RASG Tax Commentary2019

VISION & MISSION

Profession Leader to provide highest quality services to our

clients with complete independence and integrity by
professionally trained, committed & motivated team.

Environment conducive to creativity, job security, personal

growth and development of team members with adherence to
ethical practices.

Training Facilities with dedication to groom professionals with

the aim to make them leaders in chosen disciplines.

CONTENTS

Preamble 01
Highlights 05
Income Tax 09
Sales Tax 65
Other Laws 89

Then which of the favors of your Lord
will you deny ?

Al-Quran

PREAMBLE

Alhamdulillah!

RIAZ AHMAD SAQIB GOHAR & CO. (RASG) is pleased to present the ‘highlights, comparison and
comments’ on this year’s budget with a, “The Crossroads” theme, to its client, friends and associates.
While developing this document every endeavor has been made to keep the presentation simple, with
the view to help our readers understand the amendments in the various statutes through the Finance
Bill, 2019.

This commentary reflects our understanding of the legislation and we recommended that reference
should be made to the precise wording of the Bill wherever necessary. We would also recommend that
the professional advice should be sought before acting upon any of the amendments.

After going through the various proposed amendments in the Finance Bill, 2019 one gets a general
feeling that on the one side government means a serious business in strengthening its taxation system
and administration and on the other hand these proposed measures are neither decisive nor
revolutionary as expected favoring the economic growth. In our humble opinion, these measures will
be deterrent to encouraging inflow of foreign investments and development of the industrial sector of
Pakistan; which is the need of the hour. Our economy is at the crossroads of its inevitable future and it
seems like with the proposed Finance Bill, 2019, the Federal Government while following the ‘Carrot
and Stick’ policy has ignored the ‘Carrot” part of the policy. One wonders how we will ‘tame the
beast.’ For our comments on the economic overview please visit the ‘Publications’ portion on our
website www.rasgco.com.

Sincerely yours,

Gohar Manzoor, FCA, FCMA
The Founder and Managing Partner
Email: [email protected]

Karachi: June 12, 2019
For any clarifications please contact our following team members.

Mr. Muhammad Ali Rafique, FCA Mr. Shahid Kamran, FCA Mr. Muhammad Kamal Gohar, FCA
Partner Partner Partner
Email: [email protected] Email: [email protected] Email: [email protected]

Mr. Fareed H. Siddique, ITP Mr. Mohammed Kamil Gohar, ACA Mr. Abu Bakar Siddique, ACA
Director Taxation Manager Manager
Email: [email protected] Email: [email protected] Email: [email protected]



HIGHLIGHTS



HIGHLIGHTS

Income Tax

Minimum threshold of taxable income for salaried individuals is proposed to be reduced from Rs.
1,200,000/- to Rs. 600,000/-. On the other hand, maximum slab rate for salaried individuals is
proposed to be enhanced from 25% to 35%.

Maximum slab rates for ‘other than salaried’ individuals and AOP are proposed to be enhanced
from 29% and 30% respectively to 35% each.

Rate of tax for companies is proposed to be freezed at 29% for the tax year 2019 and onwards.
However, in budget speech, it was stated that this rate will be freezed only for two years and relief
will be provided afterwards.

The threshold of salary being 50% or more of the total taxable income for the pupose of qualifying
as ‘salaried individual’ is being proposed to be enhanced to 75% of the total taxable income.

Maximum tax rates slab for property income (rental income) is proposed to be enhanced from 20%
to 35%.

Rate of advance tax on ‘dividend from power generation sector’ is proposed to be enhanced from
7.5% to 15% and tax on ‘dividend from Companies where no tax is payable by such company due
to exemption of income or carry forward of business losses or claim of tax credits is proposed to
be enhanced to 25%.

Rate of tax on ‘profit on debt’ upto Rs. 36 Million per annum is proposed to be enhanced by 5% for
each slab i.e. from 10%, 12.5% and 15% to 15%, 17.5% and 20% respectively.

Profit on debt in the hands of individual exceeding Rs. 36 Million per annum is proposed to be
included in the normal income of the tax payer rather than separate taxation.

Rate of minimum tax on turnover under section 113 is proposed to be enhanced from 1.25% to
1.5% and on certain sectors to be enhanced from 0.20% to 0.25%, 0.25% to 0.3% and 0.5% to
0.75% respectively.

Reduced tax rates for certain service sectors defined under clause (94) of the part IV of second
schedule of the Ordinance is proposed to be omitted. It is proposed that withholding rate on these
sectors shall be charged at 4% of the gross amount of turnover. Further, the rate of tax for transport
services is also proposed to be increased from 2% to 4% of the gross amount of turnover.

The most awaited concept of royalty income to a resident person is proposed to be introduced, the
rate of withholding tax is proposed at 15%, which will be adjustable.

Holding period of exemption of capital gain on immoveable properties is being enhanced from 3
years to 10 years for open plot and to 5 years for constructed property.

05 TAX COMMENTARY

Final Tax Regime is proposed to be abolished and converted into Minimum Tax Regime for
commercial importers, commission agents/brokers, contractors and suppliers/traders.

The definition of filer and non-filer given under the law proposed to be abolished and concept of
‘persons not appearing in the Active Tax Payer List (ATL)’ is proposed to be introduced, which
would be governed by newly proposed ‘Tenth Schedule’. Further, the facility for inclusion in ATL
after due date is being proposed subject to payment of penalty.

Concept of offshore evader and enabler is proposed to be introduced, whereby both the evader and
enabler will be subject to heavy penalties.

Payments for purchase of immoveable and movable assets valuing more than Rs. 5 Million and Rs.
1 Million respectively is proposed to be restricted through banking channel.

Claims of income tax refunds is proposed to be settled through tradeable bonds having maturity
period of three (3) years. For this purpose, a separate company has been formed.

Tax credit for investment as provided under section 65B has been proposed to reduce from 10% to
5% and period of investment under this section to be restricted to 2019 rather than 2021.

Penalties on different defaults as prescribed under section 182 is being enhanced almost to double
and above.

Sales Tax & Federal Excise Duty (FED).

As per budget speech SRO 1125(I)/2011 is proposed to be rescinded and zero rate of sales tax on
five export-oriented sectors i.e. textile, leather, carpets, sports goods and surgical goods shall be
subject to sales tax at standard rate of 17%. However, notification to this effect is still awaited.

Zero rating of utilities allowed to export oriented sector is proposed to be withdrawn.

Rate of sales tax on local supplies on finished articles of textile & leather and finished fabrics
enhanced from 6% and 9% to 15% and 17% respectively.

Ginned cotton which is presently exempt is proposed to be subjected to reduced rate of 10%.

Rate of sales tax on sugar is proposed to be enhanced from 8% to standard rate i.e. 17%.

The penalty for late filing of sales tax return is proposed to be enhanced from Rs. 5,000 to Rs.
10,000.

Extra sales tax is proposed to be withdrawn and certain goods are proposed to be inserted into the
Third [3rd] schedule subject to sales tax on retail price.

FED on aerated waters is proposed to be enhanced from 11.5% to 14%.

Special Regime of taxation of the whole steel sector is proposed to be abolished and FED on
billets, ingots, bars, ship plates and other long profiles at 17% in sales tax mode is proposed to be
imposed.

TAX COMMENTARY 06

As per budget speech SRO 1125(I)/2011 is proposed to be rescinded and zero rate of sales tax on
five export-oriented sectors i.e. textile, leather, carpets, sports goods and surgical goods shall be
subject to sales tax at standard rate of 17%. However, notification to this effect is still awaited.
Zero rating of utilities allowed to export oriented sector is proposed to be withdrawn.
Rate of sales tax on local supplies on finished articles of textile & leather and finished fabrics
enhanced from 6% and 9% to 15% and 17% respectively.
Ginned cotton which is presently exempt is proposed to be subjected to reduced rate of 10%.
Rate of sales tax on sugar is proposed to be enhanced from 8% to standard rate i.e. 17%.
The penalty for late filing of sales tax return is proposed to be enhanced from Rs. 5,000 to Rs.
10,000.
Extra sales tax is proposed to be withdrawn and certain goods are proposed to be inserted into the
Third [3rd] schedule subject to sales tax on retail price.
FED on aerated waters is proposed to be enhanced from 11.5% to 14%.
Special Regime of taxation of the whole steel sector is proposed to be abolished and FED on
billets, ingots, bars, ship plates and other long profiles at 17% in sales tax mode is proposed to be
imposed.

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INCOME TAX



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