Salient Features of Federal Budget 2004-05

SALES TAX

RELIEF MEASURES

·                     Zero-rating on imports and supply of Plant, Machinery, Equipment and ginned cotton to registered persons.

·                     Relief to agriculture sector by Exempting imports of tractors, bulldozers, combined harvesters and agricultural implements as well as fixing deemed price of DAP Fertilizer and Phosphoric Acid.

·                     Abolishing Further Tax  and higher rate of sales tax @20%.

·                     Simplified Tax Regime For Registered Retailers  and steel melters

·                     Reducing Carry Forward period to six months.

·                      Reduction In Activation Charge In Respect Of Cellular Phones

·                     Allowing benefit of input tax on all certain items with certain exclusions.

·                     Excluding certain types of Islamic banking and financing transactions from the purview of sales tax.

·                     To promote SMEs, the turnover tax scheme is being abolished and exemption threshold is being raised at Rs. 5 million for both manufacturers and retailers

REVENUE MEASURES

·                     Levy of sales tax on supply of Cottonseed, Crude Vegetable Oil obtained therefrom and Oil Dirt/Sludge. Supply of oil cake will be zero-rated.

·                     Levying Central Excise Duty in the VAT Mode on Advertisement on cable and closed circuit television and Services supplied by shipping agents

·                     Levy of Central Excise Duty in VAT Mode on Import/ Supply of edible oil and supply of vegetable ghee/cooking oil  to provide level playing field

·                     Improvement In Presumptive Assessment Scheme.

·                     Incentive scheme for Commercial

·                     Zero-rating on import/supply of hides and skin.

·                     Zero-rating on import/supply of raw wool.

SIMPLIFICATION MEASURES

·                     New simplified Refund Rules

·                     Substitution of Section 73 and allowing input on accrual basis

·                     Simplified provisions relating to registration/deregistration

·                     powers of condonation of delay to the Collectors

·                     Reduction in penalty

·                     New sales tax registration and returns forms

·                     Rationalizing Debit and Credit Note Rules

TECHNICAL MEASURES

·                     Disallowing input adjustment on account of fake invoices

·                     Increasing pitch of penalty for cases of tax fraud.

·                     Empowering Collector for requisitioning information from Banking Companies in cases of tax fraud.

·                     Prohibit the supply of Filter Rods to unregistered persons

·                     To make provision for search under Warrant.

·                     New provision to provide for assistance to officers of sales tax by other agencies.

·                     exemption on imports through special order  by the Board.

·                     Issuance of rules in respect of services sector.

·                     Consolidation of existing and new Notifications.

·                     Legal framework for the Gawadar Special Economic Zone.

MISCELLANEOUS PROVISIONS

·                     supply of zero-rated goods to privileged persons rationalized

·                     allowing payment in installments

·                     act of making taxable supplies without getting sales tax registration as tax fraud.

INCOME TAX

RELIEF MEASURES

·                     Income limit for reduced rate application to senior citizens is proposed to be raised to Rs.300,000 from Rs.200,000.

·                     Withholding tax at rate of 10% on income from Bahbood Saving Certificates/Accounts is proposed to be withdrawn.

·                     Basic threshold of income is proposed to be raised from Rs. 80,000 to Rs.100,000.

·                     It is proposed to withdraw mandatory payment of 15% of disputed tax for filing first appeal.

·                     It is proposed to allow advance tax payment on last assessed tax basis and provide estimate of income for the current year.

·                     Withholding tax on import of DAP Phosphate is proposed to be reduced from 6% to 1%.

·                     Withholding tax on import of agricultural tractor in CBU condition is proposed to be reduced from 6% to 2%.

·                     Withholding tax on import of machinery is proposed to be withdrawn.

·                     Income from “capital gains” is proposed to be extended for another two years i.e. upto June 2007.

·                     Mark-up and debt written off under State Bank of Pakistan BPD Circular 29 of 2002 is proposed to be exempted from operation of certain tax provisions.

·                     Carry forward of unadjusted minimum tax on turnover is proposed to be allowed for adjustment against future tax liability upto five years.

·                     Tax credit to profit on interest on loan is proposed to be extended to house loan to employees of statutory bodies and public listed companies, from employers is proposed.

·                     Tax withheld at import of edible oil is proposed to be treated as final tax. Further 1% tax is provided to be paid on local purchases of edible oil.

·                     It is proposed to allow exemption to income from vocational, technical or poly-technical institutions setup between 1st day of July 2004 or 30th day of June 2008 for a period of 5 years.

·                     Extending amalgamation facility to banking and non-banking financial institutions upto 30th day of June 2006 and allowing amalgamation to insurance companies.

·                     Holding companies are allowed to claim loss, for three years, surrendered by 75% share subsidiary companies.  

·                     To promote consumer financing and provide level playing field the facility is proposed to allow creation of reserve out of 3% consumer loan profits by NBFCs and HBFC.

·                     Retailers having annual turnover upto Rs.5 million are proposed to opt for payment of 0.75% of their declared turnover as final tax.

·                     It is proposed to provide alternate dispute resolution mechanism.

·                     It is proposed to make mandatory filing of wealth statement by individuals declaring income of Rs.500,000.

·                     It is proposed to introduce one page, simple return form for individual and AOPs.

REVENUE MEASURES

·                     It is proposed to allow withholding tax on commission income of petroleum dealers at the rate of 10% as final tax.

·                     It is proposed to allow withholding tax on commission of traveling agents and insurance agents at the rate of 10% as final tax.

·                     Withholding tax on income from lotteries, winnings and prizes other than prize bonds is proposed to be raised to 20% from 10%.

·                     It is proposed to levy 5% withholding tax on advertisement payments made to TV satellite channels operating from abroad.

CAPITAL VALUE TAX

·                     It is proposed to charge CVT at the rate of 0.1% of the purchase value of shares traded in stock exchange.

·                     Adjustment of CVT against any wealth tax liability is proposed to be withdrawn

CUSTOMS

TARIFF RATIONALIZATION MEASURES

·                     Reduction of customs duty on import of plant, machinery and equipment not manufactured locally to 5%.

·                     Rationalization of customs duty on import of industrial raw materials

·                     Dispensing with indemnity bonds & installation certificates.

·                     Duty rationalization on smuggling-prone items.

·                     Incentive package for agricultural sector.

·                     Rationalization of duty structure of auto sector.

FACILITATION MEASURES

·                     Removal of clauses relating to surveys.

·                     Incentives to the energy sector.

·                     Duty concessions on imports relating to disabled persons

·                     Concession for hospitals, educational institutions.

·                     Incorporating customs dispute resolution mechanism in the Customs Act, 1969.

·                     Lowering the rate of penal surcharge of warehousing from 2% to 1% to facilitate the trade.

·                     Incentives to the specific sector like airline, film & cinema, energy, call centers industry.

·                     Duty concession on the import of re-located projects/units.

·                     Fiscal incentives to the Oil Exploration and Production sector.

·                     Broadening the scope of concessions for local manufacture of machinery.

·                     Incentive package for overseas Pakistanis – Baggage rules.

·                     Legislative changes in the Customs Act,1969

CENTRAL EXCISE

·                     Withdrawal of central excise duty on paints & varnishes.

·                     Withdrawal of central excise duty on syrups, squashes & juices.

·                     Price & duty adjustment on cigarettes and unmanufactured tobacco.

·                     Amendments in Central Excise law to include ‘goods’ for levy of central excise duty in VAT mode.

·                     Levy of central excise duty in VAT mode on edible oil/vegetable ghee/cooking oil.

·                     Levy of central excise duty in VAT mode on advertisement on cable TV, CCTV and shipping agents.

·                     Addition of provision of Alternate Dispute Resolution in Central Excise Act.