Budget 2021 22 Highlights Comments

Budget 2021 - 22 | Highlights & Comments
Budget 2021-22
Highlights & Comments
Yousuf Adil
Chartered Accountants
1
Foreword
This publication contains an economic review, highlights of fiscal proposals and

explanatory description of the significant changes in the Income Tax, Sales Tax,
Federal Excise and Customs Duty laws proposed through Finance Bill, 2021.
Amendments proposed in the Finance Bill, 2021 will take effect from July 01,
2021, unless stated otherwise, once it is approved by the Parliament. Various
amendments proposed through Tax Laws (Amendment) Ordinance, 2021 and
Tax Laws (Second Amendment) Ordinance, 2021 are made part of the Bill. In
respect of various exemptions and concessions withdrawn through these
Ordinances, it has now been clarified that existing beneficiaries of exemption
and concessions shall continue to enjoy benefits of the repealed provisions till
June 30, 2021 or otherwise for the periods prescribed and subject to conditions
specified therein.
This publication contains general information only, and Yousuf Adil, Chartered
Accountants, is not by means of this publication, rendering professional advice
or services. Before making any decision or taking any action that may affect
your finances or your business, you should consult a qualified professional
advisor
Yousuf Adil accepts no duty of care or liability for any loss occasioned to any
person acting or refraining from action as a result of any material in this
publication.
This publication can also be accessed on our Website.
www.yousufadil.com
Karachi
June 12, 2021
2
Contents
Budget at a Glance 04
Economic Review 05
Highlights of Important Fiscal Proposals 19
Significant Amendments Proposed In
Income Tax Ordinance, 2001 27
Sales Tax Act, 1990 100
Customs Act, 1969 119
Federal Excise Act, 2005 130
Islamabad Capital Territory (Tax on Services) Ordinance, 2001 134
3
Budget at a glance
Budget Budget
2021-22 2020-21
PKR’Bn PKR’Bn
Tax revenue 5,829 4,691
Non-tax revenue 2,080 1,704
Gross revenue receipts 7,909 6,396
Less: Provincial share in Federal taxes (3,412) (2,704)
Net revenue receipts 4,497 3,691
Expenditure
Current expenditure 7,523 7,626
Development expenditure 964 863
Total Expenditure 8,487 8,489
Federal Budget Deficit (3,990) (4,798)
Non Bank Borrowing 1,241 1,517
Bank Borrowing 681 649
Net External receipts 1,246 2,287
Other proceeds 252 103
Estimated Provincial Surplus 570 242
3,990 4,798
4
Economic Review 2020-21
The third budget of PTI government for FY21-22 was presented on 11th June, 2021 by the
Finance Minister, Shaukat Tarin with aggregate total outlay of PKR 8.4 Trillion, which envisages a
public sector development program of PKR 900 Billion.
. . . . . . . . . . . . . .vs
FY 2020 . . . . . . . .. . . . FY
. . . 2021 E
............
.......................
Real GDP Growth Real GDP Growth
-0.47 3.94%
Inflation CPI Inflation CPI
11.2% 8.8%*
Debt to GDP Ratio Debt to GDP Ratio
87.6% 79.7%*
Policy Rate Policy Rate
7.0% 7.0%
(Data Source: PES, 2020-21)
*Inflation CPI for FY21 from July’20-May’21

*Debt to GDP Ratio for FY21 from July’20-March’21
Overview
The crippling global economy has advanced only a meagre distance following a severe collapse in
2020 because of the COVID-19 outbreak that affected the entire world with acute adverse
impacts on women, youth, the poor, the informally employed, and those who work in contact-
intensive sectors. Apart from the social impact, the economic consequences have been massive
resulting from disrupted supply chains and human travel restrictions that had varied impact on
sectors where certain sectors like tourism and hospitality felt the most pressures while other
sectors that are less discretionary and or require lesser human contact like Information
Technology were less affected or rather beneficiaries of the prevalent environment.
The strength of the recovery, i.e., approx. 6% and 4.4% in 2021 and 2022 respectively is
projected to vary significantly across countries, depending on access to medical interventions,
effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics
entering the crisis.
5
Although vaccine approvals and deployments in the second half of 2020 have raised hopes of a
turnaround in the pandemic later in 2021 reflected by stronger-than-projected momentum on
average across regions based on economic data released by WEO - IMF, renewed waves and new
variants of the virus pose concerns for the outlook.
Pakistan, an emerging market economy within the Asia Pacific region has additional indigenous
challenges in addition to those faced by the developed world. In the midst of COVID-19 outbreak,
the country had many open issues amongst others in the shape of loss-making State-Owned
Enterprises (SOEs), weak exports, low Foreign Direct Investments(FDI), savings and
investments, inflationary pressures, continued classification in Financial Action Task Force (FATF)
grey list, a high fiscal deficit to GDP ratio and requirement to deal with sensitive geopolitical
events due its key political positioning that adds complexities in its overall economic affairs.
However surprising for many as the case has been, the provisional GDP growth rate for FY21 is
estimated at 3.94%, higher than the targeted growth of 2.1%, for the outgoing fiscal year that
signals a V-shaped economic recovery. A 2.77%, 3.57% and 4.43% growth in agriculture,
industrial and services sector, respectively contributed the estimated 3.94% GDP growth.
This was possible due to government's timely and appropriate measures in the form of smart
lockdown policy along with other special measures including continued accommodative fiscal
(effective management of expenditures and increased FBR tax collection) and monetary policies
(maintaining policy rate at 7%).
Other targeted measures include;
 Stimulus package of PKR 1,240 billion, a construction package,
 Launch of Temporary Economic Refinance Facility (TERF) to stimulate investment in both

new and expansion/Balancing, Modernization and Replacement (BMR) of existing units
 Connecting Overseas Pakistanis with the Banking System of Pakistan through allowance of
Roshan Digital Accounts,
 Refinance Facility for Combating COVID-19 (RFCC),
 Mandatory Targets for Housing Finance,
 SBP Rozgar Scheme - A Scheme aiming to prevent layoff by financing wages and salaries of
employees for six months (April 2020- Sep 2020) for all kind of businesses except for
Government entities, public sector enterprises, autonomous bodies and deposit taking
financial institutions,
 An expansion of the social safety net,
 National Agriculture Emergency Programme with a cost of PKR 277 billion
 Other incentives like Rabi Package, minimum support prices, industrial support packages,
relief to export-oriented industries, duty exemption under China-Pak Free Trade
Agreement-II, electricity and gas subsidy for the export-oriented industries and tax
exemptions for electric vehicles manufacturers.
6
For Pakistan, the strategy seems to be working where government is monitoring the country's
situation actively and taking necessary measures to facilitate agriculture and industry sectors to
avoid the downside risk and to further accelerate the economic recovery. Coupled with this,
macroeconomic stabilization measures and structural reforms supported by international
development partners will help the economy to move on a higher and sustainable growth
trajectory.
Real GDP
GDP over the years
2018 2019 2020 2021 E

………………………………………………………………………………
……..……………….....
5.8% 2.08% -0.47% 3.94%
Real GDP Growth

7.0
5.8
6.0 5.3
5.0 4.5
3.8 4.1 4.1 3.94
3.6 3.7
Percentage %
4.0
3.0
2.08
2.0
1.0
-
FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 FY-18 FY-19 FY-20 FY-21 E
(1.0) -0.47
(2.0)
The start of the fiscal year 2021 was better in terms of containment of pandemic and healing of
economy, however 2nd wave in late October 2020 and 3rd wave in March 2021 made government
efforts more challenging for containing the pandemic and preserving the economic activities.
7
Pakistan’s economy has showed the firm recovery and posted growth of 3.94% which is
significantly higher than the previous two years i.e. -0.47% and 2.08% in FY20 and FY19
respectively and has also surpassed the target of 2.1% for FY21 which is even higher than the
target after more than 15 years.
GDP Growth 2020-21

2.1% Budget
3.9% Actual
The GDP growth propelled because of government’s better pandemic management, fiscal
stimulus, notable measures in terms of schemes and vaccination drive that translated into
positive performance across all sectors of Agriculture, Industrial and Services enabled through
better consumer confidence, Gross Fixed Capital Formation and export growth. The focus of
government towards E-commerce and digitalization of the economy has been commendable that
shall further assist the GDP growth through achievement of globalization (addition to Amazon
seller’s list), market efficiency, enhance investment and produce employment opportunities.
The strong growth in GDP in the first 9 months of current fiscal year is largely supported by 9%
growth in the large scale manufacturing along with the robust performances in services sector
which is the highest ever growth since FY2007.
Sector Performance
Agricultu Industry Services

re
2.77% 3.57% 4.43%
Growth Growth Growth
Target was 2.8% Target was 0.1% Target was 2.6%

growth growth growth
8
Agriculture sector which contributes 19.2% of the GDP grew by 2.77% compared to a target of
2.8%. The growth of important crops such as wheat, rice, sugarcane, maize and cotton
collectively stood at 4.6%. The production of Wheat, sugarcane, maize and rice showed
substantial growth of 8.1%, 22%, 7.38% and 13.6% respectively, compared to last year and
exceeded the production targets. However, cotton observed a negative growth of 22.8%.
Other crops having a contribution of 11.69% in agriculture value addition and 2.24% in GDP due
to rise in production of fodder, vegetables and fruits. The overall crops sector with a share of
35.81% in agriculture value addition and 6.87% in GDP, witnessed a growth of 2.47%.
Livestock having a share of 60.07% in agriculture and 11.53% in GDP witnessed a growth of
3.06%.
Services sector, which contributes 61.68% of the GDP grew by 4.43%, compared with a target of
2.6%. This growth was mainly driven by Wholesale & Retail Trade and finance and insurance
sectors, which contributed around 8.37% and 7.84%, respectively in services value addition.
Major decline in this sector is witnessed in Transport, storage and communication that declined by
0.61% mainly due to restrictions on use of transportation as a result of lockdown during the
pandemic.
Industrial sector, contributes 19.12% of the GDP that grew by 3.57%, compared with a target of
0.1%. Major contributor to this growth is manufacturing sector that grew by 8.71%. The
significant increase in manufacturing sector is mainly due to the remarkable performance of
Large-scale Manufacturing (LSM) that witnessed 8.99% growth mainly due to government’s
decision, adopting the policy of smart lockdown to boost the business sentiments as compared to
5.1% decline during the same period last year. This is the highest period wise growth since FY07
supported by promising performance of Textile, Food, Beverages, Tobacco and Automobile. Prime
Minister’s construction package has also supported well all other allied industries such as
increased cement dispatches and iron and steel production.
Trade & Payments

Current Account
FY 20 FY 21
Current Account
First 10 Months of FY ($4.7) B $773 M
Pakistan’s current account remained in surplus during the first 10 months of FY21 supported by
higher home remittances inflows and growth in exports. As per State Bank of Pakistan (SBP),
current account balance was in surplus of USD 773 million during July-April FY21 depicting a
significant turnaround from USD 4.7 billion deficit during the same period of the last fiscal year
(FY20).
9
As the economy is rebounding in FY21, Pakistan’s rising import bill was offset by unprecedented
growth in workers’ remittances and recovery in exports. With the contained current account
balance, the country’s foreign exchange reserves also surged to 40-year high level. The inflow of
workers’ remittances in Pakistan has depicted consistent rising trend since FY18 to FY21 with a
meritorious growth of 29% and has reached USD 24.2 billion during July-April FY21.
Trade Deficit (USD billion)
60 40
30
40
20
20
10
0 0
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21*
Import Export Trade Deficit
(Data Source: SBP)
*Based on July-April month data
Export of goods grew by 6.5% during July-April FY21 and stood at USD 21 billion as compared to
USD 19.7 billion in the same period last year. Import of goods grew by 13.5% to USD 42.3 billion
as compared to USD 37.3 billion last year. Consequently, the trade deficit increased by 21.3% to
USD 21.3 billion as compared to USD 17.6 billion last year.
Financial Account
On YoY basis, inflows of FDI reached USD 2.3 billion during July-March FY21 compared to USD
2.7 billion last year. The outflows of FDI during July-March FY21 reached USD 872.8 million
against USD 548.5 million last year. China has highest share in FDI owing 46.7% of the total FDI.
The foreign portfolio investment during July-March FY21 witnessed a net outflow of USD 268.7
million as against an inflow of USD 227.5 million in the same period last year. Outflows were
recorded from both debt (USD 3.5 million) and equity securities (USD 265.2 million).
Foreign Exchange Reserves stood at USD 22.7 billion in the first 10 months of current fiscal year.
Out of this, the SBP's reserves were USD 15.6 billion whereas reserves held with the commercial
banks were USD 7.1 billion. Pakistan's Rupee strengthened against the dollar, effectively
appreciating the Rupee by 9.5% supported by recovery in exports, vigorous growth in worker
remittances and strong inflows through Roshan Digital Accounts.
10
Balance of Payment
2,000 959
235 183
-
USD Million
-2,000
-1,364
-4,000
-4,147
-6,000
-8,000
-7,354
Current Account Capital Acccount Financial Account
FY20 (Jul-Mar) FY21 (Jul-Mar)
The better performance of external sector in FY21 is expected to continue in coming years on
account of domestic economic rebound as well as global economic recovery especially in
Pakistan’s trading partners. Further, government’s efforts regarding export diversification and
exploration of new destinations will help in improving external sector in general and trade balance
in particular.
Public Debt
By the end of March 2021, the total public debt of Pakistan reached PKR 38,006 billion, showing
an increase of PKR 1,607 billion which was much less when compared with the increase of 2,499
billion witnessed during the same period last year. Entire net increase in total public debt was due
to increase in domestic debt, which contributed PKR 2,269 billion to the public debt whereas
external debt decreased by PKR 662 billion.
Public Debt and Debt to GDP Ratio

40 100
Amount in PKR Trillion
35
12.5 80 Percentage %
30 13.1
25 11.8
60
20 8.5
6.1 6.6
15 5.2 40
4.8 5.1 25.6
10 5.1 20.7 23.3
4.8 13.6 14.9 16.4 20
5 9.5 10.9 12.2
6.0 7.6
- -
FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 FY-18 FY-19 FY-20 FY-21*
Domestic Debt External Debt Debt to GDP Ratio
*Data for FY21 is from July’20-March’21
11
The current Energy Minister of Pakistan explained the reason behind increase in public debt was
not due to borrowing but due to revaluation of external debt stock in terms of rupees after
currency devaluation in first two years of their government. Also increase in debt was offset by
corresponding increase in the government’s liquid cash balances.
The Debt-to-GDP ratio of Pakistan is expected to reduce and will remain below 84% at the end of
current fiscal year.
Domestic Debt
During the first nine months of FY21, domestic debt was recorded at PKR 25,552 billion at the
end of March 2021, displaying an increase of PKR 2,270 billion. Permanent debt, floating debt and
unfunded debt constituted around 62%, 24% and 14% of domestic debt portfolio recorded at PKR
15,882 billion, PKR 6,000 billion and PKR 3,652 billion respectively at end of March 2021.
External Debt
During the first nine months of FY21, external public debt was recorded at USD 81.6 billion at the
end March 2021, displaying an increase of USD 3.6 billion. As per Pakistan Economic Survey
2020-21, Pakistan’s external public debt is derived from four key sources, with around 49%
coming from multilateral loans, 31% from bilateral loans, 13% from commercial loans and 7%
from Eurobonds/Sukuk.
Pakistan’s strategy to reduce its debt burden to a sustainable level includes commitment to run
primary surpluses, maintain low and stable inflation, promote measures that support higher long-
term economic growth and follow an exchange rate regime based on economic fundamentals.
With narrower fiscal deficit, public debt is projected to enter a firm downward path while
government’s efforts to improve maturity structure will enhance public debt sustainability.
Monetary Policy
16.0 Monetary Policy Analysis

14.0
12.0
Percentage %
10.0
8.0
6.0
4.0
2.0
-
FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 FY-18 FY-19 FY-20 FY-21 E
Average Interest rates 13.5 12.3 9.7 9.8 7.3 5.8 6.0 6.0 9.9 10.1 7.0
Inflation CPI 13.7 11.0 7.4 8.6 4.5 2.9 4.8 4.7 6.8 11.2 8.8
12
The State Bank of Pakistan’s (SBP) decision to keep its policy rate unchanged at the June 2020 level
of 7% throughout this fiscal year has been a key driver of an estimated 4% economic growth.
The data released by the Pakistan Bureau of Statistics shows that the year-on-year inflation in
May 2020 was 8.2%, however, by May 2021 the rate spiked up to 10.9%. Whereas, it averaged
from July-May 2021 at around 8.8%. The other inflationary indicators like the Sensitive Price
Indicator (SPI) was recorded at 13.5% against 14.0% last year. Wholesale Price Index (WPI) was
recorded at 8.4% in July-May FY21 compared to 11.1% last year.
The headline inflation measured by the Consumer Price Index (CPI) was recorded at 8.6% during
July-April FY21 as against 11.2% during the same period last year. Non-Perishable food items are
the main contributory factor in jacking up the food inflation such as poultry group (chicken and eggs),
followed by the staple group (wheat, wheat flour and edible oil).
Core inflation for Urban and Rural recorded at 5.8% and 7.6% respectively during July-April FY21
as compared to 7.8% and 8.7% during the same period last year. Whereas the widespread
effects of demand and supply side imbalances were being witnessed throughout the world,
Pakistan, by the end of FY20, was busy effectively managing the price stability through prudent
demand management policies especially on account of controlled prudent government
expenditure policy and restricting government to borrow from the central bank.
On the supply side, government established Sahulat/Bachat Bazars and restricted passing on of
increase in international crude oil prices to the general public alongside administrative measures
including crackdowns, smooth supply of essential domestic goods and Ramazan package.
As a result, the inflation rate stabilized and turned out to be single digit due to which State Bank
of Pakistan’s (SBP) decided to keep its policy rate unchanged at the June 2020 level of 7%
throughout this fiscal year. Due to low interest rates, the private-sector credit offtake shot up
about 42% in 10 months and one week of this fiscal year as opposed to the year-ago period.
Chances are that the credit offtake will remain strong till the end of the fiscal year on June 30 as
private-sector credit retirement does not traditionally take place before the start of the new fiscal
year.
Fiscal Policy
Tax Collections and Budget Deficit
Fiscal Analysis
14.0
12.0
Percentage %
10.0
8.0
6.0
4.0
2.0
-
FY-21
FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 FY-17 FY-18 FY-19 FY-20
E
Tax Revenue to GDP Ratio 9.3 10.2 9.8 10.2 11.0 12.6 12.4 12.9 11.7 11.4 12.1
Fiscal Deficit as % of GDP 6.5 8.8 8.2 5.5 5.3 4.6 5.8 6.5 9.0 8.1 7.0
13
Pakistan is confronted with major challenges associated with fiscal policies due to additional
spending made in order to curb the negative effects of Covid-19. The Government of Pakistan
took several measures to strengthen its fiscal policy especially by increased revenue collections.
During the period (July–March FY21), the budget deficit was contained at 3.5% of GDP against
4.1% of GDP in the comparable period of FY20. Similarly, the primary balance which is
the difference between Government’s revenue (what it is earning) and its non-interest
expenditure, posted a surplus balance of PKR 451.8 billion which is 0.9% of GDP during (July-
March FY21) compared to PKR 193.5 billion in the same period of FY20.
In last 10 months, the FBR tax collection saw a substantial increase. The overall tax collection
stood at PKR 3,780.3 billion resulting in an increase of 14.4% in July-April FY21 (PKR 3,303 billion
last year). It is evident that the collection of taxes during the review period surpassed the target
of PKR 3,637 billion. Even after the 3rd wave of COVID-19, revenue performance reflects the
continued growth of economic activity and indicates the efforts of government to enhance the tax
collection.
The overall expenditure is reduced throughout the current fiscal year by managing expenditures
efficiently. In July-March FY21, total expenditures increased by 4.2% compared to 15.8% growth
in the same period of last year. Power, food and agriculture sectors constituted a significant
portion of government spending in order to curtail the impact of Covid-19 in the economy
through subsidies and grants.
The current aim of fiscal policy is to provide assistance to businesses and protecting different
groups of society who are affected by adverse impacts of Covid-19. At the same time, the
government is concentrating on sustaining fiscal deficit and primary balance at a manageable
level. In the first three quarters of FY21, fiscal performance depicted a satisfactory level. The
cash transfer program in response to COVID-19 during FY21 was expanded by the government
through Benazir Income Support Program (BISP) under Ehsaas Program.
However, fiscal performance challenges still remains which are largely dependable on the Covid-
19 evolution both locally and internationally. Conclusively, effective management of expenditure
and revenue collection will help out in coping up with these challenges.
FY 20 FY 21 E
Fiscal Deficit as % of GDP
8.1% 7.0%
Total Revenue
During July-March, FY21, total revenue grew by 6.5% against the growth of 30.9% in the same
period of last year, i.e., PKR 4,993 billion during July-March, FY21 from PKR 4,690 billion in the
same period of FY20.
Of the Total revenue, tax revenue (federal & provincial) that grew by 11.9% during July-March,
FY21 contributes PKR 3,765.0 billion due to growing economic activities and improved tax
collection.
14
In contrast, the non-tax revenue fell sharply during July-March, FY21 after witnessing strong
growth in the same period of last year. Non-tax revenue, stood at PKR 1,227.6 billion during July-
March, FY21. The fall is attributed to absence of a one-off renewal fee for GSM licenses from
telecommunication companies and lower receipts from a surplus profit of SBP and mark-up
whereas in contrast receipts from Gas Infrastructure Development Cess (GIDC), Natural Gas
Development Surcharge and petroleum Levy have witnessed an increase that off-sets some of the
decline.
Total Expenditure
On the expenditure side, total expenditure grew by 4.2% during July-March, FY21 as compared to
15.8% growth observed in the same period of FY20.
The current expenditure was contained at 8.4% during July-March, FY21 against 16.9% growth
recorded in the same period of last year. This containment was made possible due to reduced
expenditures on defence, pensions and running of civil government while higher mark-up
payments, increase in subsidies and grants to others had some off-setting effect.
The total development expenditure (excluding net lending) stood at PKR 668.0 billion during July-
March, FY21 as compared to PKR 751.7 billion in the same period of FY20, showing a decline of
11.1% due to reduced focus on PSDP spending.
FBR Tax Collection

An approx. 36% collection was made through direct taxes registering a growth of 11.2% during
the first ten months of FY 2021 with the remainder coming from indirect taxes. Within the indirect
taxes, Sales tax, Federal Excise and Custom duties contributed 65.86%, 9.24% and 24.90%
respectively.
Certain relief measures to create fiscal space included incorporating incentive package given to
construction industry in Finance Act 2020, COVID-19 Prevention of Smuggling Bill, 2020, Speedy
clearance of tax refunds, Sales Tax, Income Tax and Customs Duty exemption on health
equipment, customs duties exemption on import of highly essential items.
15
Budget overview 2021-22
The Pakistan federal budget for FY21-22 follows times of economic hardship since at least two
years in search for stability and recovery in the midst of COVID-19. Pakistan plans to spend its
way out of the pandemic-induced slump, with a new budget that seeks to put more money in the
hands of people and boost economic activity.
The FY21-22 budget also being referred as “growth oriented” budget by experts hovers around
fostering sustained and inclusive growth, horizontal and vertical expansion of social safety net to
support the vulnerable segments of the society and successful continuation of IMF program.
Moreover, providing impetus to the economic activity through higher public development
spending and consequently supporting job creation. Funding for special initiatives led by the
Prime Minister like Kamyab Jawan, Sehat Sahulat Card, Naya-Pakistan Housing Scheme, House
Financing Mark-up, Collateral free lending to SMEs etc. have also been protected. FBR collection
however, will increase through improvement in tax system, broadening tax base and
strengthening of administrative controls through technological inventions. Other measures include
withdrawing tax exemptions, rationalizing concessionary regime, simplifying tax rules and
ensuring tax compliance. Furthermore, ensuring better financial management and fiscal
discipline, by striking a balance between relief measures and fiscal deficit to keep the primary
balance at a sustainable level.
The total outlay of budget 21-22 is PKR 8,487 billion. The government has targeted an economic
growth of 4.8% in FY22. A higher relative budget target stems from the achievement of 3.94%
provisional growth in FY21 after the economy witnessed a V-shaped recovery.
Total Revenue target has been set at PKR 7,909 billion for FY22 (up 23.7% vs. last year’s
budget), where FBR Revenues for the year have been estimated at PKR 5,829 billion (up 24.3%
vs. last year’s budget). The Non Tax Revenue target has been set at PKR 2,080 billion (22.1% vs.
last year’s budget), whereas the government has budgeted PKR 610 billion under Petroleum Levy
(PDL) – up PKR 450 billion from last year’s budget.
Total Development Expenditures target has been set at PKR 964 billion for FY22, (up 12% vs. last
year’s budget). Total Current Expenditures are estimated at PKR 7,523 billion for FY22 (largely
unchanged compared to last year budget). Interest expense is estimated at PKR 3,060 billion,
while pension bill has been set at PKR 480 billion. Government has earmarked subsidies of PKR
682 billion compared to last year’s allocation of PKR 209 billion, which is a significant increase of
226%. It includes new allocation of PKR 266 billion for Power Holding Private Limited (PHPL) and
Independent Power Producers (IPPs). The Defence Expenditure has been set at PKR 1,289 billion
for FY22, 6% higher compared to last year’s budget.
The economy has fairly recovered from a dip of last year due to COVID-19 situation. However,
the government should accordingly pursue a multipronged strategy with focus on revenue
mobilization, rationalization of recurrent expenditures to provide space for development / capital
expenditure, support for the driver sectors of the country’s economy and increase the foreign
exchange earnings for management of current account and easing off pressure on the Rupee
(PKR).
16
Expenditure
12.14%
5.66%
Interest Payments
36.06%
5.64% Defence Affairs
Grants and Transfers
Federal PSDP
10.60%
Running of Civil Govt
Pensions
13.76% Others
16.14%
Receipts 2.97%
6.72%
8.02%
Net Revenue Receipts
Net External Receipts
Non Bank Borrowings
Bank Borrowings
14.62%
Estimated Provincial Surplus
Privatization Proceeds
53%
14.68%
17
Key highlights of budget FY22

 Karachi’s transformation plan will be implemented with PPP and government support. The
plan will be allocated PKR 98 billion from the PSDP
 Allocation of PKR 682bn subsidy for life line power consumers and other matters
 PSDP allocation of Rs2.1 trillion, up by over 30% compared to last year. PSDP allocation
includes Dasu, Diamer Bhasha and Mohmand Dams; in addition to other hydro projects
 The budget, as expected has focused on inclusive and sustainable growth, while providing
relief to masses through the Ehsaas Program (allocation of Rs260bn), providing cheaper
financing and other measures
 To combat corona PKR 100bn set in the budget
 Sehat card facility for 4- 6 million families
 Government of Pakistan will offer a new Uniform Export Facilitation Scheme, and phase
out existing scheme in the next two years
 The government will be approving 14 high-impact PPP transactions worth over Rs978
billion from April to October 2021
 Special focus has been laid on social spending, uplifting of small farmers and
improving agriculture output. Specifically, government has allocated PKR260bn
for Ehsaas programme, PKR 30billion for Naya Pakistan Housing authority and
PKR3bn markup subsidy for Naya Pakistan scheme
 Interest free loans will be given to farmers for purchase of farm equipment and tractors.
For better food security government has announced a transformational plan for
establishing cold storages, commodity warehousing and food processing
 Artificial leather, boiler manufacturing, liquefied packaging industry and

dairy industry given tariff relief.
18
Highlights of Important
Fiscal Proposals
Income Tax 9. Any Loss on income from property can

now be set off against income
1. Taxpayers are now required to declare
chargeable to tax except salary.
‘Business bank account’ through
original or modified registration form
10. Revised withholding tax rates in
to the Commissioner. Non-declaration
respect of income from property in
of such bank account is to be treated
case of individuals and AOPs are
as offence punishable on conviction
introduced. Revised table contains four
with a fine or imprisonment not
slabs (with 25% highest withholding
exceeding one year or both.
tax rate) as compared to current 8
slabs (with 35% highest withholding
2. The Board’s powers to notify any
tax rate). Threshold of non-taxable
industrial undertaking has been
rent is increased from Rs. 200,000 to
withdrawn.
Rs. 300,000.
3. Telecommunication companies
11. First Year Allowance (FYA) at the rate
operating under the license of Pakistan
of 90%, in lieu of initial allowance, is
Telecommunication Authority are now
withdrawn.
covered under the definition of
industrial undertaking.
12. Commissioner is now empowered to
compute gain on disposal of assets
4. Separate rules for taxation of small
acquired through gift, if such gifted
and medium enterprises have been
assets are disposed of within two
introduced through newly inserted 14th
years of acquisition as an arrangement
Schedule.
for tax avoidance.
5. Section 7B pertaining to taxation of
13. Workers’ Welfare Fund and Workers’
Profit on debt, received by persons
Profit Participation Fund paid under
other than a company, under final tax
laws enacted by the provinces after
regime, shall now apply on profit on
eighteenth Constitutional amendment
debt not exceeding Rs.5 Million as
are now allowable as deductible
against Rs.36 Million currently
allowance except payments to the
provided.
provinces by trans-provincial
establishment.
6. Profit on debt is to be taxed at 15%
irrespective of the amount of profit on
14. Tax credit for persons employing fresh
debt .
graduates is now withdrawn.
7. Allowances paid on fixed or as
15. Tax credit for investment in point of
percentage of salary or which are not
sale machines by prescribed persons is
wholly, exclusively and actually spent
introduced at lower of amount
on behalf of the employer are not to
invested or Rs.150,000.
be considered as allowances solely
expended in performance of
16. Tax credit for specified industrial
employment and will therefore be
undertakings is introduced at of 25%
taxable.
of the eligible investment amount
against the tax payable under the
8. Taxation in respect of Income from
provisions of the Ordinance including
Property is brought under normal tax
minimum and final taxes.
regime for all types of taxpayers.
19
17. Section 100C - Tax credit for certain dispute within 60 days of its
persons, has been revamped to clarify appointment extendable by 30 days
various ambiguities. for reasons to be recorded as
compared to current time limit of 120
18. No new notice is now required to be days. The Board is also empowered to
issued for invoking section 111 if appoint second ADRC.
already confronted through notice
under section 122(9). 28. Tax demand raised through an appeal
effect order is now payable
19. Threshold for application of minimum immediately.
tax under section 113 for individuals
and association of persons is enhanced 29. Powers of a Commissioner to reject
from Rs.10 million to Rs.100 million. advance tax estimate filed by a
taxpayer are withdrawn.
20. Commissioner can now issue notice
requiring to file a return of income by 30. All Companies can now obtain
a person having foreign income, even certificate for non-withholding of tax
after passing of time limit of five under section 153(1)(a), which was
years. being issued to listed companies only
under existing law.
21. Commissioner is now empowered to
waive condition of filing revised 31. Export of services is now subject to
accounts or audited accounts for filing final tax regime at 1% with an option
of a revised return. to be taxed under normal tax regime
by filing a yearly option.
22. The scope of assessment under section
122(5A) is restricted by withdrawing 32. Commissioners are now required to
Commissioner’s power to make or issue exemption or reduced rate
causing to make query. certificates under section 159 within
15 days from filing of application.
23. Time limit of 120 days prescribed for
passing an amendment order after 33. Annual statements for withholding of
issuance of show-cause notice under taxes for payments other than salary
section 122. are required to be filed within 30 days
of end of relevant tax year. Further, a
24. Requirement for updating taxpayers statement in prescribed form
profile introduced vide Finance Act, reconciling amounts mentioned in the
2020, is now omitted. annual statement with the amounts
disclosed in return / Accounts is to be
25. Revision application is now to be e-filed by due date of filing of return.
processed by lower authorities within
120 days of the directions by the 34. FBR may process electronic processing
Commissioner. of refunds after verification of tax
credit, even when the taxpayer has
26. The Board is empowered to prescribe not filed a refund application.
mechanism for electronic filing of
appeals. 35. Penal provisions under section 182
have been revisited resulting in
27. The time period for appointment of revision of penalties for various
Alternate Dispute Resolution offences.
Committee (ADRC) by the Board is
reduced from 60 days to 30 days. 36. The Board is empowered to prescribe
ADRC is now required to decide the procedure for e-hearings.
20
37. Provisions related to withholding tax withdrawn through Tax Laws (Second
on cash withdrawals, advance tax on Amendment Ordinance), 2021 are
transactions in bank and banking reintroduced through the Bill, with the
transactions otherwise than through explanation that beneficiaries shall
cash are withdrawn. continue to enjoy the benefits of such
provisions for the periods prescribed
38. Motor Vehicle registration authority is and subject to specified conditions.
to collect tax at specified rate on sale
of motor vehicles sold prior to 48. Super tax at 4% is extended for
registration by the persons purchasing banking companies beyond tax year
the vehicle from local manufacturer. 2021.
39. Individuals and Association of Persons 49. Capital gains on disposal of securities
having turnover of Rs.100 million or under section 37A are reduced from
more are to be treated as withholding 15% to 12.5% from tax year 2022.
tax agents for Commission and
Brokerage payments. 50. Single tax rate of 5% on Capital gain
on immoveable property is introduced
40. Provisions related to collection of tax irrespective of gain amount.
on gas bill of CNG stations are
withdrawn. 51. Minimum tax rates under section 113
are revised for various sectors. The
41. Advance tax collection on domestic highest rate is reduced from 1.50% to
and international air tickets is 1.25%.
withdrawn.
52. Oilfield services, telecommunication
42. Provisions related to reliefs provided to services, warehousing services,
investors through Roshan Digital collateral management services, travel
Accounts are re-introduced in the and tour services are brought into 3%
Finance Bill. minimum tax services under section
153(1)(b).
43. The scope of collection of advance tax
by manufacturers from distributors, 53. Separate provisions for taxation of
dealers, wholesalers and retailers has royalty received from resident persons
been extended to pharmaceutical, and withholding provisions related
poultry and animal feed, edible oil and thereto are omitted.
ghee, battery, tyres, varnishes,
chemicals, cosmetics and IT 54. Revised advance tax collection rates
equipment sales to such distributors, are introduced on electricity and
dealers, wholesalers and retailers. telephone bills. The advance tax on
telephone bills is proposed to be
44. Advance tax on petroleum products is reduced from 12.5% to 10% in Tax
withdrawn. Year 2022, and to be further reduced
to 8% from Tax Year 2023 onwards.
45. Advance tax on extraction of minerals
is withdrawn. 55. Exemption available on salary income
of Pakistani seafarer is withdrawn.
46. Advance tax on remittance abroad
through credit, debit and prepaid cards 56. Payments received by the members
is withdrawn. from Provident Fund, Approved
pension Fund will now be taxable at
47. Various exemptions and reliefs 10% to the extent of amount
provided under the Second Schedule
21
representing profit on debt earned on

accumulated balance in such Funds.
Sales Tax
57. Exemption of tax in respect of capital
1) Introduction of ‘Online Market Place’
gains earned by a resident individual
(OMP) in to Tier 1 retailers to capture
on sale of constructed property,
online businesses platform like Daraz,
subject to fulfillment of specified
Foodpanda, Amazon etc. with liability
conditions, is withdrawn.
to pay sales tax imposed on persons
running the online market place
58. Profits and gains derived from a
irrespective of ownership of goods.
bagasse / biomass based cogeneration
power project with specified condition
2) Maximum annual turnover threshold to
have been exempted from tax.
fall outside the scope of ‘Cottage
Dividend payments by such taxpayers
Industry’ enhanced from Rs.3 million
from these operations will be taxed at
to Rs.10 million
7.5%.
3) Minimum shop area to fall out of the
59. Exemption in respect of benefit
ambit of ‘Tier-1 Retailer’ relaxed in
provided by employer on account of
terms from 1000 square feet to 2000
treatment or hospitalization or both to
square feet for furniture outlets/
an employee has been withdrawn.
showrooms.
Further, exemption of medical
allowance to the extent of 10% of the
4) Retailers accepting payment through
basic salary subject to specified
debit or credit cards using point of sale
conditions is also withdrawn.
brought within purview of Tier-1.
60. The tax payable by woman enterprises
5) Levy of sales tax at the stage of
on profit and gains derived from
advance payment for a supply is
business chargeable to tax under the
withdrawn.
head “Income from Business” shall be
reduced by 25%.
6) Public listed companies are exonerated
from application of input adjustment
61. Section 148 will not be applicable on
threshold under Section 8B.
import of specified items mainly
medical supplies and food items.
7) The time limitation of 5 years for
issuance of Show Cause Notice under
62. Export of various items mainly food
Section 11 to be counted from the end
supplies will not be subject to
of the financial year in which the
collection of tax on export proceeds
relevant date falls.
under section 154.
8) NTN and CNIC for AOPs/Companies
63. Ten years’ tax exemption is provided
and individuals respectively to be
to Special Technology Zone Authority,
treated as Common Identifier Number
Zone developers and Zone enterprises.
(CIN) in addition to STRN with the
spirit of promoting ease of doing
64. Dividend income and long term capital
business.
gains of any venture capital fund from
investments in Zone enterprises is
9) Cash book now to be maintained as
exempted.
the prescribed record under the Act
and electronic version of all the
records as described in the Act are
also proposed to be maintained by the
registered taxpayer.
22
10) Board empowered to prescribe rules 17) Refund due in the consequence of
for determination of the transfer price order passed under section 66 if not
of taxable supplies in respect of any paid within forty five (45) days of the
transaction between associates, which date of order will now be eligible for
is authority of the Commissioner or payment of sum equal to KIBOR per
officer of Inland Revenue as per annum of the amount of refund due.
existing law.
18) Adjustments in respect of inter-parties
11) Specific law for obtaining extension of payables and receivables will now be
time for furnishing sales tax return treated as payments satisfying the
introduced. provisions of Section 73 subject to
approval of the commissioner.
12) Concept of ‘Border Sustenance
Markets’ has been introduced as tax- 19) Following amendments in law which
exempt areas to exempt sales tax on were previously introduced through
food related and other consumable Tax Laws (Amendment) Ordinance,
goods supplied within limits of such 2021 are proposed to be incorporated
markets near Pakistan’s border with under respective provisions of the Act.
Iran & Afghanistan.
a) Exemption of sales tax on import
13) Manufacturers of specified goods to of CKD kits for electric vehicles
obtain brand license for each brand or by manufacturers,
Stock Keeping Unit (SKU), sale of
goods failing which goods shall be b) Exemption of sales tax on goods
subject to penal actions including temporarily imported by
outright confiscation and destruction. athletes/ sportsmen for facilitate
international athletes,
14) Officer of Inland Revenue empowered
to recover tax with default surcharge c) Exemption of sales tax on auto
and penalty with reference to disable syringes,
assistance in collection and recovery of
duties in pursuance of a request from d) Reduced rate of sales tax at the
a foreign jurisdiction under a tax rate of 1% on local supply of
treaty or intergovernmental agreement electric vehicles,
etc.
e) Exemption from value addition
15) Empowerment of Board is legislated to tax on import of electric
share data or information, received vehicles, KD kits for small car, 2-
from provincial or foreign governments 3 wheelers, HCVs and all these
under agreement for exchange of vehicles in CBU conditions
information, with any other Ministry or
Division of Federal Government or 20) Zero-rating withdrawn on Petroleum
Provincial Government subject to Crude Oil, parts/ components of zero-
specified limitations and conditions. rated plant and machinery, import of
plant and machinery by petroleum and
16) The Board to prescribe procedure for gas sector and supply, repair and
‘Mystery Shopping’ in respect of maintenance of ships.
invoices issued by Tier-1 retailers
integrated with FBR online system 21) Exemptions or reduced rates
randomly to prevent abuse of applicable on certain goods other than
provisions for prize scheme to promote relating to basic food items, health and
tax culture. education are to be withdrawn.
23
22) Sales tax on sugar to be levied on treaty or intergovernmental

retail price basis by including the sugar agreement etc.
under Third Schedule.
3. Manufacturers of specified goods to
23) Reclaimed lead and used lead batteries
obtain brand license for each brand or
mostly supplied through an
Stock Keeping Unit (SKU), sale of
unorganized sector, is to suffer goods failing which goods shall be
withholding of whole amount of subject to penal actions including
applicable sales tax by manufacturer outright confiscation and destruction.
of lead batteries as withholding agent.
24) Imports of plant, machinery, equipment 4. Empowerment of Board is legislated to

and raw materials for consumption share data or information received
within Special Technology Zone by the from provincial or foreign governments
Special Technology Zone Authority, under agreement for exchange of
Zone developers and Zone enterprises information, with any other Ministry or
exempted from sales tax to encourage Division of Federal Government or
IT industry in the country. Provincial Government subject to
specified limitations and conditions.
25) Zero-rating of sales tax on local
supplies of raw materials, components, 5. Electric vehicles (4 wheelers)
parts and plant and machinery to exempted from levy of FED till June
registered exporters authorized under 30, 2026 which is otherwise applicable
Export Facilitation Scheme, 2021. at rates ranging from 2.5% to 30% ad
val on imported motor vehicles
26) Reduction of sales tax rate on small
principally designed for the transport
cars upto engine capacity of 850cc
of persons.
from 17% to 12.5%.
6. Locally manufactured electric vehicles
27) Exemption of small cars upto engine (4 wheelers) and motor vehicles of
capacity of 850cc from levy of value
cylinder capacity upto 850cc excluded
added sales tax.
from the levy of FED which previously
28) As per salient features, exemption of attracted 2.5% to 7.5% FED according
sales tax granted to marble and to engine capacity.
granite manufacturers having annual
turnover less than Rs.5 million, is to 7. FED withdrawn on certain items like
be withdrawn. edible oils and steel products on which
levy of sales tax at standard rate has
been restored by virtue of omissions
Federal Excise Duty from the Sixth Schedule to the ST Act.
1. Option to file revised FED return within 8. FED imposed on fruit juices vide
60 days without the approval of the Finance Act, 2019, withdrawn to deter
Commissioner where the revised FED increase in prices and provide relief to
payable is not less than the originally the sector facing adverse situation.
declared FED or refund claimed is not
more than originally claimed. 9. Additional FED on mobile phone calls,
SMS message and internet data usage
2. Officer of Inland Revenue empowered to be levied at varying rates ranging
to recover tax with default surcharge from Re.0.1 to Rs.5 based on call
and penalty with reference to
duration, SMS and internet usage.
assistance in collection and recovery of
duties in pursuance of a request from
10. FED on telecommunication services to
a foreign jurisdiction under a tax
be reduced from current 17% to 16%,
24
which is applicable in Islamabad

Capital territory. 3. Reduction in rate of CD on inputs / raw
materials imported by manufacturers
11. As per silent features exemption of under food processing industry.
FED is being given to the industrial
units located in FATA & PATA to 4. Reduction / exemption of CD, ACD on
facilitate the people of tribal areas and imports made by other sectors
to encourage investment and including printing and graphic arts,
economic growth in these areas. dairy, footwear, Tourism, poultry,
plastic packaging, paint, chemical,
12. Payment on account of Merchant artificial leather, electronics etc.
Discount Rate (MDR) service provided
by banking companies to be brought 5. Exemption of ACD on import of raw
out of the purview of FED. materials for cables / optical fiber
manufacturers.
13. Electronically heated tobacco to be
subject to FED at the rate of 6. Concept of ‘Boarder Sustenance
Rs.5,200/- per kg. Markets’ introduced for the benefit of
people residing in border areas to
14. Food related items and other counter smuggling and providing legal
consumable goods exempted from FED way of trading opportunities.
on supply within limits of Border
Sustenance Markets. 7. Value of import of unsolicited gifts
whether through post or courier
15. Import and supply of raw materials, enhanced from existing PKR 20,000 to
components, parts and plant and PKR 30,000.
machinery by registered persons
authorized under Export Facilitation 8. The term owner as contained in the
Scheme, 2021 exempted from levy of Customs Act, 1969 has been defined
FED. as a person who is entitled to the
possession of the goods, either as
Islamabad Capital Territory owner or agent of the owner.
Ordinance 9. The scope of term smuggling is further

widened, which now also includes the
The export of services provided from term retailing in its scope.
Islamabad Capital Territory are classified as
zero rated services. 10. Directorate General of National
Nuclear Detection Architecture is to be
Customs Act, 1969 established with an aim to support
Pakistan’s Nueclear Security Regime.
1. Reduction / exemption of CD, ACD
11. Directorate General of Marine would
and & RD on imports made by
exclusively deal with customs related
textile/steel sectors and imports of
matters and movement of goods
intermediary goods and POS
through sea waters.
machines.
12. The Collector of Custom’s has been
2. Exemption of CD and ACD on import of
empowered for issuance or cancelation
API, raw material of auto-disable
of license to specified warehouses.
syringes and reduced rating of 5% on
import of plant and machinery by
13. The Board has now been empowered
Pharma Industry.
to constitute a committee or centre to
25
settle disputes regarding classification exportation of certain imported goods

of goods. (banned or restricted), if the same are
not cleared within sixty days from the
14. The validity of all exemption arrival date of such goods.
notifications issued on or after July 01,
2016 and placed before National 24. Provisional release under section 83B
Assembly has been extended up to shall only be applicable on goods
June 30, 2022. which are not subject to confiscation in
absolute manner.
15. The Collector of Customs would also 25. Relaxation provided to rectify an error
be empowered for determination of in goods declaration even after
customs value along-with Director warehousing of the goods if directed
General. by the Collector of Customs.
16. The Director General may on his own 26. Customs authorities authorized to
or in pursuance of review petition increase the period of warehousing of
determine or rescind the value of the goods upto six months.
goods.
27. Suspension of registration of registered
person shall be done after providing
17. Request regarding mutilation or
proper opportunity of being heard.
scrapping of goods can now be made
only before the filing of goods 28. Assistant Collector empowered to
declaration. amend error in goods declaration.
18. Now no show cause notice proposed to 29. Penalties in respect of non-compliance
be served where the recoverable of import related documentary
amount is less than Rs.20,000 which requirements has been
was previously Rs.100. revised/enhanced.
30. Option to pay penalty to release the
19. The Bill proposes to empower the conveyance shall not be given to such
Board to make rules to prevent conveyance that is being seized
overstatement or understatement of repeatedly for the third time.
goods exported or imported with a
view to illegally transfer funds into or 31. Time limitation for issuance of show
outside Pakistan. cause notice in case of goods lying at
sea-port, airport or dryport has now
20. Timeline of 24 hours for delivery of been restricted to 30 days, which may
import manifest in case of import via be extended upto further 15 days.
air or land is proposed to be reduced
to 3 hours of landing in case of air 32. Substitution of lowest rank of Customs
cargo and at the time of entry of cargo officer eligible for preferring
in case of land customs-station. application / reference before High
Court against Tribunal order, from
21. Import manifest can be amended Additional Collector/Director to Deputy
before berthing of the vessel by Collector /Director.
person incharge.
33. Personnel of other law enforcement
22. Examination of goods cleared through agencies to be included into the eligible
green channel mechanism would be officials for entitlement of cash reward.
subject to prior approval from the
Collector of custom. 34. The period during which the advance
ruling shall be binding on Customs
23. Collector of Customs to be empowered Authorities enhanced from 1 year to 3
to bound shipping line for re- years.
26
Income Tax Ordinance, 2001
1. Definitions [Sections 2] aforesaid item of receipt or claimed

deduction in respect of such
expenditure not actually incurred by
1.1 Business Bank Account [Section him.”
2(10A)]
The application of the term
The Bill proposes to introduce “concealment of income” has been a
following definition for the term contentious issue amongst the tax
“Business Bank Account”: payers and the tax authorities, thus its
definition although an inclusive one
“business bank account” means a bank would help in providing more clarity and
account utilized by the taxpayer for thus may help in reducing the
business transaction declared to the discretionary powers of the Tax Officers.
Commissioner through original or Moreover, the insertion of Explanation
modified registration form prescribed would also help in reducing the
under section 181. discretionary power of the Tax Officers
who have been confronting the tax
payers’ genuine claim of exemption and
1.2 Concealment of income claim of allowability of an expense and
[Section 2(10A)] applying the harsh provisions of
concealment of income under section
The Bill proposes to define the term 111.
“concealment of income” as following:
concealment of income includes: 1.3 Income [Section 2(29)]

(a) the suppression of any item of The Bill proposes to remove income
receipt liable to tax in whole or subject to withholding tax under
in part, or failure to disclose section 233A from the definition of the
income chargeable to tax; term “income”. This amendment is in
consequence of the proposed deletion
(b) claiming any deduction or any of section 233A of the Ordinance which
expenditure not actually provides collection of advance tax by a
incurred; and stock exchange from its Members on
purchase and sale of shares in lieu of
(c) any act referred to in sub- tax on the commission earned by such
section (1) of section 111. Members.
Explanation.- For the removal of 1.4 Withdrawal of powers of the

doubt, it is clarified that where any
item of receipt declared by the
Board to notify any industrial
taxpayer is claimed as exempt from undertakings [2(29C)(b)]
tax, or where any deduction in respect
of any expenditure is claimed, mere Under the current law, the Federal
disallowance of such claim shall not Board of Revenue (the Board) has
constitute concealment of income or powers to specify in the official gazette
the furnishing of inaccurate particulars any person as industrial undertaking in
of income, unless it is proved that the addition to the industrial undertaking
taxpayer deliberately claimed as defined under clause (29C) of
exemption from tax in respect of the section 2 of the Ordinance.
27
The Bill proposes to withdraw powers 1.7 IT enabled services [Section

of the Board to notify any other 2(30AE)]
industrial undertaking and resultantly,
an undertaking shall only be treated as
The Bill proposes to insert following
industrial undertaking which falls
definition for the term “IT enabled
under the definition provided under
services” under section 2 of the
clause (29C) of section 2 of the
Ordinance:
Ordinance.
“IT enabled services” include inbound
1.5 Industrial Undertakings or outbound call centers, medical
[2(29C)] transcription, remote monitoring,
graphics design, accounting services,
The Bill proposes to bring Human Resource (HR) services,
“telecommunication companies telemedicine centers, data entry
operating under the license of Pakistan operations, cloud computing services,
Telecommunication Authority (PTA)” data storage services, locally produced
under the definition of industrial television programs and insurance
undertakings. This has been a long claims processing;”
standing demand of the Telecom
Sector and as a consequence of this The same definition was covered under
amendment, the Telecom Sector would the deleted clause (133) of Second
now be eligible to a number of relief Schedule to the Ordinance. Now by
measures that are available to bringing this definition under section
industrial undertakings under the 2, this shall be applicable to the whole
income tax law. Ordinance.
1.6 Information Technology (IT) The Bill also proposes to bring “cloud
services [Section 2(30AD)] computing services” and “data storage
services” under the definition of IT
enables services. This is a significant
The Bill proposes to define the term
change considering introduction of
“Information Technology (IT) services”
technology base businesses in the
under section 2 as under:
country, which will boost the economy
in future.
“Information Technology (IT) services”
include software development,
software maintenance, system 1.8 Small and medium enterprise
integration, web design, web [Section 2(59A)]
development, web hosting and
network design. The Bill proposes to define the term
“small and medium enterprise” as
The same definition was covered in the under:
explanation to the clause (133) of
Second Schedule to the Ordinance “small and medium enterprise” means
which is now proposed to be deleted. a person who is engaged in
Now by bringing this definition under manufacturing as defined in clause (iv)
section 2, this shall be applicable to of sub- section (7) of section 153 of
the whole Ordinance. the Ordinance and his business
turnover in a tax year does not exceed
two hundred and fifty million rupees:
Provided that if annual business

turnover of a small and medium
28
enterprise exceeds two hundred and 3. Allowance solely expended in

fifty million rupees, it shall not qualify
as small and medium enterprise in the the performance of
tax year in which annual turnover employee’s duty [Section 12]
exceeds that turnover or any
subsequent tax year. The Bill proposes to insert an
Explanation under clause (c) of sub-
1.9 Small Company [Section section 1 which clarifies that the
2(59AB)] allowance solely expended in the
performance of employee’s duty does
not include:
The Bill proposes to amend definition
of “small company” by clarifying that it
(i) allowance which is paid in
does not include “small and medium
monthly salary on fixed basis or
enterprise” as defined in newly
percentage of salary; or
inserted clause 59A.
(ii) allowance which is not wholly,
1.10 Empowering the Board to notify exclusively, necessarily or
“startup” [Section 2(62A)] actually spent on behalf of the
employer.
Currently Federal Government is
empowered to notify any business of a Insertion of “Explanation” signifies that
person or class of persons alongwith this clarification shall be applicable
conditions as a “startup”. The Bill from the date when the said clause (c)
proposes to empower the Board to was introduced in the Ordinance.
notify any business of a person or Moreover, the intention of the
class of persons as “startup” but only legislature appears to tax any
with the approval of Federal Minister- allowances provided to employees that
in-charge. are not in the nature of
reimbursement of actual expenditure
2. Profit on debt [Section 7B] incurred for the purpose of
employment supported by
Presently the profit on debt upto 36 documentary evidence.
million is taxed separately under
section 7B at slab rates provided 4. Income from property
under Division IIIA of Part I of the First [Section 15]
Schedule and not as part of normal tax
regime; however, profit on debt
Before Finance Act, 2006, income from
exceeding Rs.36 million during a tax
property was taxed under normal tax
year is taxed under normal tax regime.
regime. Since Finance Act, 2006, the
legislature has been continuously
The Bill proposes to reduce the limit of
changing tax regime for income from
profit on debt from Rs.36 million to
property.
Rs.5 million thereby profit on debt
upto Rs.5 million only is now proposed
Through Finance Act, 2006, income
to be taxed under section 7B at 15%.
from property was taxed as separate
block of income at specified tax rates
Resultantly, profit on debt exceeding
and no expense was allowed. Later,
Rs.5 million during a tax year will be
after promulgation of Finance Act,
taxed under normal tax regime and
2013, the legislature brought income
any tax deducted under section 151
property under normal tax regime and
will be treated as minimum tax.
allowed deduction of expenses against
29
income from property subject to The Bill proposes to insert the

conditions specified. explanation under section 18(1)(b) of
the Ordinance that income derived by
Since Finance Act, 2016, income from co-operative societies from the sale of
property in the hands of individual and goods, immoveable property or
association of persons (AOPs) was provision of services to its members is
being taxed as separate block of and has always been chargeable to tax
income at the rate specified in Division under the provisions of this Ordinance.
VIA of Part I of the First Schedule.
The income derived by co-operative
Further, income from property was not
societies has been a contentious issue
chargeable to tax in case of an
amongst the taxpayers and the tax
individual or AOPs who derive income
authorities, thus explanation has been
from property not exceeding two
proposed to nullify doctrine of
hundred thousand rupees in a tax year
mutuality. However, at the same time,
and such taxpayers did not derive
there could be conflict between
taxable income under any other head
taxpayers and the tax authorities that
of income.
as to whether income of cooperative
societies would be eligible to tax credit
Through Finance Act, 2019, the
under section 100C of the Ordinance
legislature allowed option to
or not.
individuals and AOPs deriving income
from property exceeding Rs.4 million
to tax it at normal tax rates without 6. Gain on disposal of
allowing deduction for any expenses. immoveable property owned
By virtue of Finance Act, 2020, an
option is available regardless of
by business [Section 22(13)]
amount of income from property
Under current law and for the purpose of
earned during a tax year.
calculation of gain on disposal of
immoveable property owned by the
The Bill proposes to bring income from
business, where the consideration
property under normal tax regime and
received on the disposal of immovable
also proposes to allow deduction of
property exceeds the cost of the
expenses incurred in deriving income
property, the consideration received is
from property for individuals and
treated as the cost of the property. As
AOPs. Resultantly, the Individuals and
such, no tax liability arises on account of
AOPs will be allowed to claim
disposal of property by the businesses.
deductions for expenses incurred in
deriving income from property and The Bill proposes to tax the
such income will be taxed under consideration received in excess of
normal tax regime at normal tax rates. cost of the property under the head
capital gain and as per provisions of
By virtue of amendment through section 37 of the Ordinance.
Finance Act, 2013, a person sustaining
a loss in any head of income cannot
set off such loss against income under
7. Withdrawal of First Year
the head salary or income from Allowance (FYA) in lieu of
property. The Bill proposes to allow a initial allowance [Section
person to set off a loss in any head of
income against income from property
23A]
also.
By virtue of section 23A of the
5. Income from Business Ordinance, First Year Allowance (FYA)
[Section 18] at the rate of 90%, in lieu of initial
30
allowance, was allowed for plant,

machinery and equipment falling under The Bill also proposes to insert an
the definition of eligible depreciable Explanation under sub-section (1A)
assets, if installed by the following: which clarifies that where a person is
habitually engaged in transactions of
 any industrial undertaking set up in sale and purchase of immoveable
specified rural and under developed property or such sale and purchase is
area; adventure in the nature of trade and
business, the gain on disposal of
 any industrial undertaking engaged in immoveable property will be
the manufacturing of cellular mobile chargeable to tax under the head
phones and qualifying for exemption Income from Business.
under clause (126N) of Part I of the
Second Schedule The Bill seeks to reduce scope of
separate block taxation and to treat
The Bill proposes to delete section 23A the gain as income from business in
of the Ordinance and FYA will no the hands of person who are regularly
longer be allowed in above stated dealing in sale and purchase of
cases. However, the undertakings shall property. However, there could be
be eligible to claim initial allowance as conflict between taxpayers and tax
allowed under section 23 of the authorities for ascertaining as to
Ordinance. whether gain on disposal of
immoveable property should be
Corresponding changes have been treated as income from business or
made in section 57 of the Ordinance, capital gain on disposal of immoveable
in respect of setting off and carrying property.
forward of losses related to FYA.
9. Disposal of assets received
8. Capital Gain on Disposal of through gift [Section 37(4A)]
Immoveable Property
[Section 37(1A)] Under existing law, for the purpose of
calculation of capital gain, where any
Under current law, capital gain on capital asset is received through gift,
disposal of immoveable property is fair market value of such asset on the
taxed as separate block of income at date of receipt of gift is treated as cost
slab rates provided in Division VIII of of the asset.
Part I of the First Schedule.
The Bill proposes to insert a proviso
The Bill proposes to reduce scope of under clause (d) of sub-section (4A)
separate block taxation and proposes which provides that if a capital asset
to tax capital gain under normal tax become property of a person through
regime if gain on disposal of gift and the asset is disposed of within
immoveable property exceeds Rs.5 two years of receipt and the
million. However, taxable gain will be Commissioner is satisfied that such gift
calculated on similar lines as it is being arrangement is a part of tax avoidance
calculated for immoveable property scheme, then the cost of asset
under provisions of section 37(3A) of disposed shall be treated as cost to
the Ordinance. donner.
The Bill further proposes to provide for The aforesaid amendment has been
a single rate of tax of 5% irrespective proposed to empower Commissioner to
of the amount of taxable capital gain. determine the cost of assets received
31
through gift which he considers as a inserted to disallow the allowance if

part of tax avoidance scheme. This amount is not paid to federation by
would provide more discretionary trans-provincial establishment in light
powers to the Commissioner and is of judgment of the courts.
likely to create unnecessary litigations.
12. Deductible Allowance for
10. Empowering the Board to amount paid of any Workers’
make amendment in the Profit Participation Fund
Second Schedule (WPPF) [Section 60B]
[Section 53]
The Bill proposes to allow deductible
Currently, Federal Government is allowance for the amount paid by a
empowered to make amendment in person under any law relating to the
the Second Schedule by adding / Workers’ Profit Participation Fund
omitting any clause and condition (WPPF) enacted by Provinces after
therein or making any change in any eighteenth Constitutional Amendment
clause or condition therein. Act, 2010.
The Bill proposes to empower the It has been clarified that deductible
Board to make amendment in the allowance shall not be allowed if any
Second Schedule to the Ordinance but amount of WPPF is paid to the
only with the approval of Federal Provinces by a trans-provincial
Minister-in-charge pursuant to the establishment. The proviso has been
approval of the Economic Coordination inserted to disallow the allowance if
Committee of the Cabinet. amount is not paid to federation by
It is to be seen how this proposed trans-provincial establishment in light
amendment is viewed by the of judgment of the courts.
professional fraternity as it is the
prerogative of the legislature to bring 13. Charitable Donation
any amendment in the law whereas [Section 61]
the subject amendment is empowering
the Board with simple approval of ECC. Under current law, a person is entitled
to claim tax credit on donation only.
11. Deductible Allowance for The Bill proposes to enlarge the scope
amount paid of any Workers’ of nature of payments eligible for tax
credit by inserting the expression
Welfare Fund (WWF) “voluntary contribution or
[Section 60A] subscription” in section 61(1) of the
Ordinance.
The Bill proposes to allow deductible
allowance for the amount paid by a Resultantly, a person will be entitled to
person under any law relating to the claim tax credit even on any voluntary
Workers’ Welfare Fund (WWF) enacted contribution or subscription paid to the
by Provinces after eighteenth organizations specified under section
Constitutional Amendment Act, 2010. 61(1) of the Ordinance.
It has been clarified that deductible In addition to the above amendment,

allowance shall not be allowed if any the Bill also proposes to add following
amount of WWF is paid to the categories of persons to whom
Provinces by a trans-provincial payment of donation, voluntary
establishment. The proviso has been contribution or subscription will be
32
eligible for tax credit to the payer of 15. Tax credit for amount
such voluntarily contribution or
subscription under section 61 of the invested in purchase of point
Ordinance: of sale machine [Section
64D]
 Any person eligible to tax credit
under section 100C of the The Bill proposes to insert new section
Ordinance. “64D. Tax credit for point of sale
machine”, by virtue of which, any
 Entities, organization and funds person who is required to integrate
mentioned in the Thirteenth with Board’s computerized system for
Schedule to the Ordinance. real time reporting of sale or receipt,
will be entitled to tax credit in respect
The Bill proposes to delete clause (61) of the amount invested in purchase of
of Part 1 of Second Schedule to the point of sale machine.
Ordinance and to insert Thirteenth
Schedule to the Ordinance. All the The amount of tax credit allowed for a
entities, organization and funds tax year in which point of sale machine
mentioned in the Thirteenth Schedule is installed, integrated and configured
were listed in the deleted clause. with the Board’s computerized system
Under current law, a person is eligible will be lesser of:
to claim deductible allowance on
account of any amount paid as (a) amount actually invested in
donation to such entities and therefore purchase of point of sale
was able to claim tax relief at highest machine; or
slab rate instead of average rate of tax (b) rupees one hundred and fifty
liability to taxable income. thousand per machine.
14. Withdrawal of tax credit for Further, for the purposes to claim tax
persons employing fresh credit for investment in purchase of
point of sale machine, the term point
graduates [Section 64C] of sale machine has been defined as a
machine meant for processing and
Through Finance Act, 2019, the recording the sale transactions for
legislature inserted section 64C to goods or services, either in cash or
encourage employment for freshly through credit and debit cards or
graduates. By virtue of section 64C of online payments in an internet enabled
the Ordinance, a person employing environment.
freshly qualified graduates from a
university or institution recognized by
Higher Education Commission was 16. Withdrawal of tax credit for
entitled to a tax credit on annual enlistment [Section 65C]
salary paid to the freshly qualified
graduates for a tax year in which such This section provides for tax credit
graduates are employed. against the tax payable for the tax
year in which the company is listed
The Bill proposes to delete section 64C and following 3 tax years to encourage
of the Ordinance and resultantly, tax enlistment of a Company in any
credit for persons employing fresh registered stock exchange of Pakistan.
graduates will be withdrawn. Through Finance Act, 2020, this
benefit was restricted to a Company,
which opts for enlistment on or before
June 30, 2022.
33
The Bill proposes to delete section 65C mining project in Sindh, supplying
of the Ordinance and resultantly tax coal exclusively to power
credit to a Company on account of generation projects.
enlistment on Stock Exchange will no
longer be available.  Clause (133): Income from
exports of computer software or IT
This is another policy change by the services or IT enabled services
Government which is not likely to be upto the period ending on 30th
well received by the Stock Exchange day of June, 2025.
considering already low number of
listings over last many years.  Clause (143): Profit and gains
derived by a start–up as defined in
17. Omission of tax credit under clause (62A) of section 2 for the
tax year in which the start-up is
section [Section 65D] certified by the Pakistan Software
Export Board and the following two
Under current law, tax credit tax years.
applicable for investment in the
specific industrial undertakings, The Bill proposes to delete aforesaid
meeting specified criteria under clauses of Part I of Second Schedule to
section 65D, is going to expire by June the Ordinance and to insert new
30, 2021. The Bill, therefore, proposes section “65F - Tax credit for certain
for omission of the said section. persons”; whereby, income of above
However, the existing beneficiaries stated persons or incomes will now no
shall continue to enjoy the benefits for longer be exempt from tax but such
the specified period, subject to persons shall now be allowed to claim
conditions and limitations provided in tax credit equal to one hundred
the section. percent of tax payable including
minimum, alternate corporate tax and
This change is likely to dent the final taxes.
confidence of the investors who
wanted to invest in relevant sectors as However, credit on income from
the subject tax credit was introduced exports of computer software or IT
in 2011 with corporate dairy farming services or IT enabled services will
added in 2012 for the tax credit on only be available if eighty percent of
investment. Time period for setting up the export proceeds in brought into
the industrial undertaking was also Pakistan in foreign exchange remitted
being extended from 2016 to 2019 from outside Pakistan through normal
and then to 2021. banking channels.
18. Tax Credit for coal mining Tax credit equal to one hundred
projects, startups and IT percent to aforesaid income and
persons will be available subject to
exporter [Section 65F] fulfillment of all of the following
conditions:
As per Part I of the Second Schedule
to the Ordinance, income of following a) return has been filed;
persons was exempt from tax subject b) withholding tax statements for
to the limitations mentioned in the the relevant tax year have been
relevant clauses: filed in respect of those
provisions of the Ordinance,
 Clause (132B): Profits and gains where the person is a
derived by a taxpayer from a coal withholding agent; and
34
30th day of June, 2019

c) sales tax returns for the tax and the 30th day of June,
periods corresponding to 2024 and the person is not
relevant tax year have been filed formed by the splitting up
if the person is required to file or reconstitution of an
Sales Tax Return under any of undertaking already in
the Federal or Provincial sales existence or by transfer of
tax laws. machinery, plant, or
building from an
19. Tax Credit for specified undertaking established in
Pakistan prior to
industrial undertakings. commencement of the new
[Section 65G] business and is not part of
an expansion project; and
The Bill proposes to insert a new
section “65G - Tax credit for specified b) industrial undertaking set up by
industrial undertakings”, by virtue of the 30th day of June 2023 and
which, specified industrial engaged in the manufacture of
undertakings will be allowed an plant, machinery for generation
investment tax credit of 25% of the of renewable energy from
eligible investment amount against the sources like solar and wind for a
tax payable under the provisions of the period of five years beginning
Ordinance including minimum and final from the date such industrial
taxes. undertaking is set up.
For the purposes of claiming tax The tax credit not fully adjusted
credit, the eligible investment means during the year of investment
investment made in purchase and will be carried forward to the
installation of new machinery, subsequent tax year upto two
buildings, equipment, hardware and tax years.
software except self-created software It is pertinent to note section 65G(i)
and used capital goods. refers to the expression “the eligible
taxpayer defined in sub-section (3)”;
Following persons / taxpayers will be however sub-section (3) define
eligible for claiming the tax credit “eligible person” rather than eligible
under this section: taxpayer. Appropriate changes are
required in the newly inserted section.
a) Green field industrial
undertaking as defined in clause
(27A) of section 2 engaged in- 20. Non-recognition Rules
[Section 79]
(i) the manufacture of goods
or materials or the Section 79 provides that no gain or
subjection of goods or loss shall be taken to arise on disposal
materials to any process of an asset:
which substantially
changes their original (a) between spouses under an
condition; or agreement to live apart;
(ii) ship building: (b) by reason of the transmission of

the asset to an executor or
Provided that the person beneficiary on the death of a
incorporated between the person;
35
The Bill proposes to empower the

(c) by reason of a gift of the Board to prescribe special procedure,
asset2[to a relative, as defined in with approval of the Minister-in-
sub-section (5) of section 85]; charge, for scope and payment of tax,
filing of return and assessment in
(d) by reason of the compulsory respect of small traders and
acquisition of the asset under any shopkeepers.
law where the consideration
received for the disposal is 22. Empowering the Board to
reinvested by the recipient in an
asset of a like kind within one prescribe special procedure
year of the disposal; for certain persons and to
notify any other sector
(e) by a company to its shareholders
on liquidation of the company; or [Section 99C]
(f) by an association of persons to its Currently, Federal Government is

members on dissolution of the empowered to prescribe special
association where the assets are procedure for scope and payment of
distributed to members in tax, record keeping, filing of return
accordance with their interests in and assessment in respect of small
the capital of the association. businesses, construction businesses,
medical practitioners, hospitals,
Sub-section (2) currently provides educational institutions and any other
that the above non-recognition sector specified by the Federal
rules shall not apply where the Government.
person acquiring the asset is a
non-resident person at the time The Bill proposes to empower the
of acquisition, thus gain or loss Board to prescribe special procedure,
shall be taken to arise on disposal with approval of the Minister-in-
of assets by such non-resident charge, for scope and payment of tax,
person as covered from (a) to (f). record keeping, filing of return and
The proposed amendment seeks assessment in respect of small
to provide that no gain or loss businesses, construction businesses,
shall be taken to arise in hands of medical practitioners, hospitals,
non-resident person in respect of educational institutions and to notify
disposal of assets as covered any other sector.
under (d), (e) and (f) only.
23. Empowering the Board to
21. Empowering the Board to specify the profits and gains
prescribe special procedure of any business which
for small traders and consists of, or includes, the
shopkeepers [Section 99B] exploration and extraction of
Currently, Federal Government is such mineral deposits of a
empowered to prescribe special wasting nature (not being
procedure for scope and payment of petroleum or natural gas)
tax, filing of return and assessment in
respect of small traders and [Section 100)
shopkeepers.
Currently, Federal Government is
empowered to specify the profits and
36
gains of any business which consists Government or a Provincial

of, or includes, the exploration and Government or armed
extraction of such mineral deposits of forces including civilian
a wasting nature (not being petroleum employees of armed forces
or natural gas) carried on by a person and their dependents
in Pakistan to be computed in where the said trust is
accordance with the rules in Part II of administered by a
the Fifth Schedule. committee nominated by
the Federal Government or
The Bill proposes to empower the a Provincial Government;
Board to specify, with approval of the
Minister-in-charge, the profits and c) a trust;
gains of any business which consists
d) a welfare institution registered
of, or includes, the exploration and
with Provincial Or Islamabad
extraction of such mineral deposits of
Capital Territory (ICT) social
a wasting nature (not being petroleum
welfare department;
or natural gas) carried on by a person
in Pakistan to be computed in e) a not for profit company
accordance with the rules in Part II of registered with the Securities
the Fifth Schedule. and Exchange Commission of
Pakistan under section 42 of the
24. Tax Credit for Charitable Companies Act, 2017;
Organizations. [100C] f) a welfare society registered
under the provincial or
The Bill proposes to substitute section Islamabad Capital Territory (ICT)
100C - Tax credit for certain persons, laws related to registration of
with change in nomenclature as - Tax co-operative societies;
credit for charitable organisations.
g) a waqf registered under
Mussalman Waqf Validating Act,
The proposed section now specifically
1913 (VI of 1913) or any other
categorises the persons and types of
law for the time being in force or
income derived by such persons
in the instrument relating to the
eligible for tax credit under the section
trust or the institution;
as under:
h) a university or education
a. Persons institutions being run by non-
profit organization existing solely
a) persons specified in Table for educational purposes and not
- 2 of clause (66) of Part I for the purposes of profit;
of the Second Schedule to
this Ordinance; i) a religious or charitable
institution for the benefit of
b) a trust administered under public registered under any law
a scheme approved by the for the time being in force; and
Federal Government and j) international non-governmental
established in Pakistan organization (INGOs) approved
exclusively for the by the Federal Government.
purposes of carrying out
such activities as are for
the welfare of ex-
employees and serving
personnel of the Federal
37
b. Incomes conditions [including obtaining

approval under section 2(36)
a) income from donations, from specified date] as per
voluntary contributions provisions of section 100C of the
and subscriptions; Ordinance.
b) income from house It is important to note that no

property; amendment has been made in sub-
clause (2) of clause (66) of Part 1 of
c) income from investments Second Schedule to the Ordinance,
in the securities of the which still provides for exemption to
Federal Government; the persons specified in Table 2.
Appropriate amendment needs to be
d) profit on debt from made in this sub-clause.
scheduled banks and
microfinance banks; 25. Special provisions relating to
e) grant received from builders and developers
Federal, Provincial, Local [Section 100 D]
or foreign Government;
Section 100D was introduced vide Tax
f) so much of the income Laws (Amendment Ordinance) of 2001
chargeable under the head dated April 17, 2020 providing
"income from business" as incentive package to Construction
is expended in Pakistan for sector. The relevant provisions were
the purposes of carrying later enacted through Finance Act,
out welfare activities: 2020.
Provided that in the case Section 100D provided certain

of income under the head conditions for availing incentive
"income from business", including dates for completion of
only so much of such projects by September 30, 2020.
income shall be eligible for Considering the low activity due to
tax credit under this COVID-19, such dates were extended
section that bears the till September 30, 2021 through the
same proportion as the Income Tax (Amendment) Ordinance
said amount of business of 2021 from January 1, 2021. These
income bears to the provisions are now proposed to be
aggregate of income from enacted through Finance Act, 2021.
all sources; and Section 100D also provided amnesty
for capital investment if certain
g) any income of the persons conditions including opening and
mentioned in clauses (a), deposit of amount into a bank account
(b) and (h) as mentioned is fulfilled till December 31, 2020. This
in 9.1 above. date was also extended till June 30,
2021 through the Income Tax
Further, persons specified in (Amendment) Ordinance of 2021 from
Table - 2 of clause (66) of Part I January 1, 2021. These provisions are
of the Second Schedule to now proposed to be enacted through
Ordinance are proposed to be Finance Act, 2021.
covered under section 100C and
will be eligible for tax credit Further, an amnesty from section 111
subject to the criteria and is provided under section 100D for the
38
first purchaser of a building or a unit the Board on the online Iris web
of the building purchased from the portal.
builder in respect of purchase price of
the building or unit of the building These dates as per clause (i) and (ii)
subject to the following conditions, were extended from December 31,
namely: 2020 to June 30, 2021, whereas the
(i) full payment is made through a date as per clause (iii) was extended
crossed banking instrument to the from December 31, 2020 to December
builder during a period starting from 31, 2021 through the Income Tax
the date of registration of the project (Amendment) Ordinance of 2021.
with the Board under this section and These provisions are now proposed to
ending on the 30th day of September, be enacted through Finance Act, 2021.
2022, in case the purchase is from a
new project; and 26. Special provisions relating to
(ii) full or balance amount of payment is small & medium enterprises
made through a crossed banking [Section 100E]
instrument to the builder during a
period starting from the date of The Bill proposes to introduce new
registration of the project with the section 100E from tax year 2021 and
Board under this section and ending onwards, whereby tax payable of
on the 30th day of September, 2022, Small and Medium Enterprise (SME) as
in case the purchase is from an defined under the newly inserted
existing incomplete project; and clause (59A) of section 2 shall be
computed in accordance with the rules
The above date was also extended till made under the proposed Fourteenth
March 31, 2023 through the Income Tax Schedule.
(Amendment) Ordinance of 2021. These
provisions are now proposed to be
enacted through Finance Act, 2021. 27. Avoidance of double tax
[Section 107]
Moreover, amnesty from section 111
of the Ordinance was available to the The Bill propose to add new word
purchaser of a plot who intends to “assistance in the recovery of taxes “
construct a building thereon if: section 107(1), empowering the Board
to enter into any Agreement with other
(i) the purchase is made on a jurisdictions for assistance
before the 31st day of in recovery of taxes.
December, 2020;
28. Unexplained Income
(ii) the full payment is made on or
before the 31st day of [Section 111]
December, 2020 through a
crossed banking instrument; The Bill proposes to introduce
explanation under section 111(5) that
(iii) construction on such plot is separate notice under section 111 is
commenced on or before the not required to be issued if the
31st day of December, 2020; explanation regarding and source of
amount credited or investment of
(iv) such construction is completed money, valuable article or the funds
on or before the 30th day of from which expenditure was made has
September, 2022;and been confronted to the taxpayers
(v) the person registers himself with through a notice under section 122(9).
39
furnish return of income. Clause (58)

This amendment is proposed to had already been omitted vide the
counter various appellate decisions, Finance Act, 2014, consequent to the
whereby it has been held that separate amendment the clause (ad) had
notice under section 111 is to be become redundant.
issued before invoking section 111.
Further, the Bill proposes to introduce
29. Minimum Tax [Section 113] a new proviso under sub section (5),
whereby the time-limitation of the last
As per existing provision, minimum tax five completed tax years provided
is applicable to an individual and AOP under said sub-section shall not apply
having turnover Rs. 10 million in a where the Commissioner is satisfied on
particular tax year. The Bill proposes the basis of reasons to be recorded in
to enhance the threshold of Rs. 10 writing that a person who failed to
million to Rs. 100 million. furnish his return has foreign income
or owns foreign assets. Accordingly,
Further, the Bill proposes to include Commissioner can now issue notice to
the clarification that the term turnover a person to file his return of income
covers receipts from all sources even after five years, if he has reasons
including but not limited to receipt to believe that such person had foreign
from the sale of immovable property income or owned foreign assets during
where such amount is taxable under a particular year.
the head of Income from Business.
Moreover, the Bill propose to insert a
Moreover, the Bill also proposes to new proviso under clause (a), sub
include new explanation wherein it is section (6), whereby the
clarified that taxpayer would be able to Commissioner may waive condition of
carry forward entire amount of revised accounts or audited accounts
minimum tax paid under section 113 where he thinks that the same are not
of the Ordinance for subsequent five necessary.
tax years even in such case where
minimum tax is paid by the taxpayer 31. Taxpayer’s Profile [Section
due to zero normal tax liability during 114A]
a particular tax year.
Through Finance Act, 2020 section
This is a positive development as this 114A was introduced wherein every
would resolve long pending dispute person filing return of income is
between taxpayers and tax authorities required to submit taxpayer’s profile,
in those cases where taxpayers were instead of provision of information
not allowed to carry forward minimum along with the return of income on
tax paid under said section to annual basis. Due date for updating
subsequent tax years if there is a nil the tax profile was extended from
normal tax liability in a tax year in December 31, 2020 to June 30, 2021.
which minimum tax paid was paid
Non-compliance of the above would
30. Return of Income attract monetary penalties and will
[Section 114] lead to exclusion of the taxpayer’s
name from the Active Taxpayers List.
The Bill proposes to omit clause 114
(1)(ad), whereby welfare institution The Bill proposes to withdraw above
approved under clause (58) of Part I of section. The proposed change would
the Second Schedule are required to be welcomed by the tax payers as
40
number of them were facing issues in automated adjusted assessment

updating their profiles especially the mechanism was enacted until the
foreign companies not having any Board notifies the date from which
presence in Pakistan. provisions of sub-section (2A) shall
apply.
32. Assessment [Section 120] For the purposes of this section, the
following provisos are proposed to be
Before Finance Act, 2020, where a inserted under sub-clause (b) of
taxpayer furnished a return of income, section (1) of section 120:
the Commissioner shall be treated to
have made an assessment of taxable "Provided that until the date specified
income and tax due thereon equal to under the fourth proviso to sub-section
amounts specified in the return. (2A) is notified, this subsection shall
Further, such return was taken for all be in force as if sub-section (2A) is not
purposes to be an assessment order in operation:
issued by the Commissioner.
Provided further that once the date
Through Finance Act, 2020, the under the fourth proviso to sub-section
legislature introduced sub-section (2A) (2A) is notified, clauses (a) and (b)
and automated adjusted assessment shall only apply when the provisions of
mechanism was enacted. Under this sub- section (2A), if invoked, are first
mechanism, the return filed shall be complied with:
subject to an automatic review and
adjustment within six months of filing Provided further once compliance is
of return for rectification of any made under the second proviso:
numerical errors or incorrect claims,
losses, deductible allowances or tax (i) the adjusted amount under sub-
credit, or wrongful carry forward of section (2A) shall be construed
losses that are apparent from the to be the tax payable and due
return of income. In this regard, a under clause (a);and
notice shall be issued to the taxpayer (ii) the date of the compliance under
before the adjustments are effected in sub-section (2A) shall be the
the return, which is required to be date for the purposes of clause
responded within 30 days of the date (b).
of notice.
Further, the Bill proposes to empower
Further, where no such adjustments Board to notify date for the
are made within the specified period of applicability of provisions regarding
six months, the return filed shall be system based issuance of notice for
deemed to have been automatically automated adjustments in the return
adjusted on the day the return is filed of income.
and automatic intimation through IRIS
shall be forwarded to the taxpayer. So effectively as a consequence of the
proposed amendments in section 120,
The current provisions as to deemed upon return filing, the Commissioner
assessment order will now apply to shall be taken to have made an
adjusted return rather than the assessment of taxable income for that
original return filed by the taxpayer. tax year and tax due thereon. Further
the return filed shall be taken for all
The Bill proposes to restore provisions the purpose of the Ordinance to be as
of the section 120 as if sub-section assessment order.
(2A) is not in operation and no
41
The provisions of sub-section (2A) and 34. Revision by the

automated adjusted assessment
mechanism shall only apply once the Commissioner
date of application is notified by the [Section 122A]
Board.
The Bill proposes a time limit of 120
33. Amendments of assessment days for giving appeal effects to an
order by a lower tax authority, if the
[Section 122] order is remanded back by the
Commissioner for modification,
Under the current provisions of law, alteration, implementation of direction
Commissioner may after making or or de novo proceedings.
causing to be made, such enquiries as
he deemed necessary amend or
further amend an assessment order 35. Alternative Dispute
under section 122(5A). Due to these Resolution [Section 134A]
powers, through proceedings under
section 122(5A), tax authorities raise Through the Bill, it is proposed to
detailed queries which effectively make below amendments in section
tantamount to detailed scrutiny of the 134A:
records of a taxpayer as in case of
detailed tax audit. - Allow taxpayers against whom
criminal proceeding have been
In order to curb misuse of such initiated to avail Alternative
powers, the Bill proposes to delete Dispute Resolution mechanism.
wording ‘after making, or causing to
be made, such inquiries as he deems - If the issue involves a mixed
necessary’. This is a welcoming question of fact and law, the
change, in line with the decisions of Board after considering all
the courts, which will restrict the relevant facts and
authorities to extend the scope of circumstances, shall decide
amendment proceedings. whether or not Alternative
Dispute Resolution Committee
The Bill also proposes to limit the (ADRC) may be constituted.
finalization of assessment proceedings
within 120 days of issuance of show- - The application for dispute
cause notice under section 122(9), to resolution shall be accompanied
be extended for further 90 days for by an initial proposition for
any reason to be recorded in writing. resolution of the dispute, from
This provision will be applicable for which proposition, the taxpayer
show cause notices issued on or after would not be entitled to retract.
July 1, 2021. The above time limit will
not include period when proceedings - Reduce time limit from 60 days
are adjourned due to any reason to 30 days to constitute ADRC.
including on account of stay, ADRC
proceedings, agreed assessment - Reduce time limit from 120 days
proceedings under section 122D or to 60 days for decision by ADRC,
time taken by the taxpayers through of its appointment.
adjournment. The amendment seeks
to expedite the disposal of proceedings - Grant stay of recovery of
in an efficient manner. demand till decision or
dissolution of ADRC committee
whichever is earlier.
42
the lower estimate of advance tax

- If the committee fails to decide payable submitted by a taxpayer, if
the case within 60 days of its Commissioner is not satisfied with the
appointment the Board shall documentary evidences provided or
dissolve the committee and may where an estimate of the advance tax
re-constitute another committee payable is not accompanied by the
to the provision of this section prescribed details. In such a case, the
shall apply mutatis mutandis taxpayer is required to pay advance
tax as per the prescribed formula.
36. Due date for payment of tax
The Bill proposes to withdraw the
[Section 137] above mentioned power of the
Commissioner to reject the advance
Presently, taxpayer is required to pay tax estimate.
the tax demands created through any
assessment orders within 30 day of
service of notice. 39. Dividends
[Section 150 and 236S]
The Bill proposes that any tax demand
raised through an appeal effects order Under the current law, withholding tax
shall now be payable immediately provisions related to dividend in cash
without following above limit of 30 and Dividend in specie are separately
days. Clarification is desired in this covered under sections 150 and 236 S
regard as to what is meant by respectively.
immediately; whether this refers to
the same day order was served and The Bill proposes to merge withholding
would that be practically possible. tax provisions related to dividend in
cash and dividend in specie under
37. Assistance in the recovery section 150.
and collection of taxes
40. Return on Investments in
[Section 146C]
Sukuks
The Bill proposes to insert a new [150A & Profit on debt 151]
clause whereby provisions of sections
138, 138A, 139, 140, 141, 142, 143, Presently, provision related to return
144, 145, 146, 146A, 146B shall apply on investments in Sukuks and Profit on
for assistance in collection and debt are covered under sections 150A
recovery of taxes from a taxpayer in and 151 respectively.
order to pursue any request received
from a foreign country under a tax The Bill proposes to delete section
treaty, a multilateral convention, inter- 150A and merge the withholding tax
governmental agreement or similar provisions relating to payment of
arrangement or mechanism return on investment in Sukuks and
Profit of debt under section 151.
38. Withdrawal of
Commissioner’s Power to 41. Final tax regime on capital
reject the advance tax gains and return on
estimates [Section 147(6)] investment in Sukuks for
non-residents [Section
Under the existing law, the 152(1DA), (1DB) and (1E)]
Commissioner has the power to reject
43
Under the existing law, payments

The Bill proposes that every banking made to traders of yarn by taxpayers
company maintaining a Foreign specified in zero-rated regime of sales
Currency Value Account (FCVA) or a tax are exempt from withholding tax
Non-Resident Pakistani Rupee Value under section 153(1). Through the Bill,
Account (NRVA), of a non-resident the above exemption from withholding
individual holding Pakistan Origin Card tax is proposed to be withdrawn.
(POC) or National ID Card for
Overseas Pakistanis (NICOP) or 43. Payment of Royalty to
Computerized National ID Card
(CNIC), shall now deduct tax from Resident Person
capital gain arising on the disposal of [Section 153 B]
debt instruments and government
securities and certificates (including Under the existing law, payment on
Shariah compliant variant) invested account of royalty to a resident person
through aforesaid accounts at 10%. is subject to withholding tax @ 15%.
Further, the Bill proposes that every Through the bill, the above withholding
special purpose vehicle or a company tax is proposed to be abolished.
at the time of making payment of a
return on investment in sukuks to a 44. Export of Services
non-resident sukuk holder shall deduct
tax from the gross amount of return [Section 154A]
on investment at the rates specified in
Division IB of Part III of the First The Bill proposes to introduce a new
Schedule. framework for taxation for the
following streams of income:
Tax deducted under sub-sections
(1DA) and (1DB) shall constitute final  Computer software, IT services
discharge of tax liability of the or IT enabled services.
recipient.  Services or technical services
rendered outside Pakistan or
exported from Pakistan.
42. Payment for Goods, Services  Royalty, commission or fees
and Contracts derived by a resident company
[Section 153 (4) & (5)] from a foreign enterprise in
consideration for the use outside
Under the current law, where tax Pakistan of any patent,
deductible under section 153 (1) is not invention, model, design, secret
minimum, the Commissioner is obliged process or formula or similar
to issue exemption / reduced rate property right, or information
certificate, on payment for supply of concerning industrial,
goods within 15 days of filing of commercial or scientific
application, only to a public company knowledge, experience or skill
listed on registered stock exchange in made available or provided to
Pakistan. such enterprise.
 Construction contracts executed
Through the proposed amendment, outside Pakistan.
the Commissioner is now obliged to  Other services rendered outside
issue such certificate to all the Pakistan as notified by the Board
companies. from time to time
44
Every authorized dealer in foreign Introduction of a special regime for the

exchange, at the time of realization of specified services would help in
foreign exchange proceeds on account generating foreign exchange and at
of aforementioned services shall the same time would encourage free
deduct tax from the proceeds at the lancers especially in IT sector to
rate of 1%. No tax is to be deducted extend their reach globally.
for exports of computer software or IT Where a taxpayer, while explaining the
services or IT enabled services in case nature and source of any amount,
tax credit under section 65F is investment, money, valuable article,
available. It is pertinent to note that expenditure, referred to in section
though proceeds realized from 111, takes into account any source of
technical services rendered outside income which is subject to final tax in
Pakistan has earlier been subjected to accordance with the provisions of this
reduced rates of tax but export of section, he shall not be entitled to take
services has never been subject to credit of a sum that can be reasonably
reduced rate of tax or any special tax attributed to the business activity or
regime. activities specified above.
Previously, except for IT services, the The Board in consultation with State
above mentioned services were Bank of Pakistan shall prescribe mode,
subject to 1% tax. Through the manner and procedure of payment of
Finance Act, 2016, tax rate for these tax under this section.
services and contracts executed
outside Pakistan were subject to tax at The Board shall have the power to
50% of tax rates applicable under include or exclude certain services for
Division III of Part III of the Second applicability of provisions of this section.
Schedule i.e. rates applicable for
similar activities in Pakistan. 45. Income from Property
The tax deductible under this section [Section 155]
shall be a final tax on the income The Bill proposes to change the
arising from the above referred heading of the section as “Rent of
transactions, upon fulfilment of the immoveable property’’. The proposed
following conditions: change is in line with the gist of the
section since it deals with the
(a) return has been filed; deduction of tax on payment for rent
(b) withholding tax statements for of immoveable property.
the relevant tax year have been
filed; Currently, rent from the sub-lease of
(c) sales tax returns under Federal land or a building is taxable under the
or Provincial laws have been head Income from other sources.
filed, if required under the law; Through the Bill, an explanation has
(d) no credit for foreign taxes paid been added to clarify that withholding
shall be allowed. tax under section 155 shall also apply
when a payment is made on account
The tax deductible shall not be final for of rent of immoveable property
a person who does not fulfill the above irrespective of head of income. By
specified conditions or who opts not to virtue of this amendment, rental
be subject to final taxation. income of sub-lessee of the property,
taxable under the head “income from
Provided that the option shall be other sources” would also be liable to
exercised every year at the time of tax withholding under section 155.
filing of return under section 114.
45
46. Exemption or lower rate Similarly, another new sub-section (8)

is proposed to be inserted to
certificate [Section 159(1) (c)] streamline mechanism of monitoring of
withholding taxes by requiring
The Bill proposes to empower the taxpayers to file a reconciliation
Commissioner to issue exemption statement in prescribed format by the
certificate where income of a taxpayer due date of return of income.
is subject to 100% tax credit under
the Ordinance. The above insertions seem as a
proactive approach of FBR of
Previously, only section 100C was obtaining, in advance, the
mentioned for issuance of exemption reconciliation statement prescribed
certificate. Through the Bill, the scope under Rule 44(4) of the Income Tax
of issuing tax exemption certificate has Rules, 2002. Currently, such a
been enhanced as various taxpayers reconciliation is requested by the tax
have been brought within the scope of officers during monitoring of
100% tax credit through section 65F. withholding tax proceedings.
Furthermore, a mechanism for

automated issuance of exemption 48. Electronic processing and
certificates is introduced for corporate electronic issuance of
entities, if application is not disposed Refunds by the Board
of by the Commissioner within fifteen
days of filing of application by the [Section 170A]
company. However, the proposed
amendments also empower the The Bill proposes to insert new section
Commissioner to modify or revoke the 170A whereby a mechanism for
certificate issued automatically by IRIS electronic processing and issuance of
on the basis of reasons to be recorded refund by the Board has been
in writing and after providing an introduced. Commencing from tax year
opportunity of being heard. 2021, the Board may process and
issue refund to the taxpayer, who has
Aforesaid amendment seems to ease filed the return of income, without
the procedure for obtaining requiring refund application by the
aforementioned certificates and to taxpayer to the extent of tax credit
reduce inordinate delays in processing verified by the Board’s computerized
exemption orders. system, as may be prescribed. The
refund amount sanctioned under this
section shall be electronically
47. Statements transferred in the taxpayer’s notified
[Section 165 (7) & (8)] bank account.
In addition to existing compliance The above amendment is proposed to

requirement of filing annual statement be applicable prospectively i.e. from
for payment of salary, a new sub- tax year 2021.
section (7) is proposed to be inserted, The above amendment seems to ease
whereby every prescribed person the procedure of obtaining refunds
collecting / deducting taxes, on without submission of refund
payments other than salary, is applications and documentary
required to e-file an annual statement evidence. It is expected that some
within thirty (30) days of the end of rules are likely to be notified by the
the tax year. Board in near future for the purpose of
application of this section.
46
49. Offences and penalties [Section 182]

The Tax Laws (Second Amendment) Ordinance, 2001 revised various penalties under
section 182. The Bill now proposes to make same amendments in the penalties as under:
Existing
Existing Penalties
S.No. Existing Offences Applicable Proposed Amendments
Sections
1. Where any person fails A minimum penalty of 114 and The changes made
to furnish a return of Rs. 5,000, where 118 through Tax Laws (Second
income as required taxable income for the Amendment) Ordinance,
under section 114 year is upto Rs. 2021 have been proposed
within the due date 800,000. Furthermore, to be adapted through the
penalty amount shall Finance bill.
also be reduced by
75%, 50% or 25% if
return is filed within
one, two or three
months respectively
after the due date or
extended due date for
filing of return.
1A Where any person fails Minimum penalty of Rs 165, 165A The changes made
to furnish a statement 10,000 has now been and 165B through Tax Laws (Second
as required under prescribed for Amendment) Ordinance,
section 165, or 165A, or instances where no tax 2021 have been proposed
165B within the due was required to be to be adapted through the
date. deducted or collected Finance bill.
during the relevant
period.
4A Any person who is Such a person shall 114A Through the bill, this
required to furnish or pay a penalty of section is proposed to be
update a taxpayer’s Rs.2,500 for each day deleted.
profile but fails to of default from the due
furnish or update within date subject to a
the due date. minimum penalty of
Rs. 10,000
4B Any person who Such a person shall 181AA The proposed amendment
contravenes the pay a penalty at the seeks to enhance the
provisions of section rate of Rs. 10,000 for amount of penalty from
181AA each connection Rs.10,000 to Rs.100,000
provided to an
unregistered person.
6 Any person who repeats Such person shall pay 137 The proposed
erroneous calculation in a penalty of thirty amendments seek to
the return for more thousand rupees or make editorial changes,
than one year whereby three per cent of the the revised provision will
amount of tax less than amount of the tax be read as follow:
the actual tax payable involved, whichever is “Any person who repeats
under this Ordinance is higher. erroneous calculation in
paid. the return for more than
47
Existing
Existing Penalties
Sections
Provided that no one year whereby amount
penalty shall be of tax paid is less than the
imposed to the extent actual tax payable under
of the tax shortfall this Ordinance.”
occurring as a result of
the taxpayer taking a
reasonably arguable
position on the
application of this
Ordinance to the
taxpayer’s position.
10 Any person who— Such person shall pay a 114, 116, The proposed amendment
penalty of twenty five 118, 174, seeks to adopt changes made
a) makes a false or thousand rupees or 50% 176 and 177 vide Tax Laws (Second
misleading statement of the amount of tax Amendment) Ordinance,
to an Inland Revenue shortfall whichever is 2021. However, in result of
Authority either in higher: deletion of section 114A,
writing or orally or Furthermore, the penalty penalty is not applicable for
electronically including clause has also been offense related to the omitted
a statement in an made applicable to section.
application, certificate, section 118 “Method of
declaration, furnishing returns and
notification, return, other documents”.
objection or other
document including Provided that in case of
books of accounts an assessment order
made, prepared, deemed under section
given, filed or 120, no penalty shall be
furnished imposed to the extent of
the tax shortfall occurring
(b) furnishes or files a as a result of the taxpayer
false or mis-leading taking a reasonably
information or arguable position on the
document or application of this
statement to an Ordinance to the
Income taxpayers’ position.
Tax Authority either in
writing or orally or
electronically;
c) omits from a
statement made or
information furnished
to an Income Tax
Authority any matter
or thing without which
the statement or the
information is false or
misleading in a
material particular.
11 Any person who denies or Such person shall pay a 175 and 177 The changes made through
obstructs the access of the penalty of fifty thousand Tax Laws (Second
Commissioner or any rupees or fifty per cent of Amendment) Ordinance, 2021
48
Existing
Existing Penalties
Sections
officer authorized by the the amount of tax have been proposed to be
Commissioner to the involved, whichever, is adapted through the Finance
premises, place, accounts, higher bill.
documents, computers or
stocks
16 Any person who fails to Such person shall pay a 181C & 181D The changes made through
display his NTN or penalty of five thousand Tax Laws (Second
Business license at the rupees. Amendment) Ordinance, 2021
place of business as have been proposed to be
required under this adapted through the Finance
Ordinance or the rules bill.
made thereunder.
Following additional offences and penalties therefor have been proposed to be inserted through
the Bill:
S.No Offence Penalty Section
29 Where any person fails to Such person shall pay a penalty of Rs. 181
declare business bank 10,000 for each day of default since the
account(s), in his date of submission of application for
registration application or registration or date of opening of
fails to amend his undeclared business bank account
registration profile to whichever is later. Provided that if penalty
declare existing business worked out as aforesaid is less than
bank account(s). Rs.100,000 for each undeclared bank
account, such person shall pay a penalty of
Rs.100,000 for each undeclared business
bank account. Provided further that this
provision shall be applicable from the first
day of October 2021 during which period
the taxpayer may update their registration
forms.
An explanation in section 182(2) has 50. Return not filed within due
been proposed to be inserted whereby
it is clarified that establishing mens rea date [Section 182(A)]
is not necessary for imposition of
penalty. Under the existing law, a person who
fails to furnish or update a taxpayer
The above clarification seems to be in profile within due date specified in sub
contradiction with various judgement of section 3 of section 114A shall not be
the apex Courts whereby establishment included in the active taxpayer list for
of mens rea has been considered the latest tax year.
necessary for imposition of penalty.
The Bill proposes to delete section
114A, therefore, penalties related to
49
non-compliance of the said section is power to compound the offence in case

also proposed to be abolished. the taxpayer pays the tax due along
with penalty and default surcharge.
51. Prosecutions for non- Such power may be exercised by the
Chief Commissioner after prior approval
compliance with certain from the Board.
statutory obligations
[Section 191] In case of a company, every director or
officer of the company, who is believed
The Bill proposes to insert a new clause to be personally responsible for such
(g) to sub section 1 of section 191, concealment of income or offence, may
whereby scope of conviction with a fine be arrested. However, such arrest shall
or imprisonment or both has also been not absolve the company from the
extended to such a person who, without liabilities of payment of tax, default
reasonable excuse, fails to declare surcharge and penalty imposed under
business bank accounts in the the Ordinance.
registration form or return of income or
wealth statement. The proposed insertion seeks to
considerably increase the power of the
tax enforcement machinery. While on
52. Power to compound offenses the one hand the proposed amendment
& Trial by Special Judges is aimed at discouraging tax evasion by
[Section 202 & 203] introducing criminal proceedings;
however, on the other hand, it may
The Bill proposes to introduce detailed also create a more hostile tax
mechanism for trial by Special Judge environment for businesses, causing
and compounding of any offences under further disincentive towards broadening
such regime by introducing section of the tax base. The measure may also
203A, 203B, 203D and 203E. adversely affect efforts to bring in
Accordingly, existing provisions are foreign direct investment and
proposed to be deleted. documentation of the economy.
53. Power to arrest and prosecute 54. Procedure to be followed on

[Section 203A] arrest of a person [Section
203B]
The Bill proposes to insert new section,
empowering the authorities to arrest The Bill proposes to introduce new
and prosecute a person involved in section 203B, which shall devise the
concealment of income or any offence following procedure to be followed when
warranting prosecution under the making an arrest under newly inserted
Ordinance. Such arrest shall be carried section 203A:
out under relevant provisions of the
Code of Criminal Procedure, 1898. The - The authorised officer of Inland
power to cause arrest may be exercised Revenue shall instantly state the
by the Assistant Commissioner of fact of the arrest of the person to
Inland Revenue or any other officer of the Special Judge. The Special
equal rank, authorised by the Board in Judge shall give direction to the
this behalf. officer to produce the person at
such time, place and date as the
However, in order to create incentive Special Judge considers expedient.
for voluntary compliance, the Bill also
seeks to grant the Chief Commissioner - The person arrested under this
50
Ordinance, within 24 hour of his Revenue concludes that there is no

arrest, shall be presented before sufficient evidence or reasonable
the Special Judge or to nearest ground for suspicion, he may
Judicial Magistrate in the absence release the person with or without
of Special Judge. The Judicial sureties, and instruct the person to
Magistrate shall facilitate earliest appear before the Special Judge.
production of such person before The officer of Inland Revenue shall
Special Judge, at a date and time make a report and submit it to
to be fixed by him. Special Judge and his immediate
superior. The Special Judge may
- The Special Judge, after giving the agree with the report and
prosecution an opportunity of discharge the person.
being heard, may grant or refuse Alternatively, the Special Judge
bail to the person with or without may proceed with trial of the
sureties. The Special Judge may person if he is convinced that
also cancel such bail at a there is sufficient ground for
subsequent stage, after giving the proceedings against such person.
person an opportunity of being
heard. However, under special - The officer of Inland Revenue shall
circumstances to be made part of maintain “Register of Arrest and
record, the Special Judge may Detentions” in prescribed manner
cancel bail without granting such to maintain following record:
opportunity.
• Name of the person;
- The Special Judge or Judicial • Time and date of arrest;
Magistrate shall have power to • Details of the information
grant custody of the person to the received;
officer of Inland Revenue, for a • The details of things, goods
maximum period of 14 days, for or documents, recovered from
completion of inquiry or his custody;
investigation. Such custody shall
be granted on a written request • Name of witnesses and
made by the officer of Inland the explanation, if any;
Revenue before the Special Judge and
or Judicial Magistrate, as the case • Manner in which inquiry
may be. has been conducted from
day to day.
- The officer of Inland Revenue shall
immediately inquire into charge Such register or authenticated copies
against the arrested person, and if may be produced before the Special
he completes his inquiry within 24 Judge as and when required.
hours of such arrest, he may seek
further detention of such person in - The Officer of Inland Revenue after
his custody from the Special Judge completing his inquiry shall file
or Judicial Magistrate, as the case complaint before Special Judge, in
may be. For the purpose of a manner in which officer in-
conducting inquiry, the officer of charge of a police station submits
Inland Revenue shall have the a report before a court.
powers of an officer in charge of a
police station under the Code of - Magistrate of the first class is
Criminal Procedure, 1898. authorised to record any
statement or confession of the
- Where an officer of Inland person being prosecuted under the
51
Ordinance in accordance with

relevant provisions of the Code of (c) knowledge acquired by
Criminal Procedure, 1898. the Special Judge
during any proceeding
- The Board after the approval from before him under this
Federal Minister-in-charge, may Ordinance or under any
appoint any of its officers to other law for the time
perform the duties of Officer of being in force.
Inland Revenue under this section.
The Board will issue notification in In case a written report under clause
Official Gazette in this respect. (a) above is submitted, the Special
Judge shall proceed with the trial of the
55. Special Judge [Section 203C] accused person. However, in case of
complaint filed under clause (b) or
A new section is proposed to be knowledge obtained by the Special
inserted, which shall empower the Judge under clause (c), the Special
Federal Government to appoint Special Judge may hold a preliminary inquiry
Judges and notify the territorial limits of for ascertaining the correctness of the
each Special Judge, where he shall complaint. Further, the Special Judge
exercise jurisdiction under this may also direct a Magistrate, an officer
Ordinance. The eligibility criteria for of Inland Revenue, or a police officer to
appointment as a Special Judge is to be hold such inquiry on his behalf and
a serving or prior Session Judge. submit a report to him.
The Special Judge may dismiss the

56. Cognizance of offences by complaint, if no sufficient grounds are
Special Judges (Section obtained as a result of such inquiry.
203D)
57. Special Judge, etc. to have
The Bill proposes to introduce new exclusive jurisdiction [Section
section 203D, which shall grant power
to a Special Judge to take cognizance of 203E]
any offence punishable under this
Ordinance under either of the following The Bill proposes to insert new section
three circumstances: 203E, which shall provide exclusive
jurisdiction to the Special Judge. As
(a) a written report such, only a Special Judge having
submitted to the jurisdiction, shall try an offence
Special Judge by an punishable under the Ordinance. No
officer of Inland other court may exercise any power or
Revenue, or by any perform any function under the
other officer especially Ordinance, except in the manner and to
authorized in this the extent provided for in the
behalf by the Federal Ordinance. Similarly, no other court
Government. shall have power to entertain, hear or
decide any application, petition or
(b) a complaint filed by appeal under the Code of Criminal
any person before the Procedure, 1898, against any order or
Special Judge direction made under the Ordinance.
containing information However, the High Court may exercise
of facts pertaining to such power.
such offence.
52
58. Provisions of Code of Criminal Section 204 of the Ordinance empowers

the Federal Government to grant
Procedure, 1898, to apply immunity to person making full and
[Section 203F] true disclosure regarding concealment
of income or evasion of tax, subject to
The Bill proposes to insert a new certain conditions. The Bill proposes to
section, which provides that the court transfer this power from the Federal
of Special Judge shall follow the Government to the Board, with the
provisions of Code of Criminal approval of the Minister–in-charge.
Procedures 1898 during the
proceedings and such court shall be 62. Fee and service charges
deemed to be a Sessions court for the
purposes of the said Code. [Section 222A]
A new sub-section (2) of section 222A
59. Transfer of cases [Section is proposed to be inserted, which
203G] empowers the Board to make rules
regarding expenditure of the fee and
The Bill proposes to insert a new service charges collected under this
section, which empowers the High section.
Court or Federal Government, as
applicable, to transfer the case at any 63. E-hearing (Section 227-E)
stage of trial from the court of one
Special Judge to another Special Judge In order to keep abreast with the latest
for disposal, in order to promote the digital technologies, as well as to
ends of justice or tend to the general counter the limitations posed due to
convenience of the parties or witnesses. COVID-19, the Bill proposes to insert a
Such transfer shall not bind the new section, which shall provide
transferee Special Judge to recall and enabling mechanism of admissibility of
rehear any witness whose evidence has E-hearing. For this purpose, the Board
been recorded in the case before the may implement an E-hearing module
transfer. for conducting hearing and
electronically receiving information.
60. Place of Sittings [Section Furthermore, the recording of E-hearing
shall be admissible as evidence before
203H] any forum or court of law.
The Bill proposes to insert a new The proposed insertion is a much

section, which seeks to empower the needed and much awaited amendment,
Special Judge to hold sittings at his which shall facilitate taxpayers as well
headquarters or any other place, as the Board in conducting proceedings.
keeping in view the general Such measures shall be instrumental in
convenience of the parties or the modernizing the tax machinery of the
witnesses. country, as well as expediting the tax
collection mechanism.
61. Power to tender Immunity
from prosecution [Section 64. Directorate General of
204] Compliance Risk Management
(DGCRM) (Section 230I)
53
2021 dated February 12, 2021. In order

The Bill proposes to establish to discourage “On Money” practice of
Directorate General of Compliance Risk selling vehicles, every motor vehicle
Management. The DGCRM shall consist registering authority of Excise and
of a Director General, Directors, Taxation Department had been made
Additional Directors, Deputy Directors, responsible to collect advance tax from
Assistant Directors and such other buyers of locally manufactured motor
officers as the Board may appoint. The vehicles, who subsequently sell vehicle
Bill also seeks to empower the Board to within 90 days of delivery of such
specify the function and powers of vehicle, whether prior to or after
DGCRM. registration of vehicle. However, such
tax collection was applicable till June
65. Cash withdrawal from a bank 30, 2021.
(Section 231A) The Bill proposes to substitute this sub-
section with a slightly amended sub-
The Bill proposes to omit section 231A, section 2A, whereby the condition of 90
which requires banking companies to days is proposed to be removed. On the
collect advance tax from cash other hand, a new condition is proposed
withdrawal in a day exceeding Rs. to be introduced, whereby the advance
50,000. This omission is aimed at tax shall be collected if the locally
reducing the undue burden of manufactured motor vehicle has been
withholding taxes on banking sold prior to registration by the person
consumers. who originally purchased it from the
local manufacturer. Further, the newly
66. Advance tax on transactions inserted sub section is proposed to be
in Bank (Section 231AA) effective without any limitation of time
period as earlier provided.
The Bill proposes to omit section
231AA, which requires a banking 68. Brokerage and commission
company, non-banking financial
institution, Exchange Company or any [Section 233]
authorized dealer of foreign exchange
to collect advance tax on various Currently, under section 233 of the
transactions including sale against cash Ordinance, Federal Government, a
of any instrument, receipt of cash on Provincial Government, a Local
cancellation of any instrument, or Government, a Company or an
transfer of any sum against cash. This association of persons constituted by,
omission is aimed at reducing undue or under any law is required to collect
burden of withholding taxes on banking advance tax on payment of commission
consumers. Further, the omission of or brokerage.
advance tax on aforementioned banking
transactions shall incentivize use of The Bill proposes to add individual
banking sector by taxpayers, thereby having turnover of Rs.100 million or
creating a positive impact towards more as a withholding agent.
documentation of economy.
69. Collection of tax by a Stock
67. Advance tax on private motor Exchange registered in
vehicle [(Section 231B (2A)] Pakistan
[Section 233A]
A new sub section 2A was introduced
vide Tax Laws (Amendment) Ordinance,
54
The Bill proposes to omit section 233A, scope by including those domestic
which requires a stock exchange consumers, whose names are not
registered in Pakistan to collect appearing in the Active Taxpayers’ List.
advance tax from its members on Previously, vide Finance Act 2020,
purchase and sale of shares. Earlier, advance tax under this section was not
the application of this section had applicable on a person who produced
ceased with effect from March 01, the exemption certificate from the
2019, vide Finance Supplementary Commissioner or who had discharged
(Second Amendment) Act, 2019 dated his advance income tax liability for the
March 09, 2019. As such, this section tax year. The Bill now proposes to
had already become redundant. extend this exemption to persons
Accordingly, the Bill seeks to omit this whose income is subject to final tax
section. regime or minimum tax regime.
70. Collection of tax by NCCPL 73. Domestic electricity

[Section 233AA] consumption [Section 235A]
The Bill proposes to omit section The Bill proposes to omit section 235A,
233AA, which required National which required the person preparing
Clearing Company of Pakistan Limited electricity consumption bill to charge
(NCCPL) to collect advance tax from the and collect advance tax from
members of Stock Exchange registered consumers, since collection of tax from
in Pakistan, in respect of margin domestic customers is now covered
financing in share business or securities under section 235.
lending. Earlier, this section had been
inserted vide the Finance Act 2012
dated June 26, 2012. 74. Advance tax on purchase of
air ticket [Section
The omission is aimed at incentivizing 236B]
margin financing, margin trading and
securities lending in share business. The Bill seeks to omit section 236B,
which required airlines issuing domestic
71. CNG Stations [Section 234A] air tickets to charge advance tax under
the said section. The proposed changed
The Bill proposes to omit section 234A, aims to minimize air tickets costs to
which required the person preparing promote air travel in order to stabilize
gas consumption bill to collect advance the badly hit travel and tourism sector
tax from CNG stations. as a result of COVID-19 pandemic.
The omission is aimed at minimizing

the tax burden on CNG stations. 75. Advance tax on purchase or
sale of immovable property
72. Advance tax on electricity [Section 236C]
consumption [Section 235(1)
Various amendments were made in
and 235(3)] section 236C vide the Tax Laws
(Amendment) Ordinance, 2021 dated
This section imposes advance tax on February 12, 2021. These amendments
the amount of electricity bill from mainly introduced final tax regime for
commercial or industrial consumers. non-resident Pakistanis who sold
The Bill now proposes to broaden its immovable property through FCVA or
55
NRVA maintained with authorized banks prices of household consumables and

in Pakistan. medical supplies for end consumers.
The Bill proposes to insert the same

amendments through the Finance Act, 78. Tax on sale of certain
2021. Further, the Bill proposes to add petroleum products
public and private real estate projects [Section 236HA]
registered/governed under any law,
joint ventures, private commercial The Bill proposes to omit section
concerns to be held responsible for 236HA, which requires every person
registering, recording or attesting selling petroleum products to a pump
transfer and to collect advance tax on operator or distributor to collect
disposal of property made within the advance tax.
same tax year.
The omission seeks to encourage
76. Advance tax on sales to minimizing burden of tax on pump
operators and distributors of petroleum
distributors, dealers and products.
wholesalers [Section 236G]
The Bill proposes to add 79. Advance tax on purchase or
pharmaceuticals, poultry and animal transfer of immovable
feed, edible oil and ghee, battery, tires, property [Section
varnishes, chemicals, cosmetics, IT
equipment to the list of products on 236K]
which advance tax is collected by
manufacturer or commercial importer Various amendments had been made to
from sales to distributors, dealers and section 236K vide the Tax Laws
wholesalers. (Amendment) Ordinance, 2021 dated
February 12, 2021. These amendments
The said addition seeks to broaden the mainly introduced final tax regime for
tax net however, this will increase non-resident Pakistanis who acquired
prices of household consumables and immovable property through FCVA or
medical supplies. NRVA maintained with authorized banks
in Pakistan.
77. Advance tax on sales to The Bill proposes to insert the same
retailer [Section 236H] amendments through the Finance Act,
2021. Further, the Bill proposes to add
Similar to the above proposed public and private real estate projects
amendment, the Bill proposes to add registered/governed under any law,
pharmaceuticals, poultry and animal joint ventures, private commercial
feed, edible oil and ghee, battery, tires, concerns to be held responsible for
varnishes, chemicals, cosmetics, IT registering, recording or attesting
equipment to the list of products on transfer and to collect advance tax.
which advance tax is collected by
manufacturer, distributor, dealer, 80. Advance tax on purchase of
wholesaler or commercial importer at
the time of sale to retailers. international air ticket
[Section 236L]
The said addition seeks to broaden the
tax net however, this will increase
56
The Bill proposes to omit section 236L, value of minerals extracted, produced,
which required every airline, issuing dispatched and carried away from the
ticket for journey originating from licensed or leased area of the mines.
Pakistan to collect tax from passengers
on the gross amount of international air The omission aims at reducing the
tickets issued to passenger. burden of tax on mining activities.
The omission seeks to encourage relief

to international travelers and the airline 84. Advance tax on persons
industry which are badly hit due to the remitting amounts abroad
COVID-19 pandemic. through credit or debit or
prepaid cards [Section 236Y]
81. Advance tax on banking
transactions otherwise than The Bill proposes to omit section 236Y
through cash [Section 236P] which requires every banking company
to collect advance tax, at the time of
The Bill proposes to omit section 236P, transfer of any sum remitted outside
which requires every banking company Pakistan, on behalf of any person who
to collect advance tax on various has completed a credit/ debit card
transactions other than cash from transaction or a prepaid card
persons whose names are not transaction with a person outside
appearing on Active Taxpayers List. Pakistan.
The omission seeks to encourage The said omission aims at increasing

documentation of transaction through cross border trade through banking
banking channels. channels.
82. Dividend in specie 85. Benefits of repealed

[Section 236S] provisions [Section 242]
The Bill proposes to omit section 236S Various amendments proposed through
which requires every person who made Tax Laws (Amendment) Ordinance,
a payment of dividend in specie to 2021 and Tax Laws (Second
collect tax from the gross amount of Amendment) Ordinance, 2021 are
the dividend in specie. The relevant made part of the Bill. In respect of
amendments have been proposed in various exemptions and concessions
section 150 to cover collection of tax withdrawn through these Ordinances, it
from specie dividend. has now been clarified through
proposed section 242 that existing
beneficiaries of exemption and
83. Advance tax on extraction of concessions shall continue to enjoy
minerals [Section 236V] benefits of the repealed provisions till
June 30, 2021 or otherwise for the
The Bill proposes to omit section 236V periods prescribed and subject to
which requires every provincial conditions specified therein.
authority to collect advance tax on the
57
Below is the list of provisions introduced, amended, omitted or deleted through these Amendment
Ordinances.
Provision Reference Description
Section 2(29C)(b) Industrial Undertaking

Section 23A First Year Allowance
Section 57(4) Carry forward of Business Losses
Section 61 Charitable Donations
Section 64C Tax credit for person employing fresh graduates
Section 65F Tax credit for certain persons
Section 65G Tax credit for specified industrial undertakings
Section 100C Tax credit for charitable organizations
Section 152 Payments to non-residents
Section 182 Offences and penalties
Section 236C Advance tax on sale of immoveable property
Section 236K Advance tax on purchase or transfer of immoveable property
First Schedule Part I (Rate of Division IIA
taxes)
First Schedule Part II (Rate of Clause (c) – Rate of Advance tax under section 148
Advance Taxes)
First Schedule Part III Division II, Division III.
(Deductions of tax at source)
First Schedule Part IV Division VII, Division XIV.
(Deduction or Collection of
Advance Tax)
Second Schedule Part I, Clauses (39), (40), (53A), (61), (64A),(64B), (64C), (65), (66),
(Exemption from Total Income) (72A), (74), (75), (78), (79), (90), (90A),(91), (98), (100),
(101), (103), (103C), (104),(105),(105A),(110B), (110C), (114),
(126B), (126BA), (126G), (126I), (126O) (131), Clause 132 (c).
Second Schedule Part II (Rates Clause (2), (3), (3b), (5a), (5AB), (5B), (18), (24C), (24D).
of Advance tax)
Second Schedule Part III Clauses (2), (7), (8), (9), (9B), (16,) (17).
(Deduction of Tax at source)
Second Schedule Part IV Clause (2), (11A), (16) (17) ,(56) (79), (111A), (111AB), (112),
(Deduction of collection of (112A), (114a) ( 117), (118), (119).
advance tax)
Third Schedule Part 1 Depreciation - S. No IV in the table.
Third Schedule Part II Clause (2) – First Year Allowance
Fifth Schedule Part II (Rules for Rule 4
computation of profit and gains
from exploration and extraction
of mineral products
Seventh Schedule Rule (7C)
Thirteenth Schedule Charitable Donations
58
The First Schedule

Rates of Tax
Part I
Rates of Super Tax

[Division IIA of Part I of First Schedule]
The newly inserted clause had been inserted in Part I of the First Schedule to the Ordinance, vide
the Tax Laws (Amendment) Ordinance, 2021 dated February 12, 2021, whereby levy of Super
Tax on a banking company has been extended beyond tax year 2021. The Bill propose to
incorporate this change through the Finance Act, 2021.
Rate for Profit on Debt

[Division IIIA of Part I of First Schedule]
The Bill proposes to enact flat 15% advance tax on profit on debt, which is taxable under section
7B of the Ordinance, by deleting earlier provided specified rates.
Income from Property

[Division VIA of Part I of First Schedule]
The bill proposes to omit Division VIA which provides slab rates of tax on Income from Property
for individuals and AOPs.
Capital gains on disposal of securities

[Division VII of Part I of First Schedule]
The bill proposes to insert additional column (8), wherein rates of tax on capital gains on disposal
of securities for tax year 2022 and onwards are provided. The tax rate on capital gain on disposal
of securities covered under section 37A are proposed to be reduced from 15% to 12.5%.
Tax on capital gains on disposal of immovable property

[Division VIII of Part I of First Schedule]
The bill proposes to enact tax at a flat rate of 5% on capital gains on disposal of immovable
property.
Division IX- Minimum Tax under section 113
The Bill seeks to substitute the rates for minimum tax under section 113. The substituted Table
proposes to make the following significant changes to the existing minimum tax rates:
Relief in minimum tax
- General rate of minimum tax for all persons is proposed to be reduced from 1.5% to
1.25%.
59
- Rate of minimum tax on oil refineries is proposed to be reduced from 0.75% to 0.5%.
- Rate of minimum tax on turnover from supplies through e-commerce / online

marketplace is proposed to be reduced from 0.75% to 0.25%.
- Rate of minimum tax on Tier-1 retailers of fast moving consumer goods, who are
integrated with Board or its computerized system for real time reporting of sales and
receipts, is proposed to be reduced from 1.5% to 0.25%.
- Rate of minimum tax on persons engaged in sale and purchase of used vehicles is
proposed to be reduced from 1. 5% to 0.25%.
Additional burden of minimum tax
- Currently, all Pakistani Airlines are liable to pay minimum tax at the rate of 0.75%. The
Bill seeks to retain this rate for Pakistan International Airlines Corporation, whereas all
other Pakistani Airlines are proposed to pay minimum tax at 1.25%.
- Rate of minimum tax on dealers or distributors of fertilizers is proposed to be increased

from 0.75% to 1.25%.
- Rate of minimum tax on flour mills is proposed to be increased from 0.25% to 1.25%.
- Rate of minimum tax on motorcycle dealers registered under the Sales Tax Act, 1990 is
proposed to be increased from 0.3% to 0. 5%.
The proposed Minimum Tax rates are as follows:
Minimum Tax
as percentage of
S.No. Person(s) the person’s
turnover for the
year
1 (a) Oil marketing companies, Sui Southern Gas
Company Limited and Sui Northern Gas Pipelines
Limited (for the cases where annual turnover
exceeds rupees one billion.)
(b) Pakistan International Airlines Corporation; and

0.75%
(c) Poultry industry including poultry breeding, broiler
production, egg production And poultry feed
production
2 (a) Oil refineries
(b) Motorcycle dealers registered under the Sales Tax 0.50%

Act,1990
60
3 (a) Distributors of pharmaceutical products, fast moving

consumer goods and cigarettes;
(b) Petroleum agents and distributors who are
registered under the Sales Tax Act,1990;
(c) Rice mills and dealers;
(d) Tier-1 retailers of fast moving consumer goods who

are integrated with Board or its computerized
system for real time reporting of sales and receipts;
(e) Person’s turnover from supplies through e-

commerce including from running an online
marketplace as defined in clause (38B) of section 2.
(f) Persons engaged in the sale and purchase of used

vehicles
0.25%
4 In all other cases 1.25%
Advance tax on import of CKD Kits and batteries for electric vehicle
[Part II of First Schedule]
The newly inserted clause had been inserted in Part II of the First Schedule to the Ordinance, vide
the Tax Laws (Amendment) Ordinance, 2021 dated February 12, 2021. The Bill proposes to
incorporate this change through the Finance Act, 2021. The propose change is to encourage
environment friendly electric vehicle industry, the legislature has reduced advance tax rate to 1%
under section 148 required to be collected at import stage for import of following items:
- CKD Kits of electric vehicles for small cars.

- SUVs with 50kwh battery or below.
- LCVs with 150 kwh battery or below.
Part III,
Division I - Advance tax on dividend
The Bill proposes to omit section 236S, which prescribes withholding tax on payment of dividend-
in-specie. Withholding tax on dividend in cash and dividend in specie are proposed to be covered
in section 150. A corresponding change has been proposed in Division I of Part III of the First
Schedule, to remove reference of section 236S therefrom.
Division IA - Profit on Debt
Currently, the Ordinance provides concessionary withholding tax rate of 10% on profit on debt,
where a taxpayer furnishes a certificate that the yield or profit during the relevant tax year is less
than or equal to Rs. 500,000.
61
The Bill proposes to revoke this concession, thereby applying a withholding tax rate of 15% on all
persons earning such profit which falls under section 151 of the Ordinance.
Division - IB Return on Investment in Sukuks
Section 150A, which deals with withholding tax on return on investment in Sukuks, is proposed to
be omitted, and similar provisions are proposed to be included in section 151 of the Ordinance.
Accordingly, the Bill seeks to make necessary editorial changes in Division IB of Part III of the First
Schedule to the Ordinance, to reflect the proposed amendment.
[Division - II] Payment to Non-Resident -
Reference to newly inserted sub section 1DA of section 152 had been inserted in Division II of Part
III of the First Schedule to the Ordinance, vide the Tax Laws (Amendment) Ordinance, 2021 dated
February 12, 2021. The Bill seeks to incorporate this change through the Finance Act, 2021
Payment for Goods or Services

[Division III of Part III of First Schedule]
- The Bill proposes to omit reduce rate of withholding on supplies of fast moving consumer
goods made by distributer. The newly proposed clause 24C of Part II of Second Schedule
extends the reduced rate 0.25% to the distributor of fast moving consumer goods. To
avail this benefit, name of the distributor should be in the Active Taxpayers’ Lists issued
under the provisions of the Sales Tax Act, 1990 and the Income Tax Ordinance, 2001.
- The Bill proposes a technical correction by substituting the clause (133) of Part I of the
Second Schedule with newly inserted section 65F.
- The Bill proposes to enhance the scope of reduced withholding tax by including oilfield
services, telecommunication services, warehousing services, collateral management
services, travel and tour services in the list of specified services attracting withholding tax
at the rate of 3% in case of resident person providing such activities.
- The Bill also proposes to restrict the scope of reduced WHT rate of 3% by disallowing the
reduced rate to service provider who has agitated taxation of gross receipts before a court of
law.
Royalty paid to resident persons

[Division III of Part III of First Schedule]
The Bill proposes to omit section 153B, therefore, corresponding division containing the relevant
withholding tax rate is also proposed to be omitted.
Export of Services
[Division IVA of Part III of First Schedule]
The Bill proposes to insert new section 154A whereby tax will be deducted @1% on export of
services, and such tax deductible under this section shall fall in Final Tax Regime.
Income from property
[Division V of Part III of First Schedule]
62
The Bill proposes to substitute previous table with new reduced slab rates for income from
property and also proposes to enhance exemption of income from property from Rs. 200,000 to
Rs. 300,000. Below is the newly proposed table:
Sr Gross amount of rent Rate of tax

No.
1 Where the gross amount of rent does not exceed Nil

Rs. 300,000
2 Where the gross amount of rent exceeds Rs. 300,000 but 5 per cent of the gross
does not exceed Rs. 600,000 amount exceeding
Rs. 300, 000
3 Where the gross amount of rent exceeds Rs. 600,000 but Rs. 15,000 plus 10 per
does not exceed Rs. 2,000,000 cent of the gross amount
exceeding Rs. 600, 000
4 Where the gross amount of rent exceed Rs. 2,000,000 Rs. 155,000 plus 25 per
cent of the gross amount
exceeding
CNG Station
[Division VIB of Part III of First Schedule]
Section 234A is proposed to be omitted, therefore, corresponding division containing the relevant
Part-IV
Rate for collection of tax by a stock exchange registered in Pakistan

[Division IIA of Part IV of First Schedule]
Rates for collection of tax NCCPL

[Division IIB of Part IV of First Schedule]
Electricity Consumption
[Division IV of Part IV of First Schedule]
The Bill proposes to substitute previous table with new reduced slab rates for advance tax on
electricity consumption for commercial or industrial consumer. The Bill also proposes to enhance
lower limit of taxable consumption from 400 units to 500 units. Previously, the slab rates were
based on fixed tax amount per unit for each slab, whereas new proposed slab rates are based on
the gross amount of bill. Below are the newly proposed rates:
63
S.No Gross amount of Bill Tax
1 upto Rs. 500 Rs. 0

2 exceeds Rs. 500 but does not 10% of the amount
exceed Rs. 20,000
3 exceeds Rs.20,000 Rs. 1950 plus
12% of the amount exceeding Rs. 20,000 for

commercial consumers Rs. 1950plus
5% of the amount exceeding

Rs. 20,000 for industrial Consumers
The Bill further proposes to reduce the tax exemption limit from PKR 75,000 to PKR 25,000 for
domestic electricity consumption. Below is the proposed rate of tax to be collected on domestic
electricity consumption:
- zero percent the amount if monthly bill is less than Rs.25,000;and

- 7.5% if the amount of monthly bill is Rs. 25,000 or more.
Telephone User
[Division V of Part IV of First Schedule]
The Bill propose to reduce WHT on the subscriber of internet, mobile telephone and prepaid
internet or telephone card from 12.5% to 10% for the Tax Year 2022 and to further reduce it to
8% in subsequent Tax Years.
Cash withdrawal from a bank

[Division VI of Part IV of First Schedule]
The Bill proposes to omit section 231, therefore, corresponding division containing the relevant
Advance tax on transaction in bank

[Division VIA of Part IV of First Schedule]
The Bill proposes to omit section 231AA, therefore, corresponding division containing the relevant
Advance tax on purchase, registration and transfer of motor vehicles

[Division VII of Part IV of First Schedule]
The newly inserted clause had been inserted in Division VII of Part IV of the First Schedule to the
Ordinance, vide the Tax Laws (Amendment) Ordinance, 2021 dated February 12, 2021. The Bill
propose to incorporate this change through the Finance Act, 2021.
[Division IX] Advance tax on purchase of air tickets
The Bill proposes to omit section 236B to the Ordinance, which deals with collection of advance
tax on purchase of air tickets. Therefore, Division IX of Part IV of the First Schedule to the
Ordinance, wherein rate of advance tax to be deducted under section 236B to the Ordinance is
provided, has become redundant. Accordingly, the Bill propose to omit this Division.
64
[Division XIV] Advance tax on sale to distributors, dealers or wholesalers
Under the existing law, every manufacturer or commercial importer is required to collect advance
tax at the rate of 0.7% on sale to distributors, dealers or wholesalers of fertilizers. A new proviso
had been inserted vide Tax Laws (Amendment) Ordinance, 2021 dated February 12, 2021, which
reduced the rate of advance tax to 0.25%, subject to the condition that such distributors, dealers
or wholesalers of fertilizers are either already registered or they get themselves registered under
the Sales Tax Act, 1990 within 60 days of the promulgation of the Tax Laws (Amendment)
Ordinance, 2021.
The Bill proposes to insert new proviso, whereby, following amended proviso is proposed to be
incorporated:
- Reduced rate of 0.25% shall be applicable in case distributors, dealers or wholesalers of

fertilizer are appearing on both the Active Taxpayers’ Lists issued under the provisions of
the Sales Tax Act, 1990 and the Income Tax Ordinance, 2001.
[Division XV] Advance tax on sale to retailers
Currently, under section 236H, every manufacturer, distributor, dealer, wholesaler or commercial
importer of electronics, sugar, cement, iron and steel products, motorcycles, pesticides,
cigarettes, glass, textile, beverages, paint or foam sector, at the time of sale to retailers, and
every distributor or dealer to another wholesaler in respect of the said sectors, is liable to collect
advance tax at the rate of 1% in case of Electronic sale and 0.5% in case of other sale.
The Bill now proposes to enact flat 0.5% advance tax on all transactions covered under section
236H of the Ordinance. As such, 1% rate applicable on electronic sales shall be omitted.
Divisions XVA, XIX, XX, XXI, XXVI, XXVII
The Bill proposes to omit certain sections pertaining to collection of advance tax. Accordingly, the
Bill seeks to omit corresponding Divisions of Part IV of the First Schedule, which are as follows:
Omitted Omitted
Section description
section Division
236HA Advance tax on sale of certain petroleum products XVA
235A Advance tax on domestic electricity consumption XIX
236L Advance tax on purchase of international air tickets XX
236P Advance tax on banking transaction otherwise than through cash XXI
236V Advance tax on extraction of mineral XXVI
Advance tax on persons remitting amounts abroad through credit or debit or

236Y XXVII
prepaid cards
65
Second Schedule
A. AMENDMENTS IN PART I OF THE SECOND SCHEDULE
Income of Modaraba - Clause (100)
The Bill proposes to omit Clause (100) of Part I of the Second Schedule to the Ordinance
which provides exemption in respect of income not being income from manufacturing or
trading activity of a Modaraba registered under the Modaraba Companies and Modaraba
(Floatation and Control) Ordinance, 1980. Accordingly, such income of Modarabas would
now be subject to tax.
Intercorporate Dividend Income Clause (103C)
The Bill proposes to omit Clause (103C) of Part I of the Second Schedule to the Ordinance
which provides exemption on dividend income derived by a company if the recipient of the
dividend, for the tax year is eligible for group relief under section 59B of the Ordinance. As
a consequence of this deletion intercorporate dividend income of such entities would now be
subject to tax.
This is a major policy deviation, as the said exemption, which was in line with international
best practices, was provided after detailed deliberations in order to promote corporate
group structures in the country. Such reliefs are provided to corporate sector across the
globe as an incentive. The change in policy without taking into confidence the stakeholders
would discourage the investors and shatter their confidence on policy makers, as this would
result in increased tax cost of already existing groups who fulfill the required criteria. This
would also likely to result in tax litigations on account of vested rights.
Income of a Special Purpose Vehicle (Clause 136)
The Bill proposes to omit Clause (136) of Part I of the Second Schedule to the Ordinance
which provides exemption on income of a special purpose vehicle as defined in the Asset
Backed Securitization Rules, 1999 made under the Companies Ordinance, 1984 (XLVII of
1984). As such, income derived by Special Purpose Vehicles would now be subject to tax at
the normal rate.
This omission needs to be reconsidered as this provides an alternate tax efficient financing
option to the industry which is in line with the global practices.
B. WITHDRAWAL OF EXEMPTION FROM TOTAL INCOME AND SHIFT TOWARDS TAX

CREDIT REGIME
The Bill proposes to withdraw exemption from income provided under various clauses of
Part I of the Second Schedule to certain sectors with a shift towards tax credit regime, thus
ensuring no change in tax implications. In this regard, a new section 65F of the Ordinance
is proposed to be introduced whereby such sectors would be able to claim tax credits on
their total income subject to the conditions as stipulated under the said section are fulfilled.
Clauses withdrawn are listed in the table below:
66
Clause
Description of exemption
Omitted
(126O) Profits and gains derived by a green field industrial undertaking.
(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.
(143) Profit and gains derived by a startup as defined under section 2(64a) of the
Ordinance.
(126I) Profits and gains derived by a person from an industrial undertaking and engaged
in the manufacture of plant, machinery, equipment and items with dedicated use
(no multiple uses) for generation of renewable energy from sources like solar and
wind.
C. EXEMPTION FROM TOTAL INCOME
The Bill proposes to withdraw exemption from income provided under various clauses of
Part I of the Second Schedule to various Individuals, entities, and sectors as under:
Clause
Omitted
(4) Income chargeable under the head “Salary” received by-
 Pakistani seafarer, working on Pakistan flag vessels for one hundred and
eighty three days or more during a tax year; or
 Pakistani seafarer working on a foreign vessel provided that such income

is remitted to Pakistan, not later than two months of the relevant 3[tax
year], through normal banking channels.
(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.
67
Clause
Omitted
(53A) The following perquisites received by an employee by virtue of his employment,
namely:-
(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.
(57)(1)(iii) Income derived by Sheikh Sultan Trust, Karachi through voluntary contributions,
house property and investments in securities of the Federal Government.
(72A) Income derived by Sukuk holder from Sukuk issued by the “Second Pakistan
International Sukuk Company Limited” and “The Third Pakistan International
Sukuk Company Limited including any gain on disposal of such Sukuk.
(74) Profit on debt derived by Hub Power Company Limited on or after July 1, 1991 on
its bank deposits or accounts with financial institutions directly connected with
financial transactions relating to the project operations.
(80) Income derived by a resident individual who is a citizen of Pakistan 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.
(90) Exemption in respect of Profit on debt payable by an industrial undertaking in
Pakistan on:
 moneys borrowed under a loan agreement entered into with financial
institution in a foreign country approved by the Federal Government
through a general or special order; and
 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 such 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.
(90A) Profit on debt derived by any person on bonds issued by Pakistan Mortgage
Refinance Company to refinance the residential housing mortgage market, for a
period of five years with effect from the 1st day of July, 2018.
(91) Income of a text book board of a Province established under any law for the time
being in force.
68
Clause
Omitted
(98) Income derived by any Board (other than Pakistan Cricket Board) or other
organization established by Government in Pakistan for the purposes of
controlling, regulating, or encouraging major games and sports recognized by
Government.
(101) Profits and gains derived 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, such exemption was
available from the period July 01, 2001 to June 30, 2024.
(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.
(104) Income derived by the Libyan Arab Foreign Investment Company being dividend
income received from Pak-Libya Holding Company.
(105) Income derived by the Government of Kingdom of Saudi Arabia being dividend
income received from Saudi-Pak Industrial and Agricultural Investment Company
Limited.
(105A) Income derived by Kuwait Foreign Trading Contracting and Investment Company
or Kuwait Investment Authority being dividend income received from Pak-Kuwait
Investment Company in Pakistan.
(110B) Gain derived from transfer of 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.
(110C) Any gain derived from transfer of a bond issued by Pakistan Mortgage Refinance
Company to refinance the residential housing mortgage market. Such exemption
was available for the period July 01, 2018 to June 30, 2023.
(114) Capital gains derived by a person from an 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)
(114AA) Any income chargeable under the head “capital gains” derived by a resident
individual from the sale of constructed residential property.
(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.
(126BA) Profits and gains derived by a refinery set up between the 1st day of July, 2018
and the 30th day of June, 2023 with minimum 100,000 barrels per day
production capacity for a period of twenty years beginning in the month in which
the refinery is set up or commercial production is commenced, whichever is later.
69
Clause
Omitted
(126G) Profit and gains derived for a period of five years from the date of start of
commercial production from specified projects that have been declared ‘Pioneer
Industry’ by Economic Coordination Committee of the Cabinet of the following
companies:
1. M/s. Astro Plastics (Pvt.) Ltd. from their Biaxially Oriented

Polyethylene, Terephthalate (BOPET) Project; and
2. M/s. Novatex Ltd. from their Biaxially Oriented Polyethylene Terephtalate

(BOPET) Project
(131) Income of the following persons on the conditions that foreign exchange was
brought into Pakistan:
 Of company 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
 Of any other taxpayer as is derived in any assessment year by way of

fees for technical services rendered outside Pakistan to a foreign
enterprise under an agreement entered into in this behalf.
(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 set up or commercial
production is commenced whichever is later.
(135A) Income derived by a non-resident from investment in OGDCL exchangeable
bonds issued by the Federal Government.
(139) 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;
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
(141) Profit and gains derived by LNG Terminal Operators and Terminal Owners for a
period of five years beginning from the date when commercial operations are
commenced.
70
Clause
Omitted
(146) Income which was not chargeable to tax prior to the commencement of the
Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018) of any
individual domiciled or company and association of persons resident in the Tribal
Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan
under paragraph (d) of Article 246 of the Constitution with effect from the 1st
day of June, 2018 to the 30th day of June, 2023 (both days inclusive).
D. EXEMPTION ALREADY EXPIRED / EXPIRING ON JUNE 30, 2021
Under Part I of the Second Schedule, there were few exemptions from total income which
had either already been expired or are expiring on June 30, 2021. The Bill proposes to omit
claused covering such exemptions as under:
Clause
Omitted
(72) Profit on debt derived by a non-resident person on the following:
 In respect of private loans to be utilized on projects approved by the

Federal Government;
 On a loan in foreign exchange against export letter of credit which is

used exclusively for the export of goods manufactured or processed for
exports in Pakistan; and
 Being a foreign individual, company or firm or association of person in

respect of a foreign loan as is utilized for industrial investment in
Pakistan
(126C) Profits and gains derived by a taxpayer from an industrial undertaking set up in
Larkano Industrial Estate between July 1, 2008 and June 30, 2013 for a period of
ten years.
(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 July 1, 2014 to June 30, 2017 engaged in processing of locally grown
fruits, for a period of five years.
(126J) Profits and gains derived from an industrial undertaking set up between July 1,
2015 and June 30, 2016 engaged in operating warehousing or cold chain facilities
for storage of agriculture produce for a period of three years.
(126K) Profits and gains derived by a taxpayer for a period of fours, from an industrial
undertaking set up between July 1, 2015 and June 30, 2017 for establishing and
operating a halal meat production and obtained a halal certification in this regard,
such exemption.
(126L) Profits and gains derived from an industrial undertaking set up in the Provinces of
Khyber Pukhtunkhwa and Baluchistan between July 1, 2015 and June 30, 2018
for a period of five years.
71
Clause
Omitted
(126N) Profits and gains derived from an industrial undertaking which were setup and
commercial production has commenced between July 01, 2015 and June 30,
2017 and duly certified by the Pakistan Telecommunication Authority for
manufacturing of cellular mobile phones for a period of five year.
E. AMENDMENT IN EXISTING EXEMPTION CLAUSES
The Bills proposes to enhance and restrict scope of certain existing exemptions provided
under Part I of the Second Schedule as under:
Clause
Existing Proposed amendment
reference
(22) Any payment from a provident fund to Any payment from a provident
which the Provident Funds, 1925 (XIX of fund to which the Provident Funds,
1925) applies. 1925 (XIX of 1925) applies.
Provided that exemption under this

clause shall not be available to the
payments representing profit on
debt earned on provident fund
contributions exceeding rupees five
hundred thousand. The profit on
debt exceeding rupees five
hundred thousand shall be
chargeable to tax @ 10% as
separate block of income and the
person making payment shall
deduct tax at the said rate.”
(23) The accumulated balance due and becoming The accumulated balance due and
payable to an employee participating in becoming payable to an employee
recognized provident fund. participating in recognized
provident fund.

debt earned on provident fund
contributions exceeding rupees five
hundred thousand. The profit on
debt exceeding rupees five
hundred thousand shall be
separate block of income and the
person making payment shall
deduct tax at the said rate.
72
Clause
reference
(23C) Any withdrawal of accumulated balance Any withdrawal of accumulated
from approved pension fund that represent balance from approved pension
the transfer of balance of approved fund that represent the transfer of
provident fund to the said approved pension balance of approved provident fund
fund under the Voluntary Pension System to the said approved pension fund
Rules, 2005. under the Voluntary Pension
System Rules, 2005.

debt earned on accumulated
balance in an approved pension
fund. This profit on debt shall be
separate block of income.
(75) Income derived on account of profit on debt The scope of this clause is now
by an agency of a foreign Government, a been enhanced and capital gains
foreign national (company, firm or derived from such loan shall also
association of persons), or any other non- be exempt.
resident person approved by the Federal
Government from money borrowed under a
loan agreement or foreign currency
instrument approved by the Federal
Government.
(78) Any profit on debt derived from foreign The Bill proposes to extend the
currency accounts held with authorised scope of the exemption to include
banks in Pakistan, or certificate of profit on debt derived by non-
resident individuals, non-resident
investment issued by investment banks in
association of persons and non-
accordance with Foreign Currency Accounts
resident companies from the said
Scheme introduced by the State Bank of
bank accounts and investments.
Pakistan, by citizens of Pakistan and foreign
nationals residing abroad, foreign It has also been clarified that tax
association of persons, companies withholding under section 152 on
registered and operating abroad and foreign payment of such profit on debt will
nationals residing in Pakistan. be applicable at 0%.
(79) Any profit on debt derived from a rupee The Bill proposes to extend the
account held with a scheduled bank in scope of exemption applicable for
Pakistan by a citizen of Pakistan residing non-resident individuals holding a
abroad, where the deposits in the said POC or NICOP or CNIC.
account are made exclusively from foreign
exchange remitted into the said account, is It has also been clarified that tax
exempt from tax. withholding under section 152 on
payment of such profit on debt will
be applicable at 0%.
73
Clause
reference
(132) Profits and gains derived by a taxpayer from Exemption from profit and gains
power generation project set up in Pakistan shall be restricted to the existing
on or after July 1, 1988 are exempt from power project and also to those
tax subject to the conditions stipulated persons who are entering into
under clause 132. agreement or to whom letter of
intent is issued by the Federal or
Provincial Government, for setting
up an electric power generation
project in Pakistan upto June 30,
2021.
(126B) Profit and gains derived by Khalifa Under the substituted clause,
Coastal Refinery for a period of twenty profit and gains derived by a
years beginning in the month in which refinery shall be exempt in
the refinery is setup or commercial respect of the following
production is commenced, whichever is projects:
the later.
(a) from new deep conversion
refinery of at least 100,000
barrels per day for which
approval is given by the
Federal Government before
the 31st day of December,
2021; or
(b) for the purpose of

upgradation, modernization or
expansion project of deep
conversion refinery of at least
100,000 barrels per day of
any existing refinery which
makes undertaking to the
Federal Government in writing
before the 31st day of
December, 2021 in this
regard:
Provided that this exemption shall

be available for a period of ten
years beginning from the date of
commencement of commercial
production in the case of new
refinery and from the date of
completion of up gradation,
modernization or expansion project
of existing refinery.";
74
E. INSERTION OF EXEMPTION CLAUSES
The Bill proposes to insert new clauses under Part I of the Second Schedule and provide
exemption to various sectors and Individual as under:
Clause
reference
(103) Dividend income and long term capital gains of any venture capital fund from
investments in zone enterprises as defined in clause (p) of section 2 of the Special
Technology Zones Authority Ordinance, 2020 for a period of ten years
commencing from issuance of license by the Authority to the zone enterprise.”;
(126EA) Profits and gains derived by –
(a) Zone developer as defined in section 2 of the Special Technology

Zones Authority Ordinance, 2020 from development and operations of
the zones for a period of ten years starting from the date of signing of
the development Agreement;
(b) Profits and gains of Zone Enterprises as defined in section 2 of the

Special Technology Zones Authority Ordinance, 2020 for a period of
ten years from the date of issuance of license by the Special
Technology Zone Authority; and
(c) Special Technology Zones Authority established under the Special

Technology Zones Ordinance 2020
(132AA) Profits and gains derived from sale of electricity by National Power Parks
Management Company Limited commencing from the date of change of ownership
as a result of privatization by the Privatization Commission of Pakistan
(132C) Profits and gains derived by a taxpayer from a bagasse/biomass based
cogeneration power project having one or more boilers of not less than 60 bar
(kg/CM3) pressure each, commissioned after the first day of January 2013.
Clause (66), Part I of the Second Schedule
The Bill proposes to insert following entities under sub-clause (1), table 1, of clause (66), Part I
of the Second Schedule:
75
S.No Name
1 Islamic Naya Pakistan Certificates Company Limited (INPCCL).
2 Abdul Sattar Edhi Foundation.
3 Patient’s Aid Foundation.
4 Indus Hospital and Health Network.
5 Securities and Exchange Commission of Pakistan.
6 Dawat-e-Hadiya, Karachi.
7 Privatisation Commission of Pakistan.
8 The Citizens Foundation.
9 Sundus Foundation.
10 Ali Zaib Foundation.
11 Fauji Foundation.
12 Make a Wish Foundation.
13 Audit Oversight Board.
14 Supreme Court Water Conservation Account.
15 Political Parties registered with Election Commission of Pakistan.
F. REDUCTION IN TAX RATES
I. Part II of the Second Schedule provides reduced tax rates in respect of various
taxpayers and specified transactions. Following clauses of Part II have been omitted or
amended:
Clause
Description / Existing status Comments on amendment
reference
(3) Income derived by a taxpayer from The Bill proposes to omit this
services rendered outside Pakistan and clause. A new section 154A
construction contracts executed outside is proposed to be introduced,
Pakistan is subject to tax at the reduced whereby such income will be
rate i.e. 50% of the tax payable as taxed at 1%.
applicable in case of similar services which
are rendered and construction contracts
executed in Pakistan. However, such
reduce rate is subject to the conditions
that foreign exchange is brought into
Pakistan.
(3B) Income of Pakistan Cricket Board (“PCB”) The Bill proposes to omit this
derived from sources outside Pakistan clause as such income would
including media rights, gate money, now be chargeable to tax at
sponsorship fee, in- stadium rights, out- the normal rates as provided
stadium rights, payments made by under the First Schedule to
International Cricket Council, Asian the Ordinance.
Cricket Council or any other Cricket Board
is subject to taxed at 4% of the gross
receipts from such sources.
76
Clause
reference
(5A) The rate of tax to be deducted under sub- The Bill proposes to exclude
section (2) of section 152, in respect of clauses (78) and (79) of Part I of
payments from profit on debt payable to a the Second Schedule in respect of
non-resident person having no permanent investment by specified persons
establishment in Pakistan, shall be 10% of the through specified accounts, which
gross amount paid. is subject to tax at 0%.
(5B) Capital gains derived by a person from the The Bill proposes to omit this
sale of shares or assets by a Private clause as such capital gain
limited company to Private Equity and would now be subject to tax
Venture Capital Fund are subject to tax at at the prescribed rates as
10% of such gains. provided under the First
Schedule to the Ordinance.
(18) Income of Modaraba is subject to tax at The Bill proposes to omit this
25% excluding such income which falls clause as such the said
under Division III, Part I of the First income of Modaraba would
Schedule or section 153 or section 154 now be subject be tax at the
applies. corporate tax rates as
provided under the First
Schedule to the Ordinance.
(18A) Company setting up an industrial The Bill proposes to omit this
undertaking between the first day of July, clause.
2014 to the thirtieth day of June, 2017, is
subject to reduced tax rate of 20% for a
period of five years beginning from the
month in which the industrial undertaking
is set up or commercial production is
commenced whichever is later.
Such relief was available in cases where

50% of the cost of the project including
working capital is through owner equity
foreign direct investment.
77
Clause
reference
(18B) Tax liability is reduced by 2% in case of a The Bill proposes to omit this
company whose shares are traded on clause, as such relief of
stock exchange if; reduced tax liability by 2%
would not be available,
(i) It fulfills prescribed shari’ah hence, the income would be
compliant criteria approved by subject to tax at the normal
State Bank of Pakistan, Securities corporate tax rate.
and Exchange Commission of
Pakistan and Board;
(ii) Derives income from

manufacturing activities only;
(iii) has declared taxable income for

the last three consecutive tax
years: and
(iv) has issued dividend for the last five

consecutive tax years.
(24A) The rate of tax, under clause (a) of sub-section The Bill proposes to exclude large
(1) of section 153, from distributors of distribution houses who fulfill all
cigarette and pharmaceutical products and for the conditions for a large import
large distribution houses who fulfill all the house as laid down under clause
conditions for a large import house as laid (d) of sub-section (7) of section
down under clause (d) of sub-section (7) of 148, for large import houses from
section 148, for large import houses, shall be this clause.
1% of the gross amount of payments.
(24AA) Rate of tax under section 152 in the case The Bill proposes to omit this
of M/S CR-NORINCO JV (Chinese clause as such concessional
Contractor) as recipient, on payments rate is no more available.
arising out of commercial contract
agreement signed with the Government of
Punjab for installation of electrical and
mechanical (E&M) equipment for
construction of the Lahore Orange Line
Metro Train Project is 6% of the gross
amount of payment.
(24C) The rate of tax under clause (a) of sub-section The Bill proposes to substitute
(1) of section 153 in case of dealers and sub- this clause with following:
dealers of sugar, cement and edible oil, as
recipient of the payment, shall be 0.25% of the The rate of tax under clause (a)
gross amount of payments of sub-section (1) of section 153
in the case of distributors,
dealers, sub-dealers, wholesalers
and retailers of fast moving
consumer goods, fertilizer,
78
Clause
reference
electronics excluding mobile
phones, sugar, cement, and
edible oil as recipient of payment
shall be 0.25% of gross amount
of payments subject to the
condition that beneficiaries of
reduced rate are appearing on the
Active Taxpayers’ Lists issued
under the provisions of the Sales
Tax Act, 1990 and the Income
Tax Ordinance, 2001 (XLIX of
2001):
Provided that the benefit under

this clause shall only be available
to those Tier-1 retailers as
defined under Sales Tax Act, 1990
who are integrated and
configured with Board or its
computerized system for real time
reporting of sales or receipts.”;
(24D) The rate of minimum tax under sub-section (1) The rate of minimum tax under
of section 113 in case of dealers and sub- sub-section (1) of section 113 in
dealers of sugar, cement and edible oil shall be the case of distributors, dealers,
0.25% subject to the condition that the names sub-dealers, wholesalers and
of such dealers and sub-dealers are appearing retailers of fast moving consumer
on the active taxpayers’ lists issued under the goods, fertilizer, locally
provisions of the Sales Tax Act, 1990 and the manufactured mobile phones,
Income Tax Ordinance, 2001 (XLIX of 2001). sugar, electronics excluding
imported mobile phones, cement
and edible oil shall be 0.25%
subject to the condition that
beneficiaries of reduced rate are
appearing on the Active
Taxpayers’ Lists issued under the
provisions of the Sales Tax Act,
1990 and the Income Tax
Ordinance, 2001:
Provided that the benefit under

this clause shall be available to
only those Tier-1 retailers as
defined under Sales Tax Act, 1990
who are integrated and
configured with Board or its
79
Clause
reference
computerized system for real time
reporting of sales or receipts.”
(28A) Rate of advance tax collection under 148 The Bill propose to omit this
of the Ordinance on import of Hybrid Cars clause.
is subject to reduced rate as following.
Engine Capacity Rate of

reduction
Upto 1200 cc 100%
1201 to 1800 cc 50%
1801 to 2500 cc 25%
(28B) Advance tax collection on cash withdrawal This clause has been
was made at the reduce rate of 0.15% omitted, due to proposed
under section 231A by an exchange omission of section 231A.
company, duly licensed and authorized by
the State Bank of Pakistan, exclusively
dedicated for its authorized business
related transactions, subject to the
condition that a certificate issued by the
concerned Commissioner Inland Revenue
for a financial year mentioning details and
particulars of its Bank Account being used
entirely for business transactions is
provided.
(28E) The rate of minimum tax under section The Bill proposes to extend the
113 shall be 0.5% till Tax Year 2020, in applicability of tax rate of 0.5%
case of a trader of yarn being an under section 113 for indefinite
individual. period.
II. The Bill proposes to insert new clauses under Part II of the Second Schedule which
provides reduced tax rates in respect of various taxpayers and specified transactions.
Following clauses of Part II have been inserted:
Clause Description of exemption
(5AB) The rate of tax to be deducted under section 151 shall be ten percent from the profit
on debt from a debt instrument, whether conventional or Shariah compliant, issued
by the Federal Government under the Public Debt Act, 1944 (XVIII of 1944) or its
wholly owned special purpose company, purchased by a resident citizen of Pakistan
who has already declared foreign assets to the Board through a Foreign Currency
Value Account (FCVA) maintained with authorized banks in Pakistan under the
foreign exchange regulation issued by the State Bank of Pakistan.
Provided that the tax so deducted shall be the final tax.
80
(9AA) In respect of import of white sugar from the 25th day of August, 2020 to the 15th
day of November, 2020 both days inclusive, tax under section 148 shall be collected
at the rate of 0.25% as per quantity, quality, mode and manner prescribed by
Ministry of Commerce during the said period.
(9AB) Tax under section 148 on commercial import of the white sugar shall be collected at
the rate of 0.25% from the 26th day of January 2021 till the 30th day of June, 2021.
(9AC) Subject to quota allotment by Commerce Division, tax under section 148 shall be
collected at the rate of 0.25% on import of raw sugar imported by sugar mills from
the 26th day of January, 2021 to the 30th day of June, 2021 both days inclusive
provided that such imports shall not exceed fifty thousand metric tons per sugar mill
and three hundred thousand metric tons in aggregate by the sugar industry.”;
(18C) The rate of tax as specified in Division-III of Part-I of First Schedule shall be reduced
to 7.5% in case of dividends declared by a company as are “attributable” to profits
and gains derived from a bagasse and biomass based cogeneration power project
qualifying for exemption under clause (132C) of Part-I of this Schedule:
Provided that the amount of “attributable” dividends shall be computed in accordance
with the following formula, namely:-
AXB/C
Where-
A is the total amount of dividend for the year;
B is the accounting profit for the year attributable to the bagasse and biomass
based cogeneration power project qualifying for exemption under clause
(132C) of Part-I of this Schedule; and
C is the total accounting profit before tax for the year.
Explanation.– For the removal of doubt, it is clarified that accounting profit

attributable to the bagasse/biomass based cogeneration power project would be
determined by the external auditor of the company and the external auditor shall
issue a certificate to this effect.”;
(56) After sub-clause (iii), the following new sub-clause shall be inserted, namely:-
(iiia) Goods temporarily imported into Pakistan by international athletes which would
be subsequently taken back by them within one hundred and twenty days of
temporary import”
(ii) after sub-clause (xii), the following new sub-clauses shall be added, namely:–
(xiii) Goods produced or manufactured and exported from Pakistan which are
subsequently imported in Pakistan within one year of their exportation,
81

provided conditions of section 22 of the Customs Act, 1969 (IV of 1969) are
complied with;
(xiv) Plant and machinery imported for setting up of a bagasse/biomass based

cogeneration power project qualifying for exemption under clause (132C) of
Part-I of this Schedule.
(xv) Persons authorized under Export Facilitation Scheme 2021 notified by the
Board with such scope, conditions, limitation, restrictions and specification of
goods.
(xvi) motor vehicles upto 850cc in CBU condition;
(xvii) Printed books excluding brochures, leaflets and similar printed matter, whether
or not in single sheets.(PCT code 49.01); and
(xviii) Newspapers, journals and periodicals, whether or not illustrated or containing
advertising material (PCT code 49.02) “
(60DA) The provisions of section 148 shall not apply to the import of the capital equipment
as defined in section 2 of the Special Technology Zones Ordinance 2020 ( XIII of
2020) by –
(a) zone developers as defined in section 2 of the Special Technology Zones
Ordinance 2020 for consumption in the special technology zones for the
period of 10 years commencing from the date of signing the development
agreement;
(b) zone enterprises as defined in section 2 of the Special Technology Zones
Authority Ordinance, 2020 for a period of ten years from the date of
issuance of license by the Special Technology Zone Authority; and
(c) Special Technology Zones Authority established under the Special

Technology Zones Ordinance 2020.”
(79A) The provisions of clause (b) of sub-section (1) of section 153 shall not apply to
payments received by National Telecommunication Corporation against provision of
telecommunication services including ancillary services specified in sub-section (3) of
section 41 of the Pakistan Telecommunication (Re-organization) Act, 1996 (XVII of
1996).";
(91) in clause (91), in paragraph (iv), after sub-paragraph (xvi), the following new sub-
paragraphs shall be added, namely:– “(xvii) Corn harvester/corn picker and silage
maker with their respective PCT heading”;
(111AB) The provisions of section 100BA and rule 1 of the Tenth Schedule shall not apply to
non-resident individual holding Pakistan Origin Card (POC) or National ID Card for
Overseas Pakistanis (NICOP) or Computerized National ID Card (CNIC) maintaining a
Foreign Currency Value Account (FCVA) or Non-resident Pakistani Rupee Value
Account (NRVA) with authorized banks in Pakistan under the foreign exchange
regulations issued by the State Bank of Pakistan."
82
(118) The provisions of withholding taxes contained in the Income Tax Ordinance, 2001
(XLIX of 2001) shall not apply to Islamic Naya Pakistan Certificates Company Limited
(INPCCL) as a recipient.
(119) The provisions of section 153(1)(a) shall with effect from the first day of July, 2020
not apply to distributors, dealers, wholesalers and retailers of locally manufactured
mobile phone devices as withholding agent”
G. Reduction in Tax Liability
Part III of the Second Schedule provides for reduction in tax liability of various
taxpayers. Following clauses of Part III have been omitted or amended:
Clause
Description Comments on amendment
reference
(2) Tax liability of a teacher or a researcher, The Bills proposes to omit
employed in a non-profit education or this clause hence no relief
research institution duly recognized by would be available and total
Higher Education Commission, a Board salary income of such
of Education or a University recognized persons shall be taxed at the
by the Higher Education Commission, normal rate.
including Government research
institution is subject to a reduction to
the extent of 25% of gross tax liability in
respect of income from salary.
(7) Tax liability of a foreign filmmaker from The Bills proposes to omit
making films in Pakistan is reduced by this clause, therefore no
50% on income derived from filmmaking concession would be available
in Pakistan. and income derived by such
person shall now be subject
to tax at the normal tax
rates.
(8) Tax liability of resident companies The Bills proposes to omit,
deriving income from filmmaking shall therefore, no concession
be reduced by 70% on income from would be available and total
filmmaking. income derived by such
resident companies shall be
subject to tax at the normal
rates.
(9) Tax liability in respect of profits and The Bill proposes that now
gains derived by a person from low cost only those persons would be
housing projects where maximum sale able to take benefit of this
price of a single housing unit is Rs. 2.5 clause who have commenced
Million, is reduced to the extent of 50% their low cost housing
subject to certain conditions as laid projects on or before June
down under Clause (9), Part III. 30, 2024.
83
Clause
Description Comments on amendment
reference
Under the said clause, no time period
was specified during which a person is
required to commence such low-cost
housing project.
(9B) A person was able to avail relief of The Bill specifies time period i.e.
reduction in tax liability to the extent of on or before June 30, 2024 during
90% in case of low-cost housing which a person involved in low-
developed or approved by NAPHDA or cost housing project is required to
under the Ehsaas Programm. No time commence its project in order to
period was specified under which a claim relief on tax liability.
person is required to commence its
project.
Under the said clause, no time period
was specified during which person is
required to commence such low-cost
housing project.
II. The Bill proposes to insert new clauses under Part III of the Second Schedule which
provides for reduction in tax liability of various taxpayers. Following clauses of Part III have
been inserted:
Clause
Description
reference
(17) The tax payable by cotton ginners on their income and profits shall not be more
than sum of 1% of their turnover from cotton lint, cotton seed, cotton seed oil and
cotton seed cake:
Provided that the tax so payable shall be final tax in respect of their cotton ginning
and oil milling activities only.
(18) The rate of withholding tax on value of offshore supply contract of an Independent
Power Producer located wholly or partly in territories of AJ and K shall be 1%
provided:
(i) PPIB has issued Letter of Support for the project;
(ii) its EPC Contract has been executed and submitted to NEPRA for EPC stage
tariff determination prior to the enactment of Finance Act, 2018;
(iii) offshore supply contract arrangement of offshore supply contractor having

permanent establishment in Pakistan falls under the purview of cohesive
business operation as contemplated under Income Tax Ordinance, 2001; and
(iv) such 1% tax shall be full and final liability of the offshore contractor.
84
Clause
Description
reference
(19) The tax payable by woman enterprises on profit and gains derived from business
chargeable to tax under the head “Income from Business” shall be reduced by
25%.
Explanation.- For the purpose of this clause a woman enterprise means a startup
established on or after first day of July 2021 as sole proprietorship concern owned
by a woman or an AOP all of whose members are women or a company whose
100% shareholding is held or owned by women:
Provided that benefit of this clause shall not be available to a business that is
formed by the transfer or reconstitution or reconstruction or splitting up of an
existing business.”
Part IV
Clause (11A)
The Bill proposes to withdraw exemption of minimum tax payable under section 113 of the
Ordinance of the following persons:
 Non-profit organizations approved under clause (36) of section 2 or clause (58) or

included in clause (61) of Part-I of this Schedule;
 Taxpayer who qualifies for exemption under clause (133) of Part-I of this Schedule in
respect of income from export of computer software or IT services or IT enabled services
 Modaraba qualifying for exemption under clause (100) of Part-I of this Schedule.]
 Corporatized entities of Pakistan Water and Power Development Authority, so far as they
relate to their receipts on account of sales of electricity, from the date of their creation
upto the date of completion of the process of corporatization i.e. till the tariff is notified;
 Companies, qualifying for exemption under clause (132B) of Part-I of this Schedule, in
respect of receipts from a coal mining project in Sindh, supplying coal exclusively to
power generation projects.
 Pakistan International Sukuk Company Limited.”
 Taxpayers qualifying for exemption under clauses (126K) of Part-I of this Schedule in
respect of income from operating halal meat production, during the period mentioned in
clause (126K).
Further, the Bill also propose to provide exclusion from minimum tax payable under section 113
of the Ordinance to the following persons:
 Islamic Naya Pakistan Certificates Company Limited (INPCCL);
 Receipts from sale of electricity produced from a bagasse and biomass based co-
generation power project qualifying for exemption under clause (132C) of Part-I of this
Schedule;
85
 New entity taking over National Power Parks Management Company Limited in the eve of
privatization;
 Persons qualifying for exemption under clause (126E) of Part I of this Schedule for tax
year 2021 and onwards
 Persons qualifying for exemption under clause (126EA) of Part I of this Schedule;
 Persons mentioned in Table I of clause (66) of Part I of Second Schedule.
Clause (12B)
Under the existing clause, the provisions of section 148 shall not apply to the import of goods
specified under the said clause for a period commencing from March 20, 2020 and ending on
September 30, 2020. The Bill proposes to extend the said exemption for the period from
September 30, 2020 to June 30, 2021.
Clause (12N), Part IV, Second Schedule
The Bill proposes to insert new clause 12N, providing for specific exemption from application of
the provisions of sections 148 and 154 on the imports and exports of the specified foods and
general items which takes place within the jurisdiction of Border sustenance markets.
The provision of section 148 and 154 of the Ordinance shall not apply on the imports of the
specified food items.
The exemption under this clause shall be available on the import of goods subject to the following
conditions, namely:
(i) Such goods shall be supplied only within the limits of Border Sustenance Markets
established in cooperation with Iran and Afghanistan;
(ii) If the goods, on which exemption under this table has been availed, are brought outside the
limits of such markets, income tax shall be charged on the import value as per provisions of
section 148 of this Ordinance;
(iii) Such items in case of import, shall be allowed clearance by the Customs Authorities subject
to furnishing of bank guarantee equal to the amount of income tax involved and the same
shall be released after presentation of consumption certificate issued by the Commissioner
Inland Revenue having jurisdiction;
(iv) The said exemption shall only be available to a person upon furnishing proof of having a
functional business premises located within limits of the Border Sustenance Markets; and
(v) Breach of any of the conditions specified herein shall attract relevant legal provisions of the
Ordinance, besides recovery of the amount of income tax along with default surcharge and
penalties involved.
86
Clause (47B)
Under the existing law, the provision of the sections 150, 151, 233 and Part I, Division VII of the
First Schedule shall not apply to the Modaraba” and “or a Private Equity and Venture Capital Fund.
The Bill proposes to withdraw such exemption.
I. INSERTION OF EXEMPTION CLAUSES
The Bill proposes to insert new clauses under Part IV of the Second Schedule and provide exemption
from specific provisions to various sectors and Individuals as under:
No provisions of law shall apply for recouping of tax credit already allowed to National
Power Parks Management Company Limited for investment in plant and machinery in the
(4A)
eve of privatization merely for the reasons of change in its ownership pattern or debt to
equity ratio.”;
(12F) The provision of section 148 shall not apply on import of 1.5 million tons of wheat having
PCT Heading 1001.1900 and 1001.9900 in pursuance of Cabinet Decision in case
No.399/23/2020 dated the 16th June, 2020
(12G) The provisions of section 148 shall, in pursuance of the Cabinet Decision in case No.
541/30/2020 dated the 4th August, 2020, not apply on import by the Trading Corporation
of Pakistan of 300,000 metric tons of white sugar having PCT heading
1701.9910,1701.9920, specification B.
(12H) (a) The provisions of section 148 shall not apply on import of following goods for a period
of three months starting from the 23rd of June, 2020, namely:-
S.No. Description PCT Code
(1) (2) (3)

1. Oxygen gas 2804.4000
2. Cylinders (for oxygen gas) 7311.0090
3. Cryogenic tanks (for oxygen gas) 7311.0030
; and
(b) the concessions given in this clause shall also apply in respect of the letters of credit
opened or goods declaration forms filed on or after the 23rd June, 2020;
(12I) The provisions of section 148 shall not apply on import of 83 X Micron sprayers for Anti-
Locust Operation (Respective heading) by National Disaster Management Authority
(NDMA).
(12J) The provisions of section 148 shall, in pursuance of the Cabinet Decision in case No.
34/02/2021, dated the 12th January, 2021, not apply on import of three hundred
87

thousand metric tons of wheat through tendering process by the Trading Corporation of
Pakistan;
(12K) (a) The provisions of section 148 shall not apply on import of following goods by the
manufacturers of oxygen for a period of three months starting from the 25th day of
December, 2020, namely:-

(1) (2) (3)
1. Cryogenic Tanks (for oxygen Gas) 7311.0030
(b) the concessions given in this clause shall also apply in respect of the letters of credit
opened or goods declaration forms filed on or after the 25th day of December, 2020;
(12L) The provisions of section 148 and 153 shall not apply on import and subsequent supply of
five hundred thousand metric tons of white sugar imported by the Trading Corporation of
Pakistan;
(12M) The provisions of section 148 shall not apply on import of following goods for a period of
one hundred and eighty days starting from the 14th day of May, 2021, namely:-

(1) (2) (3)
1. Oxygen 2804.4000
2. Other (Oxygen Cylinders) 7311.0090
3. For Cryogenic (Tanks/Vessels) 7311.0030
Oxygen Concentrators/Generators/Manuf Respective
acturing Plants of all specifications and headings”;
capacities.
The provisions of section 153 shall not apply to commodity futures contracts listed on a
(43G)
Futures Exchange licensed under the Futures Market Act, 2016 (XIV of 2016).”
The provisions of section 153 shall not apply on the purchase of used motor vehicles from
(45B)
general public.”
After sub-clause (iii), the following new sub-clause shall be inserted, namely:-
(iiia) Goods temporarily imported into Pakistan by international athletes which would be
(56) subsequently taken back by them within one hundred and twenty days of temporary
import”
(ii) after sub-clause (xii), the following new sub-clauses shall be added, namely:–
88
(xiii) Goods produced or manufactured and exported from Pakistan which are
subsequently imported in Pakistan within one year of their exportation, provided
conditions of section 22 of the Customs Act, 1969 (IV of 1969) are complied with;
(xiv) Plant and machinery imported for setting up of a bagasse/biomass based

cogeneration power project qualifying for exemption under clause (132C) of Part-I
of this Schedule.
(xv) Persons authorized under Export Facilitation Scheme 2021 notified by the Board
with such scope, conditions, limitation, restrictions and specification of goods.
(xvi) motor vehicles upto 850cc in CBU condition;
(xvii) Printed books excluding brochures, leaflets and similar printed matter, whether or
not in single sheets.(PCT code 49.01); and
(xviii) Newspapers, journals and periodicals, whether or not illustrated or containing

advertising material (PCT code 49.02) “
The provisions of section 148 shall not apply to the import of the capital equipment as
defined in section 2 of the Special Technology Zones Ordinance 2020 ( XIII of 2020) by –
(d) zone developers as defined in section 2 of the Special Technology Zones Ordinance
2020 for consumption in the special technology zones for the period of 10 years
commencing from the date of signing the development agreement;
(60DA)
(e) zone enterprises as defined in section 2 of the Special Technology Zones Authority
Ordinance, 2020 for a period of ten years from the date of issuance of license by
the Special Technology Zone Authority; and
(f) Special Technology Zones Authority established under the Special Technology
Zones Ordinance 2020.”
The provisions of clause (b) of sub-section (1) of section 153 shall not apply to payments
received by National Telecommunication Corporation against provision of
(79A) telecommunication services including ancillary services specified in sub-section (3) of
section 41 of the Pakistan Telecommunication (Re-organization) Act, 1996 (XVII of
1996).";
Under clause (91), in paragraph (iv), after sub-paragraph (xvi), the following new sub-
paragraphs shall be added, namely:–
(91)
“(xvii) Corn harvester/corn picker and silage maker with their respective PCT heading”;
89
The provisions of section 100BA and rule 1 of the Tenth Schedule shall not apply to non-
resident individual holding Pakistan Origin Card (POC) or National ID Card for Overseas
Pakistanis (NICOP) or Computerized National ID Card (CNIC) maintaining a Foreign
(111AB)
Currency Value Account (FCVA) or Non-resident Pakistani Rupee Value Account (NRVA)
with authorized banks in Pakistan under the foreign exchange regulations issued by the
State Bank of Pakistan."
The provisions of withholding taxes contained in the Income Tax Ordinance, 2001 (XLIX of
(118) 2001) shall not apply to Islamic Naya Pakistan Certificates Company Limited (INPCCL) as a
recipient.
The provisions of section 153(1)(a) shall with effect from the first day of July, 2020 not
(119) apply to distributors, dealers, wholesalers and retailers of locally manufactured mobile
phone devices as withholding agent”
II. AMENDMENT IN EXISTING EXEMPTION CLAUSES
The Bill proposes to enhance and restrict scope of certain existing exemptions provided under
Part IV as under:
Clause
reference
(43D) The provisions of clause (a) of sub-section The Bill proposes that contractor
(1) of section 153 shall not apply in case of specified under the said clause would
an oil tanker contractor with effect from 1st be required to pay tax at the rate of
July 2008, provided that such contractor 3.5% instead of 2.5% on the
pays tax at the rate of 2.5%, on the payments for rendering or providing
payments for rendering or providing of of carriage services, in order qualify
carriage services w.e.f. tax year 2012. for exclusion from withholding under
section 153(1)(a) of the Ordinance.
Further, the Bill propose to omit word

w.e.f. Tax Year 2012.
(43E) The provisions of clause (a) of sub section The Bill proposes that contractor
(1) of section 153 shall not apply in case of specified under the said clause would
goods transport contractors, provided that be required to pay tax at the rate of
such contractors pay tax at the rate of 3% 3.5% instead of 3% on payments for
on payments for rendering or providing of rendering or providing of carriage
carriage services. services.
(45) The provisions of sub-section (1) of section The Bill proposes to omit sub-clause
153 shall not apply to any manufacturer- (c) reproduce below:
cum-exporter as the prescribed person:
Provided that— Nothing contained in this clause shall
apply to payments made on account
of purchase of the goods in respect of
90
Clause
reference
(a) the manufacturer-cum-exporter shall which special rates of tax deduction

deduct tax from payments made in have been specified under the
respect of goods sold in Pakistan; provisions of the repealed Ordinance.
(b) if tax has not been deducted from

payments on account of supply of
goods in respect of goods sold in
Pakistan, the tax shall be paid by the
manufacture-cum-exporter, if the sales
in Pakistan are in excess of five per
cent of export sales; and
(c) nothing contained in this clause shall

apply to payments made on account of
purchase of the goods in respect of
which special rates of tax deduction
have been specified under the
provisions of the repealed Ordinance.
(46AA) The provisions of section 153 shall not apply The Bill proposes to substitute sub-
to the following persons as recipients of clause (iv) with following:
payment, namely:—
(iv) subject to fulfillment of procedure
(i) a Provincial Government; laid down in clause (12) of Part IV of
Second Schedule, persons receiving
(ii) a local authority; payments exclusively for the supply
of agriculture produce including
(iii) persons who are residents of Azad following:
Kashmir and execute contracts in Azad
Kashmir only and produce a certificate (I) fresh milk;
to this effect from the concerned (II) fish by any person engaged
income tax authority; in fish farming;
(III) live chicken, birds and eggs
(iv) persons receiving payments from a by any person engaged in
company or an association of persons poultry farming;
having turnover of fifty million rupees (IV) live animals by any person
or more or from an individual having engaged in cattle farming;
turnover of fifty million rupees or more (V) unpackaged meat; and
exclusively for the supply of agriculture (VI) raw hides:
produce including fresh milk, fish by
any person engaged in fish farming, Provided that this clause shall not
live chicken, birds and eggs by any apply to the payments for agriculture
person engaged in poultry farming and produce which has been subjected to
by an industrial undertaking engaged any process other than that which is
in poultry processing which has not ordinarily performed to render such
been subjected to any process other produce to be fit to be taken to the
than that which is ordinarily performed market”
to render such produce fit to be taken
to market;
91
Clause
reference
(v) companies receiving payments for the

supply of electricity and gas;
(vi) companies receiving payments for the

supply of crude oil;
(vii) hotels and restaurants receiving

payments in cash for providing
accommodation or food or both, as the
case may be;
(viii) shipping companies and air carriers

receiving payments for the supply of
passenger tickets and for the cargo
charges of goods transported;
(ix) individuals who are not registered

under section 181 of the Ordinance,
receiving payments for the supply of
sand, bricks, grit, gravel, crushed
stone, soft mud or clay; and
(x) artisans, plumbers, electricians,

surface finishers, carpenters, painters
or daily wagers, receiving payments in
respect of services provided or
rendered to the construction sector
including construction of buildings,
roads, bridges and other such
structures or the development of land,
subject to the following conditions,
namely:—
(a) services under this clause are provided

or rendered by an individual who is not
registered under section 181;
(b) the name, Computerized National

Identity Card Number and address of
such individual is recorded by the
recipient of such service; and
(c) payment for such services is made

directly to such individual.”;]
(108) The provisions of sections 113, 151, 231A, The Bills proposes to omit section
231AA and 236P shall not apply to the 231A, 23AA and 236P from said
Supreme Court of Pakistan – Diamer Bhasha clause, due to proposed omission of
& Mohmand Dams – Fund. section 231A, 231AA and 236P.
92
Clause
reference
114A The provisions of clause (ae) of sub-section The provisions of clause (ae) of sub-
(1) of section 114 and section 181 shall not section (1) of section 114 and section
apply to a non-resident individual solely by 181 shall not apply to a non- resident
reason of profit on debt earned from a debt individual holding Pakistan Origin
instrument, whether conventional or shariah Card (POC) or National ID Card for
compliant, issued by the Federal Overseas Pakistanis (NICOP) or
Government under the Public Debt Act, 1944 Computerized National ID Card
and purchased exclusively through a bank (CNIC) maintaining a Foreign
account maintained abroad, a non-resident Currency Value Account (FCVA) or a
rupee account repatriable (NRAR) or a Non-resident Pakistani Rupee Value
foreign currency account maintained with a Account (NRVA) with authorized
banking company in Pakistan banks in Pakistan under the foreign
exchange regulations issued by the
State Bank of Pakistan:
Provided that this clause shall not

apply if the person referred in this
clause has Pakistan-source taxable
income other than the following;
namely:—
(a) profit on debt on FCVA or Non-

resident Pakistani Rupee Value
Account (NRVA);
(b) profit on debt earned on

Government of Pakistan (GOP)
securities either conventional or
Shariah Compliant where
investment has been made from
proceeds of FCVA or NRVA;
(c) capital gain on disposal of

immovable property acquired
from proceeds of FCVA or
NRVA;
(d) capital gain on disposal of

securities traded on Pakistan
Stock Exchange and units of
mutual funds that are acquired
from proceeds of FCVA or
NRVA; or
(e) dividend income from securities

traded on Pakistan Stock
Exchange and mutual funds that
are acquired from proceeds of
FCVA or NRVA.";
93
III. WITHDRAWAL OF EXEMPTION CLAUSES
The Bill proposes to withdraw exemption from specific provision as provided under various
clauses of Part IV to various Individuals, entities, and sectors as under:
Clause
Description Comments
reference
(57A) The provisions of sections 153 and 169 shall not Subsequent to proposed
apply to large import houses. amendment, payment received
from customer by large import
Provided that the exemption under this clause would now be subject to tax
shall not be available if any of the conditions withholding.
provided in section 148 are not fulfilled for a tax
year.
(61) The provisions of section 231A shall not apply in This clause has been omitted,
respect of any cash withdrawal, from a bank, due to proposed omission of
made by an earthquake victim against section 231A.
compensation received from GOP including
payments through Earthquake Reconstruction
and Rehabilitation Authority (ERRA) account.
(95) The provision 231A and 231AA shall not apply to This clause has been omitted,
“The second Pakistan international Sukuk due to proposed omission of
Company Limited” and the Third Pakistan section 231AA.
International Sukuk Company Limited, as a payer
(101) The provisions of section 231A shall not apply in This clause has been omitted,
respect of cash withdrawal made from a due to proposed omission of
“Branchless Banking (BB) Agent Account” utilized section 231A.
to render branchless banking services to
customers.
(101A) The provisions of section 231A shall not apply to This clause has been omitted,
a Pak Rupee account if the deposits in the due to proposed omission of
account are made solely from foreign remittances section 231A.
credited directly into such account.
(101AA) The provisions of sections 231A, 231AA and 236P This clause has been omitted,
shall not apply to a Pak Rupee Account in a tax due to proposed omission of
year to the extent of foreign remittances credited sections 231A and 231AA.
into such account during that tax year.
(109) The provisions of section 236P shall not apply at This clause has been omitted,
the time of transfer of any sum to the Supreme due to proposed omission of
Court of Pakistan - Diamer Bhasha & Mohmand section 236P.
Dams- Fund.”.
(116) This clause has been omitted,

The provision of 231A, 231AA and 236P shall not
due to proposed omission of
apply to The Prime Minister’s COVID-19
sections 231A, 231AA and
Pandemic Relief Fund-2020.
236P.
117 The provisions of section 236P shall not apply at This clause has been omitted,
the time of transfer of any sum to The Prime due to proposed omission of
Minister’s COVID-19 Pandemic Relief Fund- 2020. section 236P.
94
Third Schedule – Depreciation for Oil and Gas Sector

Under existing law, E&P entities are allowed to claim 100% depreciation in respect of ‘below
ground installations’
The Bill proposes to omit entry relating to “below ground installation”, consequent to which E&P
would now claim initial allowance and depreciation in the same manner as applicable in case of
other fixed assets.
Fifth Schedule
Amendments specific to Oil and Gas Exploration Companies
The Bill proposes following amendments with respect to the taxation of Oil and Gas
Exploration and Production companies [E&P].
Clause (2), Part-II of the Second Schedule to the Ordinance
Clause (2) of Part II of the Second Schedule to the Ordinance provides that income of E&P from
letting out of pipeline to other E&P for carriage of petroleum is taxable at the rate prescribed
under Part I of the Fifth Schedule. The Bill proposes to omit the said clause. We understand that
such omission will not have any impact on taxation of E&P Companies as no change has been
made in section 100 or Rule I, Part I of the Fifth Schedule which prescribes taxation of E&P
companies.
Clause (2), Part-III of the Second Schedule to the Ordinance
An E&P entity is allowed a reduction in tax liability to the extent of tax liability resulting due to
devaluation or revaluation of rupee in any particular tax year, subject to the condition that such
reduction is permissible as per relevant terms of the agreement entered into with the
Government.
The Bill proposes to omit Clause (2), subsequent to which increase in tax liability due to
devaluation or revaluation shall not be subject to any reduction. However, it needs to be
evaluated whether any provision of the agreement with the Government allows any relief against
tax liability under given circumstances.
Exploration and Extraction of Mineral Deposits

As per Rule (4) of Part II of the Fifth Schedule to the Ordinance, profits and gains as are derived
from the refining and concentrating of mineral deposits by an undertaking, which is also involved
in extraction and exploration of such deposits, is exempt from tax to the extent of profits not
exceeding 10% of the capital employed in such business. The Bill proposes to omit the said
exemption.
95
The Seventh Schedule

Banking Company
The Bill proposes to extend the levy of super tax beyond 2021 for banking companies.
The Tenth Schedule

The Bill proposes to delete following exclusions in respect of applicability of higher withholding
taxes, provided under rule 10 of the Tenth Schedule to the Ordinance for:
i. 155: Rent of immovable property (Note 1)
ii. 231A: Cash withdrawal from bank (Note 2)
iii. 231AA: Advance tax on transaction in bank (Note 2)
iv. 233AA: Collection of tax by a stock exchange registered in Pakistan (Note 2)
v. 236B: Advance tax on purchase of air ticket (Note 2)
vi. 236L: Advance tax on purchase of international air ticket (Note 2)
vii. 236P: Advance tax on banking transactions (Note 2)
Note 1: Due to proposed amendment, deduction of tax will be increased by 100% in

respect of recipient of property income, if such person’s name is not appearing in the Active
Taxpayers List issued by the Board.
Note 2: Due to deletion of relevant advance withholding tax sections, these sections are
also proposed to be deleted from the exclusions of the Tenth Schedule.
The Thirteen Schedule

The Bill proposes to delete clauses (61), (64A), (64B), (64C) and (65) of Part I of the Second
Schedule to the Ordinance and has introduced the “Thirteen Schedule” under the Ordinance,
which provides list of those non-profit organizations and funds which are covered in the aforesaid
clauses. A person on making donation to non-profit organizations and funds listed under the
“Third Schedule” would be entitled to claim tax credit in the manner prescribed under section 61
of the Ordinance.
S.No Name
1. Any Sports Board or institution recognized by the Federal Government for
the purposes of promoting, controlling or regulating any sport or game
2. The Citizens Foundation
3. Fund for Promotion of Science and Technology in Pakistan.
4. Fund for Retarded and Handicapped Children
5. National Trust Fund for the Disabled
6. Fund for Development of Mazaar of Hazarat Burri imam
7. Rabita-e-lslami’s Project for printing copies of the Holy Quran.
8. Fatimid Foundation, Karachi.
96
S.No Name
9. Al-Shifa Trust
10. Society for the Promotion of Engineering Sciences and Technology in Pakistan.
11. Citizens-Police Liaison Committee, Central Repoi1ing Cell, Sindh Governor House, Karachi.
12. ICIC Foundation.
13. National Management Foundation..
14. Endowment Fund of the 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.
15. Shaheed Zulfiqar Ali Bhutto Memorial Awards Society
16. Iqbal Memorial Fund
17. Cancer Research Foundation of Pakistan, Lahore.
18. Shaukat khanum Memorial Trust, Lahore.
19. Christian Memorial Hospital, Sialkot.
20. National Museums, National Libraries and monuments or institutions declared to be
National Heritage by the Federal Government
21. Mumtaz Bakhtawar Memorial Trust Hospital, Lahore.
22. Kashmir Fund for Rehabilitation of Kashmir Refugees and Freedom Fighters.
23. 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
24. Azad Kashmir President’s Mujahid Fund, 1972.
25. National Institute of Cardiovascular Diseases, (Pakistan) Karachi
26. Businessmen Hospital Trust. Lahore.
27. Premier Trust Hospital, Mardan
28. Faisal Shaheed Memorial. Hospital Trust, Gujranwala.
29. Khair-un-Nisa Hospital Foundation, Lahore.
30. Sind and Balochistan Advocates' Benevolent Fund
31. Rashid Minhas Memorial Hospital Fund
32. Any relief or welfare fund established by the Federal Government.
33. Mohatta Palace Gallery Trust
34. Bagh-e-Quaid-e-Azam project, Karachi
35. Any amount donated for Tameer-e-Karachi Fund
36. Pakistan Red Crescent Society.
37. Bank of Commerce and Credit International Foundation for Advancement
of Science and Technology
38. Federal Board of Revenue Foundation
39. The Indus Hospital, Karachi.
97
S.No Name
40. Pakistan Sweet homes Angels and Fairies Place
41. Al-Shifa Trust Eye Hospital
42. Aziz Tabba Foundation
43. Sindh Institute of Urology and Transplantation, SIUT Trust and Society for the Welfare of
SIUT.
44. Sharif Trust.
45. The kidney Centre Post Graduate Institute
46. Pakistan Disabled Foundation
47. Sardar Trust Eye Hospital. Lahore
48. Supreme Court of Pakistan - Diamer Bhasha & Mohmand Dams – Fund
49. Layton Rahmatullah Benevolent Trust (LRBT)
50. Akhuwat
51. The Prime Minister's COVID-19 Pandemic Relief Fund-2020.
52. Ghulam Ishaq khan Institute of Engineering Sciences and Technology (GIKI).
53. Lahore University of Management Sciences
54. Dawat-e-Hadiya, Karachi
55. Baitussalam Welfare Trust
56. Patients’ Aid Foundation
57. Alkhidmat Foundation.
58. Alamgir Welfare Trust International.
59. Prime Minister’s Special Fund for victims of terrorism
60. Chief Minister's(Punjab) Relief Fund for Internally Displaced Persons (IDPs) of KPK
61. Prime Minister's Flood Relief Fund 2010 and Provincial Chief Minister's
Relief Funds for victims of flood 2010
62. Waqf for Research on Islamic History, Art and Culture, Istanbul
98
The Fourteenth Schedule

The Bill proposes to introduce the concept of Small and Medium Enterprises (SMEs), which shall
be subject to tax at specified rates. The Bill further seeks to insert Fourteenth Schedule to the
Ordinance, aimed at setting out the rules for computation of profit and gains for SMEs. The
salient features of the Fourteenth Schedule are as follows:
SMEs shall be required to register on either of the following two portals:
- with the Board on its Iris web portal; or

- Small and Medium Enterprises Development Authority on its SME Registration Portal
(SMERP).
The Bill proposes to offer the SMEs an option to either opt for taxation under Normal Tax Regime
(NTR), or Final Tax Regime (FTR). Taxation under each regime shall be as follows:
The bill proposes to tax SMEs under the normal/final tax regime as follows:
Sr. Category Turnover Tax rate Tax rate

No. (NTR) (FTR)
1 Category-1 Where annual business 7.5% of taxable 0.25% of gross
turnover does not exceed income turnover
Rupees 100 million
2 Category-2 Where annual turnover 15% of taxable 0.5% of gross
exceeds Rupees 100 Million income turnover
but does not exceed
Rupees 250 million
SMEs may, at the time of filing of income tax return, exercise option to be taxed under FTR and
such exercise shall be irrevocable for three tax years.
Applicable audit provisions to SMEs
Provisions of section 177 of the Ordinance, which deals with the selection of audit by the
Commissioner and section 214C of the Ordinance, which covers the selection for audit by the
Board through risk based parametric computer ballot, shall not be applicable in case SMEs opt for
final tax regime.
The Board may select those SMEs who opt for normal tax regime, for audit under section 214C of
the ordinance through risk based parametric computer ballot, in case their tax to turnover ratio is
below the tax rates prescribed for final tax regime. However, the cases selected for audit under
section 214C shall not exceed 5% of the total population of SMEs, whose tax to turnover ratio is
below tax rates given for final tax regime.
99
Sales Tax Act, 1990
1. Definitions
b. Proposed amendments in
a. New Insertions existing definitions
Definitions of the following terms have been i. Cottage Industry [Clause
proposed to be inserted in section 2 of the
Sales Tax Act, 1990 (the ST Act) (5AB) Section 2]
Presently, one of the conditions for
i. Commissioner (Appeals) manufacturing concerns to qualify as cottage
[Proposed Clause (4A) industry is that their annual turnover should
Section 2] not exceed Rs.3 million. The Bill proposes to
enhance the said threshold from Rs.3 million
Currently, the term ‘Commissioner to Rs.10 million. The proposed amendment
(Appeals)’ as used in the ST Act has will provide major relief to small-scale
nowhere been defined under the said Act. industries by exempting them from sales tax
The Bill seeks to insert definition of registration and compliance requirements.
Commissioner (Appeals) as Commissioner of
Inland Revenue (Appeals) appointed under ii. Tier-1 Retailer [Clause (43A)
Section 30 of the Act in the similar way as Section 2]
already defined under the Income Tax
Ordinance, 2001. Currently, any retailer whose shop measures
1000 square feet or more falls within
ii. Online Market Place category of Tier-1 retailer. The Bill seeks to
[Proposed Clause (18A) relax this condition for furniture
outlets/showrooms by enhancing threshold
Section 2] of shop area from current 1000 to 2000
square feet. Further, the Bill proposes to
The Bill proposes to introduce an inclusive insert new sub-clauses (f) & (g) under
definition of online market place. Said term captioned definition to bring the following
is defined as an electronic interface such as within the ambit of Tier-1 retailer:
a market place, e-commerce platform, portal
or similar means which facilitate sale of a. a retailer operating an online
goods, including third party sale, in any of market place supplying goods
the manner, namely through e-commerce platform,
whether or not the goods are
(a) by controlling the terms and owned by him;
conditions of the sale;
(b) authorizing the charge to the b. a retailer who has acquired point
customers in respect of the of sale for accepting payment
payment for the supply; or through debit or credit cards from
(c) ordering or delivering the goods. banking companies or any other
digital payment service provider
It appears that the concept of online market authorized by State Bank of
place has been introduced to capture the Pakistan.
sales made through online platforms like
Daraz, foodpanda, etc.
100
By virtue of change enumerated as (b) 3. Scope of Tax [Section 3(9A)]

above, any retailer accepting payments
through credit/debit cards from customers Presently, the first proviso to Section 3(9A)
would also fall within the category of Tier-1 introduced through Finance Act, 2019
retailer irrespective of size of his business, entitles the customers of Tier-1 retailer to
area of shop and other criteria specified for receive a cash back of upto 5% of the sales
Tier 1 retailer. The small retailers show tax involved. The Bill seeks to withdraw such
reluctance from dealing in sales transactions incentive given to customers of Tier-1
through banking channels. retailers by omitting the said proviso.
iii. Time of Supply [Clause (44) 4. Adjustable Input Tax

Section 2] [Section 8B]
According to existing definition of time of The adjustment of input tax is currently
supply the event of taxation of supply is restricted to 90% of the output tax for a tax
triggered at earlier of: period under provisions of captioned section
in case of all registered persons with certain
(a) delivery of goods/ making available exceptions like electrical energy sector, oil
goods to the recipient of supply, or marketing companies, fertilizer
(b) receipt of payment by supplier of goods. manufacturers etc. The Bill proposes to also
exclude public limited companies listed on
The above concept of applicability of sales Pakistan Stock Exchange from the
tax on advance payment against supply of application of aforementioned restricted
goods through issuance of Advance Payment claim of input. Resultantly, these companies
Receipt (APR) was introduced vide Finance will now be able to adjust whole amount of
Act, 2013 with the support of issuance of input tax against output tax, hence, no
corresponding STGO. requirement of minimum payment of 10%
will apply for such companies.
The Bill proposes to omit from definition the
event of receipt of payment by supplier This appears to be in line with the benefits
[condition (b) above], resultantly sales tax provided under the income tax law to
now will be payable only at the time of encourage public listing of entities in
delivery of goods or making available goods corporate sector. Indeed this proposition will
to the recipient of supply in the same be welcomed by the industry, however,
manner as it was prior to above referred there may still be a resentment from public
insertion through Finance Act 2013. unlisted companies, private companies and
non-corporate businesses because the
2. Scope of Tax [Section proposed amendment only benefits listed
3(3)(c)] companies which is relatively a small bunch
as compared to overall industry.
The liability to pay tax in case of supply of
goods is of the person making the supply 5. Assessment of Tax and
and of the person importing the goods in recovery of tax not levied or
case of import of goods. As a result of
expanding the scope of sales tax to the sales short-levied or erroneously
made by the online market place, the Bill refunded [Section 11(5)]
proposes to impose the liability to pay sales
tax on the person running the online market Current provisions of the ST Act provide
place whether or not the goods are owned limitation period of five years (05) for
by him. issuance of show cause notice by officer of
Inland Revenue which is counted from the
101
relevant date (i.e. the due date of payment Although, almost every business now retains
of tax along with the monthly return) as records in electronic form, however, the
defined under the section 11(7) of the Act. proposed amendment providing legal
The Bill now proposes to amend section requirement of maintaining electronic
11(5) in a manner that would require records seems to be in consonance with the
issuance of such show cause within 5 years digital transformation of tax affairs
of the end of the financial year in which the underway in the country and the proposition
relevant date falls. It appears that proposed could also facilitate the performance of e-
amendment will result in more time available audit of records in case of all registered
for officer to initiate proceedings under persons.
Section 11 for recovery of tax.
8. Transactions between
6. Common Identifier Number associates [Section 25AA]
[Proposed Section 21B]
Currently, the Commissioner or officer of
The Bill seeks to insert new section whereby Inland Revenue is empowered to determine
effective from tax period July 2021 onwards, the transfer price of taxable supplies in
National Tax Number (NTN) in case of respect of any transaction between the
association of persons or company and persons who are associates in order to
Computerized National Identity Card (CNIC) reflect the fair market value of supplies in an
in case of an individual person registered or arm’s length transaction.
liable to be registered under the Act shall be
common identifier number in addition to the The Bill seeks to insert sub-section (2) under
Sales Tax Registration Number (STRN). It the above section whereby the Board has
seems that proposition has been made to been empowered to prescribe rules for
universally recognize/ trace the businesses carrying out the purpose of instant section.
through NTN/CNIC for sales tax purposes The proposed amendment would likely to
with the intent to introduce the concept of bring a consistent practice for applying the
‘Single Identification Number’ for each law and control abuse of section by the
taxpayer. officers as upon notification of rules of
transfer pricing, the concerned officer will be
bound to determine transfer price according
7. Records [Section 22] to such rules in the similar manner as
already in place under Income Tax
As per current provisions of above section a Ordinance, 2001 and rules made thereunder.
registered person making taxable supplies is
required to maintain and keep at his 9. Extension of time for
business premises or registered office furnishing returns [Proposed
certain records of goods purchased,
imported and supplied as prescribed under Section 26AB]
clause (a) through (ea) of sub-section (1)
such as invoices, credit notes, bank Unlike the provisions of Income Tax
statements, inventory records etc. Ordinance, 2001, presently, there is no
express and standalone provision under the
The Bill now, besides prescribing additional ST Act that specifically addresses the
requirement for maintenance of ‘cash book’ procedure for allowing extension in filing of
as part of record under clause (e), also sales tax return by the registered persons.
seeks to insert new clause (eb) requiring Resultantly, the registered persons seeking
maintenance of electronic version of all extension in time for furnishing the returns
records as mentioned in said clauses (a) to usually have been filing application for
(ea) of section 22(1). condonation of time limit under section 74 of
the ST Act read with notification issued
102
thereunder dealing with extending any time the goods carried as prescribed under the
limit or period within which an act is rules in accordance with the provisions of
required to be done under the provisions of above section. The Bills seeks to enlarge the
the ST Act. meaning of expression ‘tax-exempt areas’
already provided under the section by
The Bill proposes to address this issue by making ‘Border Sustenance Markets’ part
separately inserting the above section which thereof.
provides the following procedure for
obtaining extension in time to furnish return: The proposed amendment seems to exempt
recently established border markets in
a. a registered person seeking extension in Balochistan, near Pakistan’s border with Iran
time to furnish sales tax return is & Afghanistan which are supposed to
required to apply to the Commissioner in enhance bilateral trade and provide
writing by the due date for furnishing economic opportunities and sustenance to
the return, the people residing in border areas.
b. the Commissioner may grant the 11. Licensing of brand name

applicant extension in time for furnishing
the return by order in writing if the [Proposed Section 40E]
Commissioner is satisfied that the
applicant is unable to furnish the return The Bill proposes to insert a new Section 40E
by due date because of the following: whereby manufacturers of specified goods
are required to obtain brand license in the
 absence from Pakistan; prescribed manner for each brand or Stock
 sickness or other misadventure; or Keeping Unit (SKU). Any such specified
 any other reasonable cause. brand and SKU found to be sold without the
license shall be deemed counterfeit goods
c. Upon rejection of application by the and liable to outright confiscation and
Commissioner for extension or further destruction in the prescribed manner in
extension the registered person may addition to any other penal action which may
apply to the Chief Commissioner for the be taken under the ST Act.
same.
12. Recovery of arrears of tax
d. the extension or further extension each [Section 48]
shall not exceed fifteen (15) days unless
there are exceptional circumstances The above section provides for the manner
justifying a longer extension of time. of recovery of tax by the officer of Inland
Revenue where any amount of tax is due
It is worth noting that as per the proposed from any person.
section, extension or further extension of
time granted as aforesaid shall not change The Bill proposes to insert new sub-section
the due date for payment of sales tax for the (3) under the above section broadening the
purpose of charge of default surcharge which scope of said provision which enables the
is currently 12% per annum. officer of Inland Revenue to recover tax with
default surcharge and penalty in like manner
10. Provisions relating to goods with reference to assistance in collection and
supplied from tax-exempt recovery of duties in pursuance of a request
from a foreign jurisdiction under a tax
areas [Section 40D] treaty, a multilateral convention, and inter-
governmental agreement or similar
The conveyances carrying goods supplied agreement or mechanism. The proposed
from the tax exempt areas are required to amendment is in line with similar
be accompanied by documents in respect of
103
amendments proposed in income tax and Upon payment of refund beyond prescribed
federal excise laws. forty five (45) days of filing of refund (i.e.
delayed payment of refund), the above
13. Agreement for the exchange section provides for payment of a sum equal
to KIBOR per annum of the amount of
of information or assistance refund due in addition to the amount of
in recovery of taxes [Section refund due to the claimant which is currently
56A] applicable only in case of refunds falling
under section 10.
The existing provisions of above Section
empower the Federal Government to enter The Bill proposes to insert new proviso
into bilateral or multilateral agreements with whereby now refund due in the consequence
provincial government or governments of of order passed under section 66 if not paid
foreign countries for the exchange of within forty five (45) days of the date of
information. order, will also be eligible for payment of
sum equal to KIBOR per annum of the
The Bill also proposes to insert non-obstante amount of refund due. The proposed
sub-section (1A) which would authorize the amendment seems to be realistic in favor of
Board to share data or information (including taxpayer as delay in payment of refunds
real time data videos, images) received by even after order, without any compensation,
the Board, with any other Ministry or was detrimental for taxpayers.
Division of Federal Government or Provincial
Government subject to limitations and 16. Certain transactions not
conditions as may be specified by the Board. admissible [Section 73]
14. Prize schemes to promote Subsection (1) of section 73 provides for
tax culture [Section 56C] payment of transactions exceeding value of
Rs.50,000 through banking channel. Online
The Bill proposes to insert sub-section (2) transfers and payments through credit card
under the above section thereby are also regarded as payment through
empowering the Board to prescribe banking channel.
procedure for ‘Mystery Shopping’ in respect
of invoices issued by Tier-1 retailers The Bill seeks to insert new proviso to the
integrated with FBR online system randomly. aforesaid sub-section whereby adjustments
Upon notification of the rules, the FBR could made by registered person in respect of
be able to identify potential discrepancies in amounts payable and receivable to and from
the retail businesses and abuse of above the same party, will be treated as payments
section for prize schemes. satisfying the above provisions subject to
the following conditions:
In common parlance, ‘Mystery Shopping’ is a
method used by marketing research  applicable sales tax has been
companies and organizations that wish to charged and paid by both parties;
measure quality of sales and service, job and
performance, regulatory compliance, or to  the registered person has sought
gather specific information about a market prior approval of the Commissioner
or competitors, including products and before making such adjustments.
services.
The proposed amendment seeks to address
the practical scenario where usually balances
15. Delayed refund [Section 67] are settled by the parties on a net basis or
through offsetting balances of each other in
which case no payments may result in
104
essence which was previously considered as

non-compliance of mandatory condition of
section 73(1) by the tax authorities.
Third Schedule (Retail Price goods)

Levy of sales tax on Supply of Sugar at Retail Price
The Bill proposes to insert new serial no.50 under the above Schedule whereby sugar (except
where it is supplied as an industrial raw material to pharmaceutical, beverage and confectionery
industries) is proposed to be subject to sales tax at retail price.
Fifth Schedule (Zero rated goods)

a) Omission of items with zero-rating of sales tax
The Bill proposes to withdraw zero rating of sales tax currently available in respect of the
following items:
Sr.
Description
No.
1. (i) Supply, repair or maintenance of any ship which is neither;
(a) a ship of gross tonnage of less than 15 LDT; nor

(b) a ship designed or adapted for use for recreation or pleasure.
(ii) Supply, repair or maintenance of any aircraft which is neither;
(a) an aircraft of weight-less than 8000 kilograms; nor

(b) an aircraft designed or adapted for use for recreation or pleasure.
(iii) Supply of spare parts and equipment for ships and aircraft falling under (i) and (ii)
above.
(iv) Supply of equipment and machinery for pilot age, salvage or towage services.
(v) Supply of equipment and machinery for air navigation services.
(vi) Supply of equipment and machinery for other services provided for the handling of
ships or aircraft in a port or Customs Airport.
6. Supplies of such locally manufactured plant and machinery to petroleum and gas sector
Exploration and Production companies, their contractors and sub-contractors as may be
specified by the Federal Government, by notification in the official Gazette, subject to
such conditions and restrictions as may be specified in such notification.
10. Petroleum Crude Oil (PCT heading 2709.0000).
105
11. Raw materials, components, sub-components and parts, if imported or purchased

locally for use in the manufacturing of such plants and machinery as is chargeable to
sales tax at the rate of zero percent, subject to the condition that the importer or
purchaser of such goods holds a valid sales tax registration showing his registration
category as “manufacturer”; and in case of import , all the conditions, restrictions,
limitations and procedures as are imposed by notification under section 19 of the
Customs Act,1969 (IV of 1969), shall apply.
b) New insertion allowing zero-rate of sales tax under Export Facilitation Scheme,
2021
The Bill seeks to insert new serial no.15 under Fifth Schedule granting zero-rating of sales tax
on Local supplies of raw materials, components, parts and plant and machinery to registered
exporters authorized under Export Facilitation Scheme, 2021 notified by the Board with such
conditions, limitations and restrictions.
Sixth Schedule (Exempt Goods)

Table I – Imports or Supplies
a) Omission of items currently exempt from sales tax
The Bill proposes to streamline exemptions under the Sixth Schedule whereby exemption of
sales tax on the following items is proposed to be withdrawn on imports or supplies of these
items:
Sr. No. Description

11. Eggs including eggs for hatching
19. Cereals and products of milling industry excluding the products of milling
industry, other than wheat and meslin flour, as sold in retail packing bearing
brand name or a trademark
22. Sugar beet
24. Edible oils and vegetable ghee, including cooking oil, on which Federal Excise
Duty is charged, levied and collected by a registered manufacturer or importer
as if it were a tax payable under section 3 of the Act.
Explanation.– Exemption of this entry shall not be available on local supplies

made by importers, distributors, wholesalers or retailers.
26. Fruit juices, whether fresh, frozen or otherwise preserved but excluding those
bottled, canned or packaged.
27. Ice and waters excluding those for sale under brand names or trademarks.
29. Table salt including iodized salt excluding salt sold in retail packing bearing
brand names and trademarks.
29C. Glass bangles
73A. Milk and cream, concentrated or containing added sugar or other sweetening
matter, excluding that sold in retail packing under a brand name
106
Sr. No. Description

74. Flavored milk, excluding that sold in retail packing under a brand name.
75. Yogurt, excluding that sold in retail packing under a brand name.
76. Whey, excluding that sold in retail packing under a brand name.
77. Butter, excluding that sold in retail packing under a brand name.
78. Desi ghee, excluding that sold in retail packing under a brand name.
79. Cheese, excluding that sold in retail packing under a brand name.
80. Processed cheese not grated or powdered, excluding that sold in retail packing
under a brand name.
82. Frozen prepared or preserved sausages and similar products of poultry meat or
meat offal, excluding those sold in retail packing under a brand name or a
trademark.
83. Meat and similar products of prepared frozen or preserved meat or meat offal of
all types including poultry, meat and fish, excluding those sold in retail packing
under a brand name or a trademark.
84. Preparations suitable for infants, put up for retail sale.
85. Fat filled milk excluding that sold in retail packing under a brand name or a
trademark.
91. Energy saver lamps
93. Bicycles
101. Raw and pickled hides and skins, wet blue hides and skins, finished leather, and
accessories, components and trimmings, if imported by a registered leather
goods manufacturer, for the manufacture of goods wholly for export, provided
that conditions, procedures and restrictions laid down in rules 264 to 278 of the
Customs Rules, 2001 are duly fulfilled and complied with.
103. Import and supply thereof, up to the year 2030, of ships and all floating crafts
including tugs, dredgers, survey vessels and other specialized crafts purchased
or bare-boat chartered by a Pakistan entity and flying the Pakistan flag, except
ships or crafts acquired for demolition purposes or are designed or adapted for
use for recreation or pleasure purposes, subject to the condition that such ships
or crafts are used only for the purpose for which they were procured and in case
such ships or crafts are used only for the purpose for which they were procured,
and in case such ships or crafts are used for demolition purposes within a period
of five years of their acquisition, sales tax applicable to such ships purchased for
demolition purposes shall be chargeable.
106. Import of Halal edible offal of bovine animals.
108. Components or sub-components of energy saver lamps, namely:-
(a) Electronic Circuit

(b) Plastic Caps (upper and lower)
(c) Base Caps B22 and E27
(d) Tungsten Filaments
(e) Lead-in-wire
(f) Fluorescent powder (Tri Band Phospher)
107
Sr. No. Description

(g) Adhesive Additive
(h) Al-oxide Suspension
(i) Capping Cement
(j) Stamp Pad Ink
(k) Gutter for Suspension
115. Plant, machinery and equipment imported for setting up fruit processing and
preservation units in Gilgit-Baltistan, Balochistan Province and Malakand
Division upto the 30th June, 2019 subject to the same conditions and procedure
as are applicable for import of such plant, machinery and equipment under the
Customs Act, 1969 (IV of 1969).
123. Aircraft, whether imported or acquired on wet or dry lease.
Provided that in case of import or acquisition on wet or dry lease by Pakistan

International Airlines Corporation, this exemption shall be available with effect
from 19th March, 2015.
124. Maintenance kits for use in trainer aircrafts of PCT headings 8802.2000 and
8802.3000
125. Spare parts for use in aircrafts, trainer aircrafts or simulators
128. Aviation simulators imported by airline company recognized by Aviation
Division.
153. Steel billets, ingots, ship plates, bars and other long re-rolled profiles, on such
imports and supplies by the manufacturer on which federal excise duty is
payable in sales tax mode.
b) New insertion allowing exemption of sales tax
The Bill seeks to exempt sales tax on import and supply of the following items by inserting
the respective new entries under Table-I of the Sixth Schedule to the Act:
Sr. No. Description
157. Import of CKD (in kit form) of following electric vehicles (4 wheelers) by
local manufacturers till 30th June, 2026:
(i) Small cars/SUVs with 50 Kwh battery or below;

(ii) and Light commercial vehicles (LCVs) with 150 kwh battery or below
158. Goods temporarily imported into Pakistan by International Athletes which
shall be subsequently taken by them within 120 days of temporary import.
159. Import of auto disable Syringes till 30th June, 2021

(i) with needles
(ii) without needles
160. Import of following raw materials for the manufacturers of auto disable
syringes till 30th June, 2021
(i) Tubular metal needles
108
Sr. No. Description
(ii) Rubber Gaskets
161. Import of plant, machinery, equipment and raw materials for consumption
of these items within Special Technology Zone by the Special Technology
Zone Authority, zone developers and zone enterprises.
162. Import of raw materials, components, parts and plant and machinery by
registered persons authorized under Export Facilitation Scheme,
2021 notified by the Board with such conditions, limitations and
restrictions.
Table II – Local supplies only
a) Withdrawal of exemption
The Bill proposes to withdraw exemption of sales tax on local supplies of the following items:
Sr. No. Description
17. Raw and pickled hides and skins, wet blue hides and skins
19. Bricks (up to 30th June, 2018)
24. LED or SMD lights and bulbs meant for conservation of energy
25. Cottonseed oil
b) New insertion granting exemption of sales tax
The Bill seeks to insert following new entries thereby granting exemption of sales tax on local
supplies of these items.
Sr. No. Description
26. Supply of locally produced silos till 30.06.2026.
c) Exemption of sales tax restricted to local supplies only
Upon exclusion of the following items from Table-I of the Sixth Schedule to the Act providing
exemption of sales tax on import or supplies, the Bill now seeks to bring these items under Table-
II of the Sixth Schedule to the Act thereby restricting exemption of sales tax only on local
supplies of these items:
Sr. No. Description

27. Eggs including eggs for hatching
28. Cereals and products of milling industry excluding the products of milling
industry, other than wheat and meslin flour, as sold in retail packing bearing
brand name or a trademark
109
Sr. No. Description

29. Sugar beet
30. Fruit juices, whether fresh, frozen or otherwise preserved but excluding those
bottled, canned or packaged.
31. Milk and cream, concentrated or containing added sugar or other sweetening
matter, excluding that sold in retail packing
under a brand name.
32. Flavored milk, excluding that sold in retail packing under a brand name.
33. Yogurt, excluding that sold in retail packing
under a brand name.
34. Whey, excluding that sold in retail packing under a brand name.
35. Butter, excluding that sold in retail packing under a brand name.
36. Desi ghee, excluding that sold in retail packing under a brand name.
37. Cheese, excluding that sold in retail packing under a brand name
38. Processed cheese not grated or powdered, excluding that sold in retail packing
under a brand name.
39. Sausages and similar products of poultry meat or meat offal excluding sold in
retail packing under a brand name or trademark
40. Products of meat or meat offal excluding sold in retail packing under a brand
name or trademark.
41. Preparations suitable for infants, put up for retail
sale
42. Fat filled milk excluding that sold in retail packing under a brand name or a
trademark
110
Table IV – Conditional exemption on goods supplied with limits of Border Sustenance

Markets
New Table IV is proposed to be inserted under Sixth Schedule to the Act for providing conditional
exemption to local supplies made within the limit of the Border Sustenance Markets established in
cooperation with Iran and Afghanistan. A list of 114 items mostly covering vegetable goods and
fruits has been enumerated under the Table on which sales tax is proposed to be exempted
subject to the following conditions:
(i) Such goods shall be supplied only within the limits of Border Sustenance Markets
established in cooperation with Iran and Afghanistan;
(ii) If the goods, on which exemption under this Table has been availed, are brought
outside the limits of such markets, sales tax shall be charged on the value assessed
on the goods declaration import or the fair market value, whichever is higher;
(iii) Such items in case of import, shall be allowed clearance by the Customs Authorities
subject to furnishing of bank guarantee equal to the amount of sales tax involved and
the same shall be released after presentation of consumption certificate issued by the
Commissioner Inland Revenue having jurisdiction;
(iv) The said exemption shall only be available to a person upon furnishing proof of having
a functional business premises located within limits of the Border Sustenance
Markets; and
(v) Breach of any of the conditions specified herein shall attract relevant legal provisions
of this Act, besides recovery of the amount of sales tax alongwith default surcharge
and penalties involved.
111
Eighth Schedule (Goods subject to Specified rates)

Table – I
a) Omission of entries
The Bill seeks to majorly withdraw reduced rating of sales tax by omitting following items given
under Table-I of Eighth Schedule which were subject to certain conditions, hence, proposing to
levy of sales tax at the standard rate of 17%:
Heading Nos. of the

Sr. First Schedule to the Rate of Sales
Description
No. Customs Act, 1969 (IV Tax
of 1969)
1. Soyabean meal 2304.0000 10%
5. Raw cotton and ginned cotton Respective headings 10%
6. Plant and machinery not manufactured Respective headings 10%
locally and having no compatible local
substitutes
7 Flavoured milk 0402.9900 10%
8 Yogurt 0403.1000 10%
9 Cheese 0406.1010 10%
10 Butter 0405.1000 10%
11 Cream 04.01 and 04.02 10%
14 Milk and cream, concentrated or containing 0402.1000 and 10%
added sugar or other sweetening matter 0402.2000
15 Ingredients of poultry feed, cattle feed, 1[2301.1000], 10%
except soya bean meal of PCT heading 2305.0000, 2306.2000,
2304.0000 and oil-cake of cotton-seed 2306.3000, 2306.4100,
falling under PCT heading 2306.1000 2306.5000, 2309.9010,
2309.9020, 2309.9090,
2936.2100, 2936.2200,
2936.2300, 2936.2400,
2936.2500, 2936.2600,
2936.2700, 2936.2800,
and
2308.9000
(Guar Meal),
2303.1000
(Corn Gluton Feed/Meal),
2303.1000
(Residues of starch
manufacture and similar
residues),
3507.9000
(Enzymes-other),
112
Heading Nos. of the

Description
of 1969)
2302.1000
(Maize Bran),
2302.2000
(Rice Bran),
2302.3000
(Wheat Bran),
2302.4000
(Other Cereals),
2302.5000
(Bran of Leguminous
Plants),
2306.7000
(Oil- cake and other solid
residues of Maize (corn)
germ),
2306.4900
(Sesame Cake),
2306.9000
(Sesame Meal/other
Meal),
2842.1000
(Double or complex
silicates, including
aluminosilicates whether
or not chemically
defined),
2301.2090
(Fish Meal),
0505.9000
(Poultry by product Meal),
and the following items
only of Feed Grade:
2827.6000
(Potassium Lodide),
2833.2990
(Manganese Sulphate),
113
Heading Nos. of the

Description
of 1969)
2833.2940
(Zinc Sulphate),
2817.4000
(Zinc Oxide),
2833.2500
(Copper Sulphate),
2833.2910
(Ferrous Sulphate),
2915.5000
(Propionic acid, its salts
and esters),
2930.4000
(DL Methionine),
2930.4000
(Methionine Hydroxy
Analogue (liquid)),
2922.4100
(Lysine Monohydro
Chloride /sulphate),
2923.2000 (Lecithins),
2923.9010
(Betafin),
2922.4290 (Arganine),
2934.9910 (Furazolidon),
2922.5000 (Threonine),
2835.2600 (Mono Calcium

Phosphate),
2835.2500
(Di Calcium Phosphate),
and 2835.2600
(Mono Di Calcium
Phosphate)
19 Waste paper 47.07 5%
20 Plant, machinery, and equipment used in Respective headings 5%
production of bio-diesel
114
Heading Nos. of the

Description
of 1969)
22 Soya bean seed 1201.1000 10%
29 (i) Harvesting, threshing and storage
equipment:
(ii) Wheat thresher 8433.5200 5%
(iii) Maize or groundnut thresher or sheller 8433.5200
(iv) Groundnut digger

8433.5900
(v) Potato digger or harvester
8433.5300
(vi) Sunflower thresher
(vii) Post hole digger 8433.5200
(viii) Straw balers 8433.5900
(ix) Fodder rake 8433.4000
(x) Wheat or rice reaper 8433.5900
(xi) Chaff or fodder cutter 8433.5900
(xii) Cotton picker 8433.5900
(xiii) Onion or garlic harvester 8433.5900
(xiv) Sugar harvester 8433.5200
(xv) Tractor trolley or forage wagon

8433.5200
(xvi) Reaping machine
8716.8090
(xvii) Combined harvesters
(xviii) Pruner/shears 8433.5900
8433.5100
8433.5900
45 Following machinery for poultry sector : 8436.1000
(i) Machinery for preparing feeding stuff,

8436.2100 and
(ii) Incubators, brooders and other poultry 8436.2900 7%
equipment
(iii) Insulated sandwich panels Respective heading
115
Heading Nos. of the

Description
of 1969)
(iv) Poultry sheds
9406.1020 and
9406.9020
(v) Evaporative air cooling system
8479.6000
(vi) Evaporative cooling pad
8479.9010
50 LNG/RLNG 2711.1100 12%
51 LNG/RLNG 2711.1100 and 12%
2710.2100
60 Fat filled milk 1901.9090 10%
61 Silver, in unworked condition 7106.1000, 7106.9110 1%
and 7106.9190
62 Gold, in unworked condition 7108.1100, 7108.1210 1%
and
7108.1290
63 Articles of jewellery, or parts thereof, of 71.13 1.5% of value
precious metal or of metal clad with of gold, plus
precious metal 0.5% of value
of diamond,
used therein,
plus 3% of
making charges
65 Ginned cotton Respective headings 10%
67 LNG imported for servicing CNG sector and 2711.1100, 2711.2100 5%
local supplies thereof
b) Revision of sales tax rates
The Finance Bill has proposed to revise sales tax rates in respect of the following item at the
serial no. 56 which is mentioned hereunder:
S. Description Sales Tax Rate Conditions

No.
Existing Proposed Existing Proposed
56 Potassium 17% along with 17% along with Import and Import and
Chlorate rupees 80/KG rupees 90/KG supply thereof. supply thereof.
(KCLO3) Provided that Provided that rate
rate of rupees of rupees 90 per
70 per kilogram shall not
kilogram shall apply on imports
not apply on made by and
imports made supplies made to
by and organizations
supplies made under the control
to of Ministry of
116
S. Description Sales Tax Rate Conditions

No.
Existing Proposed Existing Proposed
organizations Defense
under the Production.
control of
Ministry of
Defense
Production.
c) New insertions
To address the concern of rising prices of locally manufactured small cars for low earning class of
society, the Bill proposes to include the following new entries in the Table-I of the Eighth
Schedule whereby reduced of sales tax has been provided on this small cars:
Sr. Description Heading Nos. of the Rate of Condition

No. First Schedule to Sales Tax
the Customs Act,
1969 (IV of 1969)
71 Following locally manufactured Respective headings 1% If supplied locally
or assembled vehicles (4
wheelers) till 30th June, 2026;
Small cars/SUVs with 50 Kwh

battery or below; and
Light commercial vehicles

(LCVs) with 150 kwh battery
or low
72. Motorcars 87.03 12.5% Locally

manufactured or
assembled
motorcars or
cylinder capacity
upto 850cc
73. Import and local supply of
Hybrid Electric Vehicles:
Upto 1800 cc
87.03 8.5%
From 1801 cc to 2500 cc
87.03 12.75%
117
Ninth Schedule
Withdrawal of fixed tax on SIM cards in the wake of litigation
In order to address the litigation issue, the Bill proposes to do away with the fixed tax on SIM
cards with effect from July 01, 2020 onwards. The Bill also seeks to provide explanation that the
proposed amendment shall not prejudicially affect Board’s stance or position in pending cases on
the issue of chargeability of sales tax on SIM cards before any court of law.
Eleventh Schedule (Withholding of Sales Tax)

Manufacturer of lead batteries prescribed as withholding agent
The Bill proposes to prescribe registered persons manufacturing lead batteries as a withholding
agent for deduction of whole of sales tax applicable on invoices of person supplying reclaimed
lead or used batteries.
Twelfth Schedule (Value Addition Tax)

Exemption of VAT on specified electric vehicle CKD kits for small cars etc.
The Bill proposes to exempt collection of upfront Value Addition Tax (VAT) on import of the
following items:
xi. Electric vehicles (4 wheelers) CKD kits for small cars/SUVs, with 50 kwh battery or below
and LCVs with 150 kwh battery of below till 30th June, 2026;
xii. Electric vehicles (4 wheelers) small cars/SUVs, with 50 kwh battery or below and LCVs
with 150 kwh battery of below in CBU condition till 30th June, 2026;
xiii. Electric vehicles (2-3 wheelers and heavy commercial vehicles) in CBU condition till 30th
June 2025; and
xiv. Motor cars of cylinder capacity up to 850cc.
118
Customs Act, 1969
1. Definitions b. Proposed amendments in

existing definitions
a. New Insertions
i. Documents
The Bill proposes to introduce the [Section 2(kka)]
definitions of the following terms in the
section 2 of the Customs Act: At present, the definition of documents
refers to a goods declaration,
i. Electronic Assessment application for claim of refund, duty
[Section 2(kkc)] drawback or repayment of duty,
import or export general manifest,
Presently, no definition of the term passenger manifest, bill of lading,
‘Electronic Assessment’ as used in airway bill, commercial invoice and
section 32(5) of the Customs Act is packing list or similar other forms or
available under the said Act. The Bill documents used for customs clearance
seeks to add definition of ‘Electronic or making a declaration to Customs,
Assessment’ which means assessment whether or not signed or initialed or
of a goods declaration in customs otherwise authenticated.
computerized system by customs
officer or by computerized system The Bill proposes to enhance list of
according to selectivity criteria. documents by including “Master bill of
lading and certificate of origin” into the
existing list of documents as
ii. Vessel Intimation Report mentioned in afore-mentioned clause.
(VIR)[Section 2(ld)]
2. Smuggle [Section 2(s)]
The Bill seeks to add a new clause to
provide definition of ‘Vessel Intimation At present, the definition of smuggle
Report’ which means an intimation by refers to bring into or take out of
the carrier or his agent regarding Pakistan, in breach of any prohibition
impending arrival of vessel at a or restriction for the time being in
customs seaport to the customs force ,or in any way being concerned
authorities in the prescribed form in carrying, transporting, removing,
where the customs computerized depositing, harboring, concealing, or
system is operational. en route pilferage of transit goods, or
evading payment of custom-duties or
iii. Owner [Section 2(oo)] taxes livable thereon.
The Bill seeks to add definition of the The Bill proposes to further enhance
term ‘Owner’ as used in the Customs the scope of the term ‘smuggle’ by
Act. By virtue of this proposition, the including “retailing” of such goods in
‘Owner’ will include any person who is the scope of smuggle.
entitled to the possession of the
goods, either as owner or agent of the 3. Directorate General of
owner.
National Nuclear Detection
Architecture [Section 3CCB]
119
As part of Pakistan’s Nuclear Security be filed through system in the

Regime and published sources in this prescribed manner.
respect by Ministry of Foreign Affairs,
Pakistan has established an effective The Bill also seeks to introduce a new
NNDA to regulate authorized imports section of 12A whereby a license to
and exports as well as to prevent illicit “Common Warehouse” shall also be
trafficking of nuclear and other issued by the Custom authorities in
radioactive materials. the similar manner as in case of public
and private warehouses with similar
The Bill proposes to insert a new provisions regarding
section whereby a Directorate General cancellation/suspension.
of National Nuclear Detection
Architecture is to be established with 6. Board empowered to
an aim to support Pakistan’s Nueclear
Security Regime. constitute committee for
settlement of classification
4. Directorate General of disputes [Section 18E]
Marine [Section 3CCC]
At present section 18E empowers the
Board to make such changes in the
The Bill also seeks to establish the Pakistan Customs Tariff specified in
Directorate General of Marine to the First Schedule to the Customs Act,
exclusively deal with customs related which required only for the purpose of
matters and movement of goods statistical suffix of the Pakistan
through sea waters. Custom Tariff PCT code.
5. Power to appoint or License The Bill now proposes to insert a

Public, Common & Private proviso to above section to empower
the Board to constitute a committee or
Warehouses center for settlement of disputes
[Section 12, 12A & 13] regarding classification of goods as
well as to prescribe rules or procedure
At present, the Collector of Customs for this purpose.
on receiving of an application may
issue license to Public and Private It is notable that the concept of
Warehouses in terms of section 12 & resolution of classification dispute by
13 of the Customs Act. classification centre already exists in
The Bill proposes to substitute the Rule 439 of the Customs Rules, 2001,
aforesaid sections the additional however, no provision exists that
impacts of which would be as under: empowers the Board to form such
centre. It appears that through
 The power of Collector of aforesaid amendment, the Bill seeks to
Customs for issuance of license remove this apparent lacuna in the
or for cancellation or suspension existing provisions of Customs Law.
of license would apply only to
the extent of jurisdiction of such 7. General Power to Exempt
Collector. from Customs Duties
 In case the Customs [Section 19(5)]
computerized system is
operational, the application shall As per current provisions of sub
section (5) of section 19, all exemption
120
notification issued on or after July 01, would also be empowered for

2016 and placed before National determination of customs value. The
Assembly shall stand in force till June Bill also seeks to insert proviso in the
30, 2021 unless rescinded earlier by afore-said section whereby the
the Federal Government or the Director of customs valuation to be
National Assembly. empowered to incorporates values
from internationally acclaimed
The Bill now seeks to extend the time publications and other prescribed
limit of the validity of afore-said documents for the purpose of
notifications up to June 30, 2022. valuation of the goods.
8. Fall Back Method It has also been proposed [through

insertion of subsection (2A)] that in
[Section 25(9)] case of any conflict arises between
value determined by Collector of
At present, section 25(9) requires that Customs and Director General
if the customs value of the imported Valuation, the value determined by
goods cannot be determined under Director General of Valuation shall be
sub-sections (1),(5),(6),(7) and (8), it applicable for customs valuation
shall, subject to the rules, be purposes.
determined on the basis of a value
derived from among the methods of 10. Power to take over the
valuation set out in sub-sections
(1),(5),(6),(7) and (8) of said section, imported goods
that, when applied in a flexible manner [Section 25C)
to the extent necessary to arrive at a
customs value. At present, section 25C authorizes the
collector of customs to either entertain
The Bill has proposed to further clarify application of any other person to take
the afore-said valuation method by over the goods at substantially higher
inserting the words “using reasonable value than the declared custom value
means” to the above expression. by the importer of the goods or to give
According to the document ‘Notes on an option to such importer for paying
clauses’ published by FBR, such the same highest offer. However, such
insertion has been made in order to authority may be exercised by the
align the said provision with article 7 Collector subject to obtaining prior
of WTO Valuation Agreement. approval from the Board for this
purpose.
9. Power to Determine Customs
The Bill now proposes to empower the
Value [Section 25A respective Chief Collector to exercise
(1)(2A)(4)] such powers that are currently vested
with the Board.
At present, section 25A, empowers the
Director of Customs valuation to 11. Revision of the Value
determine customs value of goods as
per prescribed method either on his determined [Section 25D]
own motion or on a reference, made to
him by any person or an officer of At present, a review may be filed
Customs. before the Director General of
Valuation, for revision of value
The Bill proposes to amend afore-said determined by Director of Valuation
section whereby Collector of Customs
121
within thirty days from the date of vehicle respectively, as the case
determination of customs value. may be, the relevant date in which
case, for the purposes of this
The Bill proposes to substitute the section, shall be the date on which
aforesaid section whereby the Director the vessel has berthed or the
General may on his own motion or in vehicle has crossed-over the
pursuance of review petition made to border, as the case may be;
him within 30 days of value
determination by any person or an - In other cases, the date on which a
officer of customs, rescind or goods declaration is manifested
determine afresh the value of goods. under section 79 or 104 of the
Provided that such proceedings shall Customs Act.
be completed within sixty days of filing
of the review petition or initiation of 14. Untrue Statement, error, etc.
proceedings as the case may be. [Section 32(3A)]
12. Allowing Mutilation or At present first proviso of sub section
Scrapping of Goods (3A) of section 32 provides that the
custom authorities shall issue a show
[Section 27A] cause for recovery of any taxes /
duties payable except in cases where
At present, mutilation or Scrapping of the recoverable amount is less than
Goods shall be made on request of the One Hundred Rupees.
owner of the goods imported.
The Bill has proposes to enhance the
The Bill proposes a procedural change above limit from One Hundred Rupees
whereby the afore-said request shall to Twenty Thousand Rupees in order
be made before the filing of goods avoid unnecessary litigations involving
declaration. immaterial revenue loss.
13. Date of Determination of

15. Mis-declaration of value for
Rate of Import Duty
illegal transfer of funds into
[Section 30]
or out of Pakistan
Presently the relevant date for [Section 32C]
determination of applicable rate of
duty as per the first proviso of section As per section 32C(1), a person
30 in case where a goods declaration suspected to be involved in
has been manifested in advance of overstatement and understatement of
arrival of vessel, is the date on which goods exported and imported
the manifest of conveyance is respectively and vice versa with a view
submitted at the port of first entry. to illegally transfer funds into or
outside Pakistan, shall be served with
The Bill seeks to substitute the afore- a Show Cause Notice. The second
said proviso by virtue of which the proviso of said subsection requires
relevant date in above case would be: Additional Collector for submission of
report to the Chief Collector with
- Where the rate of changes after assistance of an expert of relevant
submission of goods declaration field and an officer of SBP.
and before the berthing or cross-
over event of the vessel or the
122
This Bill proposes to substitute this in this respect. The Bill has
requirement with empowering the consequently proposed omission of
Board to make rules for carrying out sub-section (3) of section 45.
the purposes of this section.
18. Declaration and Assessment
16. Delivery of Import Manifest for home consumption or
in respect of conveyance warehousing
other than a vessel [Section 79 (1)(aa)]
[Section 44]
By virtue of clause (a) of subsection
At present, the person-in-charge of (1) of section 79 of the Customs Act,
conveyance other than a vessel is the owner of goods imported for home
required to file import manifest within consumption, warehousing or
24 hours after arrival of cargo at land transshipment is liable to file true
customs-station or customs-airport. declaration of goods by giving
complete and correct particulars,
The Bill has proposed to substitute commercial invoice, bill of lading etc.
section 44 by virtue of which the within 10 days of the arrival of goods.
above timeline of 24 hours has been
proposed to be reduced as under: The Bill proposes insertion of a new
clause (aa), whereby importer of such
i. for landing of air cargo at goods, will be responsible to upload all
customs-airport, within three the documents which are mandatory
hours of landing, and; for assessment of goods, along with
ii. for land customs-station, at the the goods declaration in order to
time of entry of cargo into the reduce the clearance time of such
country. imports.
19. Checking of Goods

17. Permission to Make declaration [Section 80]
Amendment in Import
Manifest [Section 45 (2)] Subsection (4) of section 80 of the
Customs Act requires examination of
Currently sub-section (2) of section goods based on the customs selectivity
45, provides that the person-in-charge criteria in case of Customs
of a conveyance may amend the Computerized System. The Bill seeks
import manifest after filing of such to add proviso in sub-section (4) of
manifest to correct an obvious error or section 80, whereby in case of
omission, with the prior approval of clearance of GD through green
the appropriate officer of the customs channel, the custom officers would be
authorities which, as per subsection authorized to examine such goods,
(3) of section 45, is the only manner in after prior approval of Collector of
which a manifest can be amended. Customs even for cases processed
through Customs Computerized
The Bill has now proposed to insert a System.
proviso in the said sub-section (2)
whereby the person incharge may 20. Procedure for Removal of
amend such manifest before berthing Goods from Port Area
of the vessel in the manner prescribed
under the rules notified by the Board [Section 82]
123
Currently, Section 82 provides that if quantity or value of any goods are

any goods are not cleared, stated incorrectly in the goods
warehoused, transshipped, exported, declaration due to in advertence or
or removed from the port area within bona-fide error, such error may only
specified time period, such goods shall be rectified at any time before the
be auctioned, in case the owner of warehousing of relevant goods is
goods could not be ascertained. completed.
The Bill proposes to insert a new The Bill now seeks to substitute the
proviso after clause (c) of section 82, said sub-section (5) whereby, the
to empower Collector of Customs to Collector of Customs may, after
direct shipping lines to re-export such recording the reasons to be recorded
goods, banned or restricted by the in writing, give directions for
Federal Government, if the same are correction of such errors in goods
not cleared or auctioned within sixty declaration even after the warehousing
days from the arrival date of such of the goods.
goods.
23. Warehousing period of the
21. Provisional Release of goods. [Section 98]
Imported Goods.
[Section 83B] The existing clause (a) of sub-section
(1) of Section 98 of the Customs Act
Section 83B provides that where any provides that the Collector of Customs
offence is identified in respect of such may, on sufficient reason and subject
goods that are not subject to be to payment of 1% advance surcharge
confiscated, the Collector of customs per month, extend the prescribed
may allow provisional release of such warehousing period of the goods:
goods on request of owner of the
goods after payment of potential duty, - In case of notified perishable
taxes and any penalty or fine which goods, up to one month.
may be imposed on such goods. - In case of non-perishable goods,
up to three months.
The Bill has proposed to insert the
impression “outright” before the word The Bill seeks to extend the afore-
confiscation to clarify that the mentioned power of Collector of
provisional release under aforesaid Custom for allowing such extension in
section shall only apply on such goods time up to six months for both
which are not subject to confiscation in perishable and non-perishable goods.
absolute manner.
24. Clearance for exportation
22. Receipt of Goods at [Section 131(2)]
Warehouse – GD
As per second proviso of section
Rectification after 131(2), the Collector of customs may
warehousing now permitted examine the goods intended for
with approval of collector. exportation belonging to a particular
exporter for reasons to be recorded in
[Section 88(5)] writing, only in case where Customs
Computerized System has not been
Presently, as per sub-section (5) of introduced.
section 88 of the Customs Act, if the
124
The Bill now proposes to omit the Currently, section 155R provides that
above restriction on examination of the Collector of Customs may, for
goods consequent to which reasons to be recorded in writing,
irrespective of whether Customs direct for correction of the incorrect
Computerized System has been data that has been electronically
introduced or not, the Collector would communicated to Customs. As per said
have powers to examine goods section, no other person shall alter any
belonging to a particular exporter. data in Computerized System.
The Bill proposes for insertion of a

25. Cancellation/Suspension of proviso whereby such power has been
registration of registered delegated to Assistant Collector who
user. [Section 155F] on request from importer or exporter
may issue correction or corrigendum
At present, section 155F empowers certificate to rectify any typographical
Collector of Customs to (in exceptional or clerical error in the goods
circumstances) suspend the declaration except in case where
registration of a registered user of the section 29 of the Customs Act is
Customs Computerized System after applicable.
recording reasons in writing, upon
receipt of complaint or information
about non-compliance by such user, of
any provisions of the Customs Act .
The Bill has proposed to amend afore-

said section whereby such suspension
shall be done after giving notice and
affording reasonable opportunity of
being heard to the user.
26. Correction of clerical errors

[Section 155R]
27. Punishment for offences. [Section 156]

i. The Bill seeks to revise/enhance the existing penalties regarding non-compliance of
provisions relating to mandatory requirement of documents to be presented for
import clearance in the following manner:
Sr.
Offence Penalties
No.
Existing Proposed
1. (ii) If any person Such person Such person shall be liable to a penalty
contravenes the shall be liable as under: -
requirement of to a penalty
placement of not exceeding 1st time 100,000/-
invoice and packing fifty thousand 2nd time 500,000/-
list inside the rupees.
125
Sr.
Offence Penalties
No.
Existing Proposed
import container or 3rd time 1,000,000/-

consignment.
4th time Outright confiscation of
goods and blockage of
WeBOC user ID for one
year.
(iii) If any person N/A (New Such person shall be liable to a penalty
fails to attach or insertion) as under:-
electronically
upload mandatory 1st time 50,000/-
documents 2nd time 100,000/-
required
3rd time 150,000/-
under section 79 or
4th time 200, 000/-
131 of the Customs
5th time 250,000/- and onwards
Act, 1969.
ii. Presently, non-filing of goods

declaration within 10 days is an
offence liable to penalty
of Rs.5,000 per for initial 5 days, Provided that the collector may order
Rs.10,000 per day after 5 days to release such conveyance subject to
subject to a maximum penalty of provision of requisite Bank guarantee
Rs.100,000. The Bill now from the owner regarding the
proposes to delete the said production of such conveyance as and
penalty. when required during the proceedings.
iii. The Bill proposes to enhance the The Bill proposes to insert a new
scope of penalty provision as per proviso to section 157 whereby if such
serial no. 89 (smuggled goods) conveyance is seized repeatedly for
and 90 (non-duty paid/ unlawfully the third time, no option to pay fine in
removed from warehouse etc.) of lieu of the confiscation shall be given.
section 156 of the Customs Act
by including the activity of 28. Power of adjudication
‘retailing’ within the scope
offences subject to prescribed [Section 179]
penalty.
Currently, subsection (3) of section
179 requires a customs officer to
27. Extent of confiscation decide cases involving confiscation of
[Section 157(2)] goods or recovery of duty and other
taxes not levied, short levied or
Section 157(2) requires every erroneously refunded, within a period
conveyance of whatever kind used in of 90 days of the issuance of show
the removal of any goods liable to cause notice or within such extended
confiscation under the Customs Act period of time not exceeding 60 days
shall also be liable to confiscation. and in cases where provisions of
126
smuggling are invoked, within 30 days under the Occupational Groups and
of the issuance of show cause notice. Services (Probation Training and
Seniority) Rules, 1990.
Through insertion of proviso, the Bill
seeks to specify time limit of 30 days The Bill proposes to substitute the
within which show cause notice may above provision whereby the list of
be issued in cases where goods are eligible officials has been enhanced to
lying at sea-port, airport or dryport, also include officers of and officials of
which may be extended up to a further other Law Enforcement Agencies’ who
period of 15 days by the Collector of assist Customs Officers and officials in
Customs. such proceedings.
31. Advance Ruling

29. Reference to High Court
[Section 212B (5)]
[Section 196]
At present, Section 212B(5) provides
Presently, any aggrieved person or that the Ruling issued on request of
Collector or Director of Intelligence and applicant under sub-section (1) of
Investigation or Director of Valuation or section 212B shall be binding on the
any officer of customs not below the Customs for a period of one year
rank of Additional Collector or Additional unless there is a change in law or facts
Director may prefer an application or circumstances on the basis of which
before the High Court in prescribed form the advance ruling was pronounced.
along with statement of any question of
law arising out of Order passed by the Through Finance Bill, the above time
Appellate Tribunal under section period of one year has been proposed
194B(3) of the Customs Act. to be extended to three years.
The Bill seeks to substitute the lowest

rank of Customs officer eligible for
preferring application / reference for
any question of law arising before High
Court arising out of Tribunal order
from Additional Collector/Director to
Deputy Collector /Director.
30. Reward to Customs Officers

and Officials [Section 202B
(1)]
Presently, the officers entitled to cash
rewards for their conduct in the cases
of confiscation of goods, evasion of
customs duty and other taxes, are of
Customs Service of Pakistan as defined
127
Schedules
1. Reduced rating of CD/ACD/RD to Textile, Steel Sectors and POS Machines
The Bill proposes reduction / exemption of Customs Duty (CD), Additional Customs
Duty (ACD) and & Regulatory (RD) on import of:
i. goods falling under various PCT codes (589 as per Salient Features) to
encourage imports investments in the textile industry.
ii. flat rolled products of HRC and stainless steel.
iii. raw materials and intermediary goods and point of sale machines falling (under
328 tariff lines (as per salient features) as a consequence of tariff rationalization.
2. Exemption/concessionary rates to Pharma Sector
The Bill proposes exemption from CD & ACD on more than 350 Active Pharmaceuticals
Ingredients (API) (as per Salient Features provided) to pharmaceutical sector to ensure
stability of pharmaceuticals products prices in the market.
The Bill also provides for concessionary rate of 5% provided on import of Plant,
machinery and equipment by importers in such Sector.
Exemption of CD & ACD has also been proposed on import of raw material of auto-disable
syringes and Reduction in tariff on finished auto-disable syringes.
3. Reduction of inputs on Food processing
The Bill also proposes reduction in rate of CD on inputs / raw materials imported by
manufacturers under food processing industry.
4. Incentives proposed to Other Sectors
Following is the list of various other industries with proposed Customs Duty
benefits/incentives proposed through the Finance Bill:
Sr. No. Description of Industry/Sector Proposed Benefit
1 Uncoated paper and paperboard for printing and Reduction of CD & ACD
graphic arts industry.
2 Vaccines for veterinary medicines and feed Reduction / exemption of
additives to incentivize the dairy sector. CD & ACD
3 Goods falling under more than 100 PCT codes Reduction / exemption of
relating to Tourism industry. CD & ACD
4 Raw material/inputs of footwear industry. Reduction of duties
5 Inputs for poultry industry. Reduction / exemption of
CD & ACD
128
Sr. No. Description of Industry/Sector Proposed Benefit

6 Raw material for manufacturer of aseptic plastic Reduction / exemption of
packaging. CD & ACD
7 Import of raw materials for cables / optical fiber Exemption of ACD
manufacturers.
8 CD & ACD on raw materials for Paint Industry. Reduction / Exemption of

CD & ACD
Raw materials for Chemical and Artificial Leather
9 Reduction / Exemption of
Industry. CD & ACD
10 Inputs for Electronics Manufacturing Industry. Reduction / Exemption of

CD & ACD
Raw materials / inputs of furniture, coating, boiler
11 Reduction / Exemption of
manufacturing industry, bobbins and cops CD & ACD
manufacturing industry etc.
5. Joint Border Sustenance Markets
The Bill proposes to introduce the concept of Boarder Sustenance Markets (through
Part VIII of Fifth Schedule to the Customs Act) for the benefit of people residing in
border areas to counter smuggling and providing legal way of trading opportunities.
5. Threshold for Value of Unsolicited Gifts increased
The Bill proposes to enhance the value of import unsolicited gifts whether through
post or courier from existing PKR 20,000 to PKR 30,000.
129
Federal Excise Act, 2005
1. Filing of return and payment of duty etc. [Section 4]

Currently, approval is required to be obtained from the Commissioner for filing of revised
Federal excise Duty (FED) return. The Bill proposes to insert a proviso under above section
which allows registered person to file the revised return within 60 days of the filing of
original return. The said revision may be made without obtaining approval of the
Commissioner subject to the condition that the duty payable as per revised return is more
than the originally declared duty or where the refund claimed is less than the originally
declared refund.
The proposition apparently aligns procedure of revision of FED return with the procedure of
revision of sales tax return under Sales Tax Act, 1990 and Income Tax Ordinance, 2001.
2. Recovery of unpaid duty or of erroneously refunded duty or arrears

of duty, etc. [Section 14]
The above section empowers the officer of Inland Revenue to determine amount of duty
payable by a person and to recover the same from person with default surcharge and
penalty after issuing a show cause notice.
The Bill proposes to insert new sub-section (4) under the above section broadening the
scope of said provision which enables the officer of Inland Revenue to recover duty with
default surcharge and penalty in like manner with reference to assistance in collection and
recovery of duties in pursuance of a request from a foreign jurisdiction under a tax treaty,
a multilateral convention, and inter-governmental agreement or similar agreement or
mechanism.
It is notable that unlike direct taxes, at present Pakistan does not have any tax
treaty/multilateral treaty etc. with respect to indirect taxes and such proposition indicates
the intentions of the Federal Government to enter into such agreements for indirect taxes
with foreign governments in the near future.
3. Licensing of brand name. [Proposed Section 45AA]

The Bill proposes to insert a new Section 45AA whereby manufacturers of specified goods
are required to obtain brand license in the prescribed manner for each brand or Stock
Keeping Unit (SKU). Any such specified brand and SKU found to be sold without the license
shall be deemed counterfeit goods and liable to outright confiscation and destruction in the
prescribed manner in addition to any other penal action which may be taken under the FE
Act. Similar provision has also been inserted under Sales Tax Act, 1990.
4. Agreements for the exchange of information or assistance in

recovery of duties. [Section 47A]
The existing provisions of above Section empower the Federal Government to enter into
bilateral or multilateral agreements with provincial government or governments of foreign
countries for the exchange of information.
The Bill now seeks to insert sub-section (3) under the above Section which could also
enable the Federal Government to enter into a bilateral or multilateral convention, and
130
inter-governmental agreement or similar agreement or mechanism for assistance in the

recovery of duties.
The Bill also proposes to insert non-obstante sub-section (1A) which would authorize the
Board to share data or information (including real time data videos, images) received by
the Board, with any other Ministry or Division of Federal Government or Provincial
Government subject to limitations and conditions as may be specified by the Board.
FIRST SCHEDULE
TABLE I – Dutiable Goods
a) Omissions / Exemptions
i. Omission of items proposed to be subjected to sales tax
The Bill proposes to withdraw levy of FED on the following items on which levy of sales
tax at standard rate has been proposed to be restored by virtue of omission of such items
from the Sixth Schedule to the Sales Tax Act, 1990:
Sr. Heading / Sub- Existing Rate of

Description of Goods
No. Heading Number Duty
1. Edible oils excluding deoxidized 15.07, 15.08, 15.09, 17% ad val.

soybean oil falling under 15.10, 15.11, 15.12,
heading 15.18 15.13, 15.14, 15.15,
15.16 1517, and
15.18,
2. Vegetable ghee and cooking oil Respective heading 17% of retail price.
(a) in retail packing
(b) not in retail packing
57. Fruit juices, syrups and Respective heading 5% of retail price.

squashes, waters containing
added sugar or sweetening
matter etc. excluding mineral
and aerated waters
58. Steel Billets, ingots, ship plates, Respective heading 17% ad val.
bars and other long re-rolled
products
ii. Exemption from FED Electric Vehicles Imported
The Bill proposes to exclude electric vehicles (4 wheelers) from the purview of imported
motor vehicles principally designed for the transport of persons which are otherwise
subject to FED at the rates ranging from 2.5% to 30% ad val. under serial No.55 of Table
131
– I First Schedule to the Act. The immunity for the said electric vehicles is proposed to be
provided till June 30, 2026.
iii. Exemption from FED Electric Vehicles Locally Manufactured
The Bill also seeks to exclude locally manufactured electric vehicles (4 wheelers) and
motor vehicles of cylinder capacity upto 850cc from levy of FED which were otherwise
subject to FED at varying rates from 2.5% to 7.5% under serial No.55 B of Table – I First
Schedule to the Act. The immunity for the said vehicles is proposed to be provided till
June 30, 2026.
b) New insertion
The Bill proposes to levy FED on the following new item, namely:
Sr. Description of Heading / Sub-Heading

Proposed Rate of Duty
No. Goods Number
8c. Tobacco mixture in 2403.9990 Rs.5,200/- per kg.

an electrically
heated tobacco
product by whatever
name called,
intended for
consumption by
using a tobacco
heating system
without combustion
TABLE II – Dutiable Services
a) The Bill proposes to reduce the rate of FED on telecommunication services from existing
17% to proposed 16% under serial no.6 of the Table – II to the First Schedule.
b) In addition to the above FED, the Bill proposes to levy further FED on certain
telecommunication services by inserting the new serial no. 6A in the following manner:
Sr. Heading / Sub-

Description of Services Rate of Duty proposed
No. Heading Number
6A. Following telecommunication

services:
(a) Mobile phone call, if call

duration exceeds three Respective sub- One rupee per call in addition
minutes; heading of 98.12 to the rates of duty specified
under Serial No.6
132
(b) Internet services; 9812.6000 Five rupees per GB in addition

to the rates of duty specified
under Serial No.6
Ten paisa per sms in addition

(c) Sms services 9812.1710 to the rates of duty specified
under serial no.6
c) The Bill proposes to exclude Merchant Discount Rate (MDR) for accepting digital payment
from the services of banking companies by virtue of amendment proposed in description
of dutiable service under serial No.55 of Table – II of the First Schedule to the Act which
are otherwise subject to levy of FED at the rate 16% of the charges.
SECOND SCHEDULE
a) In line with the omission of respective entries from the First Schedule, the Bill also
proposes to delete the following items from Second Schedule which were subject to
collection of duty under sales tax mode:
Heading/
Sr. No. Description of Goods
sub-heading Number
1. Edible oil excluding epoxidized soyabean 15.07, 15.08, 15.09, 15010, 15.11,
oil falling under heading 15.18 15.12, 15.13, 15.14 15.15, 15.16, 15.17
& 15.18
2. Vegetable ghee and cooking oil Respective heading
4. Steel Billets, ingots, ship plates, bars and Respective heading

other long re-rolled products
THIRD SCHEDULE
a) The Bill proposes to provide conditional exemption on the following items from levy of
FED by inserting new entries in the following manner:
Heading/
Sr. No. Description of Goods sub-heading
Number
24. The following goods, when supplied within the limits of the
Border Sustenance Markets, established in cooperation with
Iran and Afghanistan:
(i) Animal Fats and Oil and their fractions 1516.1000

(ii) Vegetable Fats and their fractions
133
Heading/
Sr. No. Description of Goods sub-heading
Number
(iii) Vegetable Oils and their fractions 1516.2010
1516.2020
Provided that, such items in case of import, shall be allowed
clearance by the Customs Authorities subject to furnishing of
bank guarantee equal to the amount of duty involved and the
same shall be released after presentation of consumption
certificate issued by the Commissioner Inland Revenue having
jurisdiction:
Provided further that, the said exemption shall only be

available to a person upon furnishing proof of having a
functional business premises located within limits of the
Border Sustenance Markets.
25. Import and supply of raw materials, components, parts and Respective heading
plant and machinery by registered persons authorized under
Export Facilitation Scheme, 2021 notified by the Board with
such conditions, limitations and restrictions.
Islamabad Capital Territory

(Tax on Services)Ordinance,
2001
1. Scope of Tax [Section 3]
The above section provides for charge of tax at the rates prescribed under Schedule on
the value of taxable services rendered or provided in Islamabad Capital Territory.
The Bill proposes to insert a new subsection (1A) whereby export of services has been
classified as zero rated services.. Earlier export of IT services and IT-enables services was
exempt from sales tax under a notification issued by the Federal Government.
By virtue of this insertion, the exporters of services in ICT including exporters of IT and IT
enabled services would be entitled to claim refund of attributable input taxes. Such refund
was previously not claimable in case of service providers of IT and IT enabled services
due to exemption of exports of such services.
134
Contact us
For more information you may contact
Atif Mufassir Zubair Abdul Sattar Rana Muhammad Usman Khan

Partner - National Leader Tax & Legal Partner Tax & Legal Partner
Email: amufassir@yousufadil.com Karachi office Lahore office
Email: zsattar@yousufadil.com Email: rmukhan@yousufadil.com
Imran Memon Arshad Mehmood Sufian Habib

Executive Director Partner Tax & Legal Director Tax & Legal
Email: immemon@yousufadil.com Karachi office Islamabad office
Email: amehmood@yousufadil.com Email: sufianhabib@yousufadil.com
Our offices
Karachi
Islamabad
Cavish Court, A-35, Block 7 & 8
18-B/1
KCHSU, Shahrah-e-Faisal
Chohan Mansion, G-8 Markaz
Karachi - 75350, Pakistan
Islamabad, Pakistan
Phones: + 92 (21) 34546494-97 Phones: + 92 (51) 8350601, + 92 (51) 8734400-3
Fax : + 92 (21) 34541314 Fax: + 92 (51) 8350602
Email: sghazi@yousufadil.com Email: shahzad@yousufadil.com
Lahore Multan
134-A, Abubakar Block th
4 Floor Mehr Fatima Tower,
New Garden Town, Lahore, Pakistan Oposit High Court,
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35440520 Phones: + 92 (61) 4571131-2
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Email: rmukhan@yousufadil.com
Email: rmukhan@yousufadil.com
About Yousuf Adil
Yousuf Adil, Chartered Accountants provides Audit & Assurance, Consulting, Risk Advisory, Financial Advisory and Tax
& Legal services, through nearly 550 professionals in four cities across Pakistan. For more information, please visit our
website at www.yousufadil.com.
This publication contains general information only and is not intended to address the matters of any particular
individual or entity. Before making any decision or taking any action that may affect your finances or your business,
you should consult a qualified professional advisor. No representations, warranties or undertakings (express or
implied) are given as to the accuracy or completeness of the information in this publication, and nor the Firm, its
employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in
connection with any person relying on this publication.
© 2021. For135
information, contact Yousuf Adil, Chartered Accountants.

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Budget 2021 - 22 | Highlights & Comments

This publication contains an economic review, highlights of fiscal proposals and

This publication can also be accessed on our Website.

Highlights of Important Fiscal Proposals 19

Significant Amendments Proposed In

Income Tax Ordinance, 2001 27

Sales Tax Act, 1990 100

Customs Act, 1969 119

Federal Excise Act, 2005 130

Islamabad Capital Territory (Tax on Services) Ordinance, 2001 134

Tax revenue 5,829 4,691

Non-tax revenue 2,080 1,704

Gross revenue receipts 7,909 6,396

Less: Provincial share in Federal taxes (3,412) (2,704)

Net revenue receipts 4,497 3,691

Current expenditure 7,523 7,626

Development expenditure 964 863

Total Expenditure 8,487 8,489

Federal Budget Deficit (3,990) (4,798)

Non Bank Borrowing 1,241 1,517

Bank Borrowing 681 649

Net External receipts 1,246 2,287

Other proceeds 252 103

Estimated Provincial Surplus 570 242

Economic Review 2020-21

Inflation CPI Inflation CPI

Debt to GDP Ratio Debt to GDP Ratio

Policy Rate Policy Rate

(Data Source: PES, 2020-21)

*Inflation CPI for FY21 from July’20-May’21

Other targeted measures include;

 Stimulus package of PKR 1,240 billion, a construction package,

 Launch of Temporary Economic Refinance Facility (TERF) to stimulate investment in both

 Refinance Facility for Combating COVID-19 (RFCC),

 Mandatory Targets for Housing Finance,

 An expansion of the social safety net,

 National Agriculture Emergency Programme with a cost of PKR 277 billion

2018 2019 2020 2021 E

(Data Source: PES, 2020-21)

Real GDP Growth

(Data Source: PES, 2020-21)

GDP Growth 2020-21

Agricultu Industry Services

Target was 2.8% Target was 0.1% Target was 2.6%

(Data Source: PES, 2020-21)

Trade & Payments

(Data Source: PES, 2020-21)

Trade Deficit (USD billion)

Import Export Trade Deficit

(Data Source: SBP)

*Based on July-April month data

FY20 (Jul-Mar) FY21 (Jul-Mar)

(Data Source: PES, 2020-21)

Public Debt and Debt to GDP Ratio

Domestic Debt External Debt Debt to GDP Ratio

(Data Source: PES, 2020-21)

*Data for FY21 is from July’20-March’21

16.0 Monetary Policy Analysis