Highlights of 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

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