Proposed Budgetary Changes in Federal Excise

Section  2      Definitions

• It is proposed that in section 2, after clause (24), the following new clause be added:-

“(24A) “whistleblower” means whistleblower as defined in section 42D of the Federal Excise Act, 2005”

 

The definition of whistleblower as contained in section 42D is reproduced hereunder for ease of reference:-

“For the purpose of this section, “whistleblower” means a person who reports concealment or evasion of duty leading to detection or collection of duty, corruption or misconduct, to the competent authority having power to take action against the person or a federal excise authority committing fraud, corruption, misconduct, or involved in concealment or evasion of duty.”

 

Section  16    Exemptions

• Sub-section (2) is proposed to be amended so as to require the approval of the Economic Coordination Committee of Cabinet before granting exemptions of duty leviable under the Federal Excise Act, 2005.

• Sub-section (3) is proposed to be omitted so as to withdraw the power of the Board to exempt duty leviable under the Federal Excise Act, 2005 by special order.

• It is proposed that after sub-section (4), the following sub-sections be added:-

“(5) The Federal Government shall place before the National Assembly all notifications issued under this section in a financial year.”

 

(6) Any notification issued under sub-section (2) after 1st July, 2015, shall, if not earlier rescinded, stand rescinded on the expiry of the financial year in which it was issued.”

Section  35    Powers of Board or Commissioner to pass certain orders

 

• Sub-section (1) is proposed to be amended so as to enable the Board or the Commissioner to examine records of any decision or order passed by a subordinate officer on his own motion or on pointation by any other person. Previously, it was argued that this provision could only be invoked suo motoand the same cannot be invoked in the instances where the discrepancy / illegality is pointed out by someone else. The proposed amendment is aimed to set at knot long outstanding controversy.

 

Section  42D   Reward to Whistleblowers

 

• The concept of whistleblower has been introduced. For this purpose the following new section 42D is proposed to be added:-

 “42D. Reward to whistleblowers.– (1) The Board may sanction reward to whistleblowers in cases of concealment or evasion of duty, corruption or misconduct providing credible information leading to such detection of evasion of duty;

 

(2) The Board may, by notification in the official Gazette, prescribe the procedure in this behalf and also specify the apportionment of reward sanctioned under this section for whistleblowers;

 

(3) The claim for reward by the whistleblower shall be rejected if–

 

(a) the information provided is of no value;

(b) the Board already had the information;

(c) the information was available in public records; or

(d) no collection of duty is made from the information provided

     from which the Board can pay the reward;

 

(4) For the purpose of this section, “whistleblower” means a person who reports concealment or evasion of duty leading to detection or collection of duty, corruption or misconduct, to the competent authority having power to take action against the person or a federal excise authority committing fraud, corruption, misconduct, or involved in concealment or evasion of duty.”

 

Section  45A    Monitoring or tracking by electronic or other means

 

• In sub-section (2) of section 45A, it is proposed that after the word “labels”, the word and comma “barcodes,” be inserted.

 

• After sub-section (2), the following new sub-section is proposed to be added:-

 

“(3) Such tax stamps, banderoles, stickers, labels, barcodes etc., shall be acquired by the registered person referred to in sub-section (2) from a licensee appointed by the Board for the purpose, against price approved by the Board, which shall include the cost of equipment installed by such licensee in the premises of the said registered person.”

Section  46    Departmental Audit

 

• It is proposed that the word “Departmental” in the heading be omitted.

• It is proposed that sub-section (4) be substituted with the following:-

“(1) The Board may appoint as many special audit panels as may be necessary, comprising two or more members from the following–

 

(a) an officer or officers of Inland Revenue;

 

(b) a firm of Chartered Accountants as defined under the Chartered Accountants Ordinance, 1961 (X of 1961);

 

(c) a firm of Cost and Management Accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966); or

 

(d) any other person as directed by the Board, to conduct audit of a registered person or persons, including audit of refund claims and forensic audit and the scope of such audit shall be determined by the Board or the Commissioner Inland Revenue on a case-to-case basis. In addition, the Board may, where it considers appropriate, also get such audit conducted jointly with similar audits being conducted by provincial administrations of sales tax on services.”

 

• It is proposed that after sub-section (4), the following new sub-sections be inserted and the existing sub-section (5) be re-numbered as sub-section (9):-

“(5) Each special audit panel shall be headed by a chairman who shall be an officer of Inland Revenue;

 

(6) If any one member of the special audit panel, other than the chairman, is absent from conducting an audit, the proceedings of the audit may continue and the audit conducted by the special audit panel shall not be invalid or be called in question merely on the ground of such absence.

 

(7) The Board may prescribe rules in respect of constitution, procedure and working of special audit panel.

 

(8) Every member of the special audit panel shall have the powers of officers of Inland Revenue under sections 23 and 45 and sub-sections (1) to (3) of section 46.”

 

Section  47A    Agreements for the exchange of information

 

• The following new section is proposed to be inserted:-

“47A. Agreements for the exchange of information.– (1) The Federal Government may enter into bilateral or multilateral agreements with provincial governments or with governments of foreign countries for the exchange of information, including electronic exchange of information, with respect to excise duty imposed under this Act or any other law of Pakistan, or under the corresponding laws of that country and may, by notification in the official Gazette, make such provisions as may be necessary for implementing such agreements.

(2) The provisions of section 107 of the Income Tax Ordinance, 2001 (XLIX of 2001) shall, mutatis mutandis, apply to this section.

 

Section  47B   Disclosure of information by a public servant

 

• The following new section is proposed to be inserted:-

 

47B. Disclosure of information by a public servant.– (1) Any information acquired under any provision of this Act or in pursuance of a bilateral or multilateral agreement or tax information exchange agreement shall be confidential and no public servant shall disclose any such information, except as provided under section 216 of the Income Tax Ordinance, 2001 (XLIX of 2001).

 

The provisions of section 216 of Income Tax Ordinance 2001 (XLIX of 2001) shall, mutatis mutandis, apply to this section.”

 

 

 

CHANGES IN THE FIRST SCHEDULE TO THE ACT

TABLE I (EXCISABLE GOODS)

 

• Duty structure on cigarettes is being revised / increased. The new proposed rates are as under: –

Sr. No. of Schedule	New description of goods	New rate of duty
	Locally produced cigarettesif their on-pack printed retail price exceeds rupees three thousand three hundred and fifty per thousand cigarettes.	Rs.3,030/- per thousand cigarettes
	Locally produced cigarettesif their on-pack printed retail price does not exceed rupees three thousand three hundred and fifty per thousand cigarettes	Rs.1,320 /-per thousand cigarettes

• The rate of federal excise duty for aerated waters is proposed to be increased from 9% of retail price to 12% of retail price.

• It is proposed that after serial number 55, a new serial number 56 and entries relating thereto be added. This proposed addition will result in “filter rod for cigarettes” (5502.0090) being subject to a rate of “rupee 0.75 per filter rod”.

 

 

AMENDMENTS IN TABLE II OF THE FIRST SCHEDULE

(EXCISABLE SERVICES)

 

• Sub-clause (iii) of Sr. No.3(a) is proposed to be omitted. The same has been introduced through Sr. No. 9 of Table II of the Third Schedule (conditional exemption).

ADDITIONS IN TABLE – I OF THE THIRD SCHEDULE

TABLE – I

(Goods)

 

• Conditional exemptions has been proposed to be granted to the following items:

 

Sr. No.	Description of goods	Heading / Sub-heading Number
(1)	(2)	(3)
18	White cement	25.23
19	Motor cars and other motor vehicles principally designated for the transport of persons including station wagons and racing cars of cylinder capacity exceeding 850cc	87.03

 

 

ADDITIONS IN TABLE – II OF THE THIRD SCHEDULE

 

TABLE – II

(Services)

 

• The following new items are proposed to be added in the list of services exempt from excise duty subject to certain conditions:

 

Sr. No.	Description of goods	Heading / Sub-heading Number
(1)	(2)	(3)
9	Services provided or rendered in respect of travel by air of passengers on “socio-economic routes”, which means the shortest part of journeys starting from or ending at an airport located in Makran coastal region, FATA, Azad Jammu and Kashmir, Gilgit-Baltistan or Chitral.	98.03
10	Services provided or rendered in respect of travel by air of passengers on international journeys from Pakistan to:(a) Hajj Passengers;(b) Diplomats; and(c) Supernumerary crew.	9803.1000
11	Advertisements in newspapers and periodicals	9802.4000
12	Services provided or rendered by banking companies and non-banking financial companies in respect of Hajj and Umrah, cheque book, insurance, Musharika and Modaraba financing and utility bill collection.