- Advertisement -
ISLAMABAD, Jun 10 (APP):Following are the proposed budgetary measures pertaining to the Sale Tax and Federal Excise Duty (FED) for FY 2025-26.
Sales Tax measures:
DEFINITION OF CARGO TRACKING SYSTEM & E-BILTY:
The definition of the Cargo Tracking System for electronic monitoring and tracking of goods transported within or across Pakistan’s territory has been inserted in the Act. This aims to enhance tax enforcement, ensure compliance, and prevent tax evasion. Additionally, e-Bilty has been defined as a transport document generated through the Cargo Tracking System, as prescribed by the Board, to accompany goods during their movement.
E-COMMERCE:
To better incorporate digitally ordered taxable goods into the e-commerce sales tax framework, the definition of
‘e-commerce’ has been introduced, and ‘online marketplace’ is redefined to include all taxable activities. Currently, online marketplaces are required to withheld 1% sales tax on local supplies made by non-active taxpayer vendors. However, this does not fully capture the growing e-commerce sector, especially businesses using websites, apps etc for online sales to consumers. To address this, the withholding tax scope has been expanded to cover transactions settled via online payment or CoD. Under the proposed regime—substituting S. No. 8 of the Eleventh Schedule— payment intermediaries (banks, financial institutions, exchange companies, and payment gateways) will collect sales tax on digital payments, while couriers will handle tax collection for CoD transactions. Additionally, the withholding tax rate is set to increase from 1% to 2%.
STRENGTHENING ENFORCEMENT AND CREATING DETERRENCE AGAINST TAX FRAUD:
The government is actively combating tax fraud through a range of policy and administrative measures. These efforts include enhancing enforcement mechanisms to identify and prevent tax evasion and imposing tougher penalties to serve as a deterrent. Likewise, distinguishing between civil and criminal liability improves the likelihood of winning cases at appellate fora. Following measures are proposed in this regard, namely:
(a) The existing legal provisions does not envisage the role of an ‘abettor’ who connives with the registered persons involved in fraudulent activities to evade the sales tax. Now, the term “abettor” is proposed to be defined and punishment for this offence is also proposed.
(b) Tax fraud is currently defined under clause (37) of section 2. The scope of this definition is broadened to cover all kinds of frauds including those involving technology.
(c) A number of amendments are introduced in penalty section of law to discourage tax fraud.
(d) A clear distinction has been created in the law for proceeding against the non-compliance and tax frauds. The cases involving tax frauds shall be prosecuted before the special judges based on the inquiry and investigation by the department and the final decision shall be taken by a judge instead of an officer of the department.
VALUE OF IMPORTED GOODS:
A proviso is added in the definition of the retail price in section 2 for enhancing its scope to cover the imported goods falling within the ambit of Third Schedule.
LIMIT OF INPUT TAX ADJUSTMENT:
It is proposed that the Board be empowered to set a limit on input tax adjustment to restrict claims related to suspicious or illegal transactions. However, registered persons will have the opportunity to file applications regarding the proposed adjustment limits.
BAR ON OPERATIONS OF BANK ACCOUNTS:
Sections 14AC, 14AD, and 14AE are proposed to be added to the Act to promote sales tax registration and economic documentation. These provisions introduce enforcement measures such as restrictions on bank account operations, transfer of immovable property, business premises sealing, property seizure, and the appointment of a receiver to compel unregistered persons to comply. The current sales tax law does not include such enforcement mechanisms.
APPOINTMENT OF EXPERTS AND AUDITORS:
Board or the Commissioner is empowered to appoint experts for assistance in audit, investigation, litigation or valuation. Furthermore, Board has also been vested with the power to appoint auditors (not more than 2000 in number) through direct engagement or through third party.
ADDITION IN THIRD SCHEDULE:
Importers and manufacturers are required to collect sales tax on items listed in the Third Schedule of the Sales Tax Act, 1990, based on the retail price at applicable rates as embossed on the packaging of the product. The purpose of the inclusion in the Third Schedule to capture the down-stream value addition in the supply chain beyond manufacturing. The following items are proposed to be included in the Third Schedule for the same purpose as stated above: ?
*Imported pet food including ‘dogs and cats’ food in retail packing
*Imported coffee in retail packing
*Imported chocolates in retail packing
*Imported cereal bars in retail packing
WITHDRAWAL OF EXEMPTION:
*Currently, S. No. 151 of Table-1 of Sixth Schedule provides exemption of sales tax on supplies, imports and import of plant and machinery by the industrial units located in the erstwhile FATA/PATA. Local industrial units such as iron, steel, tea etc. in settled areas have raised concerns about the misuse of this exemption. It is proposed that the exemption be gradually withdrawn by charging sales tax in phased manner.
*Both import and supply of photovoltaic cells whether or not assembled in modules or made up into panels is exempt from sales tax. This exemption disproportionately benefits commercial importers, while the local industry has been rendered uncompetitive due to the absorption of input tax costs on purchases. In order to create level playing field and generate revenue, it is proposed that exemption available to solar panels/PV modules may be withdrawn.
WITHDRAWAL OF REDUCED RATE:
*S. No. 53 of Table-1 in the Eighth Schedule provided a reduced 5% import tax rate on cinematographic equipment until June 30, 2023. Since this provision is now redundant, its omission has been proposed.
*Currently, reduced rate of 12.5% is chargeable on supply of locally manufactured or assembled motorcars upto 850cc. This concession was intended to provide relief to middle-class consumers using small cars which was not effectively passed on to end consumers. Furthermore, as part of GST reforms, all existing concessionary rates are being reviewed and withdrawn wherever feasible. Therefore, this provision is proposed to be omitted.
*Currently, reduced rate of 10% is available on local supply of vermicillies and sheer mall. As part of the GST reforms, all existing concessionary rates are reviewed and withdrawn wherever possible. Therefore, reduced rate of 10% is proposed to be withdrawn.
GRANT OF EXEMPTION ON LOCAL SUPPLY OF BUN & RUSK:
Bun and rusk are currently subject to a reduced 10% sales tax. Since they are staple foods for lower-income groups, it is proposed that their local sale be exempted from sales tax.
EXTENSION IN EXEMPTION ON SUPPLY OF ELECTRICITY TO EXFATA/PATA:
Currently, supply of electricity to residential, commercial and industrial units located in erstwhile FATA/PATA is exempt till 30.06.2025. In order to provide relief to electricity consumers in these areas, it is proposed that above-mentioned exemption may be extended till 30.60.2026.
STREAMLINING OF EXEMPTION ON IMPORT OF CYSTAGON, CYSTA DROPS & TRIENTINE CAPSULES:
To streamline the aforementioned exemption, the condition ‘for personal use only,’ which has been causing hardship for patients, is proposed to be omitted to better accommodate the limited number of patients who have repeatedly requested its removal.
APPEAL TO CIR (APPEAL), ATIR & REFERENCE TO HIGH COURT:
Currently, the Commissioner (Appeals) can only entertain appeals where the assessed tax or refund value does not exceed Rs. 10 million. It is proposed that all orders under sections 10, 11A, 11D, 11E, 11F, 21, 33, 34, and 66 be appealable before CIR (Appeals), regardless of pecuniary limits. Additionally, registered 9 persons will have the option to file an appeal directly before the ATIR if they choose to do so. Similarly, the procedures for filling appeal before ATIR and refence to high court have also been streamlined.
CONDONATION OF TIME LIMIT:
Earlier the condonation could be given for any period as may be required under the circumstances. However, for inculcating rationality, it is proposed that the condonation may be given for a period of two years. In the case of huge loss of revenue, the same can be extended for a longer period as may be appropriate by processing through a committee.
EXEMPTION OF SALES TAX ON IMPORT OR LEASE OF AIRCRAFT BY PAKISTAN INTERNATIONAL AIRLINES:
In order to facilitate the privatization of Pakistan International Airline, it is proposed to grant the exemption from the payment of sales tax on the import or lease of aircraft.
FEDERAL EXCISE DUTY:
POWER TO SEIZE AND CONFISCATE COUNTERFEITED CIGARETTES, BEVERAGES OR GOODS:
To create deterrence, dutiable goods manufactured or produced without affixing or affixing counterfeited tax stamps, banderols, stickers, labels or barcodes are proposed to be made liable to seizure along with the conveyance used for movement of such goods. Furthermore, such seized goods are also made liable to outright confiscation.
APPEALS:
The procedure for filing appeals to the Commissioner (Appeals), the Appellate Tribunal Inland Revenue, and references to the High Court has been streamlined. The pecuniary jurisdiction of the Commissioner (Appeals) has been withdrawn. However, a registered person will have the option to file an appeal directly with the Appellate Tribunal Inland Revenue without first availing the right of appeal before the Commissioner (Appeals).
WITHDRAWAL OF FED ON ALLOTMENT OR TRANSFER OF RESIDENTIAL / COMMERCIAL PROPERTY:
Federal excise duty on the allotment and transfer of residential and commercial plots, imposed through the Finance Act, 2024, is now proposed to be withdrawn.
AUTHORIZE OFFICERS OF OTHER DEPARTMENT FOR ENFORCEMENT ACTIONS UNDER FE ACT:
It is proposed that FBR may be empowered to authorize officers or employees from other departments within the Federal or Provincial Governments, through a notification in the official Gazette, to perform functions or exercise powers under section 26 (power to seize dutiable goods) and sub-section (1) of section 27 (confiscate dutiable goods) of the Act.