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Today's Paper | November 21, 2024

Updated 19 Sep, 2021 07:16am

Additional tax imposed on non-filer entities

ISLAMABAD: The federal government has imposed additional sales tax ranging between 5 and 17 per cent on supply of electricity and gas to the non-filer industrial and commercial entities in an attempt to broaden the tax base.

The additional taxation on the industrial and commercial entities that did not exist on tax roll — income tax and sales tax — was one of the budgetary proposals given by the Pakistan Business Council.

According to a notification (SRO1222 of 2021), the additional sales tax will be levied on the total billed amount excluding the amount of federal taxes besides the tax payable on supplies of electricity and natural gas to persons having industrial or commercial connections.

The additional levy will only be applicable to those entities that have not obtained sales tax registration number or are not on the active taxpayers list maintained by the Federal Board of Revenue (FBR).

A flat rate of 17pc was imposed on supplies to unregistered industrial entities on a monthly basis. This will be in addition to the tax payable on supplies of electric power and natural gas to persons having unregistered industrial connections.

However, different rates were notified for unregistered commercial entities.

The additional sales tax rate will be 5pc on total billed amount up to Rs10,000 whereas 7pc rate will be charged on the billed amount between Rs10,001 and Rs20,000. The rates would be 10pc, 12pc and 15pc in case the bill amounts range from Rs20,001 to Rs30,000, Rs30,001 to Rs40,000, and Rs40,001 to Rs50,000, respectively.

For all the unregistered commercial entities, 17pc additional sales tax will be charged on the bill amount above 50,000 per month.

Immunity from inquiry

Through presidential ordinance, the government has also provided immunity from inquiry to an amount, up to Rs5 million, remitted through Money Service Bureaus (MCBs), Exchange Companies and Money Transfer Operators such as Western Union, MoneyGram and Ria Finance. Currently, the facility is only available on money remitted through banking channels.

The ordinance has allowed National Database and Registration Authority (Nadra) to share its records or any information available or held by it, on its own motion or upon application by FBR. The FBR may forward such information to the concerned income tax authority having jurisdiction in relation to the subject matter regarding the information, who may utilize the information for the purposes of income tax.

The ordinance has also allowed Nadra to compute indicative income and tax liability — create a relationship between expenses such as air travel expense paid through debit/credit cards and declared incomes and assets and may create risk scores for further probe by the FBR.

Subsequently, such indicative income and tax liability will be communicated to the person to whom it relates. And such person will have the option to pay such as prescribed by the FBR. In case the person did not pay such liability within specified time, the FBR will take action under income tax ordinance on the basis of incomes and liabilities computed by Nadra.

After giving taxpayers data access to Nadra, the FBR has also abolished Section 198 that says a person who discloses any particular confidential information of a person will commit an offence punishable on conviction with a fine of minimum Rs500,000 or imprisonment for a term of maximum one year, or both. As a result, the apex probe agency can now access profiles of taxpayers without any restrictions.

The penalties for non-filing of tax returns are revised upward. The penalty will be 0.1pc of tax payable for each day of default or Rs1,000 a day, the maximum penalty will be 200pc of tax payable. The minimum penalty will be Rs10,000 if 75pc or more is salary income while it will be Rs50,000 in other cases.

Through the ordinance, the reduced rate of tax is extended to the steel sector and the exemption on minimum tax on turnover was extended to locally manufactured mobile phones.

Professionals working from home

The federal government through the ordinance introduced an additional withholding tax ranging between 5pc and 35pc to be collected from professionals including accountants, lawyers, doctors, dentists, health professionals, engineers, architects, IT professionals, tutors, trainers and other persons engaged in provision of services not appearing on active taxpayers list and operating from residential premises having domestic electric connections from distribution companies (Discos).

The tax collected in this case from domestic consumer will be adjustable, but it has not been clarified how Discos will identify those professionals working from domestic premises.

The FBR can direct the gas and power distribution companies for discontinuing the supplies to any person, including tier-1 retailers, who fail to register for sales tax purpose; or notified tier-1 retailers registered but not integrated with FBR’s computerised system. However, upon registration or integration, the FBR will notify the restoration of their gas or electricity connection through Sales Tax General Order.

Through the ordinance, the penalties were revised upward massively for those who fail to integrate their businesses with the FBR. The minimum penalty is Rs500,000 for the first default and a maximum of Rs3 million for a third default. If such person fails to integrate his business within 15 days of imposition of penalty for a fourth default, his business premises will be sealed till such time he integrates his business.

Published in Dawn, September 19th, 2021

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