Latest changes in Sales Tax and Income Tax

1)      Following important changes have been made by the Federal          Government/FBR in the taxation regime:-

Sales Tax

Sales tax on the basis of retail price in respect of the following items has been abolished which means that these items will now be taxable on the basis of their ex-factory price:-

TABLE

S. No.	Specified Goods
1	Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tube-lights, fans, electric irons, washing machines and telephone sets.
2	Household gas appliances, including cooking range, ovens, geysers and gas heaters.
3	Foam or spring mattresses and other foam products for household use.
4	Auto-parts and accessories.
5	Lubricating oils, brake fluids, transmission fluid, and other vehicular fluids and maintenance products.
6	Tyres and tubes.
7	Storage batteries.
8	Arms and Ammunitions.
9	Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retails packing.
10	Tiles.
11	Biscuits, confectionary, chocolates, toffees and candies.

[SRO 895(I)/2013 dated 4^th October, 2013]

2)      All items which have been excluded from the Third Schedule vide   SRO 895(I)/2013 dated 4^th October, 2013 have been subjected to 2% extra tax in terms of section 3(5) of the Sales Tax Act, 1990. For this purpose,  amendments have been made in Chapter XIII of the Sales Tax Special Procedure Rules, 2007. For ease of reference, list of items     is given below:-

TABLE

S.No.	Specified Goods
1	Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tube-lights, fans, electric irons, washing machines and telephone sets.
2	Household gas appliances, including cooking range, ovens, geysers and gas heaters.
3	Foam or spring mattresses and other foam products for household use.
4	Auto-parts and accessories.
5	Lubricating oils, brake fluids, transmission fluid, and other vehicular fluids and maintenance products.
6	Tyres and tubes.
7	Storage batteries.
8	Arms and Ammunitions.
9	Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retails packing.
10	Tiles.
11	Biscuits, confectionary, chocolates, toffees and candies.

It is pointed out that this 2% extra tax is to be collected from manufacturers and importers in addition to tax payable under sub-section(1) and (2) of section 3 of the Act or value addition tax. The specified goods on which extra tax has been paid will be exempt from sales tax on subsequent supplies, including those as made by a retailer. The procedure already laid down in Chapter XIII of Special Procedure will be applicable on these goods.

[SRO 896(I)/2013 dated 4^th October, 2013]

3)        Following amendments have been made in the Sales Tax Special Procedure  (Withholding) Rules, 2007 (SRO 660(I)/2007 dated 30^th June, 2007):-

i)                   Rate of withholding in case of supplies by registered wholesalers, dealers, (including petroleum dealers) or distributors has been reduced from 1/5^th of the sales tax amount to 1/10^th of the sales tax amount shown on the invoice.

ii)                Federal/Provincial Governments, autonomous bodies and public sector organizations, on purchase of taxable goods from persons liable to be registered but not actually registered, shall deduct sales tax at the applicable rate of the value of the taxable supplies.

iii)              All other withholding agents, on purchase of taxable goods, from persons liable to be registered but not actually registered, will deduct sales tax @ 1% of the value of taxable supplies. Input tax of this withholding  shall not be available to the registered persons.

iv)              The provisions of withholding rules shall not apply to the following products:-

1)     Goods specified in the Third Schedule i.e liable to tax on the basis of retail price.

2)     Supplies made by commercial importers who paid value addition tax on such goods at the time of import as prescribed under Chapter X of the Sales Tax Special Procedure Rules, 2007.

These two exclusions are in addition to previous 9 exclusions mentioned in Rule 5 of the said Rules.

[SRO No.897(I)/2013 dated 4^th October, 2013]

4)      Following amendments have been made in SRO 1125(I)/2011 dated         31.12.2011:-

1)    Import and supplies of fabric will be charged to sales tax @ 3%. Previously there were different interpretations about the levy of sales tax @ 2% or 5%. The confusion has been removed and sales tax on the import and supply of fabric shall now be at 3%. Further, value addition tax @ 2% shall be charged on commercial import of fabric. This 2% tax is adjustable against output tax.

2)    Previously refund on local supplies was disallowed under the scheme of SRO. This has now been made admissible subject to pre-refund audit. In case value addition of a refund claimant is less than 10%, the registered person will furnish a revolving bank guarantee valid for at least 90 days. Post refund audit will be finalized within a period of 90 days.

[SRO 898)(I)/2013 dated 4^th October, 2013]

INCOME TAX

Following Amendments have been made in the Second Schedule of the Income Tax Ordinance, 2001 through SRO___ (I)/ 2013 dated___October 2013:

1)      A new clause (14A) has been inserted in Part II of the Second Schedule to the Income Tax Ordinance, 2001. As per new clause, rate of collection of tax in the case of goods transport vehicles has been reduced from five rupees per kilogram of the laden weight to three rupees per kilogram of laden weight. The rate of collection of tax in the case of oil tankers shall remain the same as given in clause (14) of Part II of the Second Schedule i.e. two rupees per kilogram of laden weight.

2)      As per clause (a) of Section 165 of the Income Tax Ordinance, 2001 the person collecting or deducting the tax has to mention, in the monthly statement furnished to the commissioner, the name, CNIC number, NTN and address of each person from whom tax has been collected or deducted.

Through above mentioned SRO, a new clause (80) has been inserted in Part IV of Second Schedule to the Income Tax Ordinance, 2001. As per new clause, the manufacturer, distributor, dealer and wholesaler, required to collect advance tax under Subsection (a) of Section 236H, is not under  obligation to mention the name, CNIC number, NTN and address of the person from whom tax has been collected, in the monthly statement furnished to the  Commissioner.