Value Added Tax (VAT) Pakistan

Value added Tax(Or VAT for short) has been declared as the new sales tax in pakistan with effect from 01 July 2010. In an effort to keep you up beat with the new law, we have compiled this short guide to highlight the significant changes the new VAT law is bringing for your business.

Difference between VAT and Sales Tax:
VAT is levied on goods and services while sales tax is imposed generally on goods. Contrary to sales tax VAT has no cascading effect.

VAT is a multistage tax, levied only on the value added at each stage in the chain of supply of goods and services with the provision of a set-off for the tax paid at earlier stages in the chain. Thus, VAT eventually becomes a single point tax.

Scope of VAT:
VAT will cover supply (including import) of both goods and services at uniform rate of 15 percent unless exempted under the VAT law. The businesses whose annual turnover is less than Rs.7.5 million will be out of VAT net.

Documentation of economy and improve revenue collection
Generally, all the commercial activities involving production and distribution of goods and provision of services are brought under tax net giving tolerance for a pre-fixed registration threshold level.

This results in documentation of every body in the supply chain. Those who are not registered in the chain are not in a position to claim or deduct tax paid at purchase levels. VAT promotes economic documentation with the help of its in-built invoice-based credit mechanism. Tax invoice is blood line of VAT-induced documentation. VAT has self-enforcing features and documents business transactions through tax invoicing.

Impact of VAT on food prices

In Pakistan, most of the processed packaged/branded food items are already chargeable to sales tax. Basic food items being out of VAT net, there will be no tangible price increase in food items usually sold in processed packaged/branded form.

Consumer prices of the food items which are currently being charged to sales tax on retail price basis are likely to fall because VAT will be charged on actual sale or open market price, not on printed retail price basis.

Retailers will be in position to discount their prices to attract consumers.

Difference between goods and services

VAT VS GST
VAT is more broad-based, equitable and efficient and is without cascading (tax over tax) and hence, is preferable to narrow-based and cascading-ridden traditional sales tax.

VAT and cost of compliance
There will be no increase in compliance cost of those who are already registered and operating under sales tax regime and will automatically switchover to VAT. The new taxpayers will however, have to incur nominal expense on VAT compliance. Due to IT- based VAT processes, VAT compliance cost usually remain low for the taxpayers who discharge their tax obligations regularly on fair lines.

Zero rating in VAT regime.
All exports of goods and services shall be zero-rated under VAT. The input tax involved therein shall be refunded expeditiously.

Exemptions under VAT
Upfront VAT exemptions are available under the First Schedule each of the Federal and Provincial VAT Bills. Exemptions will generally cover basic foods items, charities, public sector education and health and international commitments.

Exempt goods VS zero-rated goods
Exempt supplies are input-taxed and zero-rated supplies enjoy effective exemption because the input tax involved therein is creditable/refundable.
Misuse of Discretionary powers of VAT officials regarding recovery and raiding business premises.

Fiscal Deficit

Fiscal deficit is the difference between the government’s expenditures and its revenues (excluding the money it’s borrowed).

A country’s fiscal deficit is usually communicated as a percentage of its gross domestic product (GDP).

Fiscal Deficit=Govt. Spending –Govt. Earning

Causes of Fiscal Deficit

 High Govt. Spending
 Lower Revenue
 Inflation

Budget 2014/15 Salient Features »

Finance Minister Ishaq Dar presented the budget for the fiscal year 2014-15 with a total outlay of Rs3.945 trillion in the National Assembly.

The total outlay of budget 2014-15 is Rs 4,302 billion.
This size is 7.9% higher than the size of budget estimates 2013-14.

The resource availability during 2014-15 has been estimated at Rs 4,074 billion against Rs 3,011 billion in the budget estimates of 2013-14.

The net revenue receipts for 2014-15 have been estimated at Rs 2,225 billion indicating an increase of 16% over the budget estimates of 2013-14.

The provincial share in federal revenue receipts is estimated at Rs 1,720 billion during 2014-15, which is 14.5% higher than the budget estimates for 2013-14.

The net capital receipts for 2014-15 have been estimated at Rs 691 billion against the budget estimates of Rs 493 billion in 2013-14 i.e. an increase of 40%.

The external receipts in 2014-15 are estimated at Rs 869 billion. This shows an increase of 50.7% over the budget estimates for 2013-14.

The overall expenditure during 2014-15 has been estimated at Rs 4,302 billion, out of which the
current expenditure is Rs 3,463 billion and
development expenditure is Rs 839 billion.

Current expenditure has been estimated to be higher than the revised estimates for 2013-14 by 8.3%,
while development expenditure lower by 2.4%.

The share of current expenditure in total budgetary outlay for 2014-15 is 80.5% as compared to 78.8% in revised estimates for 2013-14.

The expenditure on General Public Services is estimated at Rs 2,543 billion which is 73.4% of the current expenditure.

The size of Public Sector Development Programme (PSDP) for 2014-15 is Rs 1,175 billion. Out of this, Rs 650 billion has been allocated to provinces.

Federal PSDP has been estimated at Rs 525 billion, out of which Rs 296 billion to Federal Ministries / Divisions, Rs 176 billion to Corporations, Rs 12.5 billion to Pak Millennium Development Goals and Community

Development Programme, Rs 36 billion to Federal Development Programme / Projects for Provinces and Special Areas, and Rs 5 billion to Earthquake Reconstruction and Rehabilitation Authority (ERRA).

The other development expenditure outside PSDP for 2014-15 has been estimated at Rs 162 billion.

To meet expenditure, bank borrowing has been estimated for 2014-15 at Rs 228 billion, which is lower than the budget and revised estimates of 2013-14.

Govt restricts budget deficit at 5.7 per cent

ISLAMABAD - Failing to achieve other major economic targets, the incumbent government has successfully restricted budget deficit below the target as it remained at 5.7 percent of the GDP (Rs 1482 billion) during previous financial year 2013-14.
The government had set budget deficit target at 6.3 percent of the GDP (Rs 1638 billon) during last fiscal year 2013-14. However, later, the government had agreed with the International Monetary Fund (IMF) to bring the deficit to 5.8 percent of the GDP (Rs 1508 billion). But, the government has brought down the deficit to 5.7 percent of the GDP apparently due to the foreign inflows like auction of Eurobond and $1.5 billion Saudi grant.

Income Tax Authorities


The Federal Board of Revenue

Definition
"Federal Board of Revenue" means the Federal Board of Revenue (FBR) established under the Federal Board of Revenue Act, 2007.

Who appointed the FBR?
The Federal Government has appointed the Federal Board of Revenue (FBR) by the authority of the Federal Board of Revenue Act, 2007.

Basic function of the FBR:
Tax collection shall be the basic function of the FBR.

Status of the FBR:
FBR shall be the highest executive authority in Pakistan.

Head of the FBR:
Chairman of the FBR shall be the main authority in the FBR who shall be appointed by the Federal Government.

Members of the FBR:
FBR shall consist of at least seven members who shall be appointed by the Federal Government.

Powers and Functions of the Federal Board of Revenue (FBR):

The FBR has following powers and performs the following functions in the presence of its powers:

1) Approval of research institutions: [26(2)]
The FBR may approve any institution engaged in scientific research in Pakistan as “Scientific Research Institution” so that such institution may claim its scientific research expenditures as deduction against income from business.

2) Approval of employee training scheme: [27(c)]
The FBR may approve a Pakistani employee training scheme against which deduction is allowed to business.

3) Approval of Leasing Companies and Modaraba: [28(3)]
The FBR may approve any leasing company or Modaraba, where lease rental payment made to such company is allowed as deduction against income from business to that person who makes such payment.

4) Approval of charitable institutions: [61]
The FBR may approve any institution as a charitable institution for the purposes of the Income Tax Ordinance, 2001, especially, for donation purposes.

5) Method of accounting: [32(3)]
The FBR may specify that any class of persons shall record its "Income from Business" on a cash or accrual basis.

6) Apportionment of deductions: [67(2)]
The FBR may make rules u/s 237 for the purposes of apportioning deductions where the expenditure relates to the derivation of more than one head of income.

7) Permission for tax year: [74]
The FBR may permit person or class of persons to use special tax year instead of normal tax year.

8) Power to demand particular data: [180]
The FBR may demand any data regarding exempted income of any industrial and commercial organization (By delivering data collection and compilation responsibility to any government or private department)

9) Authority of circulars: [206]
The FBR may issue circulars to achieve consistency in the administration of the Ordinance and to provide guidance to taxpayers and officers of the FBR.

10) Empowerment of general administration:
The FBR shall exercise the general administration of the Income Tax Ordinance, 2001.

11) Appointment of income tax authorities: [208]
The FBR may appoint as many income tax authorities as are necessary.

12) Criterion for selection of audit: [177(1)]
The FBR may define criterion to guide the Commissioner of Income Tax that how the CIT select a particular person to conduct audit of its income tax affairs during a particular tax year.

13) Appointment of the auditor: [177(8)]
The FBR may appoint a firm of Chartered Accountants, to conduct an audit of the income tax affairs of any person.

14) Determination of the scope of audit: [179(8)]
The scope of any audit conducted by firm of Chartered Accountants or Cost and Management Accounts shall be determined by the FBR on a case to case basis.

15) Determination of jurisdiction: [209(6)]
Where a question arises as to whether a Commissioner has jurisdiction over a person or not, the question shall be decided by the RCIT or RCITs concerned and, if they are not in agreement, it is determined by the FBR.

16) Authority of approval: [212]
The FBR may authorize the RCIT or the CIT to grant approval on behalf of the FBR.

17) Registration of income tax practitioners: [223(10)]
The FBR may make rules u/s 237 for the registration of income tax practitioners.

18) Power to make rules: [237(1)]
The FBR may, by notification in the Official Gazette, make rules for carrying out the purposes of the Income Tax Ordinance, 2001.

19) Delegation of powers: [209(2)]
The FBR may delegate all or any of its powers and functions to any income tax authority.

20) Unexplained income or assets:
The FBR may make rules u/s 237 for the procedure of taxation of any unexplained income or asset of any person discovered by any income tax authority.

21) Supervision of subordinate authorities:
The FBR supervises the functions, duties and jurisdiction of its subordinate authorities.

Income Tax Ordinance, 2001


THE SECOND SCHEDULE

EXEMPTIONS AND TAX CONCESSIONS [See section 53]

PART I

EXEMPTIONS FROM TOTAL INCOME


Incomes, or classes of income, or persons or classes of persons, enumerated below, shall be exempt from tax, subject to the conditions and to the extent specified hereunder:

(3) Any income chargeable under the head "Salary" received by a person who, not being a citizen of Pakistan, is engaged as an expert or technical, professional, scientific advisor or consultant or senior management staff by institutions of the Agha Khan Development Network, (Pakistan) listed in Schedule I of the Accord and Protocol dated, November 13, 1994 executed between the Government of the Islamic Republic of Pakistan and Agha Khan Development Network.

(4) Any income chargeable under the head “Salary” received by-

(a) a Pakistani seafarer, working on Pakistan flag vessels for one hundred and eighty three days or more during a tax year; or

(b) a Pakistani seafarer working on a foreign vessel provided that such income is remitted to Pakistan, not later than two months of the relevant 1[tax year], through normal banking channels.

(5) Any allowance or perquisite paid or allowed as such outside Pakistan by the Government to a citizen of Pakistan for rendering service outside Pakistan.

(8) Any pension received by a citizen of Pakistan from a former employer, other than where the person continues to work for the employer (or an associate of the employer).

Provided that where the person receives more than one such pension, the exemption applies only to the higher of the pensions received.

(9) Any pension -

(i) received in respect of services rendered by a member of the Armed Forces of Pakistan or Federal Government or a Provincial Government;

(ii) granted under the relevant rules to the families and dependents of public servants or members of the Armed Forces of Pakistan who die during service.

(12) Any payment in the nature of commutation of pension received from Government or


1 Substituted “income year” through Finance Act, 2014.

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under any pension scheme approved by the Board for the purpose of this clause.

(13) Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement or, in the event of his death, by his heirs as does not exceed -

(i) in the case of an employee of the Government, a Local Government, a statutory body or corporation established by any law for the time being in force, the amount receivable in accordance with the rules and conditions of the employee’s services;

(ii) any amount receivable from any gratuity fund approved by the Commissioner in accordance with the rules in Part III of the Sixth Schedule;

(iii) in the case of any other employee, the amount not exceeding two hundred thousand rupees receivable under any scheme applicable to all employees of the employer and approved by the Board for the purposes of this sub-clause; and

(iv) in the case of any employee to whom sub-clause (i), (ii) and (iii) do not apply, fifty per cent of the amount receivable or seventy-five thousand rupees, whichever is the less:

Provided that nothing in this sub-clause shall apply -

(a) to any payment which is not received in Pakistan;

(b) to any payment received from a company by a director of such company who is not a regular employee of such company;

(c) to any payment received by an employee who is not a resident individual; and to any gratuity received by an employee who has already received any gratuity from the same or any other employer.

(16) Any income derived by the families and dependents of the "Shaheeds" belonging to Pakistan Armed Forces from the special family pension, dependents pension or children's allowance granted under the provisions of the Joint Services Instruction No. 5/66.

(17) Any income derived by the families and dependents of the "Shaheeds" belonging to the Civil Armed Forces of Pakistan to whom the provisions of the Joint Services Instruction No. 5/66 would have applied had they belonged to the Pakistan Armed Forces from any like payment made to them.

(19) Any sum representing encashment of leave preparatory to retirement of a member of the Armed Forces of Pakistan or an employee of the Federal Government or a Provincial Government.

(20) Any income received by a person from an annuity issued under the Pakistan Postal Annuity Certificate Scheme on or after the 27th July, 1977, not exceeding ten thousand rupees per annum.

(22) Any payment from a provident fund to which the Provident Funds Act, 1925(XIX of

Softax (Pvt) Limited Income Tax Ordinance, 2001


1925) applies.

(23) The accumulated balance due and becoming payable to an employee participating in a recognized provident fund.

(23A) the accumulated balance upto 50% received from the voluntary pension system offered by a pension fund manager under the Voluntary Pension System Rules, 2005 at the time of eligible person’s-

(a) retirement; or

(b) disability rendering him unable to work; or

(c) death by his nominated survivors.

1[(23B) The amounts received as monthly installment from an income payment plan invested out of the accumulated balance of an individual pension accounts with a pension fund manager or an approved annuity plan or another individual pension account of eligible person or the survivors pension account maintained with any other pension fund manager as specified in the Voluntary Pension System Rules 2005 shall be exempt from tax provided accumulated balance is invested for a period of ten years:

Provided that where any amount is exempted under this clause and subsequently it is discovered, on the basis of documents or otherwise, by the Commissioner that any of the conditions specified in this clause were not fulfilled, the exemption originally allowed shall be deemed to have been wrongly allowed and the Commissioner may, notwithstanding anything contained in this Ordinance, recompute the tax payable by the taxpayer for the relevant years and the provisions of this Ordinance shall, so far as may be, apply accordingly.

(23C) Any withdrawal of accumulated balance from approved pension fund that represent the transfer of balance of approved provident fund to the said approved pension fund under the Voluntary Pension System Rules , 2005.]

(24) Any benevolent grant paid from the Benevolent Fund to the employees or members of their families in accordance with the provisions of the Central Employee Benevolent Fund and Group Insurance Act, 1969.

(25) Any payment from an approved superannuation fund made on the death of a beneficiary or in lieu of or in commutation of any annuity, or by way of refund of contribution on the death of a beneficiary.

(26) Any income of a person representing the sums received by him as a worker from out of the Workers Participation Fund established under the Companies Profits (Workers Participation) Act, 1968 (XII of 1968).

2[]




1

2




Clause (23B) & (23C) inserted by Finance Act, 2012. Clause (35) omitted by Finance Act, 2014. Earlier it was:

Softax (Pvt) Limited Income Tax Ordinance, 2001


(39) Any special allowance or benefit (not being entertainment or conveyance allowance) or other perquisite within the meaning of section 12 specially granted to meet expenses wholly and necessarily incurred in the performance of the duties of an office or employment of profit.

(40) Any income of a newspaper employee representing Local Travelling Allowance paid in accordance with the decision of the Third Wage Board for Newspaper Employees constituted under the Newspaper Employees (Conditions of Service) Act, 1973, published in Part II of the Gazette of Pakistan, Extraordinary, dated the 28th June, 1980.

(51) The perquisite represented by the right of the President of Pakistan, the Provincial Governors and the Chiefs of Staff, Pakistan Armed Forces to occupy free of rent as a place of residence any premises provided by the Government.

(52) The perquisite represented by free conveyance provided and the sumptuary (entertainment) allowance granted by Government to Provincial Governors, the Chiefs
of Staff, Pakistan Armed Forces and the Corps Commanders.

(53) The following perquisites and allowances provided or granted by Government to the Ministers of the Federal Government, namely :-

(a) rent-free accommodation in so far as the value thereof exceeds ten per cent of the basic salary of the Ministers concerned;

(b) house-rent allowance paid by Government in lieu of rent-free accommodation in so far as it exceeds five hundred and fifty rupees per month;

(c) free conveyance; and

(d) sumptuary allowance.

(53A) The following perquisites received by an employee by virtue of his employment, namely:-

1[ ]

(ii) free or subsidized food provided by hotels and restaurants to its employees during duty hours;

(iii) free or subsidized education provided by an educational institution to the children of its employees;

(iv) free or subsidized medical treatment provided by a hospital or a clinic to its employees; and

(v) any other perquisite or benefit for which the employer does not have to bear any marginal cost, as notified by the Board.


Any income representing compensatory allowance payable to a citizen of Pakistan locally recruited in Pakistan Mission abroad as does not exceed 75 per cent of his gross salary.
1 Sub-clause (i) omitted by Finance Act, 2013.



“(i) free or concessional passage provided by transporters including airlines to its employees (including the members of their household and dependents);”

Softax (Pvt) Limited Income Tax Ordinance, 2001


(55) The perquisites represented by the right of a judge of the Supreme Court of Pakistan or of a judge of High Court to occupy free of rent as a place of residence any premises provided by Federal or Provincial Government, as the case may be, or in case a judge chooses to reside in a house not provided by Government, so much of income which represents the sum paid to him as house rent allowance.

(56) The following perquisites, benefits and allowances received by a Judge of Supreme Court of Pakistan and Judge of High Court, shall be exempt from tax.

(1) (a) Perquisites and benefits derived from use of official car maintained at Government expenses.

(b) Superior judicial allowance payable to a Judge of supreme Court of Pakistan and Judge of a High Court.

(c) Transfer allowance payable to a Judge of High Court.

(2) The following perquisites of the Judge of Supreme Court of Pakistan and Judge of High Court shall also be exempt from tax during service, and on or after retirement.

(a) The services of a driver and an orderly.

(b) 1000 (one thousand) free local telephone calls per month.

(c) 1000 units of electricity as well as (25 hm3 of gas) per month and free supply of water; and

(d) 200 litres of petrol per month.

(3) If during service, a judge dies, exemption from tax in respect of benefits and perquisites provided to widow as mentioned in sub-clause (2) shall also be available to the widow.

(57) (1) Any income from voluntary contributions, house property and investments in securities of the Federal Government derived by the following, namely:-

(i) National Investment (Unit) Trust of Pakistan established by the National Investment Trust Limited, if not less than ninety per cent of its Units at the end of that year are held by the public and not less than ninety per cent of its income of the year is distributed among the Unit-holders;

(ii) any Mutual Fund approved by the Securities and Exchange Commission of Pakistan set up by the Investment Corporation of Pakistan, if not less than ninety per cent of its Certificates at the end of that year are held by the public and not less than ninety per cent of its income of that year is distributed among the Certificate-holders; and

(iii) Sheikh Sultan Trust, Karachi.

(2) Any income 1[(other than capital gain on stock and shares of public company, PTC vouchers, modarba certificates, or any instrument of redeemable capital and



1 Words etc. inserted by Finance Act, 2010.

Softax (Pvt) Limited Income Tax Ordinance, 2001


derivative products held for less than 12 months)] derived by any Mutual Fund, investment company, or a collective investment scheme REIT Scheme or a or Private Equity and Venture Capital Fund approved by the Securities and Exchange Commission or the National Investment (Unit) Trust of Pakistan established by the National Investment Trust Limited from any instrument of redeemable capital as defined in the Companies Ordinance, 1984 (XLVII of 1984), if not less than ninety per cent of its income of that year is distributed amongst the Unit-holders.

(3) Any income of the following funds and institutions, namely: -

(i) a provident fund to which the Provident Funds Act, 1925 XIX of 1925), applies;

(ii) trustees on behalf of a recognized provident fund or an approved superannuation fund or an approved gratuity fund;

(iii) a benevolent fund or group insurance scheme approved by Board for the purposes of this clause;

(iv) Service Fund;

(v) Employees Old Age Benefits Institution established under the Employees Old Age Benefit Act, 1976 (XIV of 1976);

(vi) any Unit, Station or Regimental Institute; and

(vii) any recognized Regimental Thrift and Savings Fund, the assets of which consist solely of deposits made by members and profits earned by investment thereof;

Explanation.- For this clause, “Service Fund” means a fund which is established under the authority, or with the approval of the Federal Government for the purpose of –

(a) Securing deferred annuities to the subscribers of payment to them in the event of their leaving the service in which they are employed; or

(b) Making provision for their wives or children after their death; or

(c) Making payment to their estate or their nominees upon their death.

(viii) a Pension Fund approved by the Securities and Exchange Commission of Pakistan under the Voluntary Pension System Rules, 2005;

(ix) any profit or gain or benefit derived by a pension fund manager from a pension Fund approved under the Voluntary Pension System Rules, 2005, on redemption of the seed capital invested in pension fund as specified in the Voluntary Pension System Rules, 2005;


(xi) International Irrigation Management Institute.

Softax (Pvt) Limited Income Tax Ordinance, 2001


1[(xii) Punjab Pension Fund established under the Punjab Pension Fund Act, 2007 (I of 2007) and the trust established thereunder.]

2[(xiii) Sindh Province Pension Fund established under the Sindh Province Pension Fund Ordinance, 2002.]

3(58)

(58A)

(59)

(60)]

(61) Any amount paid as donation to the following institution, foundations, societies, boards, trusts and funds, namely:_

(i) any Sports Board or institution recognised by the Federal Government for the purposes of promoting, controlling or regulating any sport or game;

4[(ia) The Citizens Foundation.]

(iii) Fund for Promotion of Science and Technology in Pakistan;

(iv) Fund for Retarded and Handicapped Children;

(v) National Trust Fund for the Disabled;

(vii) Fund for Development of Mazaar of Hazarat Burri Imam;

(viii) Rabita-e-Islami's Project for printing copies of the Holy Quran;

(ix) Fatimid Foundation, Karachi;

(x) Al-Shifa Trust;

5[ ]

(xii) Society for the Promotion of Engineering Sciences and Technology in Pakistan;

(xxiii) Citizens-Police Liaison Committee, Central Reporting Cell, Sindh Governor House, Karachi;

(xxiv) ICIC Foundation;

6[ ]

(xxvi) National Management Foundation;

(xxvii) Endowment Fund of the institutions of the Agha Khan Development Network

Inserted by Finance Act, 2010.

Paragraph (xiii) inserted by Finance Act, 2014.

Clauses (58), (58A), (59) & (60) omitted by Finance Act, 2014.

Sub-clause inserted by Finance Act, 2012.

Clause (ix) omitted by Finance Act, 2011.

Clause (xxv) omitted by Finance Act, 2011.

Softax (Pvt) Limited Income Tax Ordinance, 2001

(Pakistan) listed in Schedule 1 of the Accord and Protocol, dated November 13,1994, executed between the Government of the Islamic Republic of Pakistan and Agha Khan Development Network;

(xxviii) Shaheed Zulfiqar Ali Bhutto Memorial Awards Society;

(xxix) Iqbal Memorial Fund;

(xxx) Cancer Research Foundation of Pakistan, Lahore;

(xxxi) Shaukat Khanum Memorial Trust, Lahore;

(xxxii) Christian Memorial Hospital, Sialkot;

(xxxiii) National Museums, National Libraries and Monuments or institutions declared to be National Heritage by the Federal Government;

(xxxiv) Mumtaz Bakhtawar Memorial Trust Hospital, Lahore;

(xxxv) Kashmir Fund for Rehabilitation of Kashmir Refugees and Freedom Fighters;

(xxxvi) Institutions of the Agha Khan Development Network (Pakistan) listed in Schedule 1 of the Accord and Protocol, dated November 13, 1994, executed between the Government of the Islamic Republic of Pakistan and Agha Khan Development Network;

(xxxvii)Azad Kashmir President's Mujahid Fund, 1972; National Institute of Cardiovascular Diseases, (Pakistan) Karachi; Businessmen Hospital Trust, Lahore; Premier Trust Hospital, Mardan; Faisal Shaheed Memorial Hospital Trust, Gujranwala; Khair-un-Nisa Hospital Foundation, Lahore; Sind and Balochistan Advocates' Benevolent Fund; Rashid Minhas Memorial Hospital Fund;

(xxxviii)Any relief or welfare fund established by the Federal Government;

(xxxix) Mohatta Palace Gallery Trust;

(xl) Bagh-e-Quaid-e-Azam project, Karachi; 1[ ]

(xli) Any amount donated for Tameer-e-Karachi Fund 2[and]

3[(xlii) Pakistan Red Crescent Society.]

4[Provided that the amount so donated shall not exceed-

(a) in the case of an individual or association of persons, thirty percent of the taxable income of the person for the year; and

(b) in the case of a company, 5[twenty] percent of the taxable income of the

Word “and” omitted by SRO # 990(I)/2011 dated: October 18, 2011.

Substituted colon vide SRO # 990(I)/2011 dated: October 18, 2011.

Sub-clause (xlii) inserted by SRO # 1125(I)/2005, dated: November 10, 2005.

Proviso inserted by Finance Act, 2005.

Substituted for “fifteen” by Finance Act, 2009.

Softax (Pvt) Limited Income Tax Ordinance, 2001


person for the year.]

1[(xlii) **Bank of Commerce and Credit International Foundation for Advancement of Science and Technology.]

2[(xliv) Any amount donated to Federal Board of Revenue Foundation.]

3[Provided that the amount so donated shall not exceed-

(a) in the case of an individual or association of persons, thirty percent of the taxable income of the person for the year; and

(b) in the case of a company, 4[twenty] percent of the taxable income of the person
for the year.]

(64A) Any amount donated to the Prime Minister’s Special Fund for victims of terrorism.

(64B) Any amount donated to the Chief Minister’s (Punjab) Relief Fund for Internally Displaced
Persons (IDPs) of NWFP.

5[(64C)Prime Minister’s Flood Relief Fund 2010 and Provincial Chief Ministers’ Relief Funds, for victims of flood 2010.]

(65) Any income derived from donations made by non-official or private sector sources in
Pakistan to the Waqf for Research on Islamic History, Art and Culture,
Istanbul set up by the Research Centre for Islamic History, Art and Culture
(IRCICA).

(66) Any income derived by-

(i) Abdul Sattar Edhi Foundation, Karachi;

(ii) Al-Shifa Trust, Rawalpindi.

(iii) Bilquis Edhi Foundation, Karachi.

(iv) Fatimid Foundation, Karachi.

(vi) International Islamic Trade Finance Corporation”.

(vii) Islamic Corporation for Development of Private Sector;

(viii) National Memorial Bab-e-Pakistan Trust for the assessment year commencing on or after the 1st day of July, 1994.


1 Sub-clause inserted by SRO # 990(I)/2011 dated: October 18, 2011. ** seems to be sub-clause (xliii), because (xlii) already inserted by SRO 1125(I)/2005.

2 Sub clause (xliv) inserted by SRO # 383(I)/2012 dated: April 18, 2012.

3 Proviso inserted by Finance Act, 2005.

4 Substituted for “fifteen” by Finance Act, 2009.

5 Inserted clause (64C) vide SRO # 755(I)/2010 dated: August 09, 2010.

6 Omitted sub-clause (v) “Hamdard Laboratories (Waqf) Pakistan” by Finance Act, 2014.


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(ix) Pakistan Agricultural Research Council, Islamabad.

(x) Pakistan Engineering Council;

(xi) The corporatized entities of Pakistan Water and Power Development Authority from the date of their creation upto the date of completion of the process of corporatization i.e. till the tariff is notified.

(xii) The Institution of Engineers, Pakistan, Lahore.

(xiia) The Prime Minister’s Special Fund for victims of terrorism.

(xiib) Chief Minister’s (Punjab) Relief Fund for Internally Displaced Persons (IDPs) of

NWFP.

(xiii) The Institutions of the Agha Khan Development Network (Pakistan) as contained

in Schedule 1 of the Accord and Protocol, dated November 13, 1994, executed between the Government of the Islamic Republic of Pakistan and the Agha Khan Development Network.

(xiv) The Liaquat National Hospital Association, Karachi.

(xv) The Pakistan Council of Scientific and Industrial Research.

(xvi) The Pakistan Water and Power Development Authority established under the Pakistan Water and Power Development Authority Act, 1958 (W. P. Act XXXI of 1958).

(xvii) WAPDA First Sukuk Company Limited.

(xviii) Micro Finance Banks for a period of five years starting from first day of July 2007:

Provided such banks shall not issue dividends to their share holders and their profit and gain (if any) shall be utilized for Micro Finance Operations only.

(xix) Pension of a former President of Pakistan and his widow under the President Pension Act, 1974 (IX of 1975).

(xx) State Bank of Pakistan and State Bank of Pakistan Banking Services Corporation.


(xxi) International Finance Corporation established under the International Finance Corporation Act, 1956 (XXVIII of 1956) and provided in section 9 of Article VI of Articles of Agreement 1955 as amended through April 1993.

(xxii) Pakistan Domestic Sukuk Company Ltd.

(xxiii) The Asian Development Bank established under the Asian Development Bank Ordinance, 1971 (IX of 1971).

(xxiv) The ECO Trade and Development Bank.

(xxv) The Islamic Chamber of Commerce and Industry under the Organisation of Islamic Conference (OIC).

(xxvi) Commission on Science and Technology for Sustainable Development in the South

Softax (Pvt) Limited Income Tax Ordinance, 2001

(COMSATS) formed under International Agreement signed on 5th October, 1994.

1[(xxvii) WAPDA on issuance of twenty billion rupees TFC’s/SUKUK certificates for construction of Diamer Bhasha Dam Projects.]

2[(xxviii)The Citizens Foundation.]

3[(xxviii) Federal Board of Revenue Foundation,]

4[(xxviii)*Wapda Second Sukuk Company Limited.]

5[(xxix) Sindh Institute of Urology and Transplantation, SIUT Trust and Society for Welfare of Patients of SIUT.]

6[(xxx) Greenstar Social Marketing Pakistan (Guarantee) Limited.]

(72) Any profit on debt payable to a non-resident person,-

(i) in respect of such private loan to be utilized on such project in Pakistan as may be approved by the Federal Government for the purposes of this clause, having regard to the rate of profit and the terms of re-payment of the loan and the nature of project on which it is to be utilized;

(ii) on a loan in foreign exchange against export letter of credit which is used exclusively for export of goods manufactured or processed for exports in Pakistan.

7[(iii) being a foreign individual, company, firm or association of persons in
respect of a foreign loan as is utilized for industrial investment in
Pakistan provided that the agreement for such loan is concluded on or

after the first day of February, 1991, and is duly registered with the State Bank of Pakistan:

Provided that this clause shall have retrospective effect of exemption to the agreements entered into in the past and shall not be applicable to new contracts after the 30th day of June, 2010, prospectively.]

(74) Any profit on debt derived by Hub Power Company Limited on or after the first day of July, 1991, on its bank deposits or accounts with financial institutions, directly connected with financial transactions relating to the project operations.

Sub-clause (xxvii) inserted vide SRO # 119(I)/2011 dated: February 14, 2011.

Sub-clause inserted by Finance Act, 2012.

Sub-clause (xxviii) inserted by SRO # 383(I)/2012 dated: April 18, 2012.

Sub-clause (xxviii) inserted by SRO # 463(I)/2012 dated: April 28, 2012.

*Erroneous numbering already exist this should have been (xxix).

Sub-clause (xxix) inserted by SRO # 1225(I)/2012 dated: October 01, 2012. Sub-clause inserted by Finance Act, 2014.
Inserted vide Finance Act, 2010.

Softax (Pvt) Limited Income Tax Ordinance, 2001

1[ ]

(75) Any income of an agency of a foreign Government, a foreign national (company, firm or association of persons), or any other non-resident person approved by the Federal Government for the purposes of this clause, from profit on moneys borrowed under a loan agreement or in respect of foreign currency instrument approved by the Federal Government.

(78) Any profit on debt derived from foreign currency accounts held with authorised banks in Pakistan, or certificate of investment issued by investment banks in accordance with Foreign Currency Accounts Scheme introduced by the State Bank of Pakistan, by citizens of Pakistan and foreign nationals residing abroad, foreign association of persons, companies registered and operating abroad and foreign nationals residing in Pakistan.

(79) Any profit on debt derived from a rupee account held with a scheduled bank in Pakistan by a citizen of Pakistan residing abroad, where the deposits in the said account are made exclusively from foreign exchange remitted into the said account.

(80) Any income derived from a private foreign currency account held with an authorised bank in Pakistan, or certificate of investment issued by investment banks in accordance with the Foreign Currency Accounts Scheme introduced by the State Bank of Pakistan, by a resident individual who is a citizen of Pakistan:

Provided that the exemption under this clause shall not be available in respect of any incremental deposits made in the said accounts on or after the 16th day of December, 1999, or in respect of any accounts opened under the said scheme on or after the said date.

2[ ]

3[ ]

(90) Any profit on debt payable by an industrial undertaking in Pakistan -

(i) on moneys borrowed by it under a loan agreement entered into with any such financial institution in a foreign country as may be approved in this behalf by the Federal Government by a general or special order; and

(ii) on moneys borrowed or debts incurred by it in a foreign country in respect of the purchase outside Pakistan of capital plant and machinery in any case where the loan or debt is approved by the Federal Government, having regard to its terms generally and in particular to the terms of its payment, from so much of the tax payable in respect thereof as exceeds the tax or taxes on income paid on such interest in the foreign country from which the loan emanated or in which the debt was incurred (hereinafter referred to as the `said country'):


Clause (74A) omitted by Finance Act, 2011.

Clause (81A) omitted by Finance Act 2014. Clause (88A) omitted by Finance Act 2014.

Softax (Pvt) Limited Income Tax Ordinance, 2001


Provided that, where the amount of such tax or taxes paid in the said country exceeds the amount of the tax payable in Pakistan, no refund of the amount paid in excess shall be allowed:

Provided further that, where the said country exempts such interest or allows credit against its own tax for the tax which would have been payable in Pakistan if the said interest were liable to tax in Pakistan, no tax shall be payable in Pakistan in respect of such interest.

(91) Any income of a text-book board of a Province established under any law for the time being in force, accruing or arising from the date of its establishment.


(98) Any income derived by any Board or other organization established in Pakistan for the purposes of controlling, regulating or encouraging major games and sports recognised by Government:

Provided that the exemption of this clause shall not be applicable to the Pakistan Cricket Board.


(99) Any income derived by a Collective Investment Scheme or a REIT Scheme, if not less than ninety per cent of its accounting income of that year, as reduced by capital gains whether realized or unrealized, is distributed amongst the unit or certificate holders or shareholders as the case may be:


6[Provided that for the purpose of determining distribution of at least 90% of accounting income, the income distributed through bonus shares, units or certificates as the case may be, shall not be taken into account.]

Explanation.- For the purpose of this clause the expression “accounting income” means income calculated under the generally accepted Accounting Principles and verified by


Clause (92) omitted by Finance Act, 2013.

“(92) Any income of any university or other educational institution established solely for educational purposes and not for purposes of profit.”

Clause (92A) omitted by Finance Act 2014. Clause (93) omitted by Finance Act, 2011.

Clause (93A) omitted by Finance Act 2014. Clause (98A) omitted by Finance Act, 2013.

“(98A) Any income derived by International Cricket Council Development (International) Limited (IDI), International Cricket Council (ICC), employees, officials, agents and representatives of IDI and ICC, officials from ICC members, players, coaches, medical doctors and officials of member countries, IDI partners and media representatives, other than persons who are resident of Pakistan, from ICC Champions Trophy, 2008 hosted in Pakistan.”

6 Proviso inserted by Finance Act, 2014.

Softax (Pvt) Limited Income Tax Ordinance, 2001


the auditors.

(99A) Profits and gains accruing to a person on sale of immovable property to a REIT Scheme upto thirtieth day of June, 1[2015].

(100) Any income, not being income from trading activity, of a modaraba registered under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980), for any assessment year commencing on or after the first day of July, 1999:

Provided that not less than ninety per cent of its total profits in the year as reduced by the amount transferred to a mandatory reserve, as required under the provisions of the said Ordinance or the rules made thereunder, as are distributed amongst the shareholders:

Provided further that with effect from the first day of July, 1999 for the purpose of determining the distribution of ninety per cent profits, the profits distributed through bonus certificates or shares to the certificate holders shall not be taken into account.

(101) Profits and gains derived between the first day of July, 2000 and the thirtieth day of June, 2[2024] both days inclusive, by a venture capital company and venture capital fund registered under Venture Capital Companies and Funds Management Rules, 2000 and a Private Equity and Venture Capital Fund.

3[(102) Omitted by Finance Act, 2010]

(102A) Income of a person as represents a subsidy granted to him by the Federal Government for the purposes of implementation of any orders of the Federal Government in this behalf.

(103) Any distribution received by a taxpayer from a collective investment scheme registered by the Securities and Exchange Commission of Pakistan under the Non-Banking Finance Companies and Notified Entities Regulations, 2007, including National Investment (Unit) Trust or REIT Scheme or a Private Equity and Venture Capital Fund out of the capital gains of the said Schemes or Trust or Fund.

4[Provided that this exemption shall be available to only such mutual funds, collective investment schemes that are debt or money market funds and these do not invest in shares.]

(103A)Any income derived from inter-corporate dividend within the group companies entitled to group taxation under section 59AA or section 59B.

5[ ]


1 Substituted for “2010” by Finance Act, 2010.

2 Substituted figure “2014” by Finance Act, 2012.

3 Omitted by Finance Act, 2010.

4 Proviso inserted by Finance Act, 2010.

5 Clause (103B) omitted by Finance Act, 2013. It was earlier inserted vide Finance Act, 2010.

Softax (Pvt) Limited Income Tax Ordinance, 2001


(104) Any income derived by the Libyan Arab Foreign Investment Company being dividend of the Pak-Libya Holding Company.

(105) Any income derived by the Government of Kingdom of Saudi Arabia being dividend of the Saudi-Pak Industrial and Agricultural Investment Company Limited.

(105A)Any income derived by Kuwait Foreign Trading Contracting and Investment Company or Kuwait Investment Authority being dividend of the Pak-Kuwait Investment Company in Pakistan from the year of incorporation of Pak-Kuwait Investment Company.

(105B)Any income received by a taxpayer from a corporate agricultural enterprise, distributed as dividend out of its income from agriculture.

(107) Any income derived by any subsidiary of the Islamic Development Bank wholly owned by it and set up in Pakistan and engaged in owning and leasing of tankers.

1[(107A)Any income derived by the Islamic Development Bank from its operations in Pakistan in connection with its social and economic development activities.]

2[(110) Omitted by Finance Act, 2010]

(110A) Any gain on transfer of a capital asset of the existing stock exchanges to new corporatized stock exchange, in the course of corporatization of an existing stock exchange.

(110B) Any gain on transfer of a capital asset, being a membership right held by a member of an existing stock exchange, for acquisition of shares and trading or clearing rights acquired by such member in new corporatized stock exchange in the course of corporatization of an existing stock exchange.

3[(111) Omitted by Finance Act, 2010]

(113) Any income chargeable under the head "capital gains", being income from the sale of shares of a public company set up in any Special Industrial Zone referred to in clause (126)of this Schedule, derived by a person for a period of five years from the date of commencement of its commercial production:

Provided that the exemption under this clause shall not be available to a person from the sale of shares of such companies which are not eligible for exemption from tax under clause (126).

(114) Any income chargeable under the head "capital gains" derived by a person from an

“(103B)Any dividend in specie derived in the form of shares in a company, as defined in the Companies Ordinance, 1984 (XLVII of 1984)

Provided that when such shares are disposed off by the recipient, the amount representing the dividend in specie shall be taxed in accordance with provisions of section 5 of this Ordinance and the amount, representing the difference between the consideration received and the amount hereinabove, shall be treated in accordance with provisions of section 37 or section 37A, as the case may be.”

Clause (107A) inserted by Finance Act, 2011. Clause (110) omitted by Finance Act, 2010. Clause (111) omitted by Finance Act, 2010.

Softax (Pvt) Limited Income Tax Ordinance, 2001


industrial undertaking set up in an area declared by the Federal Government to be a "Zone" within the meaning of the Export Processing Zones Authority Ordinance, 1980 (IV of 1980).

1[ ]

(117) Any income derived by a person from plying of any vehicle registered in the territories of Azad Jammu and Kashmir, excluding income arising from the operation of such vehicle in Pakistan to a person who is resident in Pakistan and non-resident in those territories.

2[(126) Any income of a public sector university established solely for educational purposes and not for purposes of profit, with effect from 1st day of July, 2013.]

3[(126A) income derived by China Overseas Ports Holding Company Limited from Gwadar Port operations for a period of twenty years, with effect from the sixth day of February, 2007.]

(126B) Profit and gains derived by Khalifa Coastal Refinery for a period of twenty years beginning in the month in which the refinery is setup or commercial production is commenced, whichever is the later.

(126C)(1) Profits and gains derived by a taxpayer from an industrial undertaking set up in Larkano Industrial Estate between the 1st day of July, 2008 and the thirtieth day of June, 2013, both days inclusive, for a period of ten years beginning with the month in which the industrial undertaking is set up or commercial production commenced, whichever is the later.

(2) Exemption under this clause shall apply to an industrial undertaking which is owned and managed by a company registered under the Companies Ordinance 1984 (XLVII of 1984) and formed exclusively for operating the said undertaking.

(126D)Profit and gains derived by a taxpayer from an industrial undertaking set up in the Gwadar declared by the Federal Government to be a Zone within the meaning of Export Processing Zone Authority Ordinance, 1980 (IV of 1980) as Export Processing Zone, Gwadar, for a period of ten years beginning with the month and year in which the industrial undertaking is set up or commercial operation commenced, whichever is later.

4[(126E)Income derived by a zone enterprise as defined in the Special Economic Zones Act, 2012 (XX of 2012) for a period of ten years starting from the date the developer certifies that the zone enterprise has commenced commercial operation and for a period of ten years to a developer of zone starting from the date of signing of the development agreement in the special economic zone as announced by the Federal Government.]

Clause (114A) inserted by Finance Act, 2011.

Clause (126) substituted by Finance Act, 2014. Clause (126A) substituted by Finance Act, 2014. Clause (126E) substituted by Finance Act, 2013.


“(126E)Corporate income tax holiday for a period of five years for projects from the date of start of commercial operations, and for developers of the Zone for a period of ten years from the date of start of development activity in the Special Economics Zones as announced by the Federal Government.”

Softax (Pvt) Limited Income Tax Ordinance, 2001


1[(126F)Profits and gains derived by a taxpayer located in the most affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and PATA for a period of three years starting from the tax year 2010:

Provided that this concession shall not be available to the manufacturers and suppliers of cement, sugar, beverages and cigarettes;]

2[(126H) Profits and gains derived by a taxpayer, from a fruit processing or preservation unit set up in Balochistan Province, Malakand Division, Gilgit-Baltistan and FATA between the first day of July, 2014 to the thirtieth day of June, 2017, both days inclusive, engaged in processing of locally grown fruits, for a period of five years beginning with the month in which the industrial undertaking is set up or commercial production is commenced, whichever is later.]

(131) Any income-

(a) of company registered under the Companies Ordinance 1984 (XLVII of 1984), and having its registered office in Pakistan, as is derived by it by way of royalty, commission or fees from a foreign enterprise in consideration for the use outside Pakistan of any patent, invention, model, design, secret process or formula or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided to such enterprise by the company or in the consideration of technical services rendered outside Pakistan to such enterprise by the company under an agreement in this behalf, or

(b) of any other taxpayer as is derived by him, in the income year relevant to assessment year beginning with the first day of July, 1982 and any assessment year thereafter, by way of fees for technical services rendered outside Pakistan to a foreign enterprise under an agreement entered into in this behalf :-Provided that-

(i) such income is received in Pakistan by or on behalf of the said company or other taxpayer, as the case may be, in accordance with the law for the time being in force for regulating payments and dealings in foreign exchange; and

(ii) where any income as aforesaid is not brought into Pakistan in the year in which it is earned and tax is paid thereon, an amount equal to the tax so paid shall be deducted from the tax payable for the year in which it is brought into Pakistan and, where no tax is payable for that year or the tax payable is less than the amount to be deducted, the whole or such part of the said amount as is not deducted shall be carried forward and deducted from the tax payable for the year next following and so on.

Clause (126F) inserted by Finance Act, 2010.

Clause (126H) inserted by Finance Act, 2014.

Softax (Pvt) Limited Income Tax Ordinance, 2001


(132) Profits and gains derived by a taxpayer from an electric power generation project set up in Pakistan on or after the 1st day of July, 1988. The exemption under this clause shall apply to such project which is-

(a) owned and managed by a company formed for operating the said project and registered under the Companies Ordinance, 1984 (XLVII of 1984), and having its registered office in Pakistan;

(b) not formed by the splitting up, or the reconstruction or reconstitution, of a business already in existence or by transfer to a new business of any machinery or plant used in a business which was being carried on in Pakistan at any time before the commencement of the new business; and

(c) owned by a company fifty per cent of whose shares are not held by the Federal

Government or Provincial Government or a Local Government or which is not controlled by the Federal Government or a Provincial Government or a Local Government:

Provided that the condition laid down in sub-clause (a) shall not apply to the Hub Power Company Limited:

Provided further the exemption under this clause shall not apply to oil fired power plants setup between 22nd October, 2002 and 30th June, 2006 but shall apply to Dual Fuel (Oil/Gas) power projects set up on or after the first September, 2005:

Provided further that the exemption under this clause shall be available to companies registered in Pakistan or Azad Jammu and Kashmir owning and managing Hydel Power Projects, set up in Azad Jammu and Kashmir or Pakistan:

Provided further that exemption under this clause shall also be available to the expansion projects of the existing Independent Power Projects already in operation.

(132A)Profit and gains derived by Bosicor Oil Pakistan Limited for a period of seven and half years beginning from the day on which the refinery is setup of commercial production is commenced which ever is later.

1[(132B) Profits and gains derived by a taxpayer from a coal mining project in Sindh, supplying coal exclusively to power generation projects.]

(133) Income from exports of computer software or IT services or IT enabled services upto the period ending on 30th day of June, 2016.

Explanation.- For the purpose of this clause -

(a) “IT Services” include software development, software maintenance, system integration, web design, web development, web hosting, and network design, and

(b) “IT enabled services” include inbound or outbound call centres, medical transcription, remote monitoring, graphics design, accounting services, HR


1 Clause (132B) Inserted by Finance Act, 2014.

Softax (Pvt) Limited Income Tax Ordinance, 2001


services, telemedicine centers, data entry operations, locally produced television programs and insurance claims processing.

1[]

2[(135A)Any income derived by a non-resident from investment in OGDCL exchangeable bonds issued by the Federal Government.]

(136) Any income of a special purpose vehicle as defined in the Asset Backed Securitization Rules, 1999 made under the Companies Ordinance, 1984 (XLVII of 1984):

Provided that, if there is any income which accrues or arises in the accounts of the special purpose vehicle, after completion of the process of the securitization, it shall be returned to the Originator as defined by the said rules within the income year next following the year in which the income has been determined and such income shall be taxable in the hands of the Originator.

(139) (a) The benefit represented by free provision to the employee of medical treatment or hospitalization or both by an employer or the reimbursement received by the employee of the medical charges or hospital charges or both paid by him, where such provision or reimbursement is in accordance with the terms of employment:

Provided that National Tax Number of the hospital or clinic, as the case may be, is given and the employer also certifies and attests the medical or hospital bills to which this clause applies;

(b) any medical allowance received by an employee not exceeding ten per cent of the basic salary of the employee if free medical treatment or hospitalization or reimbursement of medical or hospitalization charges is not provided for in the terms of employment; or

3[(140) All payments on account of principal, interest, or fees received by the Overseas Private Investment Corporation (OPIC), for development project undertaken in pursuance to the investment Incentive Agreement signed between the Government of Pakistan and the Government of the United State of America, dated 18th November, 1997.]

Clause 135 omitted by Finance Act, 2014.

Clause (135A) inserted by SRO # 64(I)/2012 dated: January 27, 2012.

Inserted clause (140) by Notification # 1353(I)/2012 dated October 31, 2012.

Dear Kindly share the stuff of tax administration / tax reforms????

Bro proposed tax reforms are not part of ur test

The Sales Tax Act, 1990

(3A) “association of persons” includes
a firm,
a Hindu undivided family,
any artificial juridical person and
body of persons formed under a foreign law,
but does not include a company;

(3AA) ‘banking company’ means a banking company as defined in the BankingCompanies Ordinance, 1962 (LVII of 1962) and includes any body corporate which transacts the business of banking in Pakistan.

(4) “Board” means the Federal Board of Revenue established under section 3 of the Federal Board of Revenue Act, 2007;

1(4A) “Chief Commissioner” means a person appointed as the chief Commissioner Inland Revenue under section 30;”;

2“(5) ‘Commissioner’ means the Commissioner of Inland Revenue appointed under section 30;”;

(5A) “common taxpayer identification number” means the registration number or any other number allocated to a registered person;

(5AA) “company” means—

(a) a company as defined in the Companies Ordinance, 1984 (XL VII of 1984);

(b) a body corporate formed by or under any law in force in Pakistan;

(c) a modaraba;

(d) a body incorporated by or under the law of a country outside

Pakistan relating to incorporation of companies;

(e) a trust, a co-operative society or a finance society or any other society established or constituted by or under any law for the time being in force; or

(f) a foreign association, whether incorporated or not, which the Board has, by general or special order, declared to be a company for the purposes of the Income Tax Ordinance 2001 (XLIX of 2001);

(5AAA) “computerized system” means any comprehensive information technology system to be used by the Board or any other office as may be notified by the Board, for carrying out the purposes of this Act;

(5AB) ”cottage industry” means a manufacturer
whose annual turnover from taxable supplies made in any tax period during the last twelve months ending any tax period does not exceed five million rupees or

whose annual utility (electricity, gas and telephone) bills during the last twelve months ending any tax period do not exceed seven hundred thousand rupees;

1 Substituted vide Finance (Amended) Ordinance, 2009.

2 Substituted vide Finance (Amended) Ordinance, 2009.

8

The Sales Tax Act, 1990


(6) ‘Customs Act’ means the Customs Act, 1969 (IV of 1969), and where appropriate all rules and notifications made under that Act;

(6A) 'defaulter' means a person and, in the case of company or firm, every director, or partner of the company, or as the case may be, of the firm, of which he is a director or partner or a proprietor and includes guarantors or successors, who fail to pay the arrears;

(6B) “default surcharge” means the default surcharge levied under section 34;

(7) ‘distributor’ means a person appointed by a manufacturer, importer or any other person for a specified area to purchase goods from him for further supply and includes a person who in addition to being a distributor is also engaged in supply of goods as a wholesaler or a retailer;

(8) ‘document’ includes any electronic data, computer programmes, computer tapes, computer disks, micro-films or any other medium for the storage of such data;

(9) ‘due date’ in relation to the furnishing of a return under section 26 (***) and section 26AA means the 15th day of the month following the end of the tax period, or such other date as the Board may, by notification in the official Gazette, specify;

(9a) (***)

(9A) “e-intermediary” means a person appointed as e-intermediary under section

52A for filing of electronic returns and such other documents as may be prescribed by the Board from time to time, on behalf of a person registered under section 14;

(9aa)(***)

(10) ‘establishment’ means an undertaking, firm or company, whether incorporated or not, an association of persons or an individual;

(11) ‘exempt supply’ means a supply which is exempt from tax under section 13;

(11A) “firm” means the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all;

(12) ‘goods’ include every kind of movable property other than actionable claims, money, stocks, shares and securities;

(13) ‘importer’ means any person who imports any goods into Pakistan;

(14) “input tax”, in relation to a registered person, means—

(a) tax levied under this Act on supply of goods to the person;

(b) tax levied under this Act on the import of goods by the person;

(c) in relation to goods or services acquired by the person, tax levied under the Federal Excise Act, 2005 in sales tax mode as a duty of excise on the manufacture or production of the goods, or the rendering or providing of the services;

The Sales Tax Act, 1990


(d) Provincial sales tax levied on services rendered or provided to the person; and

(e) levied under the Sales Tax Act, 1990 as adapted in the State of

Azad Jammu and Kashmir, on the supply of goods received by the person;

1(14A) The expression “KIBOR” means Karachi Inter-Bank offered rate prevalent on the first day of each quarter of the financial year;

2“(15)‘Local Sales Tax Office’ means the office of Superintendent of Inland Revenue or such other office as the Board may, by notification in the official Gazette, specify;”;

(16) ‘Manufacture’ or ‘produce’ includes -

(a) any process in which an article singly or in combination with other articles, materials, components, is either converted into another distinct article or product or is so changed, transformed or reshaped that it becomes capable of being put to use differently or distinctly and includes any process incidental or ancillary to the completion of a manufactured product;

(b) process of printing, publishing, lithography and engraving; and

(c) process and operations of assembling, mixing, cutting, diluting, bottling, packaging, repacking or preparation of goods in any other manner;

(17) ‘manufacturer’ or ‘producer’ means a person who engages, whether exclusively or not, in the production or manufacture of goods whether or not the raw material of which the goods are produced or manufactured are owned by him; and shall include–

(a) a person who by any process or operation assembles, mixes, cuts, dilutes, bottles, packages, repackages or prepares goods by any other manner;

(b) an assignee or trustee in bankruptcy, liquidator, executor, or curator or any manufacturer or producer and any person who disposes of his assets in any fiduciary capacity; and

(c) any person, firm or company which owns, holds, claims or uses any patent, proprietary, or other right to goods being manufactured, whether in his or its name, or on his or its behalf, as the case may be, whether or not such person, firm or company sells, distributes, consigns or otherwise disposes of the goods:

Provided that for the purpose of refund under this Act, only such person shall be treated as manufacturer-cum-exporter who owns or has his own manufacturing facility to manufacture or produce the goods exported or to be exported;




1 Added vide Finance Act, 2009.

2 Substituted vide Finance (Amended) Ordinance, 2009.


The Sales Tax Act, 1990

1“(18) “Officer of Inland Revenue” means an officer appointed under section
30;”;

(19) ‘open market price’ means the consideration in money which that supply or a similar supply would generally fetch in an open market;

(20) “output tax”, in relation to a registered person, means-

(a) tax levied under this Act on a supply of goods, made by the person;

(b) tax levied under the Federal Excise Act, 2005 in sales tax mode as a duty of excise on the manufacture or production of the goods, or the rendering or providing of the services, by the person;

(c) Provincial sales tax levied on services rendered or provided by the person;


(21) “person” means,–

(a) an individual;

(b) a company or association of persons incorporated, formed, organized or established in Pakistan or elsewhere;

(c) the Federal Government;

(d) a Provincial Government;

(e) a local authority in Pakistan; or

(f) a foreign government, a political subdivision of a foreign government, or public international organization;”;

(22) ‘Prescribed’ means prescribed by rules made under this Act;

(22A) “Provincial sales tax” means tax levied under.–

(a) the Balochistan Sales Tax Ordinance, 2000 (I of 2000);

(b) Islamabad Capital Territory (Tax on Services) Ordinance, 2001

(XLII of 2001);

(c) the Punjab Sales Tax Ordinance , 2000 (Pb. Ord. II of 2000);

(d) the North West Frontier Province Sales Tax Ordinance, 2000 (III of 2000); and

(e) the Sindh Sales Tax Ordinance, 2000 (VIII of 2000);

(23) ‘registered office’ means the office or other place of business specified by the registered person in the application made by him for registration under this Act or through any subsequent application to the 1Commissioner;

1 Substituted vide Finance (Amended) Ordinance, 2009.


11

The Sales Tax Act, 1990


(24) ‘registration number’ means the number allocated to the registered person for the purpose of this Act;

(25) ‘registered person’ means a person who is registered or is liable to be registered under this Act:

Provided that a person liable to be registered but not registered under this Act shall not be entitled to any benefit available to a registered person under any of the provisions of this Act or the rules made there under;

(26) * * *

(27) ‘retail price’, with reference to the Third Schedule, means the price fixed by the manufacturer, inclusive of all duties, charges and taxes (other than sales tax) at which any particular brand or variety of any article should be sold to the general body of consumers or, if more than one such price is so fixed for the same brand or variety, the highest of such price;

(28) ‘retailer’ means a person, supplying goods to general public for the purpose of consumption:

Provided that any person, who combines the business of import and retail or manufacture or production with retail, shall notify and advertise wholesale prices and retail prices separately, and declare the address of retail outlets, and his total turnover per annum shall be taken into account for the purposes of registration under section 14.


(28A) omitted

(29) ‘return’ means any return required to be furnished under Chapter-V of this Act;

(29A) “sales tax” means—

(a) the tax, additional tax, or default surcharge levied under this Act;

(b) a fine, penalty or fee imposed or charged under this Act; and

(c) any other sum payable under the provisions of this Act or the rules made there under;

(29AA) “sales tax account” means an account representing the double entry recording of sales tax transactions in the books of account;

dear, superNova, You are actively participating in this forum. Your stuff will help us in preparation. I have a question that what does it stand for SRO, What does it mean? And I need external knowledge regarding Federal Excise Act 2005, as when it was tabled and consented in national assembly and senate and when president signed? What is Finance act? Thanks in advance.