 3
2811.1920 Phosphorous acid hypo phosphoric acid 11 3
2811.1990 Other 11 3
2812.1100 Carbonyl dichloride (phosgene) 11 3
2812.1200 Phosphorus oxychloride 11 3
2812.1300 Phosphorus trichloride; 11 3
2812.1400 Phosphorus pentachloride 11 3
2812.1500 Sulphur monochloride 11 3
71
CD (%)
2812.1600 Sulphur dichloride 11 3
2812.1700 Thionyl chloride 11 3
2812.1910 Arsenic trichloride 11 3
2812.1990 Other 11 3
2812.9000 Other 11 3
2813.1000 Carbon disulphide 11 3
2813.9000 Other 11 3
2816.1010 Magnesium hydroxide 11 3
2816.1090 Other 11 3
2821.1020 Iron hydroxides 11 3
2821.2000 Earth colours 11 3
2835.3900 Other 11 3
2836.9930 Bicarbonate of ammonium 11 3
2837.1100 Of sodium 11 3
2902.1920 Limonene(Dipentene) 11 3
2902.9010 Naphthalene 11 3
2903.9200 Hexachlorobenzene (ISO) and DDT (ISO) (clofenotane 11 3
(INN), 1,1,1-trichloro-2,2-bis(p-chlorophenyl)ethane)
2904.1010 Benzene sulphonic acid 11 3
2915.2100 Acetic acid 11 3
2915.7090 Other 11 3
2929.9020 N,N-Dialkyl(methyl, ethyl, n-propyl, or isopropyl) 11 3
phosphor amidic dihalides
2929.9030 Dialkyl(methyl, ethyl, n-propyl or isopropyl)N,N- 11 3
dialkyl (methyl, ethyl, n-propyl or
isopropyl)phosphoramidates
2929.9090 Other 11 3
2933.7990 Other 11 3
2933.9100 Alprazolam (INN), camazepam (INN), 11 3
chlordiazepoxide (INN), clonazepam (INN),
clorazepate, delorazepam (INN), diazepam (INN),
estazolam (INN), ethyl loflazepate (INN), fludiazepam
(INN), flunitrazepam (INN), flurazepam (INN),
halazepam (INN), lorazepam (INN), lormetazepam
(INN), mazindol (INN), medazepam (INN), midazolam
(INN), nimetazepam (INN), nitrazepam (INN),
nordazepam (INN), oxazepam (INN), pinazepam
(INN), prazepam (INN), pyrovalerone (INN),
temazepam (INN), tetrazepam (INN) and triazolam
(INN);salts thereof
2933.9200 Azinphos-methyl (ISO) 11 3
2934.1090 Other 11 3
2935.1000 N-Methylperfluorooctane sulphonamide 11 3
2935.2000 N-Ethylperfluorooctane sulphonamide 11 3
2935.3000 N-Ethyl-N-(2-hydroxyethyl) perfluorooctane 11 3
sulphonamide
2935.4000 N-(2-Hydroxyethyl)-N-methylperfluorooctane 11 3
sulphonamide
2935.5000 Other perfluorooctane sulphonamides 11 3
72
CD (%)
2939.6900 Other 11 3
2939.7900 Other 11 3
2939.8090 Other 11 3
3002.3000 Vaccines for veterinary medicine 11 3
3204.1110 Powdered* 3
3204.1710 Powdered 16 3
3205.0000 Colour lakes; preparations as specified in Note 3 to 11 3
this Chapter based on colour lakes.
3207.2000 Vitrifiable enamels and glazes, engobes (slips) and 11 3
similar preparations
3207.3000 Liquid lusters and similar preparations 11 3
3802.1000 Activated carbon 11 3
3802.9000 Other 11 3
3807.0000 Wood tar; wood tar oils; wood creosote; wood 11 3
naphtha; vegetable pitch; brewers' pitch and similar
preparations based on rosin, resin acids or on
vegetable pitch.
3824.8500 Containing 1,2,3,4,5,6-hexachlorocyclohexane (HCH 11 3
(ISO)), including lindane (ISO, INN)
3824.8600 Containing pentachlorobenzene (ISO) or 11 3
hexachlorobenzene (ISO)
3824.8700 Containing perfluorooctane sulphonic acid, its salts, 11 3
perfluorooctane sulphonamides, or perfluorooctane
sulphonyl fluoride
3824.8800 Containing tetra-, penta-, hexa-, hepta- or 11 3
octabromodiphenyl ethers
3824.9100 Mixtures and preparations consisting mainly of (5- 11 3
ethyl-2-methyl-2-oxido-1,3,2-dioxaphosphinan-5-
yl)methyl methyl methylphosphonate and bis[(5-
ethyl-2-methyl-2-oxido-1,3,2-dioxaphosphinan-5-
yl)methyl] methylphosphonate
3824.9920 Ion exchangers 11 3
3824.9930 Prepared binders 11 3
3824.9980 Chloroparaffins liquid 11 3
3909.3100 Poly(methylene phenyl isocyanate) (crude MDI, 20 3
polymeric MDI)
4005.1020 Sheets 11 3
4005.9100 Plates, sheets and strip 11 3
4804.2100 Unbleached 16 3
4804.2900 Other 16 3
4805.3000 Sulphite wrapping paper 11 3
4805.4000 Filter paper and paperboard 11 3
4809.2000 Self- copy paper 11 3
6903.1000 Containing by weight more than 50 % of graphite or 11 3
other carbon or of a mixture of these products
6903.2090 Other 11 3
7604.1010 Bars and rods 11 3
8007.0010 Tin plates, sheets and strip, of a thickness exceeding 11 3
0.2 mm.
73
CD (%)
8007.0020 Tin foil (whether or not printed or backed with paper, 11 3
paperboard, plastics or similar backing materials), of a
thickness (excluding any backing) not exceeding 0.2
mm; tin powders and flakes.
8410.1100 Of a power not exceeding 1,000 kW 11 3
8410.9010 For machines of heading 8410.1100 11 3
8412.8090 Other 11 3
8412.9090 Other 11 3
8413.8200 Liquid elevators 11 3
8413.9140 Other parts for machines of heading 8413.1100 11 3
8414.2000 Hand- or foot- operated air pumps 11 3
8424.2020 For industry 11 3
8425.4200 Other jacks and hoists, hydraulic 11 3
8504.9040 Toroidal cores and strips 11 3
8506.5000 Lithium 11 3
8535.2110 Up to 17.5 kV 20 3
8536.5010 Pressure switches 11 3
8539.9030 Base cap for tube light 11 3
8539.9090 Other 11 3
8543.1000 Particle accelerators 11 3
8543.2000 Signal generators 11 3
8901.2000 Tankers 11 3
9402.1010 Dentists' chairs 11 3
2710.1997 Transformer oil 16 11
3204.1120 Liquid* 11
3204.1720 Liquid 16 11
3204.1990 Dyes, synthetic 16 11
3212.9010 Aluminium paste and powder 16 11
3506.9110 Shoe adhesives 16 11
6903.9010 Refractory products of a kind used in industrial ovens, 16
11
kilns and furnaces
7613.0010 Aerosol cans without valves and covers 11 11
8481.1000 Pressure- reducing valves 16 11
8501.5210 Submersible motors of stainless steel 3 11
2707.5000 Other aromatic hydrocarbon mixtures of which 65 % 20 16
or more by volume (including losses) distils at 250oC
by the ISO 3405 method (equivalent to the aStM D 86
method)
2803.0020 Carbon black (other than rubber grade) 20 16
2915.1100 Formic acid 20 16
3202.9010 Tanning substances, tanning preparations based on 20
chromium sulphate 16
Disperse dyes and preparations based thereon:
3204.1790 Other 16 16
3403.1910 Greases 20 16
3911.1010 Petroleum resins 20 16
3921.1300 Of polyurethanes 20 16
4007.0010 Single cord 20 16
4007.0090 Other 20 16
74
CD (%)
7616.9920 Aluminium slugs 20 16
8308.9020 Buckle 20 16
8419.9020 Of machine of heading 8419.4000 and 8419.5000 16 16
8504.3100 Having a power handling capacity not exceeding 1 kVA 20 16
*these items also appear with same description and CD rate with different PCT Code.
3. The Bill seeks to levy Customs duty on the following items:
PCT code Description Rate

3903.9010 Styrene acrylic emulsion 11
3903.9090 Other 11
7326.1911 Forgings of crank shaft: ----Upto 10 Kg 11
7326.1919 Other 11
3204.1190 Other 16
4. The Bill has proposed to increase the rate of CD on following item:
CD (%)
9406.9100 Modular clean room panels 3 20
5. The Bill seeks to widen the scope of certain exemptions available to

imports by privileged persons, organizations and other dignitaries under
Chapter 99 of the First Schedule to the Act in the following manner:
PCT Exemption
Code
Existing Proposed
9903 Imports by Privileged personnel/ Imports by Privileged personnel/

organization: organization:
Goods imported by privileged personnel (i) Goods imported by privileged

or by organizations or by any person personnel or by organizations or by any
authorized by the contracting parties, person authorized by the contracting
under grant-in- aid agreements parties, under grant-in- aid agreements
(including those agreements which (including those agreements which cover
cover off budget foreign contributions or off budget foreign contributions or funds
funds brought by registered INGO’s brought by registered INGO’s without any
without any financial liabilities to the financial liabilities to the Government of
Government of Pakistan) signed by the Pakistan) signed by the Economic Affairs
Economic Affairs Division (EAD) and or Division (EAD) and or by any Ministry
by any Ministry authorized by the authorized by the Government of Pakistan
Government of Pakistan and duly
75
PCT Exemption
Code
Existing Proposed
concurred by the Federal Board of and duly concurred by the Federal Board of
Revenue (FBR) Revenue (FBR)
(ii) Goods imported by the foreign

airlines under Air Services Agreements
signed by the Aviation Division,
Cabinet Secretariat, Government of
Pakistan with other countries on the
basis of reciprocity and duly concurred
by the Federal Board of Revenue.
9917 (1) Goods imported into and exported (1) Goods imported into and exported
(except to tariff area of Pakistan) from (except to tariff area of Pakistan) from the
the Export Processing Zones established under
the Export Processing Zone Authority
Export Processing Zones established Ordinance, 1980 (IV of 1980) and any
under the Export Processing Zone enactment relating to Gwadar Special
Authority Economic Zone, subject to such conditions,
Ordinance, 1980 (IV of 1980) and any limitations and restrictions as the Federal
enactment relating to Gwadar Special Board of Revenue may impose from time to
time.
Economic Zone, subject to such
conditions, limitations and restrictions
as the (2) Capital goods, as defined in the
Federal Board of Revenue may impose preamble of Part-I of the Fifth Schedule to
from time to time. the Customs Act, and firefighting
equipment, except the items listed under
Chapter 87 of the Pakistan Customs Tariff,
imported for setting up of a Special
(2) Plant and machinery, except the Economic Zone (SEZ) by zone developers
items listed under Chapter 87 of the and for installation in that zone by Zone
Pakistan Enterprises, on one-time basis as
prescribed in the SEZ Act, 2012 and rules
Customs Tariff, imported for setting up
thereunder subject to such conditions,
of a Special Economic Zone (SEZ) by
limitations and restrictions as the Federal
zone
Board of Revenue may impose from time to
developers and for installation in that time. Co-developer as defined in
zone by Zone Enterprises, on one time Special Economic Zone Rules, 2013,
basis shall also be entitled to avail the same
incentives and exemptions for the
as prescribed in the SEZ Act, 2012 and same period as available to the
rules thereunder subject to such Developer under the SEZ Act 2020*,
conditions, subject to condition that the Developer
of the SEZ relinquishes its rights to the
76
PCT Exemption
Code
Existing Proposed
limitations and restrictions as the incentives and exemptions in favour of

Federal Board of Revenue may impose the Co-developer; provided further
from time that the respective Special Economic
Zone Authority duly endorses such
to time. reassignment, and ensures that such
reassignment shall not be misused.
(3) Following imports for construction,
development and operations of Gwadar *should be SEZ Act 2012
port
and Free Zone Area subject to such (3) Following imports for construction,
conditions, limitations and restrictions development and operations of Gwadar
as the port and Free Zone Area subject to such
conditions, limitations and restrictions as
Federal Board of Revenue may impose
the Federal Board of Revenue may impose
from time to time:-
from time to time: -
(i) Equipments and materials (plant,

(i) Equipments and materials (plant,
machinery, equipment, appliances and
machinery, equipment, appliances and
accessories), imported by the accessories), imported by the Concession
Concession holder, its operating holder, its operating companies including
companies and Gwadar International Terminals
Limited and Gwadar Marine Services
contractors/sub-contractors exclusively Limited*, and their contractors and sub-
for construction and operation of the contractors exclusively for construction and
operation of the terminals and the Free
terminals and the Free Zone Area for a
Zone Area for a period of forty (40) years;
period of forty (40) years;
(ii) Ship bunker oils imported by the

Concession holder for the sole purposes of
(ii) Ship bunker oils imported by the
supplying fuels and lubricants to all
Concession holder for the sole purposes
visiting ships including foreign and
of
local and fishing vessels at Gwadar
supplying fuels and lubricants to the Port for a period of forty (40) years;
ships used in the port and its terminals
for a period of forty (40) years; (iii)Vehicles imported by the concession
holder and its operating companies for a
period of twenty-three (23) years for
(iii)Vehicles imported by the concession construction, development and operations
holder and its operating companies for a of Gwadar Port and Free Zone Area under
the regulatory mechanism. The regulatory
mechanism for such vehicles, including the
number and types importable, shall be
devised by the Ministry of Port & Shipping
77
PCT Exemption
Code
Existing Proposed
period of twenty three (23) years for and FBR (in consultation with the Provincial
construction, development and Government if so required) and notified by
operations the FBR;
of Gwadar Port and Free Zone Area (iv) Imports by the following
under the regulatory mechanism. The businesses to be established in the
Gwadar Free Zone Area for a period of
regulatory mechanism for such vehicles, 23 years with effect from 1st July,
including the number and types 2016, packaging, distribution, stuffing
importable, shall be devised by the and de-stuffing, CFS, container yard,
Ministry of Port & Shipping and FBR (in warehousing including cool and cold
rooms, transhipment, labelling, light
consultation with the Provincial end assembly and re-assembly,
Government if so required) and notified imports and exports/value added
by the exports, value adding of imports, other
similar or related businesses activities
FBR; and such commercial activities as are
required to support the free zone.
*the amendment once approved will have

(iv) Imports for port-related businesses
retrospective effect from June 01, 2020.
established in the Free Zone Area for a
period of 23 years.
9925 Artificial kidneys, hemodialysis (A) Artificial kidneys, hemodialysis

machines, hemodialyzers, A.V. fistula machines, hemodialyzers, A.V. fistula
needles, needles, hemodialysis fluids and powder,
blood tubing tines for dialysis, reverse
hemodialysis fluids & powder, blood osmosis plants for dialysis, double lumen
tubing tines for dialysis, reverse catheter for dialysis, catheters for renal
osmosis plants failure patients, peritoneal dialysis solution
for dialysis, double lumen catheter for and cardiac catheters.
dialysis, catheters for renal failure (B) Following items and appliances for
patients, Ostomy use: -
peritoneal dialysis solution and cardiac 1. Baseplate/Stoma Wafer/Flange.
catheters. colostomy bags and 2. Ostomy (Colostomy/Ileostomy/
appliances Urostomy) bags (All type)
identifiable for Ostomy use. 3. Ostomy (Colostomy/Ileostomy/

Urostomy) Paste
4. Ostomy (Colostomy/Ileostomy/
Urostomy) Belt
Urostomy) Deodorizers
78
PCT Exemption
Code
Existing Proposed
6. Ostomy (Colostomy/ Ileostomy/

Urostomy) Strip Paste
7. Stoma Powder/Ostomy Powder
(Colostomy/Illeostomy/Urostomy
Powder/ Ileostomy/Urostomy
Powder)
Urostomy) Skin Barrier Spray and Wipe
Urostomy) Adhesive Remover Spray
and Wipe.
10. Ostomy
(Colostomy/Ileostomy/Urostomy)
Adhesive Spray & Wipe.
Urostomy) Mouldable Ring
Urostomy) Elastic Tape
Urostomy) Barrier Cream
Urostomy) Protective Sheets
Urostomy) Cap
Urostomy) Protective Seal
17. Plastic Clips for closing the Ostomy
bags.
18. Liquid washers and wipes for
cleaning and washing peristomal skin
19. Night Drainage Bag
20. Cystoscope
21. Lithotripter
22. Colonoscope
23. Sigmoidoscope
24. Laparoscope
25. Suprapubic Cystostomy Set
26. Ryles Tube (Nasogastric Tube)
27. Foley's Catheter
79
PCT Exemption
Code
Existing Proposed
28. Endoscope (Video Endoscopes)

29. Linear Cutter/Stapler
30. Circular Stapler
31. Right Angle Cutter/Stapler
32. Laparoscopic Hand Instruments:
a) Dissector
b) Grasper
c) Scissors
d) Clipper
e) Hook
f) Retractors
g) Needles Holders
h) Knot Pusher
i) Telescope (0o, 30o)
33. Urological Endoscopic Instruments:
(a) Resectoscope (Rotating and Fix)
(b) Optical Urethrotone
(c) Telescope (0o, 30o, 75o)
(d) Turp Resecting Loops
(e) Diathermy Cord
(C) Dietetic foods for medicinal

purposes, subject to submission of
provisional enlistment certificate duly
issued under the Drug Regulatory
Authority Act, 2012 (XXI of 2012), and
the rules made thereunder, by the
Drug Regulatory Authority of Pakistan.
9939 Diagnostic kits for HIV and Hepatitis Diagnostic kits for HIV, Hepatitis. Cancer
and Corona Virus
Fifth Schedule
Part-I
Imports of Plant, Machinery, Equipment and Apparatus, including Capital Goods for
various industries/sectors
The Bill proposes to enhance the meaning of capital goods given under Part-I of the Fifth
Schedule to include within its scope plant, machinery and equipment imported by the IT sector,
80
storage, communication and for infrastructure development of SEZs by Zone Developer whereby
a duty free import of such goods will be allowed to these sectors which is currently available to
other industries like mining, agriculture, fisheries etc.
The Bill also seeks to extend the period of exemption from CD on import of plant and machinery
for setting up of industries in erstwhile FATA areas from June 30, 2020 to June 30, 2023 under
serial number 26 of the table under Part-I.
In addition to above, the Bill proposes to reduce the rate of customs duty on items imported
under following PCT headings under table to the Part I subject to the condition mentioned against
the same.
Sr. Customs duty

Description PCT Code Condition
No. %
Existing Proposed
23 Parts, Components and If
inputs for manufacturing imported
LED lights: by LED
3810.9090 20 0 Light and
(ii) Pickling preparations Bulbs
for metal surfaces; manufactu
soldering brazing or 3907.7000 rers
welding powders and registered
pastes consisting of metal 20 0 under the
and other materials Sales Tax
Act, 1990
(iii) Poly Butylene subject to
Terephthalate annual
quota
determinat
ion by the
Input
Output
Coefficient
Organizati
on
(IOCO).
36 Machinery, equipment and
other project related items
for setting up of
Submarine Cable Landing
stations
(i) Tubes Pipes and 7303.0000 0 If
hollow profiles of 20 imported
cast iron by
(ii) Articles of non- 7325.1000 Internet
20
malleable cast iron Service
(iii) Static Converters 8504.4090 providers
16 registered
(iv) Machines for the 8517.6290 under the
reception, 16 Sales Tax
conversion and Act 1990,
81
Sr. Customs duty

Description PCT Code Condition
No. %
Existing Proposed
transmission or duly
regeneration of certified
voice, images or by the
other data, Ministry of
including Informatio
switching and n
routing apparatus Technolog
(v) Optical fiber 8544.7000 y and
Cables Telecomm
unication
and
Pakistan
Telecomm
unication
Authority
(PTA), and
subject to
20 annual
quota
determinat
ion by the
Input
Output
Co-
efficient
Organizati
on
(IOCO).
37 Other Electric Conductors If imported by
exceeding 32000 V manufacturers of
transformers,
8544.6090 20 11
registered under
the Sales Tax Act
1990.
Part-II
Import of Active Pharmaceutical Ingredients, Excipients/Chemicals, Drugs, Packing

Material/ Raw Materials for Packing and Diagnostic Kits and Equipment, Components
and other Goods
The Bill proposes to reduce customs duty from 11% to 0% on “Meglumine antimonite” under PCT
heading ‘3004.9099’ without any applicable condition under Table C of Part-II.
Part-III
Ships and Floating crafts, Nashir-e-Quran, Raw Materials/Inputs for Poultry and Textile
Sector; Other Goods
82
The Bill seeks to extend the period of exemption from CD on import of Ships and other floating
crafts including tugs, survey vessels and other specialized crafts purchased or bare-boat
chartered by a Pakistani entity and flying Pakistani flag from June 30, 2020 to June 30, 2030
under serial number 105 of the table under Part-III.
The Bill proposes to allow exemption for those Nashir-e-Quran who do not have their own in-
house printing facility in respect of paper of certain specification imported for printing of Holy
Quran subject to certain conditions.
The Bill proposes to further reduce rate of customs duty on import of following goods under Part-
III as given hereunder:
Sr. Customs duty

Description PCT Code
No. %
Existing Proposed
96 (i) Coils of aluminium alloys 7606.9290 5 0
109 (i) Other craft paper 4804.3900 16 15
116 (xiii) Glass board for manufacturing TV
panels (LCD, LED, OLED, HDI etc.) 8529.9090 10 0
Besides above, the Bill proposes to insert the following entries under Part-III for granting reduced
rate of CD:
Sr. Description PCT Code Customs duty Condition

No. %
Existing Propos
under First ed
Schedule
119 Organic 3814.0000 20 5 If imported by
composite manufacturers of
solvents and Butyl Acetate
thinners, not registered under the
elsewhere Sales Tax Act 1990,
specified or subject to annual
included; quota determination
prepared paint by Input Output Co-
or varnish efficient Organization
removers. (IOCO).
120 Semi-finished 7207.1110 11 5 If imported by

products of 7207.1190 manufacturers of
Iron or non- 7207.1210 Wire Rods registered
alloy steel 7207.1290 under the Sales Tax
7207.1910 Act 1990, subject to
7207.1920 annual quota
7207.1990 determination by
7207.2010 Input Output Co-
7207.2020 efficient Organization
7207.2090 (IOCO).
83

No. %
Existing Propos
under First ed
Schedule
121 Plasticised 3904.2200 20 0 If imported by
(Poly Vinyl manufacturers of
Chloride) disposable syringes
and saline infusion
sets, registered
under the Sales Tax
Act 1990, subject to
annual quota
determination by
Input Output Co-
efficient Organization
(IOCO).
122 Other 3907.9100 20 0 If imported by

unsaturated manufacturers of
Polyesters buttons, registered
under the Sales Tax
Act 1990, subject to
annual quota
determination by
Input Output Co-
efficient Organization
(IOCO).
If imported by
manufacturers of
interlining/ buckram,
registered under the
Sales Tax Act 1990,
subject to annual quota
Other saturated determination by Input
123 3907.9900 20 5
Polyesters Output Co-efficient
Organization (IOCO).
(i) Skimmed
124 0402.1000 20 0 If imported by
milk powder
manufacturers of Ready
(ii) Chickpeas 0713.2010 3
to Use Supplementary
(iii) Soyabean Foods (RUSF), duly
1507.9000 Rs 11700MT
oil authorized by United
(iv) Palm Olein 1511.9030 Rs 9050MT Nations World Food
Program (UNWFP) and
(v) subject to annual quota
Hydrogenated 1516.2010 Rs 10200MT determination by Input
vegetable fats
84

No. %
Existing Propos
under First ed
Schedule
(vi) Malto Output Co-efficient
1702.9030 11
dextrins Organization (IOCO).
(vii) Premixes of
vitamins and 2106.9090 20
minerals
(viii) Emulsifier 3404.9090 11
(ix) Antioxidant 3824.9999 11
Part-VI
Imports of Aviation Related Goods i.e. Aircrafts and Parts etc. by Airline
Companies/Industry under National Aviation Policy 2015
The Bill seeks to provide incentive on the import of Aircraft engine classified under PCT heading
‘8407.1000’ by further decreasing already reduced rate of 3% under first schedule to 0% under
serial number 7 of the Part-VI of fifth schedule with the condition that same is used in aircraft
and trainer aircraft.
85
Federal Excise Act, 2005
1. Adjustment of Duties of The Bill now proposes to substitute the

aforesaid sub-section to exclude un-
Excise [Section 6] manufactured tobacco from the ambit of
this section. The scope of power to seize
The Bill proposes to amend Section 6 to goods is proposed to be extended to all
empower Board to restrict adjustment of other dutiable goods, in addition to
input FED on materials wastage. Similar counterfeited cigarettes or beverages
amendment has been proposed in Section 7 manufactured unlawfully.
‘Determination of tax liability’ of the Sales
Tax Act, 1990 which has been discussed in 4. Confiscation of cigarettes,
detail in sales tax section of this un-manufactured tobacco or
commentary and is therefore not being
discussed separately in this section. beverages [Section 27]
At present, section 27 only covers

2. Power to Tax Authorities cigarettes, un-manufactured tobacco or
[Section 14C] beverages, which if seized for the reason of
counterfeiting, to be confiscated. The Bill
The Bill proposes insertion of Section 14C in now seeks to include all goods subject to
the FE Act whereby the judgment of High Federal Excise Duty in order to broaden the
Court and Appellate Tribunal deciding a scope of confiscation on account of
question of law in case of a registered counterfeiting.
person, are binding on Commissioner.
Similar proposition has been made through 5. Appeals to the
insertion of Section 11C of the Sales Tax
Act, 1990 which has been discussed in Commissioner Appeals
detail in sales tax section of this [Section 33]
commentary and is therefore not being
discussed separately in this section. The Bill proposes amendment in Section 33
However, the date of above referred of the FE Act whereby provisions regarding
decision of Appellate Tribunal or High Court, Appeal form filing, prescribed fee and
in this case, shall not be prior to July 01, restriction regarding consideration of
2005. documents not previously submitted by the
registered person, have been discussed.
3. Power to Seize [Section 26] Similar propositions have been made
through amendment in Section 45B of the
At present, subsection (1) of section 26 Sales Tax Act, 1990 which have been
provides that counterfeited cigarettes or discussed in detail in sales tax section of
beverages and cigarettes, un-manufactured this commentary and is therefore not being
tobacco or beverages which have been discussed separately in this section.
manufactured unlawfully or on which duty
has not been paid, shall be liable to seizure 6. Appeals to Appellate
besides the conveyance which has been
used for the movement, carriage or Tribunal [Section 34(3)]
transportation of such goods.
The Bill proposes to reinstate previously
omitted sub section 2A of Section 34 by
86
renumbering the same as sub section (3) of electronically through email or to the e-
Section 34. By virtue of said proposed folder maintained for the purposes of e-
reinstatement, it is proposed that the filing of sales tax-cum-Federal excise
Appellate Tribunal may admit, hear and returns by the public and private limited
dispose an appeal in accordance with companies only.
section 131 and 132 of the Income Tax
Ordinance, 2001. The Bill seeks to broaden the service of
such notices and other documents in case
7. Alternative Dispute of other registered persons as well by
substituting the words ‘limited companies,
Resolution [Section 38] both public and private’ with ‘registered
Similar amendments regarding ADRC person’.
provisions have been proposed in Section
134A ‘Alternative Dispute Resolution’ of the 11. Real-time access to
Income Tax Ordinance, 2001 which have information and databases
been discussed in detail in income tax
section of this commentary and is therefore
[Section 47AB]
not being discussed separately in this Similar proposition has been made through
section insertion of Section 175A ‘Real-time access
to information and databases’ of the
8. Selection for audit by the Income Tax Ordinance, 2001 which has
Board [Section 42B] been discussed in detail in income tax
section of this commentary and is therefore
The Board, at present, can select a person not being discussed separately in this
or class of persons for audit through section.
computerized balloting which may be
random parametric as the Board deem fit.
The Bill seeks to require the Board to keep
such parameters confidential.
9. Audit [Section 46]

By virtue of insertion of sub-section (10)
into section 46 vide Finance Act, 2018,
audit of a registered person under section
46 can only be conducted once in every 3
years. The Bill has proposed to abolish this
condition through omission of sub-section
(10), consequent to which such person can
again be selected for audit under this
section every year.
10. Services of notices and

other documents [Section
47]
At present, notices and other documents
are treated to be served if sent
87
FIRST SCHEDULE
a) The Bill proposes to introduce FED on the following items, namely:
Heading / Sub- Rate of Duty

Sr. No. Description of Goods
Heading Number proposed
6a. Caffeinated energy drinks 2202.1010 25% of the retail
2202.9900 price
8a. E-liquids by whatsoever name Respective heading Rs. 10 per ml

called, for electric cigarette
kits
55C. Imported double cabin (4x4) 8704.2190 25% ad val
pick-up vehicles 8704.3190
55D. Locally manufactured double 8704.2190 7.5% an val
cabin (4x4) pick-up vehicles 8704.3190
b) The Bill proposes to bring changes in FED rates for the following items, namely:
Heading / Sub-
Existing FED Proposed
Sr. No. Description of Goods Heading
rate FED Rate
Number
8. Cigars, cheroots, cigarillos 24.02 65% of retail 100% of retail
and cigarettes of *tobacco price price
and tobacco substitutes
13. Portland cement, aluminous 25.23 Rs. 2 per KG Rs. 1.75 per
cement, slag cement, super KG
sulphate cement and similar
hydraulic cements, whether
or not colored or in the form
of clinkers
56. Filter rod for cigarettes 5502.0090 Rs. 0.75 per Rs. 1 per filter
filter rod rob
*(through substitution, tobacco substitutes has been proposed to be replaced with tobacco and tobacco substitutes)
88
Comments on Tax Laws (Amendment)

Ordinance, now part of Finance Bill
2020
1. Definition of “Industrial ‘Builder’ means a person who is registered
as a builder with the Board and is engaged
Undertaking” [Section in the construction and disposal of
2(29C)] residential and commercial buildings.
As part of Government’s commitment to
‘Capital Investment’ means investment as
grant the status of Industry to the real
equity resources and does not include
estate and construction, the definition of an
borrowed funds.
Industrial Undertaking has been amended to
include the following:
‘Developer’ means a person who is
registered as a developer with the Board and
“From the 1st day of May 2020, a person
is engaged in the development of land in the
directly involved in the construction of
form of plots of any kind either for itself or
buildings, roads, bridges and other such
otherwise.
structures or the development of land, to the
extent and for the purpose of import of plant
‘Existing project’ means a construction or
and machinery to be utilized in such activity,
development project, which
subject to such conditions as may be notified
by the Board”.
(i) has commenced before the date of
commencement of the Tax Laws
Presently, Companies other than involved in
(Amendment) Ordinance, 2020 i.e. April
the business of real estate and construction
16, 2020;
sector can apply for exemption certificate for
non-collection of advance tax under section (ii) is incomplete;
148 of the Ordinance at the import stage.
Consequent to aforesaid amendment, real (iii) is completed on or before the 30th day
estate and construction sector may apply for of September, 2022; and
exemption certificate subject to the
(iv) a declaration is provided in the
conditions are met as outlined in the
registration form under Eleventh
relevant SROs.
Schedule to the effect of percentage of
the project completed up to the last day
Further, companies operating in real estate
of the accounting period pertaining to
and construction sector may also entitled to
tax year 2019.
claim tax credit available under section 65D
of the 2001, Ordinance, if they do not opt to
‘First purchaser’ means a person who
be taxed under newly introduced Eleventh
purchases a building or a unit, as the case
Schedule.
may be, directly from the builder and does
not include a subsequent or a substituted
2. Special Provisions relating purchaser;
to Developers & Builders
[Section 100D] ‘new project’ means a construction or
development project, which –
Section 100D has been introduced entailing
the special provisions relating to taxation of (i) is commenced during the period
Developers and Builders deriving income starting from the date of
from sale of plots and buildings both commencement of the Tax Laws
commercial and residential. (Amendment) Ordinance, 2020 and
ending on the 31st day of December,
2.1 Key Definitions for section 2020; and
100D
(ii) is completed on or before the 30th day
The Ordinance introduces the following of September, 2022.
definitions under section 100D:
89
‘Project’ means a project for construction expenditure incurred in deriving

of a building with the object of disposal, or a the income;
project for development of land into plots
with the object of disposal or otherwise; (iii) the amount of the income shall not
be reduced by (any deductible
‘registered with the Board’ means allowance e.g. Zakat or the set off
registered after submission of form on of any loss;
project-by-project basis on the online IRIS
web portal; (iv) no tax credit shall be allowed
against the tax payable under this
2.2 New Fixed Tax Regime regime except credit for tax under
section 236K collected from the
(a) Income and Projects Covered builder or developer after the
commencement of the Tax Laws
The Ordinance introduces optional (Amendment) Ordinance, 2020 on
‘Fixed tax regime’ from tax year 2020 purchase of immoveable property
and onwards for eligible builders and utilized in a project;
developers on a project by project basis (v) there shall be no refund of any tax
on the income, profits and gains collected or deducted under the
derived from the sale of buildings or Ordinance;
sale of plots, from
(vi) if the tax payable has not been
(a) a new project to be completed by paid or short paid, the said
the 30th day of September, 2022; amount of tax may be recovered
or and all the provisions of the
Ordinance shall apply accordingly;
(b) an incomplete existing project to and
be completed by the 30th day of
September, 2022: (vii) sections 113 and 113C shall not
apply on the turnover, income,
Any income, profits and gains of a profits and gains of a builder or
builder or developer of an incomplete developer from a project.
existing project earned up to tax year
2019 and any other income for tax year
2020 and onwards that is not liable to
be taxed under this section will be
taxed according to existing provisions
of law.
(b) Features of new regime
(i) the income shall not be chargeable

to tax under any head of income in
computing the taxable income of
the person;
(ii) no deduction shall be allowed

under the Ordinance for any
90
3. Tax Amnesty on catalyst to increase economic activity in the

country thereby improving employment
Investment in Construction opportunities as number of sub-sectors and
Sector small and medium size industries are
associated with construction industry.
In order to stimulate investment in real
estate and construction sector, a no- The newly introduced scheme provides
questions-asked amnesty has been immunity from the provisions of section 111
introduced. Both previous and current of the Ordinance , and no questions will be
federal governments have launched tax asked regarding source of funds from
amnesty schemes in 2018 and 2019, albeit investors making capital investment in new
the scope of this scheme is limited to construction projects in the form of money
investment made in construction sector only. or land, either as an individual, as an
The proponent of this particular amnesty association of persons or a company, subject
scheme argues that this would act as a to conditions as explained below.
Type of Investment
Conditions
Investor Mode
Individual Monetary Investor shall open a new bank account and deposit such
amount in it on or before the 31st day of December, 2020
Land Investor shall have the ownership title of the land at the
time of commencement of the Tax Laws (Amendment)
Ordinance, 2020
Corporate Monetary Such amount shall be invested through a crossed banking

shareholder / instrument deposited in the bank account of such
Partner association of persons or company, as the case may be, on
or before the 31st day of December, 2020
Land Such land shall be transferred to such association of

persons or company, as the case may be, on or before the
31st day of December, 2020. Provided that the person shall
have the ownership title of the land at the time of
commencement of the Tax Laws (Amendment) Ordinance,
2020
Registration: The Company or AOP shall be a single object

company duly registered under the Companies Act, 2017 or
Partnership Act, 1932 as the case may be.
Additional conditions to be met  The investments made shall be wholly

utilized in a project.
 Prescribed IRIS form shall be submitted
by the person making investment.  Grey structure in case of builders and
landscaping in case of developers have
 been completed on or before
September 30, 2022, and duly certified
91
by NESPAK or respective map incurred as certified by prescribed

approving authority. Chartered Accountants firm, with the
exception of legal transmission to heirs.
 Further, for land developer, the
following additional conditions should  Inclusion of partners or shareholders
be met; after December 31, 2020 is
permissible; however, such investors
- 50% of plots have been booked for
shall not be eligible to avail tax
sale and 40% of sale proceeds
amnesty.
thereof have been received by
September 30, 2022 as duly
certified by specified chartered Amnesty to the purchaser
accountancy firm.
Provisions of section 111 shall also not apply
- 50% of the project roads have to:
been laid upto sub-grade level as
duly certified by NESPAK.  the first purchaser of a building or a
unit in the building in respect of the
 The value or price of the land or purchase price both in case of new
building shall be higher of project or existing incomplete project
where payment is routed through
a) 130% of FBR assessed fair market
crossed banking instrument between
value; or
the date of registration of project with
b) At the option of person making the FBR and September 30, 2022.
investment, lower of the value
determined by at least two  The purchaser of plot for building
independent SBP approved construction where the purchase, the
valuers. payment thereof and commencement of
construction has been made on or
Exclusion before December 31, 2020 subject to
construction completion by September
The following incomes or persons are 30, 2022 and subject to registration of
excluded from the relief provided under the such purchaser with FBR on IRIS portal.
amnesty scheme:
Thus no questions would be asked from the
 Holder of public office, benamidar or his purchaser of building or plot regarding
spouse or dependents; or source of funds who complies with the above
mentioned conditions.
 Public Listed Company, real estate
investment trust or any company 4. Additional Reliefs Allowed
whose income is exempt under the
Ordinance.
Advance Tax on Auction Sale
 Proceeds of crime including money [Division VIII Part IV 1 st
laundering, terror financing excluding Schedule]
tax evasion.
Reduced rate of advance tax of 5% has been
Restriction of Ownership introduced for sale of immovable property
Changes through auction.
 Under the new amnesty, no change in Reduction in Tax Liability for Low
ownership shall be allowed for Cost Housing [Clause 9A Part III
incomplete projects except where 50% 1st Schedule]
cumulative cost on the project has been
92
In pursuance of the government’s policy to (a) in case of a commercial or a

exploit the demand gap in the urban housing residential building excluding a
sector of Pakistan, the federal government house, the saleable area of the
launched its flagship “Naya Pakistan Housing building; and
Project” to undertake low cost housing
initiatives. (b) in case of a house, the covered
area of house;
Any tax payable on the income, profits and
gains of projects of low cost housing under (ii) in case of a developer, the total
NAYA Pakistan Housing & Development land area of the project.
Authority or EHSAAS programme shall be
reduced by 90%. ‘building’ means a residential or commercial
building or unit thereof.
Exemption of Capital Gains Tax
[Clause 114AA Part I 2nd Schedule] ‘commercial building’ includes any
building or part thereof which is to be used
Capital gains derived by resident individual for commercial purposes in accordance with
on residential property not exceeding 500 the relevant laws;
sq. yards in case of house or 4000 sq. feet
in-case of flat, that is used by such ‘commencement of project’ means,–
individual or his / her spouse or dependents
for personal accommodation and the related (i) in case of a construction project, when
utility bills are issued in the name of such layout plan is approved by the
individual shall be exempt. concerned authority; and
Provided that exemption has not been (ii) in case of a development project, when
availed previously by such individual or his / the development plan is approved by
her spouse or dependents with respect to the concerned authority:
Cessation of Capital Value Tax Provided that where the builder or developer
has taken all actions and done all things
Collection of Capital Value Tax stands ceased which are required and necessary to procure
effective 17 April 2020 with respect to assets any approvals but any such approval is
or a right to use for 20 years acquired delayed beyond a period of 30 days from
thereafter. date of relevant application and the cutoff
date of 31st day of December, 2020 is not
5. Eleventh Schedule to the adhered to by the builder or developer, the
Board may provisionally accept
Ordinance commencement of such project on a case to
case basis
Eleventh Schedule is introduced providing
for the computation of income and tax ‘completion of project’ means. –
payable thereon as derived by developers
and builders on Project-by-Project basis. (i) in the case of a builder, the date on
which the grey structure is completed:
I. Key Definitions
(ii) in the case of a developer, the date on
Following terms have been defined in the which –
Eleventh Schedule: (A) at least 50% of the total plots
‘area’ means have been booked in name of
buyers;
(i) in case of a builder, –
93
(B) at least 40% of the sale proceeds II. Tax on Builders

have been received;
Commercial Residential
(C) landscaping has been completed; Buildings Buildings
and Rupees. / Rate /
(D) at least 50% of the roads have Area Sq. Ft. Sq. Ft.
been laid up to sub-grade level as Any size Upto Others
certified by the approving 3000
authority or NESPAK; Sq. Ft.
Provided that such grey structure shall only Karachi, Lahore &
250 80 125
be considered as completed when the roof of Islamabad
the top floor has been laid as per the
approved plan; Hyderabad, Sukkur,
Multan, Faisalabad,
'Low cost housing' means a housing Rawalpindi,
scheme as developed or approved by Gujranwala, 230 65 110
NAPHDA or under the ‘Ehsaas Programme’; Sahiwal, Peshawar,
Mardan,
‘NAPHDA’ means Naya Pakistan Housing Abbottabad, Quetta
and Development Authority;
Urban areas not
‘NESPAK’ means National Engineering 210 50 100
specified above
Services Pakistan (Private) Limited;
III.Tax on Developers
‘residential building’ means a building
which is not a commercial building but does For
not include buildings used for industrial Entire
Development
purposes; Projects
of Industrial
Area Rupees. / Area
‘saleable area’ in case of buildings, means Sq. Yd.
Rate / Sq. Yd.
saleable area as determined by the
approving authority or map approving Any size Any Size
authority or NESPAK under the relevant Karachi, Lahore &
laws; 150 20
Islamabad
‘unit’ means a self-contained or independent Hyderabad,

building or part thereof including houses, Sukkur, Multan,
apartments, shops, offices, etc. Faisalabad,
Rawalpindi,
I. Tax Rates under Fixed Tax Gujranwala, 130 20
regime Sahiwal,
Peshawar, Mardan,
Newly introduced Eleventh Schedule Abbottabad,
provides following fixed tax rates based Quetta
on covered area to be computed on
Urban areas not
project by project basis: 100 10
specified above
 These rates shall be applicable for

computing tax liability for the project
94
on annual basis. The annual tax liability form alongwith an irrevocable option to
shall be worked out as under: be assessed under this Schedule in
Tax liability as per the rates in rule 10 / respect of each project. A developer
Estimated project life in years who is also a builder in case of a project
shall submit two separate forms for
 The estimated project life for tax registration as a developer and as a
purposes shall not exceed two and a builder.
half years. In case of existing
incomplete projects, the estimated A builder or developer availing this
project life shall be treated as three scheme shall electronically file a return
years from tax year 2020 through tax of income and wealth statement as may
year 2022, and the tax payable shall be be prescribed accompanied with
reduced by the percentage of evidence of payment of due tax which
completion up to the last day of the shall be taken for all purposes of the
accounting period pertaining to tax year Ordinance to be an assessment order
2019 as declared in registration form. issued to the taxpayer by the
Commissioner to the extent of income
 Tax liability of tax year 2020 shall be computed under these rules.
paid along with return.
Every builder or developer shall be
 Year shall include fraction of a year; required to obtain and provide to the
and Board in the prescribed manner a
certificate from approving authority or
 The tax liability so calculated and paid map approving authority or NESPAK,
shall be final tax. following details:
 Quarterly advance tax equivalent to one (a) ‘total land area’ in square yards;
fourth of the tax liability shall be (b) ‘covered area’ in square feet;
payable in four equal installments on (c) ‘saleable area’ in square feet; and
dates as prescribed under section 147 (d) type (commercial, residential or
of the Ordinance. industrial) of saleable area or the
total land area, as the case may
 In case of mixed use buildings having be.
both commercial and residential areas,
respective rates mentioned above shall (ii) Incorporation of profits and
apply. gains for computation of
income. –
 In case of development of plots and
constructing buildings on the same A builder or developer opting for
plots as one project, both rates shall taxation under section 100D shall not
apply: Provided that in the case of ‘low be allowed to incorporate profits and
cost housing’ and all projects developed gains in its books of accounts accruing
by NAPHDA, the higher rates shall from such projects (including
apply. incorporate profits and gains accruing
from a low cost housing project) in
(i) Registration and Certification excess of ten times of the tax paid
requirements under this regime.
A builder or developer shall

(iii) Exemption from certain
electronically register a project on IRIS
withholding tax provisions
through FBR website on or before the
31st day of December, 2020 through
submission of prescribed registration
95
Eligible Developers and Builders shall

be exempted from withholding taxes on
purchase of building materials under
section 153 of the Ordinance except for
the following:
 Steel & cement;
 Plumbing, electrification,
shuttering and related services
provided by companies.
Dividend income paid to a person by a

builder or developer being a company
out of the profits and gains derived
from a project shall be exempt from tax
in the hands of such person and also
from tax withholding obligations under
section 150.
96
Petroleum Products
Surcharge Ordinance, 1961
Powers to grant exemption from payment, authorise refund and

procedure for collection and refund of Petroleum Levy
[Section 3A]
As per current provisions of the Ordinance Petroleum Levy in respect of petroleum products is
collected in the same manner as duty of excise leviable under Federal Excise Act, 2005. In addition to
this, the Bill proposes amendment in section 3A(2) of the Ordinance to include the collection of
Petroleum Levy in the same manner as general sales tax payable under the Sales Tax Act, 1990.
Besides current provisions of Customs Act, 1969 and Federal Excise Act, 2005 applicable in respect of
the levy, collection and refund of the Petroleum Levy, the Bill seeks to amend subsection (3) whereby
provisions of Sales Tax Act, 1990 will also apply in relation to the said levy, collection and refund of
the Petroleum Levy.
97
Contacts
For more information you may contact
Shoaib Ghazi Zubair Abdul Sattar Rana Muhammad Usman Khan

Chief Executive Officer Partner Tax & Legal Partner
Email: sghazi@deloitte.com Karachi office Lahore office
Email: zsattar@deloitte.com Email: rmukhan@deloitte.com
Atif Mufassir Arshad Mehmood Farrukh Jamil

Partner - National Leader Tax & Legal Partner Tax & Legal Executive Director Tax & Legal
Email: amufassir@deloitte.com Karachi office Islamabad office
Email: amehmood@deloitte.com Email: fjamil@deloitte.com
Muhammad Shahzad Hussain
Director – Business Process Solutions
Tax & Legal
Email: muhahussain@deloitte.com
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Budget 2020 21 Highlights Comments Deloittepk Noexp

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Budget 2020 21 Highlights Comments Deloittepk Noexp

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Budget 2020 - 21 | Highlights & Comments

This memorandum contains an economic review, highlights

Amendments proposed in the Finance Bill, 2020 will take

Deloitte Yousuf Adil accepts no duty of care or liability for

The memorandum can also be accessed on our Website.

Highlights of Important Fiscal Proposals 17

Significant Amendments Proposed In

Income Tax Ordinance, 2001 28

Sales Tax Act, 1990 59

Customs Act, 1969 67

Federal Excise Act, 2005 86

Comments on Tax Laws (Amendment) Ordinance, 2020 89

Petroleum Products Surcharge Ordinance, 1961 97

(Budget) (Revised Budget)

Tax revenue 5,464 4,208

Non-tax revenue 1,108 1,296

Gross revenue receipts 6,572 5,504

Public account receipt – net 215 421

Total receipts 6,787 5,925

Less: Provincial share in Federal taxes (2,873) (2,402)

Net revenue receipts 3,914 3,523

Current expenditure (7,836) (7,586)

Development expenditure (950) (759)

Deficit 4,872 4,822

Capital receipts 1,327 756

Credit from banking sector 979 1,724

External receipts 2,224 2,272

Privatization proceeds 100 150

Cash balance built up by provinces 242 (80)

Financing of deficit 4,872 4,822

Source: Annual Budget Statement, 2020-21

Source: Annual Budget Statement, 2019-20

Economic Review 2019-20

Source: Economic Survey 2019-20, Ministry of Finance

Source: Economic Survey 2019-20, Ministry of Finance

Source: Economic Survey 2019-20, Ministry of Finance

Current Account Deficit

Import Export Trade Deficit

Source: Economic data, SBP

Domestic Currency Debt Foreign Currency Debt Debt to GDP Ratio

Source: Economic Survey 2019-20, Ministry of Finance

Source: Economic Survey 2019-20, Ministry of Finance and SBP

Budget overview 2020-21

Key highlights of budget FY21

 Rs. 40 billion have been earmarked for Pakistan Railways

Income tax of Pakistan after November 15, 2019 is

10. Threshold of Rs.2.5 million is return, where such revision is because

in respect of payments to non-resident 65. Exemption from income tax to the

74. Exemption granted to Hajj Operations

to prescribe the mechanism for unregistered persons, the invoices of

Sales Tax 8. Provision identical to Section 124A of

2. Definition of output tax is proposed to 9. Threshold for registered retailers

5. Section 3(7) to be amended to include 13. Failure to provide real-time access by

15. Documentary material or evidence not

4. The Board is to keep the parameters

21. Exemption from value addition tax of

9. FED on filter rod for cigarettes is

interlining/buckram, wire rod and

and exemptions in favour of the Co-