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  • Offences, Penalties, and Prosecutions: You can land in hot water, if you failed to comply with filing tax returns.

    Offences, Penalties, and Prosecutions: You can land in hot water, if you failed to comply with filing tax returns.

    People are confused and get confused in the variation between Paying Taxes and Filing Taxes. Both these are two different terms with distinguished concepts. Regarding this matter people somewhat escape the liability which is ‘tax filing’.

    People, to their ill-belief, believe that, when they are paying taxes at source than there aroused no question in filing the taxes. To their dismay and misconception, they are contradicting with the puzzled context.

    This is the dilemma of our culture and society, they don’t go into the depth of anything and perhaps conclude it in their own confined perception. Let us classify and highlight this context in the most compelling tone.

    Assume, you pay the tax on your income and on other miscellaneous sources to the government but along with that you don’t document it to the government you believe that there is no need to do it. But in the meanwhile, you don’t even know that if you tend to document it so in the forthcoming time you can avail multiple benefits with contrast to your previous state of not documenting it to the government.        

    Generally, paying taxes is equivalent to paying the tax amount to the government that you owe to them in the category of salary, business income, utilities, vehicles, property and other sources. On the other hand, tax filing is equivalent to documentation of your taxes paid throughout the year and also apply for tax refund in case of excess tax paid.    

    Paying taxes and filing taxes are the faces of the same coin, there is no other way around. You cannot get away scot-free with one clause as both are proportional to each other. Almost everyone pays taxes directly and indirectly but not everybody file taxes and that is the bone of contention for Pakistan’s tax culture.  

    There are people who are intentionally  not filing tax returns and there are also such people who are unintentionally not filing taxes. There lies a big difference among them. Tax filing leads to accountability and transparency of an individual and other entities. The purpose of tax filing is to promote a tax culture into any given society for the betterment and welfare of the society in return. 

    In the case of non-filing, it could lead to consequences vice versa every action has an equal and opposite reaction. If you tend to not comply with FBR’s notices of tax filing, escape the tax filing, and/or fabricate the tax filing particulars then you not only commit the offence but you also have to pay the penalty and face legal consequences in this regard.    Now we are going to discuss in detail about the offences, penalties, and prosecutions one would have to face if he/she doesn’t file, comply, and/or avoid tax returns. Whichever the case could be

                     Offenses                Penalties                  Section
    Where any person fails to furnish a return of income within the due date.Such person shall pay a penalty equal to 0.1% of the tax payable in respect of that tax year for each day of default subject to a maximum penalty of 50% of the tax payable provided that if the penalty worked out as aforesaid is less than 40,000 rupees or no tax is payable for that tax year such person shall pay a penalty of 40,000 rupees.   Provided that If seventy-five percent of the income is from salary and the amount of income under salary is less than five million Rupees, the minimum amount of penalty shall be five thousand RupeesAs required under section 114 and 118.
    Where any person fails to furnish a statement within the due date.Such person shall pay a penalty of Rs.5000 if the person had already paid the tax collected or withheld by him within the due date for payment and the statement is filed within ninety days from the due date for filing the statement and, in all other cases, a penalty of Rs.2500 for each day of default from the due date subject to a minimum penalty of Rs. 10,000As required under section 165, or 165A or 165B.
    Where any person fails to furnish a wealth statement or wealth reconciliation statement.Such a person shall pay a penalty of 0.1% of the taxable income per week or Rs. 100,000 whichever is higher.As required under section 114 and 116.
    Where any person fails to furnish a foreign assets and income statement within the due date.Such persons shall pay a penalty of 2% of the foreign income or value of the foreign assets for each year of default.As required under section 116A.
    Any person who fails to deposit the amount of tax due or any part thereof in the time or manner laid down under this Ordinance or rules made thereunder.   Provided that if the person opts to pay the tax due on the basis of an order under section 129 on or before the due date given in the notice under sub-section (2) of section 137 issued in consequence of the said order, and does not file an appeal under section 131 the penalty payable shall be reduced by 50%.Such a person shall pay a penalty of five% of the amount of the tax in default. For the second default an additional penalty of 25% of the amount of tax in default. For the third and subsequent defaults an additional penalty of 50% of the amount of tax in default.As required under section 137.
    Any person who repeats erroneous calculations in the return for more than one year whereby the amount of tax paid is less than the actual tax payable under this Ordinance.Such a person shall pay a penalty of 30,000 rupees or 3% of the amount of the tax involved, whichever is higher.As required under section 174 and 108.
    Where a person fails to produce the record of documents on receipt of first notice.Such a person shall pay a penalty of 25000 rupees.As required under section 177.
    Where a person fails to produce the record of documents on receipt of second notice.Such a person shall pay a penalty of 50,000 rupees.As required under section 177.
    Where a person fails to produce the record of documents on receipt of third notice.Such a person shall pay a penalty of 100,000 rupees.As required under section 177.
    Any person who fails to furnish the information required or to comply with any other term of the notice served under section 176 [or 108].Such person shall pay a penalty of 25000 rupees for the first default and 50,000 rupees for each subsequent default.As required under section 176.
    Where a person has concealed income or furnished inaccurate particulars of such income, including but not limited to the suppression of any income or amount chargeable to tax, the claiming of any deduction for any expenditure not actually incurred or any act referred to in sub-section (1) of section 111, in the course of any proceeding under this Ordinance before any Income Tax authority or the appellate tribunal.Such person shall pay a penalty of 100,000 rupees or an amount equal to the tax which the person sought to evade whichever is higher. However, no penalty shall be payable on mere disallowance of a claim of exemption from tax of any income or amount declared by a person or mere disallowance of any expenditure declared by a person to be deductible, unless it is proved that the person made the claim knowing it to be wrong.As required under section 20,111 and general.
                                Offenses                          Prosecutions
    Any person who makes a statement in any verification in any return or other document furnished under this Ordinance which is false and which the person knows or believes to be false, or does not believe to be true.Prosecution for false statement in verification- the person shall commit an offense punishable on conviction with a fine up to 100,000 rupees or imprisonment for a term not exceeding three years, or both.
    Where, in the course of any proceedings under this Ordinance, any person has either in the said proceedings or in any earlier proceedings concealed income or furnished inaccurate particulars of such income and revenue impact of such concealment or furnishing of inaccurate particulars.Prosecution for concealment of income is 500,000 rupees or more shall commit an offense punishable on conviction with imprisonment up to two years or with fine or both.
    Any person who fails to declare an offshore asset to the Commissioner or furnished inaccurate particulars of an offshore asset and revenue impact of such concealment or furnishing of inaccurate particulars is ten million rupees or moreProsecution for concealment of an offshore asset- the person shall commit an offense punishable on conviction with imprisonment up to three years or with a fine up to 500,000 Rupees or both.
    A person who fails to maintain records as required under this Ordinance shall commit an offense punishable on conviction.Prosecution for failure to maintain records  (a) where the failure was deliberate, a fine not exceeding 50,000 rupees or imprisonment for a term not exceeding two years, or both; or (b) in any other case, a fine not exceeding 50,000 rupees.
    A person who – (a) makes a statement to an income tax authority that is false or misleading in a material particular; or (b) omits from a statement made to an income tax authority any matter or thing without which the statement is misleading in a material particular,Prosecution for making false or misleading statements the person shall commit an offense punishable on conviction – (i) where the statement or omission was made knowingly or recklessly, with a fine or imprisonment for a term not exceeding two years, or both; or (ii) in any other case, with a fine.
    Any person who, without reasonable excuse, fails to comply with a notice under sub-section (2) of section 116A.Prosecution for non-compliance with notice under section 116A – that person shall commit an offense punishable on conviction with imprisonment up to one year or with a fine up to 50,000 Rupees or both.

    You only can remain safe from committing offence, getting penalized, and/or prosecuted. If you comply with income tax filing properly, on time, and abide by all the regulatory clauses therein Income Tax Ordinance 2001. Befiler is the only dedicated digital tax filing platform, which can assist you in safe siding yourself in real-time approach and flexible accessibility. You can file your tax returns, get the wealth statement prepared remotely with our devoted tax professional staff

  • It’s the time to profile non-filers: FBR’s bid to launch “Asaan Tax Portal”.

    It’s the time to profile non-filers: FBR’s bid to launch “Asaan Tax Portal”.

    In this week, the Federal Board of Revenue (FBR) would bring out “Tax Asaan Portal”, in its motive to furnish comprehensive details involving financial transactions of people (non-filers) in millions just in order to reinforce people to register, pay taxes, and ultimately bring them up into the tax filing system. 

    Sources associated with Business Recorder, told them on last Thursday that, FBR is about to unveil “Tax Asaan Portal” in the upcoming week, with the assistance of NADRA’s work on profiling of non-filers in the case of income tax returns.   

    The available information and data interchanged with each of the stakeholders, would be made part of the profiling of the non-filers and their estimated tax liability.

    The portal will come up with the complete details of the movable and immovable assets of non-filers, with all their financial transactions, and furthermore the portal is equipped with the capability to calculate the estimated tax of the non-filers.

    Essentials of Filing Tax Returns: FBR to support newcomers (taxpayers).

    People (non-filers) will receive SMS on their mobile phones to get access to the Tax Asaan Portal. Through which on the portal they would be granted the capacity to assess the details of their assets and estimate their tax liability. They would be allotted time to check, verify the details, voluntarily file the tax returns and pay the due taxes amount.

    For the very first time, this is the greatest opportunity granted by FBR to non-filers to file their income tax returns on their own and free of cost.

    The FBR has information and data already available, that was exchanged earlier before with NADRA. The bunch of information and data is regarded with the assets and expenditures of the persons outside the tax net from various sources. That sort of information will be available to non-filers which are not in the tax net but would be brought down through the Asaan Tax Portal.    

    With reference to Section 114B from Income Tax Ordinance 2001, the FBR will exercise its powers to issue income tax general order with respect to the nature of persons who had not filed tax returns but were liable to file tax returns under the provisions of this Ordinance. The income tax general order emphasizes punishments for the persons mentioned therein: Disabling of mobile phones, blocking of mobile phone SIMs; cutting of electricity connection, gas, and water connection. 

    In case of non-compliance, the FBR or the commissioner having jurisdiction over the person mentioned in the income tax general order may order restoration of mobile phones, mobile phone SMS and connections of electricity and gas, on that account, where the person is satisfied that the return has been filed; or the person was not liable to file a return under the provisions of the Income Tax Ordinance.

    Breakthrough in a Snapshot:

    Join hands with us:

    At Befiler, we can cater your tax filing requirements on extremely convenient interface. We can relieve your upcoming shortcomings by assisting you with tax filing and other related service at the comfort of your mobile phone. File your previous year tax returns and get yourself buckled up for filing the coming tax year income tax returns. We ensure you our services will delight you and you will be in touch with us for your forthcoming service requirements.      

    Sources:

    Business Recorder (Website)

    Faheem Practical Learning House (YouTube)

  • Company Incorporation Process: How I can Register my Company in Pakistan with Ease?

    Company Incorporation Process: How I can Register my Company in Pakistan with Ease?

    If you are looking for information regarding company registration in Pakistan, then stop getting worried as you are at the right platform for all your company incorporation related queries. You need not to surf anywhere else because all your company registration-related confusions will be answered here at Befiler. 

    You will learn about company types, its step-by-step registration process, and company registration fundamentals in Pakistan. We will guide you thoroughly on how to register your company in Pakistan. 

    But before that, you need to look at few important aspects into company registration regulations in Pakistan. The government of Pakistan has greatly simplified the company incorporation process. The regulatory body for Company incorporation is Security and Exchange Commission of Pakistan (SECP) that that registers and oversees companies for regulatory purposes. 

    Types of Companies: 

    Following are the types of legal entities which are incorporated through SECP. 

    1. Single Member Company.

    2. Private Limited Company. 

    3. Public Limited Company.

    4. Limited Liability Partnership (LLP) 

    1. Single Member Company: 

    According to Companies Act 2017, a company whose registered shareholders are limited to only one member or a company who has only one member is a single member company.

    2. Private Limited Company:

    According to companies Act 2017, a company whose registered shareholders are limited to minimum two or more members, but less than 50 members or a company who has two or more members but less than 50 members.  

    3. Public Limited Company:

    A Company which can raise funds through public is public limited company. A business must have at least 3 members and 3 directors to register as public limited company. There is no limit of maximum members. A public limited company is further classified into two types: 

    1. Listed

    2. Unlisted 

    1. Public Listed Company: 

    This type of company’s stocks are listed on Pakistan Stock Exchange (PSE) 

    2. Public Unlisted Company: 

    This type of company’s stocks are not listed on PSE but can raise funds through private equity offering. 

    Company Registration Process: 

    Given below is the process for company incorporation in Pakistan  

    1. Reservation of the Company Name: 

    The first and the foremost thing which you have to do is to decide your company name, then check that name’s availability on the SECP’s website and also not to use the prohibited terms which are banned for company name registration and are available on the SECP’s website. Referring to the Companies Act 2017, Section 10; looking for company names and deciding on a name in compliance with the law will assist you in saving a bunch of time. When you are about to register your company name, firstly create your user account in the SECP e-services, secondly checkout for your desired company name availability and file the prerequisite application from the portal.        

    3. Required documents: 

    Single Member Company Registration: 

    • Three Names of the proposed company
    • Neat and Clear Scanned copies of CNIC’s of the Director / subscriber and nominee director.
    • NTN of the proposed director / subscriber and nominee director
    • Registered address / correspondence address of the proposed Company
    • The principal business of the proposed company
    • Nature of the business activity
    • Authorized Capital
    • Paid up Capital
    • Value per share e.g.Rs. 10, Rs. 50 or Rs. 100 etc
    • Name of the Chief Executive of the Proposed Company
    • Telephone numbers and email ID of the proposed director
    • Telephone numbers and email ID of the proposed director of the Company
    • SECP login details of the proposed director / subscriber(if any)

    2. Private Limited Company Registration: 

    • Three Names of the proposed company
    • Neat and Clear Scanned copies of CNIC’s of all the proposed Directors / subscribers
    • NTN of the proposed directors / subscribers
    • Registered address / correspondence address of the proposed Company
    • The principal business of the proposed company
    • Nature of the business activity
    • Authorized Capital
    • Paid up Capital
    • Value per share e.g.Rs. 10, Rs. 50 or Rs. 100 etc
    • Combination of Shares agreed to be subscribed by each director / subscriber
    • Name of the Chief Executive of the Proposed Company
    • Authorization from other subscribers. (For Offline only)
    • Telephone numbers and email ID of all the proposed directors
    • Telephone numbers and email ID of all the proposed directors of the Company
    • Name of declarant person
    • SECP login details of the proposed directors / subscribers(if any)

    4. Collection of Incorporation Certificate with Other Certified True Copies: 

    Once you have submitted all the above mentioned prerequisite documents, it will be evaluated by SECP. All the documents will be verified by them in order to ensure their credibility and preserve the official records in turn. The Incorporation Certificate will be issued to you upon completion of the incorporation process.    

    5. Account Maintenance Certificate: 

    When you have got your incorporation certificate and other documents from SECP, then you have to pay a visit to your dedicated bank for the purpose of corporate bank account opening while mentioning all the directors/stakeholders to its signatory. 

    After getting done with the first phase, every director/stakeholder now have to deposit their declared monetary value as per the mutual agreement i.e. Paid up Capital, in their company bank account with their name.     

    This is how your desired company registration gets completed under the domain of SECP.

  • Business NTN Registration Process: How I can Register my Business NTN in Pakistan conveniently?

    Business NTN Registration Process: How I can Register my Business NTN in Pakistan conveniently?

    You most likely have heard about individual NTN, and may be guessing what if other than individual could have NTN registration facility? if so, then your guess is accurate. NTN is registered not only just for an individual, it is also registered for business, company, (AOP) and for other entities.        

    NTN irrespective of its nature, is considered as an identity of any entity, which is registered to the tax regulatory body or any other associated organization. Nevertheless, NTN is used in the bank account opening process. It is also served as a prerequisite requirement in filing income tax and sales tax returns.

    With NTN registration, individual, business person, firm and other entities not only comply with the tax regulatory body, taxation acts but they also tend to conduct it in their own benefit.

    Benefits of Business NTN Registration in Pakistan:

    With Business NTN Registration, You can enjoy the following benefits.

    • The business NTN holder can make contracts with local and international firms.
    • The business NTN holder can associate their business with regulatory bodies and other associated organizations.
    • The business NTN holder can become a member of a number of agencies.

    How can I register my business NTN?

    NTN registration for any entity is very easy and not a rocket science at all. You can easily register your NTN on FBR by following e-registration for NTN after creating user account on FBR. But why rushing to FBR and following the registration procedure steps; why not trying Befiler instead.

    You can get comprehensive NTN; registration, verification, and details modification services all under one hut.  

    Just sign in with any of your google or Facebook account or any other email . Now accumulate and provide the following mentioned documents:

    Documents required for NTN registration:

    For Business:

    • Color copy of CNIC
    • Rent agreement/ownership docs of Office premises
    • Letterhead
    • Latest paid electricity bill
    • Phone Number
    • Email address        

    For Partnership or AOP:

    • Copy of the National Identity Cards, email address and contact number of each partner.
    • Proof of the address of partnership business, utility bills
    • If the address of the partnership business is rented then the rent deed is required
    • The firm’s name
    • The place or principal place of business of the firm
    • Names of any other places where the firm carries its business
    • The date when each partner joined the firm
    • Full names of all partner and their permanent addresses (information should tally with the NIC)
    • Duration of the firm

    For Company:

    • CNIC Of CEO and All Directors and members
    • Email and Mobile Number of CEO and All Director’s (Number must be registered on their respective CNIC)
    • Nature of Business
    • Three Proposed Name of Business Premises
    • Business Address
    • Letterhead

    For NPO:

    • Copies of CNIC of All members
    • The office Bearers list with mobile numbers
    • The Managing Committee List with mobile number
    • Office Address,
    • Valid email address, letterhead, Website URL
    • Ownership documents or rent agreement of business premises
    • Asset details of members and dependents

    At Befiler the NTN registration procedure is smooth, streamline, and hassle-free. You can get your desired NTN registration done in few days, at very reasonable and affordable cost.  There is no need to rush anywhere and register your business NTN, when you can register your business NTN with Befiler at the comfort of your home.      

  • Finance Supplementary Act 2022

    Finance Supplementary Act 2022

    The purpose of the Finance (Supplementary) Bill, 2021 was to give legislative effect to the taxation, proposals of the Federal Government to achieve efficiency, equity in the tax system, widening of tax base as well as documentations of the economy.

    The State Bank of Pakistan Amendment Bill 2021 and the Finance Supplementary Bill 2021 have both been presented to the National Assembly to revive the IMF’s program of $6 billion at a standstill.

    The proposed changes include elements to tax 375 billion rupees under income tax, sales tax and federal excise laws. Whereas the government has withdrawn Rs 343 billion tax exemptions from the sales tax which will affect all the segments of society.

    The focus of the bill is centered at supporting the domestic economic stability, sustainable growth and avoid repeated booms and busts that have outlined Pakistan’s past and led to painful consequences in terms of higher inflation, higher poverty and lower growth.

    It would also balance the framework of necessary operational and financial autonomy to the State Bank with new mechanisms for enhancing transparency and strengthening accountability. 

    The Finance Supplementary Bill 2021 was presented to the National Assembly on last Thursday, passed with majority of the votes in favor and eventually became the Finance Supplementary Act 2022 after President of Pakistan’s approval on that bill. Lastly in turn, the Finance Supplementary Bill 2021 transmuted into the Finance Supplementary Act 2022. 

    Key Notes from Finance Minister Shaukat Tarin’s address in National Assembly:

    A sales tax of 8.5% will be levied upon 1,800cc domestic and imported hybrid cars. A tax of 12.75% will be levied upon 1,801 to 2,500cc hybrid vehicles while imported electric vehicles will be taxed at 12.5%.

    No general sales tax (GST) will be imposed on a 200g carton of milk, while a 17% GST will be imposed on formula milk worth more than Rs500. Tax on imported vehicles was also increased under the changes, from 5% to 12.5%. The federal excise duty on all imported vehicles will remain the same.

    There will be a duty of 2.5% on locally manufactured 1,300cc vehicles, compared to the 5% proposed earlier. The duty on locally manufactured 1,300 to 2,000cc cars was also be reduced to 5% from 10%. A 10% duty will be imposed on locally manufactured cars greater than 2,100cc.

    Proposed 17% GST has been imposed on over 150 items to yield Rs. 360 billion

    A 17% of GST has been imposed by the federal government on more than 150 items of different varieties which are inclusive of imported plant and machinery, luxury items, dairy products, meat/ poultry, pharmaceutical raw materials, commercial products, beauty/dietary supplements, computers and other goods in Pakistan which are valued at Rs. 343 billion. Cottonseed / Sunflower / Canola Seeds, Cell Phones (over US $ 200 -500), Branded Iodized Salt, Energy Saving Lights / Tube Lights, and Imported Reusable Scrap Metal.

  • Single Sales Tax Returns: A New Sales Tax Returns Portal

    Single Sales Tax Returns: A New Sales Tax Returns Portal

    A new development has been put forward by the Federal Board of Revenue FBR by launching Single Sales Tax return portal across the country. This vital breakthrough is aimed at facilitating the taxpayers, promoting ease of doing business and to reduce compliance costs. This leads to a keynote and cornerstone achievement of the FBR with the development of this sales tax return portal. All this achievement, in a nutshell, amounts to a technological initiative towards automation, data integration and taxes harmonization. 

    It would be relevant to share that the idea of the development of the Single Sales Tax Return was transformed into a reality right after discussion with the concerned authorities including provincial governments and their respective revenue bodies. The outline of the idea was also supported and backed by the input of other stakeholders: including taxpayers and tax practitioners. This digital sales tax return portal will in return ease the sales tax filing procedures and conjointly preserve the compliance costs. This initiative was the key recommendation for finance policy from the international financial organizations including World Bank and International Monetary Fund (IMF).    

    The new sales return portal will assist in minimizing the data entry, simplifying the filing process, addressing the common data issues and also rectifying the calculation errors. The portal’s system will automatically handle and distribute input tax adjustments and tax payments across the sales tax authorities, also diminishing the necessity for reconciliations and payment transfers. Following the effectiveness of this portal’s system, the concerned officers of revenue bodies will have the functional capability and capacity to make better decisions with regard to the matters of the taxpayers. Additionally, it will empower the tax collection authority to further amplify the revenue collection and to enhance the tax compliance mechanism without audits. Adding one more benefit to the queue, the portal will emphasize on the harmonization of tax procedures, integration and coordination between the federal government and the provinces, which will in return promote national unity and ensure cohesion.  

    Sales Tax on goods, in all over Pakistan, is collected by FBR and sales tax on services, in all over Pakistan, is collected by the respective territorial tax bodies of all four provinces. Sales tax on services in the Islamabad Capital Territory is also collected by the FBR. Meanwhile Azad Kashmir and Gilgit-Baltistan have their own tax regulatory bodies. 

    Presently, the taxpayers have to file their monthly sales tax returns to multiple tax regulatory authorities, for example, a person supplying taxable goods and providing services across the country would have to file sales tax return with FBR, Punjab Revenue Authority, KPK Revenue authority, Baluchistan Revenue authority, and Sindh revenue board including respective revenue authorities of AJK and Gilgit-Baltistan. Following the above scenario is such a tiring and burdensome task before the formal advent of the single sales tax return portal that it could even lead to errors and miscalculations. Now, with the formal launching of this portal, the tax payers will now file only one sale tax return.

    In this view, this new development will go on  play a vital role in transforming our indirect tax policy by broadening tax base, enhancing transparency, reducing the compliance burden and Improving administrative efficiency of the tax authorities enabling them to concentrate and tap on other potential areas of revenue sources.

  • Implications of Finance (Supplementary) Bill 2021; Get to know which commodities are going to get costlier!

    Implications of Finance (Supplementary) Bill 2021; Get to know which commodities are going to get costlier!

    The Finance (Supplementary) bill 2021 is aimed at meeting the IMF’s conditions on getting clearance of Pakistan’s sixth review of $6Bn extended loan for clearing the way for payment of $1Bn loan portion.     

    Several amendments have been proposed in the bill relating to Income Tax, Sales Tax, Custom Duties and Federal Excise Duty. The proposed changes are expected to net a total of Rs. 343 Billion in additional tax collections, mainly in the form of withdrawal of sales tax exemptions.

    Here is the list of commodities which are going to be expensive:

    • Mobile calls and imported mobiles.
    • Imported edibles
    • Automobiles (imported, local)
    • Medicines
    • Miscellaneous

    Given below is a brief description of each of the proposed amendments that is expected to make each of the following commodities more expensive.

    Mobile calls and imported mobiles:

    Withholding tax, also known as “Advance Adjustable Tax” on mobile phone calls is proposed to be increased from 10% to 15%.

    Furthermore, while previously imported CBU cellular mobile phones were chargeable to sales tax at fixed rates ranging from Rs. 1740 to Rs. 9,270 on cellular phones ranging in values from USD 200 to exceeding USD 500, these have now been proposed to be subject to sales tax at 17% ad valorem.

    All of the above will result in increasing prices for mobile phone users, both in the form of mobile phone purchases and usage of the call time and data.

    Automobiles:

    (Locally Manufactured Vehicle)

    Cars ranging between engine capacity of 1001cc-2000cc, the federal excise duty on those vehicles will be increased from 2.5% to 5%. Whereas those cars having engine capacity beyond 2000cc, the federal excise duty on those cars will be increased from 5% to 10%.    

    Locally assembled cars with an engine capacity above 850cc, the sales tax on those cars will be increased from 12.5% to 17%. 

    Locally assembled double cabin vehicles, the federal excise duty on those vehicles will be increased from 7.5% to 10%.  

    (Imported Vehicle)

    Imported cars ranging between the engine capacity of 1001cc-1799cc, the federal excise duty will be increased from 5% to 10% on them.

    Also Imported cars ranging between the engine capacity of 1799cc-3000cc, the federal excise duty will be increased from 25% to 30% on them.

    Further, imported cars beyond the engine capacity of 3000cc, the federal excise duty will be increased from 30% to 40% on them.

    The duty on imported double cabin vehicles will be increased from 25% to 30%, also the duty on the hybrid electric vehicles will be increased from 8.5% to 12%.  

    (Withholding Tax)

    Additionally, the bill also includes the propositions of increasing the withholding tax which is also known as (advance tax) so cars ranging up to 1001cc the advance tax will be increased from 50,000 rupees to 100,000 rupees.

    Following on, the cars which are ranging between 1001cc to 2000cc, the advance tax will be increased from 100,000 rupees to 200,000 rupees.

    While completing this clause, the cars which are ranging above 2000cc, the advance tax will be increased from 200,000 rupees to 400,000 rupees.

    All the above proposed amendments shall apply only in case of motor vehicles sold prior to their registration after purchase from the manufacturer.

    Imported Edibles:

    17% sales tax has been proposed to be imposed on imported items which were once exempted from sales tax. Those products include luxury items, including imported live animals, steak meat, fish, vegetables, high-end bakery items, branded cheese and sausages.  

    It has also been proposed in the supplementary finance bill 2021 that 17% sales tax will also be imposed upon imported raw materials that would be used in the making of infant foods.  

    Although, there is rising fear that the basic food items inclusive of poultry and beef may also get expensive following the outlook of the raising sales tax on imported machines that would be harnessed in the poultry sector. The imported poultry machines will bear the sales tax from 10% to 17% also the local poultry and cattle feed will bear 7% to 17% sales tax.   

    The brand packaged dairy items will also come under the radar of the increased sales tax rates and their sales tax rates will be raised from 10% to 17%.

    Medicines:

    In the propositions of the finance amendment bill 2021, the tax exemptions given to the pharmaceuticals industry worth 160 billion rupees have been withdrawn by the government. In the outlook of this development medicines will become costlier as 17% of the sales tax will also be imposed on the imported raw materials that would be used in the production of the pharmaceutical’s ingredients.  

     
    Miscellaneous Items:

    5% of the sales tax will be imposed on the imported laptops, 17% sales tax on imported magazines and journals.   

    Other than this, sewing machines, matchboxes, iodized salt, red chili and contraceptives will also come into hands with the imposition of 17% sales tax.

    All the above proposed amendments are expected to lead to increased inflation further adding to the difficulties being faced by the citizens of Pakistan.

  • Why you should integrate your POS System with FBR?

    Why you should integrate your POS System with FBR?

    If you are a retailer and selling any kind of products whether consumable or of any other nature, then you may already have a POS System or wanted to learn about POS and its integration with FBR.

    A POS system is significant in providing you visibility and reporting of your business sales, inventory, finance, accounts, and much more. Whenever you are performing your business operations you have to keep an eye on the components of your operations.

    POS system comprises of comprehensive hardware and software components which assist you in overall management of your business functions. POS hardware is inclusive of monitor, cash draw, processing unit, bar code scanner, and bar code printing machine. Whereas on the other hand POS Software is composed of varieties of modules which includes sales, inventory, distribution and etc. 

    In addition to being highly useful in reporting and management of a small sized business, it is a mandatory legal requirement for a Tier-1 Retailer as defined in the Sales Tax Act, 1990 to get their POS system integrated with the online sales tax invoice system of FBR. A Tier-1 Retailer has been defined in the law as follows:

    1. retailer operating as a unit of a national or international chain of stores;
    2. a retailer operating in an air-conditioned shopping mall, plaza or center, excluding kiosks;
    3. a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees twelve hundred thousand;
    4. a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers”;]
    5. a retailer, whose shop measures one thousand square feet in area or more or two thousand square feet in area or more in the case of retailer of furniture
    6. a retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by State Bank of Pakistan.

    Your POS System’s integration with FBR will ensure basic three components of reporting your sales data to FBR, receiving of your printed fiscal invoice number on sales receipt and updating database for future reporting.

    For you one of the key advantages of POS system integration with FBR would be that, it will help you on being a retailer to upload sale invoices and credit notes automatically to the FBR servers, and this will reduce the expenditure cost of taxation services by automatic preparation of the STR for local Tier-1 retailers.

    Another major advantage enjoyed by Tier-1 Retailers who have gotten their POS system integrated with FBR is that they will benefit from adjustment of a higher rate of input tax. In case of Non- integrated Tier-1 retailers, it has been prescribed by FBR that the during a tax period or part thereof in which the retailer continues to remain non-integrated, the adjustable input tax for whole of that tax period shall be reduced by 60%. 

    In addition to the above, the following penalties have been prescribed by the law for non-integrated Tier-1 Retailers:

                                                      

    Offence

    If you integrated your POS system for monitoring, tracking, reporting or recording of sales, production and similar business transactions with the Federal Revenue Board or its computerized system, conducts such transactions in a manner just to avoid monitoring, tracking, reporting or recording of such transactions, and/or issues an invoice which does not carry the prescribed invoice number or barcode or bears duplicate invoice number or counterfeit barcode; or you also support encouragement of such offence.

    Penalty

    You shall pay a penalty of 500,000 rupees or 200% of the amount of tax involved, whichever is higher. You shall, further, be liable, upon conviction by a Special Judge, to simple imprisonment for a term which may extend to 2 years, or with additional fine which may extend to 20,00,000 rupees, or with both. Also, if you support encouragement of such offence, shall be liable, upon conviction by a Special Judge, to simple imprisonment for a term which may extend to 1 year, or with additional fine which may extend to 200,000 rupees, or with both.

    Section 

    Sub-section (9A) of section 3 and section 40C. 

    A person required to 

    integrate his business 

    as Tier-1 Retailer, who fails 

    to get himself 

    registered under the 

    Act, and if registered, 

    fails to integrate in 

    the manner as 

    required under the 

    law and rules made 

    thereunder.

    Such person shall be liable to pay:

    (i) penalty of 500,000 rupees for first default;

    (ii) penalty of 1,000,000 rupees for second default  after fifteen days of order for first default;

    (iii) penalty of 2,000,000 rupees for third default after fifteen days of order for second default;

    (iv) penalty of 3,000,000 rupees for fourth default after fifteen days of order for third default: 

     

    Provided that if such person  fails to integrate his business within fifteen days of imposition of penalty for fourth default, his business premises shall be sealed till such time he integrates his  business.

    Sub-section (9A) of section 3

  • Sales Tax: Its Fundamental Concepts, Those Who Are Required to Register for Sales Tax, and Basics of Sales Tax Registration.

    Sales Tax: Its Fundamental Concepts, Those Who Are Required to Register for Sales Tax, and Basics of Sales Tax Registration.

    Sales Tax in Pakistan was regulated even before the formal establishment of Pakistan; for decades, the Sales Tax was based upon a very general concept, but in the late ’90s, some amendments had been made. Sales Tax then changed into Value Added Tax (VAT). 

    The VAT system had been very successful in the UK; then, attempts had been made to implement and execute it in Pakistan. So, while observing the VAT System according to Pakistani culture and surrounding environment, the VAT System then modeled accordingly with the scenarios. And many changes have been made to the Act; the dilemma is that now the original Act looks very different comparatively.        

    Sales Tax is a tax imposed by the Federal Board of Revenue FBR on the sales, supply, and import of goods into Pakistan.

    The sales tax on services is imposed by all four provinces, Islamabad Capital Territory, Gilgit-Baltistan, Azad Jammu, and Kashmir, at rates ranging from 13% to 16%.

    Let’s talk about the Basic Concepts of Sales Tax; which is also known as Value Added Tax:

    • The item you purchase or import and then the tax you paid on it is called Input Tax. The tax which is paid on availing the service is also called Input Tax. 
    • If you have any business in which you sell your product to your customers, then the tax you charge on the goods sold out to customers is called Output Tax. 
    • Every month you have to file the sales tax return. As a business entity, you are dealing with a service-oriented business, so you have to file your returns with your respective provincial tax regulatory body.
    • There is a possibility, suppose you make high purchases in any month, but you have low sales. Hence, in this case, you have high input tax and low output tax; following this, we call it Excess Input Tax.
    • In many cases of Sales Tax, Statutory Regulatory Order (SRO) occurs eventually on the ground of making any considerable change in the tax law, so in this scenario, if a seller charged extra sales tax on the goods and also the end consumer paid additional tax charges, then the seller should return the consumer the extra tax charges and also pay the due tax charges to the FBR. This condition is called Excess Tax Collection.
    • We are probably purchasing raw material and then utilizing it to manufacture two different products. Either a product may be exempted from tax, or the other is taxable. Suppose we purchase a paper and produce a book and a calendar. So the thing is that; the calendar is exempted from tax.

    As you may have learned about the basic concepts of Sales Tax, let’s take a step ahead towards the scenarios related to the sales tax culture in Pakistan. 

    In the VAT System, where every person in the supply chain is supposed to be a registered person, but that is very difficult in Pakistan due to specific problems:

    e.g., a chips manufacturer may be a company for which registration, record keeping, input and output adjustment, etc., are not a big issue. However, a chips manufacturer may be an individual running a small bakery who cannot be expected to comply with all such legal requirements.

    Likewise, every retailer in Pakistan is not expected to comply with all the legal requirements.

    Therefore, a structure has been developed in Pakistan whereby two types of exemptions have been given as under:

    Turnover based exemption, i.e., small manufacturers termed as a cottage industry, and retailers (other than specified retailers, i.e., Tier 1 retailers) are exempt from registration, and they do not charge Sales Tax on their supplies; and Items based exemption, i.e., certain products are exempt without any turnover limit, e.g., books, pharmaceutical products.

    Who is Required to Register for Sales Tax in Pakistan?

    • All the importers, wholesalers (including dealers), and distributors.
    • Manufacturers are not falling in the cottage industry. 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 Rs.10million or whose annual utility (electricity, gas, and telephone) bills during the previous twelve months ending any tax period do not exceed Rs. 800,000.
    • Retailers (Tier-1 retailers) means:
    • A retailer operates a unit of a national or an international chain of stores.
      • A retailer operates in an air-conditioned shopping mall, plaza, or shopping center.
      • A retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds rupees twelve hundred thousand (1200,000);
      • A wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers.
      • A retailer, whose shop measures one thousand square feet (12000) in area or more [or two thousand square feet in area or more in the case of retailer of furniture];
    • A person who is required to be registered for the purpose of any duty or tax collected or paid under any Provincial or Federal Law as if it was an imposition of sales tax, e.g., service providers like hotels, clubs, caterers, customs agents, ship chandlers, courier services, etc.
    • Those persons who are making zero-rated supplies, including commercial exporters who intend to obtain sales tax refunds against their zero-rated supplies.
    • A person, who is required to be registered based on upcoming criteria, but still avoids registration, can be essentially registered by the department after a proper inquiry under sub-rule 1 of Rule 6 of Sales Tax Rules, 2006.
    • A retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by state bank of Pakistan;
    • A retailer whose deductible withholding tax under sections 236g or 236h of the income tax ordinance, 2001(xlix of 2001) during the immediately preceding twelve consecutive months has exceeded the threshold as may be specified by the board through notification in the official gazette;

    A person engaged in supply of articles of jewelry, or parts thereof, of precious metal or of metal clad with precious metal excluding a person whose shop measures three hundred square feet in area or less;
    Any other person or class of persons as prescribed by the board.

    HOW TO APPLY FOR SALES TAX REGISTRATION IN PAKISTAN?

    1. You need to register yourself with the Federal Board of Revenue (FBR) before filing your Sales Tax Return.
    2. After registration with the FBR, they will provide you with a Sales Tax Registration Number which is also known as GST Registration Number or User ID and password. These credentials will allow you access to the efile portal, the online portal for filing a Sales Tax Return.
    3. The Online Sales Tax Return can only be filed while logging into the efile portal.
    4. The Automated System for Sales Tax Registration has been effective since July 1st, 2019, allowing for registration of the person for Sales Tax through the Iris Portal.
    5. Only those persons having active Iris Portal credentials can register themselves for Sales Tax.

    Gladly, Befiler – a fintech platform, is here that files your sales tax on your behalf so that you don’t need to go through the hassles of it. You just need to simply download the Befiler app or visit Befiler Sales Tax page and rest their experts will take care.

    Documents required for sales tax filing

    An application through the computerized system along with the following document shall be submitted for registration of sales tax;

    • Login Credentials ( ID & Password)
    • Color copy of CNIC of Owner / Directors / Partners
    • Business Letterhead
    • Business activity and starting date
    • Rent agreement/ownership docs of Office premises
    • Latest Paid Electricity Bill of Office premises
    • Bank Maintenance Certificate of Business Bank Account
    • GPS tagged photos of Electricity Meter & Office premises (For GST registration only with FBR)
    • GPS-tagged photographs of business premises and utility meter (in case of non-manufacturers)
    • GPS-tagged photographs of machinery and industrial electricity or gas meters installed along with manufacturing premises (in case of manufacturer)

    How to File Sales Tax Return In Pakistan

    A Sales Tax return is the taxpayer’s document of declaration through which taxpayer not only furnishes the details of transactions during a tax period but also deposits his Sales Tax liability.

    Monthly Return Payment


    The payment of tax must be made by the 15th day of the following month in which taxable supplies is made. The taxable person must fill its tax payment details on the respective sales tax portals to generate a PSID (payment slip ID), which can then be used to pay the amounts due in any of the designated banks or through electronic payment methods.

    Monthly Sales Tax Return Filing


    The registered person under the standard procedure is required to file its Sales Tax Return by the 18th of every month following the period in which taxable supplies were made.

    Annual Sales Tax Return Filing


    Every private or public limited company that is registered for federal sales tax purposes is required to file an annual sales tax return. The return for a financial year must be filed by 30 September of the following financial year. The information included in the annual sales tax return is the supplies/services provided during the year, adjustments and summary of sales tax paid, refunded or adjusted in the monthly sales tax returns.

    Sales Tax Payments

    The payment of tax must be made by the 15th day of the following month in which taxable supplies is made. The taxable person must fill its tax payment details on the respective sales tax portals to generate a PSID (payment slip ID), which can then be used to pay the amounts due in any of the designated banks or through electronic payment methods.

    What is a Sales Tax invoice?

     A taxable person must generally provide a sales tax invoice or cash memo for all taxable supplies made. Tier-1 retailers must integrate their retail outlets with the boards’ computerized systems for real-time reporting of sales. A sales tax invoice is generally necessary to support a claim for input tax credit

    The Sales Tax invoice must contain the following information:

    • A unique serial number
    • Seller’s and buyer’s name and address
    • Seller’s and buyer’s registration number
    • Date of issue of invoice
    • A description and quantity of the goods or services supplied to the customer
    • Value exclusive of sales tax
    • Amount of sales tax
    • Value inclusive of sales tax.
  • Nadra and FBR Joining Hands Together To Track And Hunt Non-Filers

    Nadra and FBR Joining Hands Together To Track And Hunt Non-Filers

    A new development has been made in Pakistan in accordance with the NADRA (National Database and Registration Authority) and Federal Board of Revenue (FBR). The breakthrough is all about the framework which indicates on how to keep an eye and detect the non-filers. With the help of advance technology, both these government machineries will work together to kickoff their joint agenda.

    In the last days of the ending year 2021-month December and in the starting days of 2022, that project will be put into action. The modern AI technology will be used by NADRA for completing the profiles of potential taxpayers, filers and will calculate the income and tax liability of non-filers. A wholesome number of 14 million transaction records based upon the financial transactions will be presented by the FBR. 

    According to the information collected the 14 million financial transactions is expanded over property sales/purchase, automobiles sales/purchase, utility bills, domestic and foreign trips, sales and purchase of dynamic and stationed properties, vehicles registrations with provincial registration and excise department and many other sorts of expenditures.       

    In the ending phase of the process, NADRA will supply the details of non-filers to FBR in that FBR will create their profiles and will upload them on its official website. Furthermore, a source from FBR has informed that potential taxpayers will be initially offered sufficient time to pay their taxes and file returns voluntarily. Contrarily, in the case of non-compliance, the authorities will take stern legal action against non-filers. Along with that, FBR will also establish special call centers, whose representatives will be provided the task to contact the non-filers to push them to submit taxes and file returns and offer them guidance for smoothly navigating the website.