Raco

RIAZ AHMAD & COMPANY
Chartered Accountants

I N D E X

FINANCE ACT 2013

DESCRIPTION PAGE NO.

INTRODUCTION 1

EXECUTIVE SUMMARY 2 5

INCOME TAX 6 46

INCOME SUPPORT LEVY 47 48

SALES TAX 49 60

FEDERAL EXCISE DUTY 61 66

CONTACT PARTNERS 67


INTRODUCTION

FINANCE ACT 2013
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This Memorandum has been prepared to facilitate our clients in better understanding of the
changes made in income tax, sales tax and federal excise duty through the Finance Act, 2013. The
changes have been explained in a concise manner and insignificant changes of consequential,
administrative, procedural or editorial nature have been ignored for the sake of brevity.

Included under the heading of Income Tax Ordinance, 2001 is a dedicated portion, titled
General, which covers complete rates of income tax, schedule of filing of various periodical
statements, rates for deduction of income tax at source, filing date of income tax return,
computation of advance tax, etc. for convenience and ready reference of our clients.

The Finance Act, 2013, unless otherwise stated, has come into force on 01 July 2013.

This Memorandum may be accessed on our web-site: www.racopk.com

It is recommended that the text of the Finance Act, 2013 as published in the Official Gazette and
the relevant laws and notifications, wherever applicable should be referred to in considering the
interpretation of any provision. This Memorandum contains only general comments. Final decision
on any issue should not be taken without detailed consideration and professional advice.

This Memorandum should not be published in any manner without the consent of the firm. For
professional advice, you may contact our following tax experts:

Sarfraz Mahmood
Muhammad Arshad
Inaam Ellahi Sheikh
M. Kamran Nasir
Liaqat Ali Panwar
Pirzada M. Khurram
Atif Bin Arshad
Muddassar Mehmood
Lahore Office Karachi Office Faisalabad Office Islamabad Office

LAHORE: 13 July 2013

EXECUTIVE SUMMARY

FINANCE ACT 2013
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Income Tax

Dividend received by a company will be charged to tax under final tax regime.

Rent received or receivable will be taxed under normal tax regime after allowing specific
admissible deductions.

Losses are no more allowed to be set-off against income from salary and property (rental income).

Agricultural income will be accepted only to the extent of agricultural tax paid under the
relevant provincial law.

Rate of minimum tax has been increased from 0.5% to 1%.

FBR will notify quantum of minimum tax to be paid by persons deriving income from
construction and sale of buildings and from development and sale of plots.

Employers certificate in lieu of return of income is no more acceptable. Every individual having
salary income exceeding basic threshold will furnish his return of income.

Holder of commercial or industrial connection of electricity with annual bill of Rupees 500,000
and any person registered with any trade or business association, market committee or
professional body will furnish return of income.

For filing the revised return of income, approval of Commissioner in writing, is mandatory.

From tax year 2013 and onwards, every resident individual, filing return of income, and every
member of an association of persons will file wealth statement and wealth reconciliation
statement irrespective of any threshold.

FBR has been empowered to obtain every information from banks in respect of their account
holders.

Compensation of delayed refunds will become due from the date of refund order.

The Commissioner is empowered to call for the record, books of account and conduct audit.

NTN is to be displayed by taxpayer having business income at conspicuous place of business.

Maximum penalty for non filing of return of income will be Rupees 20,000 and minimum
penalty for non filing of final tax statement and other periodical statements will be Rupees
50,000.

A public servant who discloses any confidential particulars will be punishable with minimum
fine of Rupees 500,000.

FBR will allow cash reward to officials of Inland Revenue for meritorious conduct and to the
informer providing credible information in respect of cases involving concealment or evasion of
taxes.


EXECUTIVE SUMMARY

FINANCE ACT 2013
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NCCPL will collect advance tax in respect of margin financing, margin trading and security
lending.

Advance tax will be collected in respect of:

i. Functions and gatherings @ 10%
ii. Foreign produced TV plays and serials at prescribed rates
iii. Cable operators and electronic media at slab rates
iv. Sales by manufacturer or commercial importer of specified sectors to distributors, dealers
and wholesalers @ 0.1%
v. Sales by manufacturer, distributor, dealer, wholesaler or commercial importer of specified
sectors to retailer @ 0.5%
vi. Fee exceeding Rupees 200,000 paid to educational institutions @ 5%
vii. Issuance or renewal of licenses by market committee to dealers, commission agents or
arhatis, etc. at slab rates

Maximum tax rates for salaried and non salaried taxpayers including association of persons have
been enhanced from 20% to 30% and from 25% to 35% respectively.

Rate of tax imposed on taxable income of a company other than a banking company has been
reduced from 35% to 34% applicable for the tax year 2014.

Rates of tax to be collected at import stage have been enhanced

Withholding tax rates u/s 153 in cases other than companies will be as under:

Section Description Rate of tax

153(I)(a) Sale of goods 4% of the gross amount
153(I)(b) Rendering or providing of services 7% of the gross amount
153(I)(c) Execution of contract 6.5% of the gross amount

Withholding tax rate on a prize on prize bond or cross word puzzle has been enhanced from
10% to 15%.

Tax on mobile phone, etc. will be collected @ 15% instead of 10%.

On cash withdrawal, advance tax @ 0.3% will be collected.

Advance tax on registration of motor vehicles will be collected at enhanced rates.

Rate of advance tax to be collected on sale by auction has been increased from 5% to 10%.

Exemption from tax on dividend in specie in the form of shares in a company is no more
available.

Tax payable on import of hybrid cars has been reduced.

Tax payable on income from salary by a full time teacher or researcher shall now be reduced by
an amount equal to 40% instead of 75%.


EXECUTIVE SUMMARY

FINANCE ACT 2013
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In case of industrial undertaking, tax will not be withheld at import stage if tax liability for the
current year is paid.

Initial allowance on plant and machinery has been reduced from 50% to 25%.

Applicable rate of tax on dividend received by banks from money market and income fund for
the tax year 2014 has been reduced from 35% to 25%.

Income Support Levy

Income support levy shall be charged from tax year 2013 and onward @ 0.5% of value of net
movable wealth exceeding Rupees 1 million.

Sales Tax

General rate of sales tax has been increased from 16% to 17% with effect from 13 June 2013.

Payment of sales tax will now be on earlier of receipt of payment or delivery of goods.

Further tax has been reintroduced at the rate of 1%.

FBR has been empowered to levy and collect sales tax on the basis of capacity or on a fixed
basis.

Registered person making taxable supplies are required to maintain record relating to gate passes,
inward or outward, and transport receipts.

Empowerment of FBR to subject any class of registered persons or class of goods to electronic
monitoring as to production, sales, clearances, stocks etc. in a prescribed manner and to specify
a particular date beyond which movement of taxable goods would be subject to affixing thereon
of tax stamps, banderole, stickers, etc.

Commissioner (Appeals) has been empowered to grant stay against recovery of sales tax demand
for a period not exceeding thirty days in aggregate where he is of the opinion that the recovery of
tax levied shall cause undue hardship to the taxpayer.

Mistakes apparent from record can now be rectified by the officer of Inland Revenue,
Commissioner, Commissioner (Appeals) or the Appellate Tribunal Inland Revenue.

Taxable supplies specified in the Third Schedule are charged to sales tax at the rate of 17% of the
retail price. The scope of Third Schedule has been extended to further goods.

Jurisdiction of persons having multiple manufacturing units or business premises will now be
determined by FBR.

Extra sales tax has been levied at the rate of 5% in addition to the normal sales tax @ 17% plus
1% further tax on supplies of electric power and natural gas to persons having industrial or
commercial connections, and whose bill in any month exceeds Rupees 15,000, but who have
either not obtained sales tax registration number or are not on the Active Taxpayers List
maintained by FBR.


EXECUTIVE SUMMARY

FINANCE ACT 2013
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Sales tax will be withheld on purchases of taxable goods from unregistered persons.

Zero rating has been withdrawn and substituted with exemption in case of various goods.

Reduced rate of 2% / 5% is no more applicable on local sales of finished articles by five export-
oriented sectors i.e. textile, carpets, leather, sports and surgical goods. Consequently, the local
sale of these finished articles now attracts sales tax at the rate of 17%.

Federal Excise

Further duty @ 2% may be levied by notification where excisable goods and services are
supplied to un-registered person.

Record related to gate passes, inward or outward and transport receipts will also be maintained
by the registered person.

Commissioner (Appeals) has been empowered to grant stay against recovery of tax in particular
case, for a period not exceeding thirty days.

Chief Commissioner has also been empowered to post officers of Inland Revenue to the premises
of registered person for monitoring purposes. Moreover, monitoring may be done through
electronic or other means.

Duty on oil seeds will now be charged @ 40 paisa per kg.

Duty on motor cars, SUVs and other motor vehicles of cylinder capacity of 1800 cc or above has
been levied @ 10% ad val.

Duty levied on services provided by assets management companies.

Conditional exemptions available on following goods have been withdrawn:

a. Hydraulic cement imported or purchased locally by petroleum or energy sector.

b. Lubricating oil supplied to Pakistan Navy for consumption in its vessels.

c. Transformer oil used in manufacture of transformers supplied against international tenders.


INCOME TAX ORDINANCE, 2001

FINANCE ACT 2013

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General provisions relating to taxes imposed under
sections 5, 6 and 7
Sections 8 & 169

Dividend received by a company will now be taxed under final tax regime. Earlier, dividend received by
a company was excluded from final taxation by Finance Act, 2007 by inserting the proviso in section 8.
Now by omitting this proviso, the benefit of reduced tax rate after allowing admissible expenses / set off
of business loss for the year / set off of unabsorbed depreciation will no more be available. For tax year
2014 and onwards, dividend income of a company will be liable to tax at prescribed rates of gross
receipt as final tax.

Income from Property Sections 15, 15A & 155

Taxation of income from property on the basis of fixed rate of tax on gross amount of rent has been done
away. Now, rent received or receivable by a person for the tax year shall be charged to tax under normal
tax regime after allowing deductions specified in newly inserted section 15A as under:

"15A. Deductions in computing income chargeable under the head "Income from Property".(1)
In computing the income of a person chargeable to tax under the head "Income from
Property" for a tax year, a deduction shall be allowed for the following expenditures or
allowances, namely:-

(a) In respect of repairs to a building, an allowance equal to one-fifth of the rent
chargeable to tax in respect of the building for the year, computed before any
deduction allowed under this section;

(b) any premium paid or payable by the person in the year to insure the building against
the risk of damage or destruction;

(c) any local rate, tax, charge or cess in respect of the property or the rent from the
property paid or payable by the person to any local authority or government in the
year, not being any tax payable under this Ordinance;

(d) any ground rent paid or payable by the person in the year in respect of the property;

(e) any profit paid or payable by the person in the year on any money borrowed
including by way of mortgage, to acquire, construct, renovate, extend or reconstruct
the property;

(f) where the property has been acquired, constructed, renovated, extended, or
reconstructed by the person with capital contributed by the House Building Finance
Corporation or a scheduled bank under a scheme of investment in property on the
basis of sharing the rent made by the Corporation or bank, the share in rent and share
towards appreciation in the value of property (excluding the return of capital, if any)
from the property paid or payable by the person to the said Corporation or the bank
in the year under that scheme.

(g) where the property is subject to mortgage or other capital charge, the amount of profit
or interest paid on such mortgage or charge;


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(h) any expenditure (not exceeding six percent of the rent chargeable to tax in respect of
the property for the year computed before any deduction allowed under this section)
paid or payable by the person in the year for the purpose of collecting the rent due in
respect of the property;

(i) any expenditure paid or payable by the person in the tax year for legal services
acquired to defend the person's title to the property or any suit connected with the
property in a court; and

(j) where there are reasonable grounds for believing that any unpaid rent in respect of
the property is irrecoverable, an allowance equal to the unpaid rent where

(i) the tenancy was bona fide, the defaulting tenant has vacated the property or
steps have been taken to compel the tenant to vacate the property and the
defaulting tenant is not in occupation of any other property of the person;

(ii) the person has taken all reasonable steps to institute legal proceedings for the
recovery of the unpaid rent or has reasonable grounds to believe that legal
proceedings would be useless; and

(iii) the unpaid rent has been included in the income of the person chargeable to
tax under the head "Income from Property" for the tax year in which the rent
was due and tax has been duly paid on such income.

(2) Where any unpaid rent allowed as a deduction under clause (j) of sub-section (1) is wholly
or partly recovered, the amount recovered shall be chargeable to tax in the tax year in
which it is recovered.

(3) Where a person has been allowed a deduction for any expenditure incurred in deriving rent
chargeable to tax under the head "Income from Property" and the person has not paid the
liability or a part of the liability to which the deduction relates within three years of the end
of the tax year in which the deduction was allowed, the unpaid amount of the liability shall
be chargeable to tax under the head "Income from Property" in the first tax year following
the end of the three years.

(4) Where an unpaid liability is chargeable to tax as a result of the application of sub-section (3)
and the person subsequently pays the liability or a part of the liability, the person shall be
allowed a deduction for the amount paid in the tax year in which the payment is made.

(5) Any expenditure allowed to a person under this section as a deduction shall not be allowed
as a deduction in computing the income of the person chargeable to tax under any other
head of income.

(6) The provisions of section 21 shall apply in determining the deductions allowed to a person
under this section in the same manner as they apply in determining the deductions allowed
in computing the income of a person chargeable to tax under the head "Income from
Business."


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Moreover, rate of tax to be deducted u/s 155, in case of individual and association of persons have also
been amended as under:

Sr. No. Gross amount of rent Rate of tax

1. Where the gross amount of rent does not
exceed Rs. 150,000
Nil
2. Where the gross amount of rent exceeds Rs.
150,000 but does not exceed Rs. 1,000,000
10% of the gross amount exceeding Rs.
150,000
3. Where the gross amount of
rent exceeds Rs. 1,000,000
Rs. 85,000 + 15% of the gross amount
exceeding Rs. 1,000,000

The rate of tax to be deducted under section 155, in case of a company shall be 15% of the gross
amount of rent.

Set off of Losses Section 56

Sub-section (1) of this section has been amended whereby loss sustained by a person under any head of
income specified in section 11 will no longer be available for setting off against income under the head
of salary or income from property.

Group Taxation & Group Relief Sections 59AA & 59B

To avail option of group taxation and / or group relief, all the group companies shall also comply with
group designation rules or regulations along with corporate governance requirements specified by the
Securities and Exchange Commission of Pakistan.

Person Section 80

Co-operative society, finance society or any other society without reference to law under which these are
established have been included in the definition of Company, by substituting sub-clause (v) of clause (b)
of sub-section (2) of this section. Moreover, by inserting sub-clauses (va) and (vb), the following entities
have also been included in definition of Company:

(va) a non-profit organization;

(vb) a trust, an entity or a body of persons established or constituted by or under any law for the
time being in force.

Unexplained Income or Assets Section 111

Agricultural income shall be accepted only to the extent of agricultural income computed on the basis of
agricultural income tax paid under the relevant provincial law. Consequently, non tax paid agricultural
income will not be taken for the purpose of explainable nature and source of income. For this purpose,
following proviso has been inserted in sub-section (1) of this section:

Provided that where a taxpayer explains the nature and source of the amount credited or the
investment made, money or valuable article owned or funds from which the expenditure was made,
by way of agricultural income, such explanation shall be accepted to the extent of agricultural income
worked back on the basis of agricultural income tax paid under the relevant provincial law.


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Minimum Tax on the Income of Certain Persons Section 113

Again, the rate of minimum tax has been enhanced from 0.5% to 1% of the turnover of a resident
company, individual or association of persons. However, individuals (other than salaried individuals)
and association of persons have also been made entitled to carry forward the minimum tax paid for the
year for adjustment against actual tax payable for subsequent five tax years.

Tax on Income of Certain Persons Section 113A

Option for payment of final tax, available to a retailer being an individual or association of persons
having turnover up to Rupees five million for any tax year has been withdrawn by substituting this
section. The substituted section provides minimum tax on the income of builders from sale of residential,
commercial or other buildings as under:

113A. Minimum tax on builders.(1) Subject to this Ordinance, where a person derives income
from the business of construction and sale of residential, commercial or other buildings, he
shall pay minimum tax at the rates as the Federal Government may notify in the official
Gazette. The Federal Government may also specify the mode, manner and time of payment
of such amount of tax.

(2) The tax paid under this section shall be minimum tax on the income of the builder from the
sale of such residential, commercial or other building.

Tax on Income of Certain Retailers Section 113B

Similarly, final tax on retailers being individuals or association of persons having turnover exceeding
Rupees five million has also been done away. Now, under this substituted section, minimum tax shall be
paid by land developers on income from development and sale of residential, commercial or other plots,
as quoted below:

"113B. Minimum tax on land developers.(1) Subject to this Ordinance, where a person derives
income from the business of development and sale of residential, commercial or other plots,
he shall pay minimum tax at the rates as the Federal Government may notify in the official
Gazette. The Federal Government may also specify the mode, manner and time of payment
of such amount of tax.

(2) The tax paid under this section shall be minimum tax on the income of the developer from
the sale of such residential, commercial or other plots sold or booked."

Return of Income Section 114

The holder of commercial or industrial connection of electricity where the amount of annual bill exceeds
Rupees five hundred thousand will now be required to furnish a return of income under section 114.
Earlier this threshold was Rupees one million. Sub-clause (viii) of clause (b) of sub-section (1) of this
section has been amended in this respect. Further, a new sub-clause (ix) has been inserted to enhance
the scope of filing the return of income by the persons as under:

"(ix) is registered with any chamber of commerce and industry or any trade or business association or
any market committee or any professional body including Pakistan Engineering Council, Pakistan
Medical and Dental Council, Pakistan Bar Council or any Provincial Bar Council, Institute of Chartered
Accountants of Pakistan or Institute of Cost and Management Accountants of Pakistan.


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Sub-section (4) of this section has also been amended to empower the Commissioner to issue notice
requiring any person to file return of income within a period of less than 30 days. Earlier, the
Commissioner was bound to allow 30 days or a longer period for filing such return of income.

New clause (ba) has been inserted in sub-section (6) of this section whereby the revised return shall be
treated as valid when it is accompanied by approval of the Commissioner in writing for revision of return.

Persons not required to furnish a return of income Sections 115 & 118

Annual statement of deduction of income tax from salary filed by the employer in case of taxpayer
having only salary income (less than Rupees 500,000) was treated as return of income furnished by the
taxpayer u/s 114. Now this facility has been withdrawn by omitting sub-section (1) of this section.
However, the proviso of this sub-section regarding electronic filing of return by a salaried taxpayer
having salary income of Rupees 500,000 or more has been placed as sub-section (2A) of section 118.
Therefore, requirement of electronic filing by a salaried taxpayer remains applicable.

Now, all the salaried taxpayers having taxable salary are bound to file their return of income. Sub-section
(4A) of section 115 regarding statement of final taxation, has been redrafted, due to consequential
changes / amendments in final tax regime, as under:

(4) Any person who is not obliged to furnish a return for a tax year because all the person's income
is subject to final taxation under sections 5,6,7,148,151 and 152, sub-section (3) of section 153,
sections 154, 156 and 156A, sub-section (3) of section 233 or sub-section (3) of section 234A shall
furnish to the Commissioner a statement showing such particulars relating to the person's income for
the tax year in such form and verified in such manner as may be prescribed.

Wealth statement Section 116

From tax year 2013 and onwards, every resident individual taxpayer, whether falling under the ambit of
normal tax regime or final tax regime, and every member of an association of persons shall file wealth
statement and wealth reconciliation statement.This amendment is effective from tax year 2013 and
onwards.

Before this amendment, following persons were required to file their wealth statement and wealth
reconciliation statement along with their return of income / statement of final taxation:

Every resident individual taxpayer whose last declared or assessed income or declared income for
the tax year was Rupees 1 million or more.
Every member of association of persons having share of income from association of persons, of
Rupees 1 million or more.
Every person other than a company, if tax paid under final tax regime was Rupees 35,000 or more.

Sub-section (3) of this section has been amended whereby revised wealth reconciliation statement and
reasons for filing the revised wealth statement will also be furnished along with the revised wealth
statement.

Investment tax on income Section 120A

Power of Federal Board of Revenue to make investment tax scheme in respect of undisclosed income has
been withdrawn by omitting this section from the statute book.



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Provisional assessment Section 122C

Provisional assessment order passed under this section was treated to be final assessment if the person
fails to furnish return of income in accordance with the notice issued by the Commissioner within sixty
days from the service of such order. Now, this period of sixty days is reduced to forty five days.

Appointment of the Appellate Tribunal Section 120

A law graduate officer of Inland Revenue Service in BS-20 or above may also be appointed as judicial
member of the Appellate Tribunal. Moreover, a chartered accountant will also be eligible for
appointment as accountant member of the Appellate Tribunal if he has, for a period of not less than ten
years, practiced professionally as a chartered accountant within the meaning of the Chartered
Accountants Ordinance, 1961(X of 1961).

Once again, the accountant member may be appointed as chairperson of the Appellate Tribunal in
special circumstances. Earlier, this condition of special circumstances was omitted by Finance Act,
2012.

Advance tax paid by the taxpayer Section 147

Since the income from property has been excluded from ambit of fixed tax, therefore every taxpayer
having income from property shall be liable to pay advance tax for the year in accordance with the
provisions of this section. For this purpose, clause (e) of sub-section (1) of this section is omitted along
with other necessary amendments.

Imports Section 148

Tax required to be collected on import of a foreign produced film imported for the purposes of screening
and viewing, shall be adjustable. For this purpose, new clause (e) has been inserted in sub-section (7) of
this section.

Payments to non-residents Section 152(2A)

For the purpose of sub-section (2A) of this section, definition of prescribed person will be the same as
defined in sub-section (7) of section 153.

Payment for goods, services and contracts Section 153

A person registered under the Sales Tax Act, 1990 has also been included in the definition of prescribed
person for the purpose of withholding tax by inserting sub-clause (j) in clause (i) of sub-section (7) of this
section.

Payment to traders and distributers Section 153A

Under this section, manufacturer was required to collect advance tax from distributers, dealers and
wholesalers at the time of sale. However, operation of this section was deferred till 30 June 2013. Now,
this section has been omitted but simultaneously, similar provisions for specified sectors have been
inserted through new section 236G.


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Income from property Section 155

Certain persons have also been included in definition of prescribed person for the purpose of
withholding tax at the time of payment of rent by amending / inserting the clauses of sub-section (3) of
this section:

a charitable institution

a private educational institution, a boutique, a beauty parlor, a hospital, a clinic or a maternity home

individuals or association of persons paying gross rent of rupees one and a half million and above in
a year

Statements Section 165

Following explanation has been added in sub-section (1) of this section whereby the provision of this
sub-section shall override all conflicting provisions contained in certain laws as under:

Explanation.- For the removal of doubt, it is clarified that this sub-section overrides all conflicting
provisions contained in the Protection of Economic Reforms Act, 1992 (XII of 1992), the Banking
Companies Ordinance, 1962 (LVII of 1962), the Foreign Exchange Regulation Act, 1947 (VII of 1947)
and the regulations made under the State Bank of Pakistan Act, 1956 (XXXHI of 1956), if any, on the
subject, in so far as divulgence of information under section 165 is concerned.

Moreover, the proviso of sub-section (6) regarding filing of annual statement in respect of taxpayers
whose income exceeds three hundred thousand rupees but does not exceed three hundred and fifty
thousand rupees in a tax year, has been omitted.

Furnishing of information by banks Section 165A

Following new section has been added in the statute book for the purposes of obtaining information from
banks in respect of their account holders in the prescribed form and manner:

165A. Furnishing of information by banks.-(1) Notwithstanding anything contained in any law for
the time being in force including but not limited to the Banking Companies Ordinance,
1962 (LVII of 1962), the Protection of Economic Reforms Act, 1992 (XII of 1992), the
Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the
State Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the subject, every banking
company shall make arrangements to provide to the Board in the prescribed form and
manner,-

(a) online access to its central database containing details of its account holders and all
transactions made in their accounts;

(b) a list containing particulars of deposits aggregating rupees one million or more made
during the preceding calendar month;

(c) a list of payments made by any person against bills raised in respect of a credit card
issued to that person, aggregating to rupees one hundred thousand or more during the
preceding calendar month;

(d) a consolidated list of loans written off exceeding rupees one million during a calendar
year; and


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(e) a copy of each currency transactions report and suspicious transactions report
generated and submitted by it to the Financial Monitoring Unit under the Anti-Money
Laundering Act, 2010 (VII of 2010).

(2) Each banking company shall also make arrangements to nominate a senior officer at the
head office to coordinate with the Board for provision of any information and documents in
addition to those listed in sub-section (1), as may be required by the Board.

(3) The banking companies and their officers shall not be liable to any civil, criminal or
disciplinary proceedings against them for furnishing information required under this
Ordinance.

(4) Subject to section 216, all information received under this section shall be used only for tax
purposes and kept confidential."

Additional payment for delayed refund Section 171

Compensation of delayed refund will now become due from the date of refund order instead of date of
assessment of income. In this respect, following explanation has been added in sub-section (2) of this
section:

Explanation. For the removal of doubt, it is clarified that where a refund order is made on an
application under subsection (1) of section 170, for the purpose of compensation, the refund becomes
due from the date refund order is made and not from the date the assessment of income treated to have
been made by the Commissioner under section 120."

Representations Section 172

Any person in Pakistan who has business connection with the non-resident person is treated as
representative of the said non-resident with reference to prevailing sub-section (3) of this section. Now,
explanation has been added to extend the meaning of business connection as under:

Explanation. In this clause the expression business connection" includes transfer of an asset or
business in Pakistan by a non-resident.

Audit Sections 177 & 214 C

The explanation has been added in this section to declare that powers of Commissioner to conduct audit
under this section are independent of the powers of Federal Board of Revenue under section 214C. Now,
the Commissioner is fully empowered to call for the record or documents including books of account of
a taxpayer to conduct audit. The explanation states as under:

Explanation. For the removal of doubt, it is declared that the powers of the Commissioner under this
section are independent of the powers of the Board under section 214C and nothing contained in
section 214C restricts the powers of the Commissioner to call for the record or documents including
books of accounts of a taxpayer for audit and to conduct audit under this section"

Similar explanation has been added in section 214C.



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Taxpayers registration Section 181

Following proviso has been added whereby individuals may be allowed to use CNIC in place of NTN:

Provided that the Board may in case of individuals allow, in place of National Tax Number, use of
Computerized National Identity Card issued by the National Database and Registration Authority."

Displaying of National Tax Number Section 181C

New section added in the Ordinance to display NTN at conspicuous place of business is as under:

181C. Displaying of National Tax Number.- Every person deriving income from business
chargeable to tax, who has been issued a National Tax Number, shall display his National
Tax Number at a conspicuous place at every place of his business.

Offences and penalties Section 182

Number of changes have been introduced and amount of penalties enhanced as detailed below:

Sr. No. Offences Penalties
Section of the Ordinance to
which offence has reference
1. Where any person fails
to furnish a return of
income as required
under section 114
within the due date.
Such person shall pay a penalty
equal to 0.1% of the tax payable
in respect of that tax year for
each day of default subject to a
maximum penalty of 50% of the
tax payable provided that if the
penalty worked out as aforesaid
is less than twenty thousand
rupees or no tax is payable for
that tax year such person shall
pay a penalty of twenty thousand
rupees.
114 and 118
1A Where any person fails
to furnish a statement
as required under
section 115, 165 or
165A within the due
date.
of Rupees 2,500 for each day of
default subject to a minimum
penalty of fifty thousand rupees.
115, 165 and 165A
1AA Where any person fails
to furnish wealth
statement or wealth
reconciliation
statement.
of Rupees 100 for each day of
default.
114, 115 and 116
8. Where a taxpayer who,
without any reasonable
cause, in non-
compliance with the
provisions of section
177-

177


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Sr. No. Offences Penalties
Section of the Ordinance to
which offence has reference

a) fails to produce the
record or document
on receipt of first
notice;

b) fails to produce the
record or documents
on receipt of second
notice; and

c) fails to produce the
record or documents
on receipt of third
notice.
of twenty-five thousand rupees;

of fifty thousand rupees; and

of one hundred thousand rupees.
9. Any person who fails to
furnish the information
required or to comply
with any other term of
the notice served under
section 176.
of twenty-five thousand rupees
for the first default and fifty
thousand rupees for each
subsequent default.
176
16. Any person who fails to
display his NTN at the
place of business as
required under this
Ordinance or the rules
made thereunder.
of five thousand rupees.
181C

Persecution of unauthorized disclosure of information by
a public servant
Section 198

A person who discloses any particulars in contravention of section 216 shall now commit an offence
punishable with a fine of not less than five hundred thousand rupees.

Earlier, the amount of penalty, five hundred thousand rupees was not mentioned in this section.

Selection for audit by the Board Section 214C

Federal Board of Revenue has now been authorized to keep the parameters for selection of audit
confidential. In this respect, following sub-section (1A) has been inserted in this section.

"(1A) notwithstanding anything contained in this Ordinance or any other law, for the time being in
force, the Board shall keep the parameters confidential."

Reward to officers and officials of Inland Revenue Section 227A

New section 227A has been inserted to allow cash reward to the officers for their meritorious conduct
and to the informers providing credible information in cases, involving concealment or evasion of
income tax and other taxes. The section states as under:


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"227A.- Reward to officers and officials of Inland Revenue. (1) In cases involving concealment or
evasion of income tax and other taxes, cash reward shall, only after realization of part or
whole of the taxes involved in such cases, be sanctioned to the officers and officials of
Inland Revenue for their meritorious conduct in such cases and to the informer providing
credible information leading to such detection.

(2) The Board may, by notification in the official Gazette, prescribe the procedure in this behalf
and also specify the apportionment of reward sanctioned under this section for individual
performance or to collective welfare of the officers and officials of Inland Revenue."

Directorates General of Law and Research and Development Sections 230B & 230C

New Directorates General have been created by inserting the following sections:

"230B. Directorate-General of Law. (1) The Directorate- General of Law shall consist of a
Director General and as many Directors, Additional Directors, Deputy Directors, Assistant
Directors, Law Officers and such other officers as the Board may, by notification in the
official Gazette, appoint.

(2) The Board may, by notification in the official Gazette, specify the functions, jurisdiction and
powers of the Directorate- General of Law.

230C. Directorate-General of Research and Development.(1) The Directorate-General of
Research and Development shall consist of a Director General and as many Directors,
Additional Directors, Deputy Directors, Assistant Directors and such other officers as the
Board may, by notification in the official Gazette, appoint.

(2) The Board may, by notification in the official Gazette, specify the functions, jurisdiction and
powers of the Directorate-General of Research and Development."

Functions, jurisdiction and powers of the above directorates are yet to be specified by the Federal Board
of Revenue.

Collection of tax by NCCPL Section 233AA

Scope of National Clearing Company of Pakistan Limited (NCCPL) has been enhanced to also collect
advance tax from margin financers, trading financers and lenders providing of any margin financing,
margin trading or securities lending under Securities (Leveraged Markets and Pledging) Rules, 2011, in
share business. This tax will be collected @ 10% of profit or mark-up or interest earned by the members,
margin financers or securities lender. However, provisions of this section shall not apply to mutual fund,
etc., in accordance with the proviso added as under:

"Provided that the provisions of this section shall not apply to any Mutual Fund specified in sub-clause
(2) of clause (57) of Part I of the Second Schedule."

Tax on motor vehicle Section 234

Advance tax collected under this section shall now be adjustable against the tax liability of the taxpayer.
Earlier, advance tax collected from the owner of the goods transport vehicle was final tax.



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Transitional Advance Tax Provisions Chapter XII

For the purpose of collection of advance tax, following new sections have been inserted in the chapter:

"236D. Advance tax on functions and gatherings. (1) Every prescribed person shall collect
advance tax at the rate specified in Division XI of Part IV of the First Schedule on the total
amount of the bill from a person arranging or holding a function in a marriage hall,
marquee, hotel, restaurant, commercial lawn, club, a community place or any other place
used for such purpose.

(2) Where the food, service or any other facility is provided by any other person, the prescribed
person shall also collect advance tax on the payment for such food, service or facility at the
rate specified in Division XI of Part IV of the First Schedule from the person arranging or
holding the function.

(3) The advance tax collected under sub-section (1) and sub-section (2) shall be adjustable.

(4) In this section,

(a) "function" includes any wedding related event, a seminar, a workshop, a session, an
exhibition, a concert, a show, a party or any other gathering held for such purpose;
and

(b) "prescribed person" includes the owner, a lease-holder, an operator or a manager of a
marriage hall, marquee, hotel, restaurant, commercial lawn, club, a community place
or any other place used for such purpose.

236E. Advance tax on foreign-produced TV plays and serials. (1) Any licensing authority
certifying any foreign TV drama serial or a play dubbed in Urdu or any other regional
language, for screening and viewing on any landing rights channel, shall collect advance tax
at the rates specified in Division XII of Part IV of the First Schedule.

(2) The advance tax collected under sub-section (1) shall be adjustable.

236F. Advance tax on cable operators and other electronic media. (1) Pakistan Electronic Media
Regulatory Authority, at the time of issuance of license for distribution services or renewal of
the license to a licensee, shall collect advance tax at the rates specified in Division XIII of
Part IV of the First Schedule.

(2) The tax collected under sub-section (1) shall be adjustable.

(3) For the purpose of this section, "cable television operator", "DTH", "Distribution Service",
"electronic media", "IPTV", "loop holder", "MMDS", "mobile TV", shall have the same
meanings as defined in Pakistan Electronic Media Regulatory Authority Ordinance, 2002
(XIII of 2002) and rules made there under.

236G. Advance tax on sales to distributors, dealers and wholesalers.(1) Every manufacturer or
commercial importer of electronics, sugar, cement, iron and steel products, fertilizer,
motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam sector, at the time
of sale to distributors, dealers and wholesalers, shall collect advance tax at the rate specified
in Division XIV of Part IV of the First Schedule, from the aforesaid person to whom such
sales have been made.


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(2) Credit for the tax collected under sub-section (1) shall be allowed in computing the tax due
by the distributor, dealer or wholesaler on the taxable income for the tax year in which the
tax was collected.

236H. Advance tax on sales to retailers. (1) Every manufacturer, distributor, dealer, wholesaler or
commercial importer of electronics, sugar, cement, iron and steel products, fertilizer,
motorcycles, pesticides, cigarettes, glass, textile, beverages, paint or foam sector, at the time
of sale to retailers, shall collect advance tax at the rate specified in Division XV of Part IV of
the First Schedule, from the aforesaid person to whom such sales have been made.

(2) Credit for the tax collected under sub-section (1) shall be allowed in computing the tax due
by the retailer on the taxable income for the tax year in which the tax was collected.

236I. Collection of advance tax by educational institutions. (1) There shall be collected advance
tax at the rate specified in Division XVI of Part-IV of the First Schedule on the amount of fee
paid to an educational institution.

(2) The person preparing fee voucher or challan shall charge advance tax under sub-section
(1) in the manner the fee is charged.

(3) Advance tax under this section shall not be collected from a person where annual fee does
not exceed two hundred thousand rupees.

(4) The term "fee" includes, tuition fee and all charges received by the educational institution,
by whatever name called, excluding the amount which is refundable.

(5) Tax collected under this section shall be adjustable against the tax liability of either of the
parents or guardian making payment of the fee.

236J. Advance tax on dealers, commission agents and arhatis etc. (1) Every market committee
shall collect advance tax from dealers, commission agents or arhatis, etc. at the rates
specified in Division XVII of Part-IV of the First Schedule at the time of issuance or renewal
of licenses.

(2) The advance tax collected under sub-section (1) shall be adjustable.

(3) In this section "market committee" includes any committee or body formed under any
provincial or local law made for the purposes of establishing, regulating or organizing
agricultural, livestock and other commodity markets."


INCOME TAX ORDINANCE, 2001 THE FIRST SCHEDULE

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THE FIRST SCHEDULE

PART I Division I

Rates of Tax for Individuals and Association of Persons Clause (1)

Rates of tax imposed on taxable income of individuals and association of persons except salaried taxpayer
are as under:

S.No. Taxable Income Rate of tax

1. Where the taxable income does not exceed
Rs.400,000
0%

2. Where the taxable income exceeds Rs. 400,000 but
does not exceed Rs. 750,000
10% of the amount exceeding Rs.
400,000

does not exceed Rs. 1,500,000
Rs. 35,000 + 15% of the amount
exceeding Rs. 750,000

4. Where the taxable income exceeds Rs. 1,500,000
but does not exceed Rs. 2,500,000


but does not exceed Rs.6,000,000
exceeding Rs.4,000,000

7. Where the taxable income exceeds Rs. 6,000,000 Rs. 1,322,500 + 35% exceeding
Rs.6,000,000

Salaried individuals, where income from salary exceeds 50% of taxable income: Clause (1A)

S. No. Taxable Income Rate of tax

1. Where the taxable income does not exceed
Rs.400,000
0%

2. Where the taxable income exceeds Rs. 400,000
but does not exceed Rs. 750,000
5% of the amount exceeding Rs. 400,000

Rs. 17,500 + 10% of the amount exceeding
Rs. 750,000

4. Where the taxable income exceeds Rs.
1,400,000 but does not exceed Rs. 1,500,000
Rs. 82,500 + 12.5% of the amount

1,500,000 but does not exceed Rs.1,800,000
Rs. 1,500,000

Rs. 140,000 + 17.5% of the amount

Rs.262,500 + 20% of the amount exceeding
Rs. 2,500,000



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S. No. Taxable Income Rate of tax

Rs.362,500 + 22.5% of the amount

Rs. 475,000 +25% of the amount exceeding
Rs.3,500,000

Rs.600,000 +27.5% of the amount

11. Where taxable income exceeds Rs. 7,000,000 Rs.1,425,000 +30% of the amount

Proviso regarding marginal tax rates has been omitted.

Part I - Division II

Rates of tax for companies Clause (i)

Rate of tax imposed on taxable income of a company other than a banking company has been reduced from
35% to 34% applicable for the tax year 2014.

Part II

Rates of advance tax

Advance tax under section 148 at import stage shall be collected at the following rates:

"(a) 5% of the value of goods in the case of industrial undertakings;
(b) 5% in all other cases of companies;
(c) 5.5% in case of all taxpayers other than those covered at (a) and (b) above; and
(d) notwithstanding the provision of clause (c) above, 12% of the value of the film in the case of a
foreign produced film imported for the purposes of screening and viewing."

Part III Division III

Payments for Goods or Services

Rates of tax to be deducted from payments on account of sale of goods, rendering of services and on
execution of contracts, by tax payers other than companies shall be as under:

Section Description Rate of tax

153(1)(a) Sale of goods 4% of the gross amount
153(1)(b) Rendering or providing of services 7% of the gross amount
153(1)(c) Execution of contract 6.5% of the gross amount

Part III - Division (VI)

Prizes and winnings

Withholding tax rate under section 156 on a prize on prize bond or cross word puzzle has been enhanced
from 10% to 15% of the gross amount paid.



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Part IV- Division III

Tax on motor vehicles

In case the motor vehicle tax under section 234 is collected in lump sum, the advance tax shall also be
collected in lump sum as under:

Sr. No. Engine Capacity Amount of tax
(Rupees)

a. Upto 1000cc 7,500
b. 1001cc to 1199cc 12,500
c. 1200cc to 1299cc 17,500
d. 1300cc to 1599cc 30,000
e. 1600cc to 1999cc 40,000
f. 2000cc and above 80,000

Part IV - Division V

Telephone users

Rate of advance tax to be collected in case of subscriber of mobile or sales telephone and pre-paid telephone
card or sale of units through any electronic medium or whatever form, has been enhanced from 10% to 15%.

Part IV - Division VI

Now, advance tax shall be collected under section 231A @ 0.3% of the cash amount withdrawn from bank.

Part IV - Division VII

Purchase of motor cars and jeeps

Rates of advance tax to be collected on registration of a new locally manufactured motor vehicle, have been
enhanced as under:

Engine capacity Amount of tax
(Rupees)

Upto 850cc 10,000
851 cc to 1000cc 20,000
1001cc to1300cc 30,000
1301cc to 1600cc 50,000
160 I cc to 1800cc 75,000
1801cc to 2000cc 100,000
Above 2000cc 150,000

Part IV - Division VIII

Advance tax at the time of sale by auction

Rate of collection of tax under section 236A shall now be 10% (previously 5%) of the gross sale price of any
property or goods sold by auction.



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Following new divisions has been added in this part specifying the rates of collection of advance tax:

Part IV - Division XI

Advance tax on functions and gatherings

The rate of tax to be collected under each sub-sections (1) and (2) of section 236D shall be 10%.

Part IV - Division XII

Advance tax on foreign-produced films and TV plays

Rate of collection of tax under section 236E shall be as follows:

Foreign-produced TV drama Rs. 100,000 per serial episode
Foreign-produced TV play Rs. 100,000 (single episode)

Part IV - Division XIII

The rate of tax to be collected under section 236F in the case of Cable Television Operator shall be as
follows:

License Category as
provided in PEMRA Rules
Tax on License
Fee (Rupees)
Tax on Renewal
(Rupees)

H 7,500 10,000
H-l 10,000 15,000
H-II 25,000 30,000
R 5,000 30,000
B 5,000 40,000
B-l 30,000 50,000
B-2 40,000 60,000
B-3 50,000 75,000
B-4 75,000 100,000
B-5 87,500 150,000
B-6 175,000 200,000
B-7 262,500 300,000
B-8 437,500 500,000
B-9 700,000 800,000
B-10 875,500 900,000

The rate of tax to be collected by Pakistan Electronic Media Regulatory Authority under section 236F in the
case of IPTV, FM Radio, MMDS, Mobile TV, Mobile Audio, Satellite TV Channel and Landing Rights, shall be
20 percent of the permission fee or renewal fee, as the case may be.

Part IV - Division XIV

Advance tax on sale to distributors, dealers or wholesalers

The rate of collection of tax under section 236G shall be 0.1% of the gross amount of sales.

Part IV - Division XV

Advance tax on sale to retailers

The rate of collection of tax under section 236H shall be 0.5% of the gross amount of sales.

INCOME TAX ORDINANCE, 2001 THE FIRST & SECOND SCHEDULES

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Part IV - Division XVI

Collection of advance tax by educational institutions

The rate of collection of tax under section 236I shall be 5% of the amount of fee

Part IV - Division XVII

Advance tax on dealers, commission agents and arhatis, etc.

The rate of collection of tax under section 236J shall be as follows:

Group Amount of tax
(per annum)
(Rupees)

Group or Class A: 10,000
Group or Class B: 7,500
Group or Class C: 5,000
Any other category: 5,000

THE SECOND SCHEDULE

EXEMPTIONS AND TAX CONCESSIONS

PART I EXEMPTIONS FROM TOTAL INCOME

Perquisites received by an employee Clause (53)

Exemption from tax in respect of free or concessional passage provided by transporters including airlines to
its employees and dependents has been withdrawn by omitting sub-clause (I) of this clause.

Educational institutions Clause (58A)

Following new clause has been inserted by replacing the clause (92) of this part to provide exemption to
educational institutions:

"(58A) Income of a university or other educational institution being run by a non-profit organization
existing solely for educational purposes and not for purposes of profit"

Certain exemptions from tax have been withdrawn by omitting the following clauses:

Income of International Cricket Council Development etc. Clause (98A)

(98A) Any income derived by International Cricket Council Development (International) Limited (IDI),
International Cricket Council (ICC), employees, officials, agents and representatives of IDI and ICC, officials
from ICC members, players, coaches, medical doctors and officials of member countries, IDI partners and
media representatives, other than persons who are resident of Pakistan, from ICC Champions Trophy, 2008
hosted in Pakistan.

INCOME TAX ORDINANCE, 2001 THE SECOND SCHEDULE

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Dividend in specie Clause (103B)

(103B) Any dividend in specie derived in the form of shares in a company, as defined in the Companies
Ordinance, 1984 (XLVII of 1984);

Provided that when such shares are disposed off by the recipient, the amount representing the
dividend in specie shall be taxed in accordance with provisions of section 5 of this Ordinance and the
amount, representing the difference between the consideration received and the amount hereinabove, shall
be treated in accordance with provisions of section 37 or 37A, as the case may be.

Profits and gains derived by Corporate Zone Developers Clause (126E)

This clause regarding exemption from tax available to special economic zones has been substituted as under:

(126E) Income derived by a zone enterprise as defined in the Special Economic Zones Act, 2012 (XX
of 2012) for a period of ten years starting from the date the developer certifies that the zone enterprise
has commenced commercial operation and for a period of ten years to a developer of zone starting
from the date of signing of the development agreement in the special economic zone as announced by
the Federal Government.

PART II REDUCTION IN TAX RATES

Import of hybrid cars Clause (28A)

To encourage the import of hybrid cars, the rates of advance tax to be collected at import stage have been
reduced by inserting the following new clause in this part:

"(28A) The rate of tax under section 148 on import of hybrid cars shall be reduced as below:-

Engine capacity Rate of reduction
Up to 1200 cc 100%
1201 to 1800 cc 50%
1801 to 2500 cc 25%

PART III REDUCTION IN TAX LIABILITY

Flying allowance Clause (1)

Reduction available in respect of flying allowance or the submarine allowance has been restricted. For this
purpose, following proviso has been added in this clause:

Provided that the reduction under this clause shall be available to so much of the flying allowance or
the submarine allowance as does not exceed an amount equal to the basic salary.

Teacher / researcher rebate Clause 1A(2)

Tax payable on income from salary by a full time teacher or researcher shall now be reduced by an amount
equal to 40% instead of 75%.

Minimum tax on distribution of cigarettes manufactured in Pakistan Clause (7)

Benefit of 80% reduction in minimum tax available to companies engaged in distribution of cigarettes
manufactured in Pakistan, has also been extended to individuals and association of persons engaged in this
business.

INCOME TAX ORDINANCE, 2001 THE SECOND, THIRD & SEVENTH SCHEDULES

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PART IV EXEMPTION FROM SPECIFIC PROVISIONS

Clause (56A)

Advance tax collected u/s 236E in respect of foreign TV drama or play dubbed in urdu shall be adjustable
with reference to following new clause inserted in this part:

(56A) The provisions of sub-section (7) of section 148 and clause (a) of sub-section (1) of section 169 shall
not apply to a person who is liable to withholding tax under section 236E

Profit on deposits Clause (59)(iv)(a)

Now, tax at source will also be withheld under section 151 in respect of profits paid on defence saving
certificates, special savings certificates, saving accounts or post office savings accounts or term finance
certificates where such deposits does not exceed Rupees 150,000.

Income from Hajj operations Clause 72A

The provision of sections 21(l) [inadmissible cash payments], 113 [minimum tax] and 152 [withholding tax
on payments to non resident] shall not apply in respect of Hajj operations, if fixed tax is paid. The new clause
(72A) states as under:

(72A) The provisions of clause (I) of section 21, sections 113 and 152 shall not apply in case of a Hajj
Group Operator in respect of Hajj operations provided that the tax has been paid at the rate of Rs.
3,500 per Hajji for the tax year 2013 and Rs.5,000 per Hajji for the tax year 2014 in respect of income
from Hajj operations.

Withholding tax on imports Clause (72B)

In case of industrial undertakings, tax will not be withheld at import stage if tax liability for current year is
paid as stated in the following new clause.

(72B) The provisions of section 148 shall not apply to an industrial undertaking if the tax liability for
the current tax year, on the basis of determined tax Liability for any of the preceding two tax years,
whichever is the higher, has been paid and a certificate to this effect is issued by the concerned
Commissioner.

THE THIRD SCHEDULE

Depreciation

Part II Initial allowance and first year allowance Clause (1)

Initial allowance available in respect of plant and machinery @ 50% has been reduced to 25%.

THE SEVENTH SCHEDULE

RULES FOR THE COMPUTATION OF THE PROFITS AND GAINS OF A BANKING COMPANY AND TAX
PAYABLE THEREON

Tax on income computed Rule 6

Tax on dividend received from money market fund and income fund was imposed @ 35% for the tax year
2014 and onwards by Finance Act, 2012. This increased rate has now been withdrawn by amending this
rule. Now tax on such dividend shall be charged at the rate of 25% for the tax year 2013 and onward.

INCOME TAX ORDINANCE, 2001 GENERAL

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Important provisions regarding income tax rates, advance tax, rates for deduction of tax at source, filing dates
of various periodical statements and income tax return, etc., are given in this part for convenience of our
clients.

INCOME TAX RATES

TAX YEAR 2014

RATES OF TAX FOR COMPANIES

The rates of tax imposed on taxable income of companies falling under various categories are as under:

S. No. Description Rate of Tax

1. Modaraba Company [clause (18), Part II, Second Schedule] 25%
2. Company other than a banking company 34%
3. Banking Company 35%
4. Small Company [Paragraph (iii), Division II, Part I, First Schedule] 25%

INCOME TAX RATES ON DIVIDEND

The rate of tax imposed under section 5 on dividend received from a company is 10% (Division III, Part
I, First Schedule)
The rate of tax in case of dividends declared or distributed on shares of a power generation company
continues to be 7.5% as per clause (20) of Part II of the Second Schedule.
The rate of tax on dividend received by a banking company from its asset management company is 20%.
Moreover, dividend received by a banking company from Money Market Funds and Income Funds will
be taxed at the rates of 25% for the Tax Year 2013 and onwards, as per proviso of Rule 6 of the Seventh
Schedule.

TAX RATES FOR INDIVIDUALS AND ASSOCIATION OF PERSONS

The rates of tax chargeable for the Tax Year 2014 are as under:

Non-Salaried Individuals and association of persons (AOP)


1. Where the taxable income does not exceed Rs.
400,000
0%

does not exceed Rs. 750,000
10% of the amount exceeding Rs.
400,000

does not exceed Rs. 1,500,000


5. Where the taxable income exceeds Rs. 2,500,000 Rs. 347,500 + 25% of the amount



FINANCE ACT 2013

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7. Where the taxable income exceeds Rs.6,000,000 Rs. 1,322,500 + 35% exceeding Rs.
6,000,000

Salaried Individuals, where income from salary exceeds 50% of taxable income:

Sr. No. Taxable Income Rate of tax

1. Where the taxable income does not exceed Rs.
400,000
0%

but does not exceed Rs. 750,000
5% of the amount exceeding Rs. 400,000

Rs. 750,000

Rs. 82,500 + 12.5% of the amount

Rs. 1,500,000

Rs. 140,000 + 17.5% of the amount

Rs. 2,500,000

Rs. 362,500 + 22.5% of the amount

Rs. 3,500,000

Rs. 600,000 + 27.5% of the amount

7,000,000
Rs. 1,425,000 + 30% of the amount

ADJUSTMENT OF TAX CREDIT BY EMPLOYER

Every responsible person, while deducting tax on the income chargeable under the head salary of employees,
is allowed to make adjustments of any tax withheld from employees under other heads, admissible tax credits,
excess tax deduction or deficiency arising out of any previous deduction or failure to make deduction during
the tax year under the provisions of section 149 of the Income Tax Ordinance, 2001 [Section 149(1)].

Presently following tax adjustments and tax credits are available to the salaried persons:

Adjustment of tax deducted/collected on:

motor vehicle under section 234 in respect of motor vehicle registered in employees own name;
telephone bill as subscriber of telephone;
cash withdrawals from banks; and
registration of a new motor vehicle under section 231B.


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Tax credits on:

donations to approved NPOs (section 61);
investment in shares and insurance (section 62);
contribution to approved pension funds (section 63); and
profit on debt paid in respect of housing loans, etc. (section 64).

The employers will, however, be responsible to obtain documentary evidences alongwith declaration from
employees on prescribed form IT-3, for correct application of relevant provisions of law. The said
declaration and evidences are required to be retained by the employer for at least 5 years.

VALUATION OF PERQUISITES, ALLOWANCES AND BENEFITS

In case of salaried taxpayers special allowance and medical allowance are exempt from tax under Clause
(39) and Clause (139) respectively of Part I of Second Schedule. However, value of other perquisites,
allowances and benefits provided by the employer shall be included in income of the employee in
accordance with the rules 4 to 7 of Part I of Chapter II of Income Tax Rules, 2002 as reproduced below:

4. Valuation of Accommodation - The value of accommodation provided by an employer to the
employee shall be taken equal to the amount that would have been paid by the employer in case
such accommodation was not provided.

Provided that the value taken for this purpose shall, in any case, not be less than forty five percent of
the minimum of the time scale of the basic salary or the basic salary where there is no time scale.

Provided further that where House Rent Allowance is admissible @ thirty per cent, the value taken
for the purpose of this rule shall be an amount not less than thirty per cent of minimum of the time
scale of basic salary or the basic salary where there is no time scale.

5. Valuation of conveyance.- The value of conveyance provided by the employer to the employee shall
be taken equal to an amount as below: -

6. For the purpose of this part, employee includes a director of a company.

REDUCTION IN TAX LIABILITY OF SENIOR CITIZENS, TEACHERS AND RESEARCHERS

Clause (IA), Part III, Second Schedule

Where taxable income other than income on which the deduction of tax is final discharge of tax liability, in a
tax year, of a taxpayer aged 60 years or more on the first day of that tax year does not exceed Rupees
1,000,000, his tax liability on such income shall be reduced by 50%.
(i)

Partly for personal and
partly for official use
5% of:
(a) the cost to the employer for acquiring the motor vehicle; or,

(b) the fair market value of the motor vehicle at the
commencement of the lease, if the motor vehicle is taken on
lease by the employer;
(ii) For personal use only 10% of:
(a) the cost to the employer for acquiring the motor vehicle; or,

(b) the fair market value of the motor vehicle at the
commencement of the lease, if the motor vehicle is taken on
lease by the employer; and


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Clause (2), Part III, Second Schedule

The provision to reduce the income tax liability of a full time teacher or a researcher employed in a non
profit educational or research institution duly recognized by Higher Education Commission, a Board of
Education or a University recognized by the Higher Education Commission including government training
and research institution, continues to be available. The tax liability in such cases shall be reduced by an
amount equal to 40% of the tax payable.

RATE OF TAX FOR CAPITAL GAIN ON SALE OF SECURITIES

Tax Year
Where holding period of a security is
Less than 6
months
6 months or more but less
than 12 months
% %
2011 10 7.5
2012 10 8
2013 10 8
2014 10 8
2015 17.5 9.5
2016 (not provided) 10

Rate of tax will be 0% where holding period of a security is twelve months or more.

Mutual fund or a collective investment scheme will deduct capital gains tax at the rates specified above, on
redemption of securities (Division VII, Part I, 1
st
Schedule)

RATE OF CAPITAL GAINS ON DISPOSAL OF IMMOVABLE PROPERTY

Holding period Rate of tax
Up to one year 10%
More than one year but not more than two years 5%

Advance tax @ 0.5% of gross amount will be collected from the seller at the time of registration or transfer of
immovable property (Division X, Part IV of 2
nd
Schedule).

INCOME FROM PROPERTY UNDER SECTION 15 & 155

The rate of tax to be deducted under section 15 and 155 on gross amount of rent in case of individuals and
association of persons are as under:

Sr.
No.
Gross amount of Rate of tax
1. Where the gross amount of rent does not
exceed Rs. 150,000
Nil
2. Where the gross amount of rent exceeds Rs.
150,000 but does not exceed Rs. 1,000,000
10% of the gross amount exceeding Rs.
150,000
3. Where the gross amount of
rent exceeds Rs. 1,000,000
Rs. 85,000 + 15% of the gross amount
exceeding Rs. 1,000,000.



FINANCE ACT 2013

- 30 -
Company

The rate of tax to be deducted under section 155, in the case of company shall be 15% of the gross amount
of rent.

ADVANCE TAX UNDER SECTION 147

Every taxpayer whose income was charged to tax for the latest tax year under this Ordinance excluding the
followings shall pay advance tax for the year under section 147 of Income Tax Ordinance, 2001 as reduced
by the tax already paid/deducted at source in the year:

i) Dividend received from a company (Section 5)
ii) Income of a non resident from Pakistan-source royalty or fee for technical services, shipping and
transport (Sections 6&7)
iii) Salary income subject to deduction of tax (Section 149)
iv) All income where the tax collected or deducted is considered as final tax (Section 168)

Advance tax in case of an individual, will be calculated in accordance with the following formula:

( A / 4 ) - B
Where

A is the tax assessed to the taxpayer for the latest tax year under the Ordinance; and

B is the tax paid in the quarter for which a tax credit is allowed under section 168, other than tax
deducted on dividend income, salary income or income from property.

Individual whose latest assessed income excluding incomes referred to in items (i) to (iv) above is less than
Rupees 500,000 is not required to pay advance income tax under section 147 of Income Tax Ordinance,
2001.

Where the taxpayer is an association of persons or a company, advance tax will be computed according to
the following formula:

( A x B / C ) - D
Where

A is the taxpayers turnover for the quarter

B is the tax assessed of the taxpayer company for the latest tax year

C is turnover of the taxpayer for the latest tax year

D is the total amount of tax paid/deducted in the quarter other than tax collected/deducted which is
considered as final tax.



FINANCE ACT 2013

- 31 -
Adjustable advance tax on capital gain from sale of securities shall be payable to the Commissioner within
21 days from the close of each quarter except last quarter which is payable on or before 30 June of each year.
The advance tax will be computed at following rates: [Section 147(5B)]

Where holding period of a security is less
than 6 months
2% of the capital gains derived during the quarter
Where holding period of a security is 6
months or more but less than 12 months
1.5% of the capital gains derived during the quarter

However, provisions regarding advance tax on capital gain from sale of securities are not applicable to
individual investors.

In case the taxpayer is an association of persons or a company, it will compulsorily estimate the tax payable
by it for the relevant tax year at any time before the last installment is due. In case the tax payable is more
than the tax due on the basis of tax assessed for the latest tax year, it shall furnish estimates to the
Commissioner and thereafter pay such amount, after making adjustments to the amounts already paid in
accordance with section 147(4). Similarly, according to the provisions of sub-section (6), if the tax payable is
less than the tax due on the said basis, every taxpayer who is required to pay advance tax, after furnishing the
estimates to Commissioner, will pay such estimated amount after adjustment of tax already paid. The
provision of minimum tax will also be taken into account while computing advance tax liability on such
basis.

New company or an association of persons, are required to pay advance income tax even in the first year of
their operation. The taxpayer will estimate the amount of advance tax payable on quarterly income basis and
thereafter pay such amount after taking into account minimum tax payable under section 113. If minimum
tax payable comes more than the advance tax calculated on the basis of quarterly income, then advance tax
will be paid equal to minimum tax calculated @ 1% on aggregated turnover of the quarter after adjustment of
the amount already paid during the quarter, if any.

Where the advance tax paid on the basis of estimation under sub-section (4A) or (6) of section 147 is less
than 90% of the tax chargeable for the relevant tax year, the taxpayer shall be liable to pay default surcharge
under section 205(IB) at the rate of 18% per annum on the amount by which the tax paid by him falls short of
the 90%. Such default surcharge shall be calculated from 1
st
day of April in that year to the date on which the
assessment is made or the 30
th
day of June of the financial year next following whichever is the earlier. [Sub-
section (1B) of Section 205]

DATE OF PAYMENT OF ADVANCE TAX

Tax Payable For On or Before
Individuals Companies and AOPs (excluding
Banking Company)

September quarter 15 September 25 September

December quarter 15 December 25 December

March quarter 15 March 25 March

June quarter 15 June 15 June


FINANCE ACT 2013

- 32 -

Advance tax on capital gain from sale of securities is payable within 21 days from the close of each quarter
except last quarter which is payable on or before 30 June of each year.

Banking company will be required to pay advance tax under section 147 in 12 equal installments on or
before 15
th
of every month. [Rule 5(1) of the Seventh Schedule]

PAYMENT OF TAX COLLECTED / DEDUCTED (RULE 43 OF INCOME TAX RULES, 2002)

DATE OF FILING OF STATEMENTS UNDER SECTION 165 (Rule 44 of Income Tax Rules, 2002)

Every prescribed person shall furnish or e-file statement under sub-section (1) of section 165 by 15
th
day of
the month following the month to which the withholding tax pertains.

However, the Commissioner may grant extension for filing of statement, on application by the taxpayer, if he
is satisfied that a reasonable cause exists for non-furnishing of statement by the due date. [Section. 165(4)]

ANNUAL STATEMENT

Annual statements will be furnished on or before 31 August of each year by the person deducting tax from
salary under section 149. [Section 165(6)].

DATE OF FILING OF RETURN OF INCOME / STATEMENT UNDER SECTION 115(4)

Category of Taxpayer Date of Filing

Companies: (For return under section 114, statements under sections 115(4) and 165)

Having tax year ending between 01 January to 30 June 31 December
Other cases
30 September
Annual Statement of deduction of Income tax from salary.

31 August
Other than Companies

Annual Statement of deduction of Income tax from salary

31 August
Return of income through e-portal in the case of salaried person 31 August
Statement of final tax under section 115(4) 31 August
Return of income 30 September

Tax collected / deducted by Deposit into Government treasury

Federal / Provincial Government On the same day

Other persons Within 7 days from the end of each week ending on Sunday

INCOME TAX ORDINANCE, 2001 GENERAL - SUMMARY OF WITHHOLDING TAX REGIME

FINANCE ACT 2013

- 33 -

Section Nature of Payment / Transactions
Tax Rate for
Deduction / Collections

Responsibility for
Deduction / Deposit
Remarks

148 (a) Imports in case of industrial undertaking

(b) In all other cases of companies

(c) In case of all taxpayers other than those
covered in (a) or (b) above

(d) In case of foreign produced film for the
purpose of screening and viewing
5% of the value including
custom duty Federal
Excise & Sales Tax if any

5%

5.5%

12%
Collector of customs

Final - except the followings (Sec.148(7)):
(a) raw material, plant, machinery, equipment
and parts by an industrial undertaking for
its own use.
(b) fertilizer by manufacturer of fertilizer.
(c) Motor vehicles in CBU condition by
manufacturer of motor vehicles.
(d) Large import houses.
(e) Foreign produced film imported for the
purpose of screening and viewing.
(f) Edible oil and packing material (will be
treated as minimum tax) [Sec. 148(8)].

- Import of remeltable steel (PCT Heading
72.04) for own use[Cl. (9B) Part II, 2
nd

Sch.]
1% Collector of customs Adjustable SRO 772(I)/2012 dated 26 June
2012
- Imports covered under SRO 1125(I)/2011
by:
(a) Manufacturer
(b) Commercial importer

1%
3%


- Import of potassic fertilizers [Cl. (13E),
Part II,2nd Sch.]

1% Collector of customs

Final
- Import of Urea fertilizers [Cl. (23), Part II
2nd Sch.]

1%


Final

- Import of pulses [Cl. (24), Part II 2nd
Sch.]

2%


Final

- Old and used automotive vehicles
[Cl. (4) Part III, 2nd Sch.]
As per SRO 577(I)/2005


Final

149 Basic salary and taxable allowances

Average rate Employer Adjustable. Exempt where the taxable income
does not exceed Rupees 400,000. [Cl (IA),
Division I, Part I, 1st Sch.]



FINANCE ACT 2013

- 34 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

Tax deducted at source of the employee, short /
excess tax deducted from salary, tax credits
under sections 61,62,63,64, etc. can be
adjusted by the employer. [Sec. 149(1)].
Payment of salary more than Rupees 15,000
should be through crossed cheques or direct
transfer of funds to the employees bank
account. [Sec. 21(m)]
150 - Payment of dividend 10%

Every person paying
dividend
Final
- Dividend declared or distributed by
purchaser of power project privatized by
WAPDA. [Cl. (17), Part II, 2nd Sch].
7.50%

Every person paying
dividend

Final

- Dividend declared or distributed by
power generation companies.[Cl (20), Part
II, 2nd Sch.]
7.5%

Every person paying
dividend

Final

Followings are exempt:

- any income derived from inter-corporate
dividend within the group companies entitled to
group taxation under section 59AA or 59B. [Cl
(103A), Part I, 2nd Sch.]
151(1):
- Payment to approved Pension fund,
recognized provident fund, approved
superannuation fund or approved gratuity fund
etc.[Cl. (47B), Part IV, 2nd Sch.]

(a) Yield on an account, deposit or a
certificate under the National Saving
Scheme or post office saving account

10%

Every person making
payment
Final tax for a person other than a company.

(b) Profit on a debt, being an account or
deposit maintained with the Banking
company or financial institution
10%

Banking company or
financial institution




FINANCE ACT 2013

- 35 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

(c) Profit on any security other than that
referred in Clause (a), issued by Federal
Government, Provincial Government or
local Government.

10%

Federal Government,
Provincial Government
or local Government


(d) Profit on bond, certificate, debenture,
security or instrument of any kind to any
person other than financial institution
10%

Banking company,
financial institution, etc.


No tax will be deducted in following cases:
- Yield or profit on investment in Bahbood
Saving Certificates or Pensioners Benefit
Account [Cl. (36A), Part IV, 2nd Sch]
- If monthly installment in monthly income
saving scheme does not exceed Rupees 1,000-
[Cl. (59) (iv) (b), Part IV, 2nd Sch.].
- Any yield from National Saving Schemes of
Directorate of National Savings where
investment was made on or before 30 June
2001 and any income derived from Mahana
Amdani Account where monthly installment
does not exceed Rupees 1,000 shall continue to
remain exempt and any person paying such
yield or income shall not deduct tax u/s 151.
The recipient of such receipt or income is not
required to produce exemption certificate in this
regard [S. 239(14)]

152
(1) Royalty or fee for technical services to non
resident

15% Every person making
payment
Final
(1A) Payment to non-resident persons on
account of certain contracts

payment
Final


FINANCE ACT 2013

- 36 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

(1AA) Payments to non-resident on account of
insurance or re-insurance premium

payment
Final
(1AAA) Payment for advertisement services to non-
resident media person relaying from
outside Pakistan
payment
Final

(2) Payment to non-resident other than
amount to which sub-section (1), (IA),
(IAA) or (IAAA) above applies

payment
Adjustable
(2) Payment to non-resident having no PE in
Pakistan, in respect of profit on debt [Cl.
(5A) Part II, 2nd Sch.]
payment
Final Subject to proviso of
clause (5A) of Part II
of 2nd Schedule

(2A)(a) Payment to PE for sale of goods

3.5% Every person making
payment
Adjustable

(2A)(b) i) Payment to PE for transport services

ii) Payment to PE for services in other cases

2%

6%
Every person making
payment
Every person making
payment
Adjustable

Adjustable

(2A)(c) Payment to PE in any other case 6% Every person making
payment
Adjustable

153
(1)(a) -Sale of rice, cotton seed or edible oil
[Div III, Part III, 1st Sch.]

1.5% Every prescribed person
making payment
Final
(Adjustable for
manufacturing co. &
listed co.)
Gross amount
payable for sale of
goods shall include
the sales
tax.[S.153(1)]

Tax will not be
deducted on account
of payments made
for:



FINANCE ACT 2013

- 37 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

-Sale of any other goods
[Div III, Part III, 1
st
Sch.]
--in case of companies
--in case of other taxpayers

3.5%
4%
Every prescribed person
making payment
Final
(Adjustable for
manufacturing co. &
listed co.)
Sale of goods not
in a financial Year

Services and
execution of contracts
not exceeding Rs.
10,000 in a financial
year. Provided that
where the total
payments in a
financial year, exceed
Rs. 25,000/10,000 as
stated above, the
taxpayer will deduct
tax from the payments
including the
payments made
earlier without
deduction of tax
during the same
financial year
[SRO586(1)/91 dated
30.06.1991]

-Sale of rice by Rice Exporters Association
of Pakistan to Utility Store Corporation.[Cl.
(13HH), Part II, 2
nd
Sch.]
1% Every prescribed person
making payment
Final
(Adjustable for
manufacturing co. &
listed co.)
-Sale of cigarettes and pharmaceutical
products by distributors of such products
and by large distribution houses subject to
the fulfillment of conditions u/s 148(7). [Cl.
(24A), Part II, 2nd Sch.]

1%

making payment

Final
(Adjustable for
manufacturing co. &
Listed co.)

Local sales, supplies to sales tax zero rated
taxpayers as per clause (45A) of Part IV of
2nd Schedule.

1%

Every person making
payment

Final Tax will not be
deducted on account
of payments made for
news print media
services in respect of
advertising services.
(1)(b) Rendering or providing of services:
[Cl. (2), Div III, Part III, 1st Sch.]
- transportation

2%
making payment
Minimum
Tax deducted on
account of the
followings will not be


FINANCE ACT 2013

- 38 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

- others:
- in case of companies
- in case of other taxpayers
6%
7%
final tax: [Sec.153(3)]
Services provided to sales tax zero rated
taxpayers as per clause (45A) of Part IV of
2nd Schedule
payment
Minimum Sale of goods and
execution of contracts
by a public company
listed on a registered
stock exchange in
Pakistan.

Advertisement
services by owners of
newspaper and
magazines.

Rendering or
providing of service.
(1)(c) Execution of a contract (Residents)
[ Cl. (3), Div III, Part III, 1st Sch.]
- in case of companies
- in case of other taxpayers

6%
6.5%
making payment
Final
(Adjustable for listed
companies)[Sec.153(3)]
(2) Payments made by every exporter or an
export house to a resident person or
permanent establishment in Pakistan, on
account of rendering of services of
stitching, dying etc. [Cl. (3), Division IV,
Part III, 1st Sch.]
0.5% Every exporter or export
house
Final
154(1) Realization of foreign exchange on
account of export of goods by exporter.
1% Every authorized dealer
in foreign exchange
Final
(2) Commission due to an indenting
commission agent.
5% Every authorized dealer
in Foreign Exchange
Final
(3) Sale of goods to an exporter under in land
back to back L/C.
1% Every banking company Final
(3A) Export of goods Export Processing Zone 1% Export Processing Zone
Authority

Final
(3B) Indirect exporter 1% Direct exporter, export
house

Final
(3C) Clearing of goods 1% Collector of customs Final
155 Payment in full or part (including advance)
on account of rent of immovable property
(including rent of furniture and fixture and
services relating to such property), where
the gross amount of rent is:
Prescribed persons as
mentioned in sub-
section (3) of section 155
Adjustable


FINANCE ACT 2013

- 39 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

Individuals and Association of Persons

Up to Rs. 150,000

Nil
Rs. 150,001 Rs. 1,000,000 10% of the amount
exceeding Rs.150,000
Adjustable
Over Rs. 1,000,000 Rs. 85,000 + 15% of the
amount exceeding Rs.
1,000,000
Adjustable
Company 15% Adjustable

156 -Payment of prize on a prize bond or cross
word puzzle.

payment
Final Where the prize is not
in cash, the person
while giving the prize
shall collect tax on
the fair market value
of the prize.
[Sec.156(2)]
-Payment on winning from a raffle, lottery,
prize on winning a quiz, prize offered by
companies for promotion of sales.
payment
Final tax
156(A) Commission paid or discount allowed to
petrol pump operator
10% Every person selling
petroleum products
Final tax
156(B) Withdrawal of balance under pension
fund:

(a) Withdrawn before the retirement age

(b) Withdrawn if in excess of 50% of
accumulated balance at or after the age of
retirement
Average rate [Sec. 12(6)]
of tax for the last 3 years
or tax rate for the year
which ever is less

- do -
Pension fund manager Adjustable Tax Tax will not be
deducted
i) in care of disability
ii) on share of the
nominated survivor of
the deceased person
iii) invested in an
approved income
payment plan
iv) paid to life
insurance company
for purchase of
approved annuity
plan


FINANCE ACT 2013

- 40 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

TRANSITIONAL ADVANCE TAX

231(A) Cash withdrawal from a bank 0.3% Banking company Adjustable tax - No tax deduction, if cash
withdrawal does not exceed Rupees 50,000, in
a day. However, if cash amount withdrawn
exceeds Rs. 50,000 in a day, tax will be
deducted on the whole amount withdrawn.
[Circular No. 9 of 2008 dated 15 August 2008].

-Further, no advance tax will be collected from
government, a foreign diplomat, a diplomatic
mission in Pakistan, foreign currency accounts
or a person who produces exemption certificate
from the Commissioner.

231(AA) Sale of various banking instruments against
cash, receipt of cash on cancellation of
any of these instruments and transfer of
any sum against cash through online
transfer, telegraphic transfer, mail transfer
or any other mode of electronic transfer.
0.3% Banking company, non-
banking financial
institution, exchange
company, authorized
dealer of foreign
exchange.
Adjustable No tax will be collected in case of
inter bank or intra bank transactions and where
payment is made through crossed cheque.
No tax will be collected where sum total of the
transaction does not exceed Rupees 25,000 in a
day.
Further, tax will not be deducted on transactions
made by Federal or a Provincial Government,
foreign diplomat or a diplomatic mission in
Pakistan or a person who produces a certificate
from the Commissioner that his income during
the tax year is exempt.
231(B) Registration of a new locally manufactured
motor vehicle:
Motor vehicle
registration authority of
Excise and Taxation
Department
Adjustable - No tax will be collected in case of:
- Federal / Provincial/ Local Government
- a foreign diplomat / diplomatic mission in
Pakistan.



FINANCE ACT 2013

- 41 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

Engine Capacity (Rupees)
upto 850 cc 10,000
851 cc to 1000 cc 20,000
1001 cc to 1300 cc 30,000
1301 cc to 1600 cc 50,000
1601 cc to 1800 cc 75,000
1801 cc to 2000 cc 100,000
Above 2000 cc 150,000

233 Payment on account of brokerage or
commission made to a person:
Federal Government,
Provincial Government,
Local Government, a
Company or an
Association of Persons
(termed as principal)
Final
- Commission agents other than advertising
agents and export indenting commission
agents
10%
-Advertising agents [Cl. (26), Part II,
Second Sch.].
5%
233A(I) - Purchase of shares as per clause (a) 0.01% Stock Exchange Adjustable
- Sale of shares as per clause (b) 0.01% Stock Exchange Adjustable

233(AA) - Profit or mark-up or interest earned by
member, margin financer, or security
lender
10% NCCPL Adjustable

234 Advance tax will be collected at the time
of collecting motor vehicle tax:

Motor vehicle tax
Collecting Authority

Adjustable

(1) In the case of goods transport vehicles

Rupee 5 Per Kilogram of
the laden weight

No advance tax shall be collected in case of
motor vehicles owned by the Federal /
Provincial or local Government.

(2) In the case of passenger transport
vehicles plying for hire with registered
seating capacity of:
No advance tax after 10 years from the date of
first registration in Pakistan on vehicle with
registered laden weight less than 8120 Kgs.[ S.
234(4)]


FINANCE ACT 2013

- 42 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

a) Four or more persons but less than ten
persons

Rupees 25 per seat
per annum
Advance tax after period of 10 years from the
date of first registration of vehicle in Pakistan
shall be collected at the rate of Rupees 1200 per
annum. (for category of 8120 Kgs or more) [Cl.
(IA) of Division III, part IV, 1st Sch.]
Advance tax on passenger transport vehicles
with registered seating capacity of ten or more
persons, shall not be collected after a period of
10 years from 1st day of July of the year of make
of the vehicle. [S. 234(3)].
In case of motor cars used for more than 10
years in Pakistan, no advance tax shall be
collected after a period of 10 years. [S. 234(2A)]
b) Ten or more persons but less than
twenty persons
Rupees 60 per seat per
annum
c) Twenty persons or more Rupees 500 per seat per
annum
(3) Other private motor cars with engine
capacity of:
a) up to 1000 cc Rupees 750
b) 1001 - 1199 cc Rupees 1,250
c) 1200 - 1299 cc Rupees 1,750
d) 1300 - 1599 cc Rupees 3,000
e) 1600 1999 cc Rupees 4,000
f) 2000 cc and above Rupees 8,000

(4) Where the motor vehicle tax is
collected in lump sum
a) up to 1000 cc Rupees 7,500
b) 1001 - 1199 cc Rupees 12,500
c) 1200 - 1299 cc Rupees 17,500
d) 1300 - 1599 cc Rupees 30,000
e) 1600 1999 cc Rupees 40,000
f) 2000 cc and above Rupees 80,000
234A Advance tax shall be collected on the
amount of gas bill of a Compressed
Natural Gas (CNG) station.
4% The person preparing gas
consumption bill
Final



FINANCE ACT 2013

- 43 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

235 Rate of collection of advance tax on
electricity bill of commercial or industrial
consumers,
where the amount of bill:
The person preparing
electricity bills.
No tax shall be collected from the taxpayers
who fall under zero rated regime of sales tax
and registered as exporter or manufacturers of
carpets, leather and articles thereof, surgical
goods, sports goods and textile and articles
thereof. [Cl (66) Part IV, 2
nd
Sch].

No advance tax shall be collected from a
person who produces a certificate from
Commissioner that his income during the tax
year is exempt from tax. [S. 235(3)]

(a) does not exceed Rs. 400 -
(b) Rs. 401 - 600 Rupees 80
(c) Rs. 601 - 800 Rupees 100
(d) Rs. 801 - 1,000 Rupees 160
(e) Rs. 1,001 - 1,500 Rupees 300
(f) Rs. 1,501 - 3,000 Rupees 350
(g) Rs. 3,001 - 4,500 Rupees 450
(h) Rs. 4,501 - 6,000 Rupees 500
(i) Rs. 6,001 - 10,000 Rupees 650 As per section 235(4), tax collected will be:
(j) Rs. 10,001 - 15,000 Rupees 1,000
(k) Rs. 15,001 - 20,000 Rupees 1,500 - In case of company, adjustable.
(l) Exceeding Rs. 20,000 - In case of other than Company:
- Commercial consumers 10% - minimum tax up to monthly bill of Rs. 30,000
- Industrial consumers 5% - adjustable if monthly bill exceeds Rupees
30,000
236 Advance tax shall be collected on account
of the following:
The person preparing
telephone bills / issuing
prepaid card.
Adjustable - No advance tax shall be collected
from Government, a foreign diplomat, a
diplomatic mission in Pakistan, or a person who
produces a certificate from the Commissioner
that his income during the tax year is exempt
from tax. [S. 236(4)]
a) in case of telephone subscriber (other
than mobile phone subscriber) where the
amount of monthly bill exceeds Rs. 1,000
10% of the exceeding
amount of bill.
b) in case of subscriber of mobile
telephone and prepaid telephone card
15% of the amount of bill
or sales price of prepaid
telephone card or sale of
units through any
electronic medium or
whatever form.


FINANCE ACT 2013

- 44 -

Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

236A Collection of advance tax at the time of
sale by public auction or auction by a
tender.
10% of the gross sale
price of any property or
goods sold by auction.

Any person making sale
by public auction or
auction by a tender
Adjustable

236B Collection of advance tax on purchase of
domestic air ticket.
5% of the gross amount
of air ticket.
The person preparing air
ticket.
Adjustable - No Tax shall be collected from the
Federal or a Provincial Government or holder of
exemption certificate. Section [236b (3)]

236C Advance tax on sale or transfer of
immovable property
0.5% of gross amount of
the consideration
received
The person responsible
for registering or
attesting the transfer
Adjustable - No advance tax will be collected
from Federal, Provincial and Local
Governments.

236D(1) Advance tax on functions and gatherings 10% of the total amount
of the bill
Prescribed person as
mentioned in clause (b)
of sub-section (4) of
section 236D
Adjustable

(2) In case where food, service or any other
facility is provided
10% of the amount paid
for such food, service or
facility
-do- Adjustable

236E Advance tax on foreign produced T.V
plays and serials:
(a) Foreignproduced T.V drama
Serial
Rs. 100,000 per episode Licensing authority Adjustable
(b) Foreignproduced T.V play Rs. 100,000 for single
episode
-do- Adjustable

236F(1) Advance tax on cable operators and other
electronic media shall be as follows:
Pakistan Electronic
Media Regulatory
Authority (PEMRA)
Adjustable



FINANCE ACT 2013

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Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

License Category Tax on
License fee
Tax on
Renewal

H Rs. 7,500 Rs. 10,000
H-l Rs. 10,000 Rs. 15,000
H-II Rs. 25,000 Rs. 30,000
R Rs. 5,000 Rs. 30,000
B Rs. 5,000 Rs. 40,000
B-l Rs. 30,000 Rs. 50,000
B-2 Rs. 40,000 Rs. 60,000
B-3 Rs. 50,000 Rs. 75,000
B-4 Rs. 75,000
Rs.100,000
B-5 Rs. 87,500 Rs.150,000
B-6 Rs.175,000 Rs.200,000
B-7 Rs.262,500 Rs.300,000
B-8 Rs.437,500 Rs.500,000
B-9 Rs.700,000 Rs.800,000
B-10 Rs.875,500 Rs.900,000

236G(1)

236H(1)
Advance tax on sales to distributors,
dealers and wholesalers

Advance tax on sale to retailer

0.1% of the gross amount
of sale

0.5% of the gross amount
of sale
Manufacturer,
commercial importer

Manufacturer,
distributors, wholesaler
or commercial importer
Adjustable- Tax shall be deducted in respect of
following sectors: Electronic, sugar, cement,
iron and steel products, fertilizer, motorcycles,
pesticides, cigarettes, glass, textile, beverages
and paint of foam sector.

Tax credit for the tax deducted under sections
236G(1) and 236H(1) shall be allowed in
computing the tax due by the distributor, dealer,
wholesaler / retailer on the taxable income for
the tax year in which the tax was collected.



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Tax Rate for

Responsibility for
Deduction / Deposit
Remarks

236I(1) Collection of advance tax by educational
institutions
5% of the amount of fee The person preparing fee
voucher or challan
Adjustable tax shall not be deducted from a
person where annual fee does not exceed two
hundred thousand rupees.

Tax shall also not be collected on the amount
which is refundable.

236J(1) Advance tax on dealers, commission
agents and arhatis etc.
Market committee Adjustable

Group Amount of tax
(per annum)

Group or Class A: Rs. 10,000
Group or Class B: Rs. 7,500
Group or Class C: Rs. 5,000
Any other category: Rs. 5,000


INCOME SUPPORT LEVY ACT, 2013

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Income Support Levy Act, 2013 (ISL) has been introduced with the objects to provide financial assistance and
other social protection and safety net measures to economically distressed persons and families. The Prime
Ministers Youth programs, small loans, microfinance, housing finance support, education fee support and
others will all be part of the larger income support programme.

ISL, in the Act, named as Levy, shall be charged from tax year 2013 and onward at the rate of 0.5% of value
of net moveable assets, exceeding Rupees 1 million, held by a person (individual) on the last date of every
tax year. Section 3 of this Act prescribes as under:
3. Charge of Levy.Subject to the provisions contained in this Act, there shall be charged for every tax year
commencing on and from tax year 2013 a Levy, in respect of value of net moveable assets held by a person
on the last date of the tax year at the rate specified in section 9 and in the manner specified hereunder.

Net moveable wealth instead of net moveable assets is defined in section 2 of this Act as under:

"net moveable wealth" means the amount by which the aggregate value of the moveable assets belonging to
a person as declared in the wealth statement for the relevant tax year, is in excess of the aggregate value of
all the liabilities owed by that person on the closing date of the tax year.

Explanation.For the purpose of this clause,

(i) where liability claimed relates wholly and exclusively to an immovable asset, it shall not be claimed
and allowed while computing the net moveable wealth. However, where the liability claimed relates wholly
and exclusively to a moveable asset, it shall be claimed and allowed as a straight deduction while computing
net moveable wealth; and

(ii) where the gross wealth of a person, declared in the wealth statement includes both moveable and
immoveable assets and the nature of assets to which the liability relates is not determinable, the liability to be
allowed while determining the net moveable wealth shall be calculated by the following formula:
(A / B) x C

Where

A is the gross value of moveable assets;

B is the gross value of both moveable and immoveable assets; and

C is the gross value of debts owed

Time and manner of payment of Levy Section 4

The ISL shall be paid alongwith wealth statement which is to filed with the return of income for the tax year.
Moreover, the officer of Inland Revenue has also been empowered to assess the ISL payable in writing under
section 5 of this Act. Section 4 and other sections are quoted below:

4. Time and manner of payment of Levy.- A person who is liable to pay the Levy under this Act shall
pay the Levy along with wealth statement.


INCOME SUPPORT LEVY ACT, 2013

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5. Assessment of Levy.The Officer of Inland Revenue shall, by an order in writing, determine the Levy
payable, and shall serve upon the person a notice of demand specifying the sum payable and the time
within which it shall be paid and thereupon such sum shall be paid to such account and in such manner
as may be prescribed, within the time specified in the notice.

6. Default surcharge,.Without prejudice to any liability under any other law for the time being in force,
where a person fails to pay Levy as provided under section 4 or the levy so paid is less than the amount
payable, he shall be liable to pay default surcharge at the rate of sixteen per cent per annum on the
amount not paid or the amount by which the Levy paid falls short of the amount payable, calculated
from the date it was payable to the date it is paid or the date of an order under section 5, whichever is
earlier.

7. Recovery of Levy.The provisions of the Ordinance shall, so far as may be practicable, apply to the
collection of Levy under this Act as they apply to the collection of tax under the Ordinance.

8. Appeals, revisions and rectifications.The provisions of the Ordinance shall, so far as may be
practicable, apply to an appeal against, or revision or rectification of, an order under this Act as they
apply to an appeal, revision or rectification under the Ordinance.

9. Rate of Levy.The rate of levy payable under this Act shall be 0.5% of the net moveable wealth
exceeding one million rupees.

10. Power to make rules.The Federal Board of Revenue may, by notification in the official Gazette,
make rules for carrying out the purposes of this Act.


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The Sales Tax Act, 1990

Reclaim or deduction of input tax not allowed if not verifiable from
CREST or in the supply chain
Sections 2(5AC), 2(33A)
and 8(1)(caa)

Through insertion of sub-sections (5AC) and (33A) in section 2, the terms CREST and supply chain have
been defined.

CREST has been defined as the computerized program for analyzing and cross-matching of sales tax returns,
also referred to as Computerized Risk-based Evaluation of Sales Tax.

Supply Chain has been defined as the series of transactions between buyers and sellers from the stage of first
purchase or import to the stage of final supply.

Moreover, effective 13 June 2013, a new clause (caa) has been inserted in section 8(1) through which a
registered person shall not be entitled to reclaim or deduct input tax paid on purchases, in respect of which a
discrepancy is indicated by CREST or input tax of which is not verifiable in the supply chain.

Substitution of definition of Provincial Sales Tax Section 2(22A)

The definition of Provincial Sales Tax has been substituted. Provincial Sales Tax now means tax levied
under provincial laws or laws relating to Islamabad Capital Territory, which are declared by the Federal
Government through notification in the official Gazette, to be provincial sales tax for the purpose of input
tax.

Payment of sales tax on earlier of receipt of payment or delivery of goods Section 2(44)

Previously, sales tax was levied at the time at which the goods were delivered or made available to the
recipient of the supply regardless of the time of payment. Sales tax was not chargeable on advance payments
against purchase of goods.

Now by way of amendments in definition of time of supply as given in sub-section (44) of section 2, sales
tax is chargeable on earlier of the time at which the goods are delivered to the recipient of the supply or the
time when any payment is received by the supplier in respect of that supply. Further, the timing for
accounting of part payment for supply of goods, supply of goods under a hire purchase agreement and
services has also been prescribed as follows:

(i) for the supply in a tax period, it shall be accounted for in the return for that tax period; and

(ii) in respect of exempt supply, it shall be accounted for in the return for the tax period during which
the exemption is withdrawn from such supply.

Accordingly, any payment received in advance will undergo the incidence of sales tax and levy thereon
would not be delayed until the supply of goods actually takes place.

Uptill 30 June 2007, sales tax was chargeable on earlier of delivery of goods or payment of consideration.

Increase in sales tax rate from 16% to 17% Section 3

Effective 13 June 2013, the rate of sales tax for the purposes of section 3 has been enhanced to 17 per cent.

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Imposition of further tax Section 3(1A) and SRO 648(I)/2013

Effective 13 June 2013, taxable supplies made to persons who have not obtained registration number are
now subject to further charge of sales tax i.e. further tax, at the rate of 1 per cent in addition to tax
chargeable at standard rate. Such further tax is in addition to that on the basis of:

Production capacity of plants, machinery, undertaking, establishments or installations producing or
manufacturing such goods
Fixed basis
Retail price
Rate prescribed at a lower or higher rate as notified for certain goods
Extra tax
Fixed rates of taxes

Further tax was abolished via Finance Act, 2004. Uptill 30 June 2004, further tax was applicable on person
other than a registered person.

However, the Federal Government has been vested with the power to notify taxable supplies in respect of
which the further tax shall not be charged, levied and paid.

Through SRO 648(I)/2013 dated 09 July 2013, the Federal Government has directed that further tax at the
rate of one percent shall not be charged, levied or paid on the following taxable supplies:

Electrical energy supplied to domestic and agricultural consumers;
Natural gas supplied to domestic consumers;
Motor spirit, diesel oil, jet fuel, kerosene oil and fuel oil;
Goods sold by retailers to end consumers;
Supply of goods directly to the end consumers including food and beverages, fertilizers and vehicles;
and
Items falling in the Third Schedule to the Sales Tax Act, 1990.

This notification shall be deemed to have taken effect from 13 June 2013.

Sales tax on the basis of capacity or on a fixed basis Section 3(1B)

Through insertion of a new sub-section (1B) in section 3, effective 13 June 2013, the Board has been
empowered to levy and collect sales tax: on the production capacity of plants, machinery, undertaking,
establishments or installations producing or manufacturing such goods; or on fixed basis, as it may deem fit,
from any person who is in a position to collect such tax due to the nature of the business instead of the sales
tax payable on value of supply under section 3(1).

The Federal Excise Duty and Sales Tax on Production Capacity (Aerated Waters) Rules, 2013 have been
notified through SRO 649(I)/2013 dated 09 July 2013, effective 10 July 2013, to levy and collect federal
excise duty and sales tax on the basis of production capacity of plants, machinery, undertakings,
establishments or installations manufacturing aerated waters, in lieu of the federal excise duty and sales tax
under Section 3(1) of the Federal Excise Act, 2005 and Section 3(2) of the Sales Tax Act, 1990.

Rate of extra tax Section 3(5)

Sub-section (5) of section 3 empowered the Federal Government to levy and collect extra amount of tax in
addition to the sales tax on value of supply. Now, effective 13 June 2013, the Federal Government is
empowered to levy and collect tax at such extra rate or amount in addition to the sales tax on value of
supply.

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Sales tax from CNG stations Section 3(8)

Effective 13 June 2013, a new sub-section has been inserted in section 3 which reads as under:

(8) Notwithstanding the rate of sales tax as contained in sub-section (1) and notwithstanding anything
contained in any law or notification made thereunder, in case of supply of natural gas to CNG stations,
the Gas Transmission and Distribution Company shall charge sales tax from the CNG stations at the rate
of nine per cent in addition to the sales tax chargeable under sub-section (1) on the value of supply,
where the value for the purpose of levy of sales tax shall include price of natural gas, charges, rents,
commissions and all local provincial and Federal duties and taxes, but excluding the amount of sales tax,
as provided in clause (46) of section 2. This rate shall include the rate of tax chargeable under sub-
section (1) and nine percent in lieu of value addition made by the CNG stations. The rate of sales tax
under this sub-section shall have effect on and from the 1
st
day of July, 2007.

Explanation The rate of nine per cent in lieu of value addition is less than the standard rate of tax
chargeable under sub-section (1), as all input tax adjustments have been catered for while determining
the figure of nine per cent.

Claim of input sales tax on purchases from blacklisted suppliers / suppliers with
suspended sales tax registration
Section 21

Disallowance of input sales tax in respect of purchases from a person who has either been blacklisted or
whose registration has been suspended is prescribed under Section 21(3). However, there was an exception
to this in cases where the claimant of input sales tax demonstrated compliance with provisions of section 73
of the Sales Tax Act, 1990. This exception has now been deleted.

Through insertion of sub-section (4), the Federal Board of Revenue (FBR), the concerned Commissioner or
any officer authorized by FBR in this behalf has been empowered to block the refunds and input tax
adjustments of a registered person in respect of whom there are reasons to believe that it is engaged in issuing
fake or flying invoices, claiming fraudulent input tax or refunds, does not physically exist or conduct actual
business, or is committing any other fraudulent activity. Further, the FBR, the concerned Commissioner or
any officer authorized by FBR in this behalf can direct the concerned Commissioner having jurisdiction for
further investigation and appropriate legal action. It needed to be clarified that disallowance of input tax
adjustment was intended for the customers of the person engaged in fraudulent activity / issuance of fake
invoices, however, in the new clause, such aspect remains vague.

Records of movements of goods Section 22(1)(ea)

By way of insertion of new sub-clause (ea) in sub-section (1) of section 22, a registered person making
taxable supplies shall now also maintain record relating to gate passes, inward or outward, and transport
receipts.

Access to record, documents etc. Section 25

An explanation has been added to sub section (5) of section 25 to clarify that powers of the Board,
Commissioner or officer of Inland Revenue to conduct audit, inquiry or investigation, access to premises,
stocks, accounts, records etc. are independent of the powers of the Board to select taxpayers for audit under
section 72B and nothing contained in section 72B restricts the powers of the Board, Commissioner or officer
of Inland Revenue to have access to premises, stocks, accounts, records, etc. or to conduct audit under
sections 25, 38, 38A, 38B and 45A.


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Power to post officer at taxpayers business premises Section 40B

Section 40B(1) empowers the Board to post an Officer of Inland Revenue to the premises of registered person
or class of such persons to monitor production, sale of taxable goods and the stock position etc. Now,
effective 13 June 2013, Chief Commissioners also have such powers.

Monitoring or tracking by electronic or other means Section 40C

The newly inserted section 40C empowers the Board as follows:

40C. Monitoring or tracking by electronic or other means. (1) Subject to such conditions, restrictions
and procedures, as it may deem fit to impose or specify, the Board may, by notification in the official
Gazette, specify any registered person or class of registered persons or any good or class of goods in
respect of which monitoring or tracking of production, sales, clearances, stocks or any other related
activity may be implemented through electronic or other means as may be prescribed.

(2) From such date as may be prescribed by the Board, no taxable goods shall be removed or sold by the
manufacturer or any other person without affixing tax stamp, banderole, stickers, labels, etc. in any such
form, style and manner as may be prescribed by the Board in this behalf.

Similar amendment has also been made in the Federal Excise Act, 2005.

Power of Commissioner (Appeals) Section 45B

Commissioner (Appeals) has been empowered to grant stay, after affording opportunity of being heard to the
Commissioner or officer of Inland Revenue against whose order appeal has been made, against recovery of a
sales tax demand for a period not exceeding thirty days in aggregate where the Commissioner (Appeals) is of
the opinion that the recovery of tax levied under Sales Tax Act, 1990, shall cause undue hardship to the
taxpayer. Similar amendment has also been made in Federal Excise Act, 2005.

Rectification of mistake Section 57

Previously, clerical or arithmetical errors in any assessment, adjudication, order or decision may, at any
time, be corrected by the officer of Inland Revenue who made the assessment or adjudication or passed such
order or decision or by his successor in office.

Section 57 has now been substituted to the effect that mistakes apparent from record can now be rectified
by the officer of Inland Revenue, Commissioner, Commissioner (Appeals) or the Appellate Tribunal Inland
Revenue. Through these provisions, sales tax law has been brought at par with provisions relating to
rectification of mistakes in the Income Tax Ordinance, 2001.

Reward to Inland Revenue officers and officials Section 72C

The Board has been empowered to prescribe the procedure for cash reward to the officers and officials of
Inland Revenue for their meritorious conduct in cases involving concealment or evasion of sales tax and
other taxes. The informer providing credible information leading to such detection is also entitled for such
cash reward.

Declaration of business bank account through submission of a prescribed form Section 73

Under section 73, business bank account mean a bank account utilized by the registered person for business
transactions, declared to the Commissioner in whose jurisdiction he is registered. Through addition in the
explanation defining business bank account, the manner of intimation has been prescribed as through Form
STR 1 or change of particulars in registration database.


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THE THIRD SCHEDULE
[Effective 13 June 2013]

Taxable supplies specified in the Third Schedule are charged to sales tax at the rate of seventeen per cent of
the retail price. The scope of Third Schedule has been extended to following goods:

Sr. No. Description Heading Nos. of the First
Schedule to the Customs Act,
1969 (IV of 1969)

22. Finished or made-up articles of textile and leather, including
garments, footwear, and bed ware, sold in retail packing
Respective headings.
23. Household electrical goods, including air conditioners,
refrigerators, deep freezers, televisions, recorders and players,
electric bulbs, tube-lights, fans, electric irons, washing
machines and telephone sets
24. Household gas appliances, including cooking range, ovens,
geysers and gas heaters
25. Foam or spring mattresses, and other foam products for
household use
26. Auto parts and accessories sold in retail packing Respective headings.
27. Lubricating oils, brake fluid, transmission fluid, and other
vehicular fluids and maintenance products in retail packing
28. Tyres and tubes Respective headings.
29. Storage batteries Respective headings.
30. Arms and ammunition Respective headings.
31. Paints, distempers, enamels, pigments, colours, varnishes,
gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers
and polishes sold in retail packing
32. Fertilizers Respective headings.
33. Cement sold in retail packing Respective headings.
34. Tiles sold in retail packing Respective headings.
35. Biscuits, confectionary, chocolates, toffees and candies Respective headings.
36. Other goods and products sold in retail packing Respective headings.

Section 3(2)(a) of the Sales Tax Act, 1990 extends powers to specify taxable supplies in the Third Schedule
to be chargeable to tax on retail price. The last entry (Serial No. 36) in the Third Schedule is not specific and
will lead to disputes.

Special Procedure for Payment of Extra Sales Tax on Specified Electric Home Appliances requires that extra
amount of sales tax at the rate of 0.75% of value of supplies shall be levied and collected on the supplies of
electric home appliances namely television sets, refrigerators, freezers, air conditioners, electric ovens,
microwave ovens, washing machines, spin dryers, and DVD/CD players of all types by manufacturers and
importers in addition to the normal sales tax. No amendment therein has been made.

Revision of Sales Tax Rate w.e.f. 13
th
June 2013 Printing of Retail Price
Sales Tax General Order 28 of 2013 dated 05 July 2013

As the list of items chargeable to sales tax on retail price basis has been expanded w.e.f. 13
th
June 2013,
hence, the manufacturers of items specified in Third Schedule to the Sales Tax Act, 1990 may face difficulty

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in printing retail price on their existing stocks of packing material which have already been printed with sales
tax @ 16% of the retail price or has been printed without retail price. FBR has allowed the use of existing
packing material for a period of two months starting from 13
th
June 2013, subject to the following conditions:

i. the manufacturer shall inform the Commissioner of Inland Revenue, having jurisdiction, about the
stocks as in hand on 12
th
June 2013, with full description and quantity, on which sales tax is printed
@ 16% or on which no retail price is printed;
ii. the sales tax in respect of supplies of such stocks shall be paid @ 17% with effect from 13
th
June
2013;
iii. the manufacturer shall advertise the retail price, sales tax @ 17% and total consumer price of such
goods in the leading daily newspapers in English, Urdu and other regional languages, at least once in
a week in July and August 2013;
iv. this permission shall not apply to cases where actual retail price excluding sales tax is different from
one printed.

THE SIXTH SCHEDULE
[Effective 13 June 2013]

Following entries have been omitted from the Sixth Schedule to the Sales Tax Act, 1990 and exemption
available thereon has been withdrawn:
Table-1 (Imports or Supplies)

1969 (IV of 1969)
(1) (2) (3)

25. Milk preparations obtained by replacing one or more of the
constituents of milk by another substance, whether or not
packed for retail sale.
1901.1000, 1901.9020 and
1901.9090

Table-2 (Local Supplies only)

1969 (IV of 1969)
(1) (2) (3)

12. Supplies against International tender Respective headings

Earlier, supplies against international tenders were subject to sales tax at zero per cent. Through Finance Act,
2012, the facility of zero rating on supplies against international tenders was withdrawn and these were
exempted from levy of sales tax by virtue of insertion of Entry No. 12 in Table II to the Sixth Schedule. Now
this exemption has been withdrawn. Further, Chapter VIIA of Sales Tax Rules, 2006, Supplies Against
International Tender, has been deleted with effect from 01 July 2013 [SRO 506(I)/2013 dated 12 June 2013].

THE SALES TAX RULES, 2006

Rule 5(1) - Place of jurisdiction SRO 506(I)/2013
Effective 01 July 2013

Now, application for registration will specify the Collectorate in whose jurisdiction the registration is sought,
as per following criteria:


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(a) in case of a corporate or non-corporate person, having a single manufacturing unit or business
premises, the Regional Tax Office or Large Taxpayers Unit, as the case may be, in whose jurisdiction the
manufacturing unit or business premises is actually located; or

(b) in case of a corporate or non-corporate person, having multiple manufacturing units or business
premises, the Board may decide the place of registration of such persons:

Provided that existing registrations which fall in category of clause (a) shall stand transferred and in
case of those falling in category of clause (b) the Board may decide the place of registration of such person.

THE SALES TAX SPECIAL PROCEDURE RULES, 2007

Extra Tax on Supplies of Electric Power and Natural
Gas Consumed by Unregistered and Inactive Persons
SRO 509(I)/2013 and SRO 510(I)/2013
Effective 13 June 2013

Extra sales tax has been levied at the rate of 5% of the total billed amount excluding the amount of federal
taxes, in addition to the normal sales tax @ 17% plus 1% further tax, on supplies of electric power and
natural gas to persons having industrial or commercial connections, and whose bill in any month exceeds
rupees fifteen thousand, but who have either not obtained sales tax registration number or are not on the
Active Taxpayers List maintained by the Federal Board of Revenue.

Chapter IVA Special Procedure for Collection and Payment of Extra Tax on Supplies of Electric Power and
Natural Gas Consumed by Unregistered and Inactive Persons has been inserted in Sales Tax Special
Procedure Rules, 2007 for this purposes. Salient features are as under:

The amount of extra tax shall be shown separately in the bill or invoice for electric power or natural
gas issued by the supplier.

The supplier shall collect and pay the amount of extra tax in the manner prescribed in Special
Procedure for Collection and Payment of Sales Tax on Electric Power and Special Procedure for
Collection and Payment of Sales Tax on Natural Gas, as the case may be.

The amount of extra tax shall not be adjustable by the supplier or the consumer in their returns, and
shall be paid in full by the supplier into the Treasury.

Where a person claims that he has a sales tax registration number, the supplier of electric power or
natural gas, as the case may be, shall require him to produce the sales tax registration certificate, and
shall verify from the Active Taxpayers List maintained by the Federal Board of Revenue that the
person is actually registered and is appearing as active thereon. The supplier shall also confirm that
the name, address and other particulars appearing on the registration certificate or Active Taxpayers
List, as the case may be, are the same as that of the electric power or natural gas connection.

A person having multiple places of business shall ensure that all such places of business are properly
declared and entered on his registration certificate and Active Taxpayers List.

After a person produces sales tax registration certificate in his name, and he is verified as active on
the Active Taxpayer List, the supplier shall incorporate the sales tax registration number in his billing
system so that it is printed on future bills. Thereafter, the supplier shall stop charging and collecting
the extra tax from such person.


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The supplier shall again start charging and collecting extra tax from the consumer from the month in
which he is de-registered from sales tax or he does not remain active on the Active Taxpayers List.

Sales tax registration certificate normally shows particulars of principal place of business only, hence, persons
having multiple places of business would now be required to obtain new / revised sales tax registration
certificates from FBR. Further, from suppliers point of view, implementation of this Special Procedure will
require a lot of effort.

SALES TAX SPECIAL PROCEDURE (WITHHOLDING) RULES, 2007

Rule 2(3) - Withholding on Purchases of Taxable Goods from
Unregistered Person
SRO 505(I)/2013

Previously, only following persons were required to withhold sales tax on purchase of taxable goods from
unregistered persons:

Federal and provincial government departments
Autonomous bodies
Public sector organisations

Now all withholding agents under these Rules are required to withhold sales tax on purchase of taxable
goods from unregistered persons.

EXEMPTION OF SALES TAX ON IMPORT OF HYBRID ELECTRIC VEHICLES
SRO 499(I)/2013 DATED 12 JUNE 2013

Customs duty, sales tax and withholding tax on import of Hybrid Electric Vehicles (HEVs) falling under PCT
Code 87.03, specified in column (2) of the table below, to the extent as specified in column (3) thereof, has
been exempted:

S. No Engine Capacity Extent of exemption in
leviable duty & taxes
(1) (2) (3)

1

Upto 1200 CC 100%
2 From 1201 CC to 1800 CC 50%
3 From 1801 CC to 2500 CC 25%

ZERO RATING WITHDRAWN AND SUBSTITUTED WITH EXEMPTION
SRO 501(I)/2013 AND SRO 502(I)/2013 DATED 12 JUNE 2013

List of exempted goods (previously zero rated):

Sr.
No.
Description PCT Headings

1. Uncooked poultry meat 02.07
2. Milk and cream 04.01 and 04.02

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Sr.
No.
Description PCT Headings

3. Flavored Milk 0402.9900 and 22.02
4. Yogurt 0403.1000
5. Whey 04.04
6. Butter 0405.1000
7. Desi ghee 0405.9000
8. Cheese 0406.1010
9. Processed cheese not grated or powdered 0406.3000
10. Cotton seed 1207.2000
11. Frozen, prepared or preserved sausages and similar products of
poultry meat or meat offal
1601.0000
12. Meat and similar products of prepared frozen or preserved meat
or meat offal of all types including poultry meat and fish
1602.3200, 1602.3900,
1602.5000, 1604.1100,
1604.1200, 1604.1300,
1604.1400, 1604.1500,
1604.1600, 1604.1900,
1604.2010, 1604.2020,
1604.2090, 1604.3000
13. Preparations for infant use, put up for retail sale 1901.1000
14. Fat filled milk 1901.9090
15. Soyabean meal 2304.0000
16. Oil cake and other solid residues, whether or not ground or in the
form of pellets
2306.1000
17. Colours in sets (Poster colours) 3213.1000
18. Writing, drawing and marking inks 3215.9010 and 3215.9090
19. Erasers 4016.9210 and 4016.9290
20. Exercise books 4820.2000
21. Directly reduced iron 72.03
22. Pencil sharpeners 8214.1000
23. Energy saver lamps 8539.3910
24. Sewing machines of the household type 8452.1010 and 8452.1090
25. Purpose built taxis, whether in CBU or CKD condition which are
built on girder chassis and having following features, namely:-

(a) Attack resistance central division along with payment tray;
(b) Wheelchair compartment with folding ramp; and
(c) Taximeter and two-way radio system.
8703.3226 and 8703.3227
26. Bicycles 87.12
27. Wheelchairs 8713.1000 and 8713.9000
28. Vessels for breaking up 89.08
29. Other drawing, marking out or mathematical calculating
instruments (geometry box)
9017.2000
30. Pens and ball pens 96.08
31. Pencils including colour pencils 96.09
32. Compost (non-chemical fertilizer) produced and supplied locally
33. Construction materials to Gawadar Export Processing Zones
investors and to Export Processing Zone Gawadar for
development of Zones infrastructure.


SALES TAX

FINANCE ACT 2013

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Zero rating on Cotton Seed Oil, supplied to registered manufacturer of vegetable ghee and cooking oil, has
been withdrawn. However, it has not been granted exemption from sales tax. Therefore, it is now chargeable
to sales tax at the rate of 17 per cent.

AMENDMENT IN SRO 1125(I)/2011 DATED 31 DECEMBER 2011
FINISHED GOODS OF FIVE SECTORS
SRO 504(I)/2013 DATED 12 JUNE 2013

The Federal Government has notified the goods specified in the table given in SRO 1125(I)/2011, including
the goods or class of goods mentioned in the conditions stated in that notification, to be the goods on which
sales tax shall, subject to the said conditions be charged at the rate of 2% or, as the case may be, at the rate
of 5%, wherever applicable, to the extent and in the manner as specified in the aforesaid conditions. Through
the subject notification, with effect from 12 June 2013, the concession has been restricted to goods other
than finished articles. Consequently, the local sale of these finished articles now attracts sales tax at the rate
of 17 per cent.

List of items excluded from SRO 1125(I)/2011 is as follows:

Entry of Table
in SRO
1125(I)/2011
Description PCT
Heading

01. Finished articles of leather and artificial leather Chapter 41 and heading 64.06
02. Following items relating to textile and articles
thereof:
a) finished articles of textiles and textile
made-ups;
b) mono-filament of more than 67 decitex;
c) sun shading;
d) fishing net of nylon or other material;
e) rope of polyethylene or nylon; and
f) tyre cord fabric.
Chapters 50, 51, 52, 53, 54
(excluding 5407.2000), 55, 56
(excluding 56.08 and 56.09), 57
(excluding made ups), 58, 59
(excluding 59.05, 59.10) and 60
03. Carpets in finished condition

Chapter 57 excluding made ups)
06. Sports goods in finished condition

Respective headings excluding
finished goods.
07. Surgical goods in finished condition Respective headings excluding
finished goods.
56. Master batches relating to other colouring matter
and other preparations
3206.4900

68. Shoe adhesives 3506.9110

NOTIFICATIONS RESCINDED
SRO 500(I)/2013 DATED 12 JUNE 2013

Following notifications have been rescinded with effect from 12 June 2013:

SRO 646(I)/2005 dated 30 June 2005
Zero rating on supply of hydrogen, nitrogen and helium falling under PCT headings 2804.1000,
2804.3000 and 2804.2990 by BOC Pakistan Limited to Pakistan PTA Limited.

SALES TAX

FINANCE ACT 2013

- 59 -

SRO 172(I)/2006 dated 24 February 2006
Exemption from sales tax available to members of Pakistan Film Producers Association (PFPA) on
import of specified goods used in production and / or display of film making.

SRO 863(I)/2007 dated 24 August 2007
Under this notification, sales tax was chargeable at the rate of zero per cent on raw materials, sub-
components, components, sub-assemblies and assemblies imported or purchased locally for the
manufacture of goods specified in the following table given in the notification. This notification has
been rescinded consequent to exemption allowed and withdrawal of zero rating earlier available
under SRO 549(I)/2008.

Sr.
No.
Description of Goods PCT Headings

1. Colors in sets 3213.1000
2. Writing, drawing and marking inks 3215.9010 and
3215.9090
3. Erasers 4016.9210 and
4016.9290
4. Exercise books 4820.2000
5. Pencils sharpener 8214.1000
6. Geometry box 9017.2000
7. Pens, ball pens, markers and porous tipped pens 96.08
8. Pencils including color pencils 96.09
9. Milk including flavoured milk 04.01, 22.02 and
0402.9900
10. Yogurt 0403.1000
11. Cheese 0406.1010
12. Butter 0405.1000
13. Cream 04.01 and 04.02
14. Desi Ghee 0405.9000
15. Whey 04.04
16. Milk and cream, concentrated and added sugar or other
sweetening matter
0402.1000, 0402.2100,
0402.2900, 0402.9100
and 0402.9900
17. Preparations for infant use put up for retail sale 1901.1000
18. Fat filled milk 1901.9090
19. Acetic acid 2915.2100

SRO 164(I)/2010 dated 10 March 2010
Exemption from sales tax leviable on supply of electricity by Peshawar Electric Supply Company or
any other duly registered Electric Supply Company to manufacturing units (having industrial
connections) whether registered or not, located in districts of Hangu, Bannu, Tank, Kohat, Chitral,
Charsadda, Peshawar, Dera Ismael Khan, Batagram, Lakki Marwat, Sawabi, Nowshera and Mardan
but this exemption was applicable to cement, sugar, beverages and cigarette sectors.

SRO 117(I)/2011 dated 10 February 2011
Under this notification, goods (other than cement, sugar, beverages and cigarettes sectors) produced
or manufactured in such areas, where the Sales Tax Act, 1990, is not applicable but are included in

SALES TAX

FINANCE ACT 2013

- 60 -
the Prime Ministers Fiscal Relief to Rehabilitate the Economic Life in Khyber Pakhtunkhwa, FATA
and PATA, namely, Bajaur Agency, Mohamand Agency, Khyber Agency, Orakzai Agency, Kurram
Agency, North Waziristan Agency, South Waziristan Agency, Malakand Agency, District Swat,
District Buner, District Shangla, District Upper Dir and District Lower Dir, were charged to fifty per
cent of the rate leviable under sub-section (1) of section 3 of the Sales Tax Act, 1990, if supplied to a
person in any area where the Sales Tax Act, 1990, is applicable. This notification was effective from
10 March 2010.

Under this notification, 50% reduction in sales tax was available on supply of goods by the
registered persons (other than cement, sugar, beverages and cigarette sectors) located in districts of
Hangu, Bannu, Tank, Kohat, Chitral, Charsadda, Peshawar, Dera Ismael Khan, Batagram, Lakki
Marwat, Sawabi, Nowshera and Mardan.

SALES TAX @ 5% ON IMPORT AND LOCAL SUPPLY OF SECOND-HAND AND WORN CLOTHING
SRO 657(I)/2013 DATED 11 JULY 2013

The Federal Government has directed that sales tax at the rate of 5% shall be charged and collected on
import and local supply of second-hand and worn clothing falling under PCT Heading No. 6309.0000.


FEDERAL EXCISE DUTY

FINANCE ACT 2013

- 61 -
The Federal Excise Act, 2005

Following amendments have been made in the Federal Excise Act, 2005:

Duties specified in the first schedule to be levied Section 3

Further duty at the rate of 2% of the value may be levied by notification where excisable goods and services
are supplied to a person who has not obtained registration number. In this respect, new sub-section (3)
inserted in this section is reproduced below:

(3A) Subject to the provision of sub-section (3) of section 6 or any notification issued thereunder, where
excisable goods and services are supplied to a person who has not obtained registration number, the
Federal Government may, by notification in the official Gazette, charge, levy and collect, on the excisable
goods and services specified in that notification, a further duty at the rate of two per cent of the value in
addition to the rate specified in subsections (1), (3), (4) and (5) of this section.

Records Section 17

Record relating to gate passes, inward or outward and transport receipts, shall also be maintained by the
registered person by virtue of new clause (da) added in sub-section (1) of this section.

Appeals to Commissioner (Appeals) Section 33

Commissioner (Appeals) has now been empowered to stay the recovery of tax in particular cases, for a period
not exceeding thirty days in aggregate. Following sub-section (1A) has been inserted in this section for this
purpose.

(1A) Where in a particular case, the Commissioner (Appeals) is of the opinion that the recovery of tax
levied under this Act, shall cause undue hardship to the taxpayer, he, after affording opportunity of being
heard to the Commissioner or officer of Inland Revenue against whose order appeal has been made, may
stay the recovery of such tax for a period not exceeding thirty days in aggregate.

Powers of Board or Commissioner to pass certain orders Section 35

Explanation has been added in this section to clarify that powers of the Board, Commissioner or officer of
Inland Revenue to conduct audit under this section and under sections 45 (Access to records and posting of
excise staff, etc) and 46 (Departmental audit) are independent of the powers of the Board to select taxpayers
for audit under section 42B. The explanation reads as follows:
Explanation.- For the purpose of sections 35, 45 and 46 and for removal of doubt, it is declared that the
powers of the Board, Commissioner or officer of Inland Revenue under these sections are independent of
the powers of the Board under section 42B and nothing contained in section 42B restricts the powers of
the Board, Commissioner or officer of Inland Revenue under these sections or to conduct audit under these
sections.

Reward to Inland Revenue officers and officials Section 42C

New section 42C has been inserted to allow cash reward to the officers for their meritorious conduct and to
the informers providing credible information in cases, involving concealment or evasion of excise duty and
other taxes. The section states as under:

FEDERAL EXCISE DUTY

FINANCE ACT 2013

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42C. Reward to Inland Revenue officers and officials.(1) In cases involving concealment or evasion of
excise duty and other taxes, cash reward shall be sanctioned to the officers and officials of Inland Revenue
for their meritorious conduct in such cases and to the informer providing credible information leading to
such detection, as may be prescribed by the Board, only after realization of part or whole of the duty
involved in such cases.

(2) The Board may, by notification in the official Gazette, prescribe the procedure in this behalf and specify
the apportionment of reward sanctioned under this section for individual performance or to collective
welfare of the officers and officials of Inland Revenue.

Access to records and posting of excise staff, etc. Section 45

Chief Commissioner has also been empowered to post officer of Inland Revenue to the premises of registered
person or class of such persons to monitor production, removal or sale of goods and the stocks position or
maintenance of records, by virtue of amendment in sub-section (2) of this section. (The amendment is
effective from 13 June 2013)

Monitoring or tracking be electronic or other means.- Section 45A

By inserting following new section 45A, the Board has been empowered to monitor or track production,
sales, clearances, stocks etc. through electronic or other means:

45A. Monitoring or tracking by electronic or other means. (1) Subject to such conditions, restrictions
and procedures as it may deem fit to impose or specify, the Board may, by notification in the official
Gazette, specify any registered person or class of registered persons or any goods or class of goods in
respect of which monitoring or tracking of production, sales, clearances, stocks or any other related
activity may be implemented through electronic or other means as may be prescribed.

(2) From such date, as may be prescribed by the Board, no excisable goods shall be removed or sold by
the manufacturer or any other person without affixing tax stamp, banderole, stickers, labels, etc. in any
such form, style and manner as may be prescribed by the Board in this behalf.

FIRST SCHEDULE

Table I (Excisable Goods)

Rate of duty has been enhanced in respect of the following goods given in Table I of this Schedule:

Sr.
No.
Description of goods Heading / sub-
heading No.
Rate of duty
Previous Current

4 Aerated waters 2201.1020 6% 9%
5 Aerated waters, containing added sugar or other
sweetening matter or flavoured
2202.1010 6% 9%
6 Aerated waters if manufactured wholly from
juices or pulp of vegetables, food grains or fruits
and which do not contain any other ingredient,
indigenous or imported, other than sugar,
colouring materials, preservatives or additives in
quantities prescribed under the West Pakistan
Pure Food Rules, 1965
Respective
headings
6% 9%

FEDERAL EXCISE DUTY

FINANCE ACT 2013

- 63 -
Rates of duty on locally produced cigarettes provided in serial numbers 9 and 10 in the Table I shall now be
applied as under: (The amendment is effective from 13 June 2013)

Sr.
No.
Description of goods Heading /
sub-heading
No.
Rate of duty
9 Locally produced cigarettes if their on-pack
printed retail price exceeds rupees two thousand
two hundred and eighty six per thousand
cigarettes
24.02 Rupees two thousand three
hundred and twenty five
per thousand
cigarettes
10 Locally produced cigarettes if their on- pack
printed retail price does not exceed rupees two
thousand two hundred and eighty six per
thousand cigarettes
24.02 Rupees eight hundred and
eighty per thousand
cigarettes

Serial number 11 of the Table I, regarding duty on locally produced cigarettes if their retail price does not
exceed thirteen rupees and thirty six paisas per ten cigarettes has been omitted. (The amendment is effective
from 13 June 2013)

Further, goods have been included in the list of excisable goods in the Table I as under: (The amendment is
effective from 13 June 2013)

Sr.
No.
Description of goods Heading /
sub-heading
No.
Rate of duty

54. Oilseeds Respective
headings
Forty paisa per kg

55. Motor cars, SUVs and other motor vehicles of
cylinder capacity of 1800 cc or above, principally
designed for the transport of persons (other than
those of headings 87.02), including station
wagons and racing cars of cylinder capacity of
1800 cc or above.
87.03 Ten per cent ad.val.

Table II (Excisable Services) Serial No. 7 & 8

Charge of duty on insurance services as listed in serial No. 7 of this Table has been omitted and included in
serial number 8 of this table along with other services as under: (The amendment is effective from 13 June
2013)

Sr.
No.
Description of services Heading / sub-
heading No.
Rate of duty
8. Services provided or rendered by banking companies,
insurance companies, cooperative financing societies,
modarabas, musharikas, leasing companies, foreign
exchange dealers, non-banking financial institutions,
Assets Management Companies and other persons dealing
in any such services.
98.13 Sixteen percent of the
charges.


FEDERAL EXCISE DUTY

FINANCE ACT 2013

- 64 -
Hence, now duty at the rate of sixteen percent of the charges shall be charged on services provided by the
assets management companies to whom exemption from duty was provided by Finance Act, 2012 with
retrospective effect from 1 July 2007 (Omitted serial No. 8 of Table II of Third Schedule).

THIRD SCHEDULE
(Conditional exemptions)

TABLE I (Goods)

Conditional exemptions available on the following goods have been withdrawn by omitting serial numbers 5,
7 and 8 of this Table: (The amendment is effective from 13 June 2013)

S. No. Description of goods Heading / sub-
heading Number

5 Hydraulic cement imported or purchased locally by petroleum or energy sector
companies or projects subject to the same conditions and procedure as are
applicable for the purposes of exemption of customs duty.
2523.9000

7 Lubricating oil if supplied to Pakistan Navy for consumption in its vessels

8 Transformer oil if used in the manufacture of transformers supplied against
international tenders to a project financed out of funds provided by the
international loan or aid giving agencies.
Respective
heading

WITHDRAWAL OF REPAYMENT-CUM-DRAWBACK OF FEDERAL EXCISE DUTY TO EXPORTERS OF
EDIBLE OIL TO AFGHANISTAN
SRO 503(I)/2013 DATED 12 JUNE 2013

Following repayment-cum-drawback-rate, on export from Pakistan of vegetable ghee by the registered
person, has been withdrawn:

100% of the Federal Excise Duty, including the duty paid under the Notification No. S.R.O. 24(I)/2006, dated
the 7
th
January, 2006, paid at import stage on the same quantity of edible oil as exported to Afghanistan, by
the units located in the violence affected areas specified in Sales Tax General Order 01/2010, dated the 20
th

January 2010.
NOTIFICATION RESCINDED
SRO 500(I)/2013 DATED 12 JUNE 2013

Following notification has been rescinded with effect from 12 June 2013:

Exemption from central excise duty leviable on goods (except cement, sugar, beverages and cigarette
sectors) produced in the areas specified in column (2) of the Table below, on and from the 01
January 2010, as was in excess of the rates mentioned in column (3) of the said Table, namely:

S.
No.
Areas Applicable rate of central
excise duty
(1) (2) (3)

1. Bajaur Agency, Mohmand Agency, Khyber Agency, Orakzai
Agency, Kurrum Agency, North Waziristan Agency and
South Waziristan Agency.
Zero per cent


FEDERAL EXCISE DUTY

FINANCE ACT 2013

- 65 -
THE FEDERAL EXCISE DUTY AND SALES TAX ON PRODUCTION CAPACITY (AERATED WATERS) RULES,
2013
SRO 649(I)/2013 DATED 09 JULY 2013

These rules apply to all manufacturers of aerated waters in Pakistan. Salient features are as under:

Every registered person manufacturing aerated waters shall furnish a declaration in respect of his factory or
factories, as the case may be, to the Commissioner, in the form prescribed in Annex-A to the Rules, by the
19
th
July 2013 for the period from 10 July 2013 to 31 March 2014 and by 15
th
March prior to each
subsequent industry year. Industry year means the continuous period of twelve months starting from the 1
st

April of one calendar year to 31
st
March of the succeeding calendar year.

The declaration shall be signed by the Principal Officer of the company, the partners or members of the firm
or association of persons, or the proprietor of the business, as the case may be, and shall state the complete
address or location of each factory, the total number of filling valves or spouts on each filling machine, and
the brand names of aerated waters intended to be manufactured.

In case of any enhancement in capacity subsequent to the declaration as above, the registered person shall
furnish a declaration of enhancement to the Commissioner, in the form prescribed in Annex-B to the Rules, at
least 15 days prior to making such enhancement.

The declarations furnished under these Rules shall be physically verified by a committee comprising of an
officer of inland revenue, not below the rank of Deputy Commissioner Inland Revenue, designated in this
behalf by the concerned Commissioner, one member either from Federation of Pakistan Chambers of
Commerce and Industry (FPCCI) or Overseas Investors Chamber of Commerce and Industry (OICCI), and one
technical member either from the Institute of Engineers of Pakistan or a similar organization.

The verification conducted in terms of above shall be the basis for the levy, collection and payment of
duty and tax by the registered person under these Rules, which shall be communicated to him by the
Commissioner in the format given at Annex-C to the Rules.

The gross amount payable in a year by a registered person under these Rules shall be determined on
the basis of the annual production capacity of the filling valves and spouts installed in a factory,
in such a manner that for the category of factory specified in column (2) of the Table below and the rate
per filling valve or spout shall be as specified in column (3) thereof:--

Sr.
No.
Category of factory manufacturing aerated waters Rate per filling valve or
spout
(1) (2) (3)

(a) Factories having only foreign origin filling machines or a mix of
foreign and local origin filling machines, whether used for
manufacturing foreign or local brands
Rupees 4,700,000 per
filling valve or spout
(b) Factories exclusively having local origin filling machines,
whether used for manufacturing foreign or local brands
(c) Factories where the total number of filling valves or spouts
installed are less than 40

The gross amount payable as determined under the Rules shall be paid by the registered person along with
his monthly return in installments in accordance with the Schedule specified in the Table given in the Rules.

FEDERAL EXCISE DUTY

FINANCE ACT 2013

- 66 -

From each installment as determined above, the registered person shall be entitled to adjust or deduct
duty paid on excisable goods used as input goods for manufacture of aerated waters, in
accordance with the provisions of section 6 of the Federal Excise Act, 2005. The registered
person shall also be entitled to adjust or deduct sales tax paid on taxable goods and services
used in the taxable activity, in accordance with the procedure, conditions and restrictions applicable
under sections 7 and 8 of the Sales Tax Act, 1990 and rules made thereunder.

The registered person shall be entitled to claim rebate, drawback or remission of duty and tax
on export of aerated waters manufactured by him in the prescribed manner.

The provisions of the Federal Excise Act, 2005, the Sales Tax Act 1990 and rules made thereunder shall,
insofar as they are not inconsistent with these rules, apply to registered persons required to pay duty and
tax under these rules.

Payment of duty and tax under these rules by a registered person shall constitute the full and final
discharge of his liability on manufacture and supply of aerated waters under the Federal Excise Act,
2005 and the Sales Tax Act, 1990.

The registered person may issue sales tax invoices to his buyers showing the amount of sales tax,
calculated at the prevailing standard rate and on the basis of work-back from the price charged from the
buyer in the invoice, but he shall not be required to charge or pay further tax.


CONTACT PARTNERS

FINANCE ACT 2013
- 67 -
For further explanations, please contact following partners:

LAHORE: Principal Office

10-B, Saint Mary Park
Main Boulevard, Gulberg-III
LAHORE-54660
Phones : (042) 35718137-9
Fax : (042) 35718136,
35714340
E-Mail : racolhr@racopk.com

Mr. Sarfraz Mahmood
FCA, FITM, FICS
Mr. Muhammad Atif Mirza
FCA

Syed Mustafa Ali
FCA

Mr. Mubashar Mehmood
ACA
Other offices at:

ISLAMABAD: 2-A, ATS Centre, 30-West
Fazal-e-Haq Road, Blue Area
ISLAMABAD
Phones : (051) 2274121-22
Fax : (051) 2278859
E-Mail : racoisd@racopk.com
Mr. Atif Bin Arshad
FCA

Mr. Muddassar Mehmood
FCA

FAISALABAD: 560-F, Raja Road, Gulistan Colony
FAISALABAD-38000
Phones : (041) 8861042,
8863644
Fax : (041) 8863611
E-Mail : racofsd@racopk.com
Mr. Liaqat Ali Panwar
FCA, FITM, FICS

KARACHI: 108, Park Avenue, Block-6,
P.E.C.H.S., Shahrah-e-Faisal
KARACHI
Phones : (021) 34310826-7,
34313952
Fax : (021) 34313951
E-Mail : racokhi@racopk.com
Mr. Inaam Ellahi Sheikh
FCA, FCA (England & Wales)

Mr. Muhammad Kamran Nasir
FCA, AITM, AICS, APA

Website www.racopk.com

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