A delegation of Federation of Pakistan Chamber of Commerce & Industry is scheduled to meet Advisor to the Prime Minister on Finance Dr. Abdul Hafeez Shaikh and Chairman of Federal Board of Revenue (FBR) Shabbar Zaidi tomorrow to discuss budget’s anomalies as they see them detrimental for business environments and may add up in cost of doing business in country. The delegation is also likely to meet PM Imran Khan to advise him of their apprehensions about tax proposals proposed in forthcoming federal budget 2019 – 20.
The delegation would comprise Engr. Daroo Khan Achakzai, President FPCCI, Mr. S.M. Muneer, Former President FPCCI & Former CE TDAP, Dr. Mirza Ikhitar Baig, Senior Vice President FPCCI, Mr. Noor Ahmed Khan, Arshad Jamal, Muslim Mohammedi, Vice Presidents FPCCI, Mr. Zubair F. Tufail, former president FPCCI and Chairman FPCCI Budget Committee, Mr. Khalid Tawab, former senior vice president FPCCI and others.
The FPCCI were of the view that Finance Bill of 2019, gives serious blow to trade and industry of the country, especially exports sector. At a press briefing today in head office of federation, the Apex Trade Body of Pakistan FPCCI have shown serious reservations and remarked that the abolishment of zero rating of five top export sectors would badly impact the exports. The businessmen are not happy with the budget proposal for FY2019-20 and emphasized that they want to resolve issues with government through dialog instead of going for any unwanted steps.
Engr. Daroo Khan Achakzai, President FPCCI said that due to proposed measures in budget, cost of manufacturing and imports will be increased exorbitantly due to increase in policy rate to 12.25% + massive devaluation of Pak-Rupee from Rs. 124.32 to Rs. 157 per dollar in last few months.
He urged the restoration of Zero Rating Regime for five export sectors otherwise exporters refunds be paid within 30 days to avoid their cash flow problem.
He proposed that sales to unregistered person be continued against payment of 3% further tax and condition of CNIC must be withdrawn unless FBR complete registration of unregistered persons in the country.
He pointed out that constant increase in tariff of gas and electricity is serving as a counter-productive to industrialization and exports.
He expressed fear that due to these changes, life of a common man will become very difficult and poor workers cannot have two meals in a day with a minimum salary of Rs. 17,500 / month.
Some of other anomalies, he figured out are: – Taxation Policy of entire Service Sector be maintained as per year 2018-19, as these sectors profits are very limited as compared to their turnover and Taxation Policy changes should be routed through Federal Government / Cabinet as directed by Supreme Court.
In this background, the numerous problems and hardships would be faced by the trade and industry summarized by president of FPCCI along with solution are: –
1. Withdrawal of zero rating for five export sectors is a bad decision and should be restored. If it is not restored, the refund should be made within 30 days. As business community have bitter experience of recent years, where FBR not paid due refunds in 3 – 4 years and created serious liquidity problems for exporter.
2. AuditU/S 72B of S.T. Act 1990: It is strongly recommended that the provision of Audit once in three years of a taxpayer be restored through computer balloting. Yearly Audit is not a good experience for taxpayer, as it ends up in corruption.
3. To encourage the new industries in the country, the Tax Credit level be restored to the previous 10% U/S 65B of I.T.O 2001.
4. To setup new industry, no source of income be asked, it will encourage industrialization and create new jobs.
5. Pharma Industry has potential of substantial exports. Imports of their raw materials should be allowed zero rated. It will have also dual effect on reducing the cost of pharmaceutical products in local market. Further 35% of export proceeds may be allowed to be retained for export promotion activities.
6. The Corporate Service Providers are of the view that the proposed Bill in respect of doing away with the clause 94 and Sub Section 4(a) of Section 153 from tax year 2020 may be reviewed as these corporate service providers do not have margin to sustain this proposal in the Finance Bill, 2019.
7. In order to promote import substitution industry and to reduce the import bill, the same tax concession parity be provided for import of raw materials for domestic manufacturing as has been extended to project under CPEC and other import based exempt projects. SRO 827/2001 and its implementation is required through administrative instructions.
8. Increase in minimum turnover tax U/S 113:
In Finance Bill, 2019 minimum turnover tax has been proposed to be increased from 1.25% to 1.50%. We suggest that current turnover tax rate of 1.25% be retained.
9. Commercial Importers were required to pay 6% income tax at import stage as full and final tax of liability. It is now proposed that 6% tax will be minimum tax and normal return will be filed for assessment by tax officer. 6% income tax on duty / taxes paid value equates to more than 9% which is much higher than actual liability. It is suggested that 6% tax may be considered as full and final instead of proposed.
10. Power to enter and search premises U/S 175 (6A) of ITO 2001:
This search approval be sought from the Chairman or Member FBR instead of CIT.
11. Refund Bonds for exporters are presently not en-cashable or discounted by the banks. It is suggested that National Bank of Pakistan be directed to encash such bonds.
12. Annual turnover limit for Cottage Industry U/S 2(5AB) of Sales Tax Act, 1990:
Definition of Cottage Industry has been proposed of Rs. 2 million annual turnovers instead of existing Rs. 10 million. It is suggested that turnover limit of Cottage industry be restored to Rs. 10 million per year.
13. Holding period in respect to Capital Gain Tax on immovable properties: It is suggested that the holding period be retained as per current year (2019-20).
14. WHT on dividends be reduced to 7.5% instead of 15%.
15. Sales to unregistered person Under Section 8(1)(m):In the year, 2018-19 sales to unregistered person were subject to 3% extra tax for claiming admissibility of input. In current year, it is proposed to give CNIC No. of the buyer otherwise input will be disallowed. Since FBR receives 3% further tax, it is suggested that current policy of 2018-19 may be continued, unless FBR complete the process of registration.
16. Definition of person resident in Pakistan Section 82:
We suggest that the condition may be applicable for 4 years following tax year 2020 instead of applying the condition retro-respectively.
17. Entitlement of Rebate to Commercial Exporters of Textiles – Circular 1(42) TID/17-RDA dated 3-2-2017.
Issue: The Ministry of Textiles vide its above referred Circular issued under Prime Minister’s trade enhancement package to boost exports has not included entitlement of rebate to the commercial textile exporters of textile goods which is an anomaly. The commercial textile exporters are also contributing for the country’s exports and will lose their customers due to not providing them level playing field vis-à-vis manufacturers-cum-exporters.
Proposal: Commercial textile exporters should also be allowed rebate facility as well under above scheme as they are also earning valuable Foreign Exchange for the country.
18. Various powers given to tax officers in the Finance Bill, 2019 may be withdrawn and policy of previous year may be continued.
19. Smuggling of petroleum products from Iran to be controlled through fiscal measures and strong surveillance.
20. Tax on CNG Stations U/S 234(A):
Currently, advance tax is collected from CNG Stations on the amount of bill issued in respect of Gas consumed by such CNG Stations. The advance tax so collected is considered as a final discharge of the liability on the income arising to such CNG Stations. The Bill proposes that the tax so collected be treated as minimum tax. Pursuant to the proposed amendment CNG Station will be required to file income tax return in place of statement U/S 115(4) of the Ordinance. It is proposed that the current Policy of 2018-19 may be continued.
21. Section 79 of Customs Act: Importers were given free time of 15 days which is now reduced to 10 days and after that penalty of Rs. 5000 / day for 5 days and Rs. 10,000 / day after 10 days for late filing of GD. It is suggested that previous policy may be retained.