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Salient Features of Federal Budget 2004-05
SALES TAX
RELIEF MEASURES
· Zero-rating on imports and supply of Plant, Machinery, Equipment and ginned cotton to registered persons.
· Relief to agriculture sector by Exempting imports of tractors, bulldozers, combined harvesters and agricultural implements as well as fixing deemed price of DAP Fertilizer and Phosphoric Acid.
· Abolishing Further Tax and higher rate of sales tax @20%.
· Simplified Tax Regime For Registered Retailers and steel melters
· Reducing Carry Forward period to six months.
· Reduction In Activation Charge In Respect Of Cellular Phones
· Allowing benefit of input tax on all certain items with certain exclusions.
· Excluding certain types of Islamic banking and financing transactions from the purview of sales tax.
· To promote SMEs, the turnover tax scheme is being abolished and exemption threshold is being raised at
Rs. 5 million for both manufacturers and retailers
REVENUE MEASURES
· Levy of sales tax on supply of Cottonseed, Crude Vegetable Oil obtained therefrom and Oil Dirt/Sludge. Supply of oil cake will be zero-rated.
· Levying Central Excise Duty in the VAT Mode on Advertisement on cable and closed circuit television and Services supplied by shipping agents
· Levy of Central Excise Duty in VAT Mode on Import/ Supply of edible oil and supply of vegetable ghee/cooking oil to provide level playing field
· Improvement In Presumptive Assessment Scheme.
· Incentive scheme for Commercial
· Zero-rating on import/supply of hides and skin.
· Zero-rating on import/supply of raw wool.
SIMPLIFICATION MEASURES
· New simplified Refund Rules
· Substitution of Section 73 and allowing input on accrual basis
· Simplified provisions relating to registration/deregistration
· powers of condonation of delay to the Collectors
· Reduction in penalty
· New sales tax registration and returns forms
· Rationalizing Debit and Credit Note Rules
TECHNICAL MEASURES
· Disallowing input adjustment on account of fake invoices
· Increasing pitch of penalty for cases of tax fraud.
· Empowering Collector for requisitioning information from Banking Companies in cases of tax fraud.
· Prohibit the supply of Filter Rods to unregistered persons
· To make provision for search under Warrant.
· New provision to provide for assistance to officers of sales tax by other agencies.
· exemption on imports through special order by the Board.
· Issuance of rules in respect of services sector.
· Consolidation of existing and new Notifications.
· Legal framework for the Gawadar Special Economic Zone.
MISCELLANEOUS PROVISIONS
· supply of zero-rated goods to privileged persons rationalized
· allowing payment in installments
· act of making taxable supplies without getting sales tax registration as tax fraud.
INCOME TAX
RELIEF MEASURES
· Income limit for reduced rate application to senior citizens is proposed to be raised to Rs.300,000 from Rs.200,000.
· Withholding tax at rate of 10% on income from Bahbood Saving Certificates/Accounts is proposed to be withdrawn.
· Basic threshold of income is proposed to be raised from
Rs. 80,000 to Rs.100,000.
· It is proposed to withdraw mandatory payment of 15% of disputed tax for filing first appeal.
· It is proposed to allow advance tax payment on last assessed tax basis and provide estimate of income for the current year.
· Withholding tax on import of DAP Phosphate is proposed to be reduced from 6% to 1%.
· Withholding tax on import of agricultural tractor in CBU condition is proposed to be reduced from 6% to 2%.
· Withholding tax on import of machinery is proposed to be withdrawn.
· Income from “capital gains” is proposed to be extended for another two years i.e. upto June 2007.
· Mark-up and debt written off under State Bank of Pakistan BPD Circular 29 of 2002 is proposed to be exempted from operation of certain tax provisions.
· Carry forward of unadjusted minimum tax on turnover is proposed to be allowed for adjustment against future tax liability upto five years.
· Tax credit to profit on interest on loan is proposed to be extended to house loan to employees of statutory bodies and public listed companies, from employers is proposed.
· Tax withheld at import of edible oil is proposed to be treated as final tax. Further 1% tax is provided to be paid on local purchases of edible oil.
· It is proposed to allow exemption to income from vocational, technical or poly-technical institutions setup between 1st day of July 2004 or 30th day of June 2008 for a period of 5 years.
· Extending amalgamation facility to banking and non-banking financial institutions upto 30th day of June 2006 and allowing amalgamation to insurance companies.
· Holding companies are allowed to claim loss, for three years, surrendered by 75% share subsidiary companies.
· To promote consumer financing and provide level playing field the facility is proposed to allow creation of reserve out of 3% consumer loan profits by NBFCs and
HBFC.
· Retailers having annual turnover upto Rs.5 million are proposed to opt for payment of 0.75% of their declared turnover as final tax.
· It is proposed to provide alternate dispute resolution mechanism.
· It is proposed to make mandatory filing of wealth statement by individuals declaring income of Rs.500,000.
· It is proposed to introduce one page, simple return form for individual and
AOPs.
REVENUE MEASURES
· It is proposed to allow withholding tax on commission income of petroleum dealers at the rate of 10% as final tax.
· It is proposed to allow withholding tax on commission of traveling agents and insurance agents at the rate of 10% as final tax.
· Withholding tax on income from lotteries, winnings and prizes other than prize bonds is proposed to be raised to 20% from 10%.
· It is proposed to levy 5% withholding tax on advertisement payments made to TV satellite channels operating from abroad.
CAPITAL VALUE TAX
· It is proposed to charge CVT at the rate of 0.1% of the purchase value of shares traded in stock exchange.
· Adjustment of CVT against any wealth tax liability is proposed to be withdrawn
CUSTOMS
TARIFF RATIONALIZATION MEASURES
· Reduction of customs duty on import of plant, machinery and equipment not manufactured locally to 5%.
· Rationalization of customs duty on import of industrial raw materials
· Dispensing with indemnity bonds & installation certificates.
· Duty rationalization on smuggling-prone items.
· Incentive package for agricultural sector.
· Rationalization of duty structure of auto sector.
FACILITATION MEASURES
· Removal of clauses relating to surveys.
· Incentives to the energy sector.
· Duty concessions on imports relating to disabled persons
· Concession for hospitals, educational institutions.
· Incorporating customs dispute resolution mechanism in the Customs Act, 1969.
· Lowering the rate of penal surcharge of warehousing from 2% to 1% to facilitate the trade.
· Incentives to the specific sector like airline, film & cinema, energy, call centers industry.
· Duty concession on the import of re-located projects/units.
· Fiscal incentives to the Oil Exploration and Production sector.
· Broadening the scope of concessions for local manufacture of machinery.
· Incentive package for overseas Pakistanis – Baggage rules.
· Legislative changes in the Customs Act,1969
CENTRAL EXCISE
· Withdrawal of central excise duty on paints & varnishes.
· Withdrawal of central excise duty on syrups, squashes & juices.
· Price & duty adjustment on cigarettes and unmanufactured tobacco.
· Amendments in Central Excise law to include ‘goods’ for levy of central excise duty in VAT mode.
· Levy of central excise duty in VAT mode on edible oil/vegetable ghee/cooking oil.
· Levy of central excise duty in VAT mode on advertisement on cable TV, CCTV and shipping agents.
· Addition of provision of Alternate Dispute Resolution in Central Excise Act.
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