Tax Laws (Second Amendment)

By Published On: August 24, 202210.7 min readViews: 575

Tax Laws (Second Amendment)

By Published On: August 24, 202210.7 min readViews: 575
Tax Laws (Second Amendment) Ordinance, 2022
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ISLAMABAD: President Dr. Arif Alvi Monday signed the Tax Laws (Second Amendment) Ordinance 2022 for additional taxation on the tobacco industry of Rs36 billion, sales tax exemption to single cylinder agriculture diesel engines, exemption of Capital Value Tax for the passenger/goods transport vehicles and vehicles of foreign diplomats and foreign diplomatic missions and restoration of old tax scheme for small traders/retailers prevailing prior to Finance Act 2022.

In this connection, the Tax Laws (Second Amendment) Ordinance 2022 has been promulgated.

The government has also restored the exemption on allowance and perquisite paid or allowed outside Pakistan by the Government of Pakistan to its citizen for services rendered outside Pakistan, withdrawn earlier through the Finance Act, 2022 with effect from July 1, 2022.

The total measures taken under the Tax Laws (Second Amendment) Ordinance 2022 stood at around Rs 38 billion. The revenue impact of the tax relief measures through the Tax Laws (Second Amendment) Ordinance 2022 stood at nearly Rs 19 billion. Therefore, the net impact of measures comes to around Rs 19 billion.

The subsidy provided by the federal or a provincial government on natural gas to consumers, including RLNG, has been granted sales tax exemption under the Tax Laws (Second Amendment) Ordinance, 2022.

Through the Ordinance, the advance tax rates on passenger transport vehicles have been rationalized.

According to an announcement of the President House, “President Dr. Arif Alvi has signed the Tax Laws (Second Amendment) Ordinance, 2022. The president approved the Ordinance on the advice of the prime minister under the Article 89(1) of the Constitution.” Under the Ordinance, the amendments have been made to Sales Tax Act 1990, Income Tax Ordinance 2001, Federal Excise Act 2005, and Finance Act 2022, the President House added.

The Ordinance has amended provisions of the Finance Act 2022 to bring necessary changes in the income tax, sales tax, and FED laws. The Ordinance has amended Income Tax Ordinance 2001, Sales Tax Act 1990, and Federal Excise Act 2005.

Under the Ordinance, the income tax exemption has also been granted to any allowance or perquisite paid or allowed as such outside Pakistan by the Government to a citizen of Pakistan for rendering service outside Pakistan. The exemption on income derived by Kuwait Foreign Trading Contracting and Investment Company or Kuwait Investment Authority being dividend of the Pak-Kuwait Investment Company in Pakistan has been restored as per the sovereign agreement.

Under the Tax Laws (Second Amendment) Ordinance, 2022, the Fixed Tax Scheme introduced for retailers (other than tier-I retailers) on commercial electricity connection has been withdrawn with effect from July 1, 2022, and the previous regime (prevailing prior to Finance Act 2022) has been restored. Instead of a fixed tax on retailers that will reduce the revenue of Rs42 billion, we will now revert to the old system of ad valorem tax. This will mean a reduction in FBR revenue of Rs15 billion. We will compensate for this by imposing taxes on tobacco and cigarettes of Rs36 billion.

The federal government has been empowered to make any future scheme and determine its modalities including tax rate or amount and the date when it will be implemented for retailers to collect tax on commercial connections. Till the new scheme is announced by the Federal Government, the previous regime prior to the Finance Act, of 2022 will remain in force.

As per Ordinance, the sales tax exemption available to the local supply of single cylinder agriculture diesel engines of 3 to 36 HP, which was withdrawn vide Finance Supplementary Act, 2022 has been restored.

Under the changes made for the tobacco sector, the Federal Excise Duty on unmanufactured tobacco has been enhanced from Rs10 per kg to Rs390 per kg; Federal Excise Duty on locally manufactured cigarettes has been enhanced from Rs5,900/1,000 sticks to Rs6,500/1,000 sticks for Tier-1 and from Rs1,850/1,000 sticks to Rs2,050/1,000 sticks for Tier-2cigarettes.

As per Ordinance, tax shall be charged from retailers, other than those falling in Tier-1, through their monthly electricity bills, at the rate of five percent where the monthly bill amount does not exceed rupees twenty thousand and at the rate of seven and a half percent where the monthly bill amount exceeds the aforesaid amount and the electricity supplier shall deposit the amount so collected directly without adjusting against his input tax. Provided that tax under this subsection shall be in addition to the tax payable on the supply of electricity.

Provided further that the commissioner of Inland Revenue having jurisdiction shall issue order to the electricity supplier regarding the exclusion of a person who is either a Tier-1 retailer or not a retailer, it added.


Tax Laws (Second Amendment) Ordinance, 2022


Government of Pakistan
****
Islamabad the 23rd August, 2022
F.No 2(1)/2022-Pub. The following Ordinance Promulgated on 22nd August, 2022 by the President is hereby published for general information:-

ORDINANCE NO. VI OF 2022
AN

ORDINANCE

further to amend certain tax laws

WHEREAS, it is expedient further to amend certain tax laws for the purposes hereinafter appearing;

AND WHEREAS, the Senate and the National Assembly are not in session and the President of the Islamic Republic of Pakistan is satisfied that circumstances exist which render it necessary to take immediate action;

NOW, THEREFORE, in exercise of the powers conferred by clause (1) of Article 89 of the Constitution of the Islamic Republic of Pakistan, the President of the Islamic Republic of Pakistan is pleased to make and promulgate the following Ordinance: –

 1. Short title and commencement.- (1) This Ordinance shall be called the Tax Laws (Second Amendment) Ordinance, 2022.

(2) It shall, unless specified otherwise, come into force at once.

2. Amendments of the Sales Tax Act, 1990.- In the Sales Tax Act, 1990, the following further amendments shall be made, namely: –

(a) in section 2, in clause (46), in sub-clause (i), in the explanation, after the word “electricity”, the expression “or natural gas including re-gasified liquefied natural gas” shall be inserted;

(b) in section 3, –

(i) for sub-section (9), the following shall be substituted and shall be deemed to have been so substituted from the 1st day of July, 2022, namely:-

“(9) Notwithstanding anything contained in sub-section (1), tax shall be charged from retailers, other than those falling in Tier-1, through their monthly electricity bills, at the rate of five percent where the monthly bill amount does not exceed rupees twenty thousand and at the rate of seven and half percent where the monthly bill amount exceeds the aforesaid amount and the electricity supplier shall deposit the amount so collected directly without adjusting against his input tax:

Provided that the tax under this sub-section shall be in addition to the tax payable on supply of electricity under sub-sections (1), (1A) and (5):

Provided further that the Commissioner of Inland Revenue having jurisdiction shall issue order to the electricity supplier regarding exclusion of a person who is either a Tier-1 retailer or not a retailer.”; and

(ii) after sub-section (11), the following new sub-section shall be added, namely: –

“(12) Notwithstanding anything contained in this Act, the Federal Government may, in lieu of or in addition to the tax under sub-section (9), by notification in the official Gazette, levy and collect such amount of tax at such rates and from such date as it may deem fit, from retailers, other than those falling in Tier-1, through their monthly electricity bill, and may also specify the mode, manner or time of payment of such tax:

Provided that different rates or amounts of tax may be specified for different persons or class of persons.”; and

(c) in the Sixth Schedule, in Table-2, in column (1), after serial number 54, the following new serial number and entries relating thereto in columns (2) and (3) shall be added, namely:-

“55. Single cylinder agriculture diesel engines (compression ignition internal combustion piston engines) of 3 to 36 HP. Respective headings.”.

3. Amendments of Income Tax Ordinance, 2001 (XLIX of 2001). – In the Income Tax Ordinance, 2001 (XLIX of 2001), the following further amendments shall be made, namely: –

(1) for section 99A, the following shall be substituted and shall be deemed to have been so substituted from the 1st day of July, 2022, namely:-

“99A. Special provisions relating to payment of tax through electricity connections. (1) Notwithstanding anything contained in the Ordinance, a tax shall be charged and collected from retailers other than Tier-I retailers as defined in the Sales Tax Act, 1990 (VII of 1990) and specified service providers on commercial electricity connections at the rates specified in the income tax general order issued in terms of sub-section (2).

(2) For the purposes of this section, the Federal Government or the Board with the approval of the Minister in-charge pursuant to the approval of the Economic Coordination Committee of the Cabinet may, issue an income tax general order to-

(a) provide the scope, time, payment, recovery, penalty, default surcharge, adjustment or refund of tax payable under this section in such manner and with such conditions as may be specified;

(b) provide the collection of tax on the amount of bill or on any basis of consumption, in addition to or in lieu of advance tax collectible under sub-section (1) of section 235, at such rates or amounts, from such date and with such conditions as may be specified;

(c) provide record keeping, filing of return, statement and assessment in such manner and with such conditions as may be specified;

(d) provide mechanism of collection, deduction and payment of tax in respect of any person;

(e) include or exempt any person or classes of persons, any income or classes of income from the application of this section, in such manner and with such conditions as may be specified; and

(f) provide that tax collected under this section shall in respect of such persons or classes of persons be adjustable, final or minimum, in respect of any income to such extent and with such conditions as may be specified.

(3) The provisions of sub-section (1) of section 235 shall apply to the persons as specified therein unless specifically exempted under the income tax general order issued under sub-section (2).

(4) The provisions of section 100BA and rule 1 of the Tenth Schedule shall not apply to the tax collectible under this section unless specifically provided in respect of the person or class of persons mentioned in the income tax general order issued under sub-section (2).”;

(2) in section 235, the sub-section (1A) shall be omitted and deemed to have been so omitted from the 1st day of July, 2022;

(3) in the First Schedule, in Part IV, –

(a) in Division III, in clause (2), for the Table, the following shall be substituted, namely: –

“S.No  Capacity Rs. per seat per annum Non Air Conditioned  Rs. per seat per annum Air Conditioned
(1) (2) (3) (4)
1. 4 or more persons
but less than 10 persons
200 375
2. 10 or more persons
but less than 20 persons
500 750
3. 20 persons or more 1000 1500”; and

(b) in Division IV, clause (3) shall be omitted;

(4) in the Second Schedule, in Part I, –

(a) after omitted clause (5), the following new clause shall be inserted and deemed to have been so inserted from the 1st day of July, 2022, namely: –

“(5A) Any allowance or perquisite paid or allowed as such outside Pakistan by the Government to a citizen of Pakistan for rendering service outside Pakistan.”; and

(b) after clause (105B), the following new clause shall be inserted, namely: –

“(105C) Any income derived by Kuwait Foreign Trading Contracting and Investment Company or Kuwait Investment Authority being dividend of the Pak-Kuwait Investment Company in Pakistan from the year of incorporation of Pak-Kuwait Investment Company.”; and

(5) in the Tenth Schedule, in Rule 10, after the omitted clause (h), the following new clause shall be inserted, namely: –

“(ha) tax collected under section 234 during the period starting from the date of commencement of the Tax Laws (Second Amendment) Ordinance, 2022 and ending on the 30th day of June, 2023 in respect of goods transport and passenger transport vehicle.”.

4. Amendments of the Federal Excise Act, 2005.- In the Federal Excise Act, 2005, in the First Schedule, in Table-1, in column (1), the following further amendments shall be made, namely: –

(a) against serial number 7, in column (4), for the word “Ten rupee”, the words “Three hundred and ninety rupees” shall be substituted;

(b) against serial number 9, in column (4), for the words “five thousand nine hundred”, the words “six thousand five hundred” shall be substituted; and

(c) against serial number 10, in column (4), for the words “one thousand eight hundred and fifty”, the words “two thousand and fifty” shall be substituted.

5. Amendment of section 8 of the Finance Act, 2022. – In the Finance Act, 2022, in section 8, the following further amendments shall be made, namely:-

(a)  in sub-section (13), after clause (c), the following new clause shall be inserted, namely: –

“(ca) “motor vehicle held in Pakistan” includes car, caravan automobiles, jeep, limousine, pickup, sports utility vehicle, trucks, vans, wagon and any other automobile excluding-

(i) a motor vehicle used for public transportation, carriage of goods and agriculture machinery; and

(ii) any motor vehicle held in Pakistan by a foreign diplomat or a foreign diplomatic mission.”; and

(b) in the First Schedule, for the expression “(See section 1)”, the expression “(See sub-section (1))” shall be substituted.

DR. ARIF ALVI
PRESIDENT

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