Highlights of tax

ISLAMABAD, Jun 3: Following are the highlights of tax measures announced by Finance Minister Dr. Hafeez Shaikh the government in the National Budget for the financial year 2011-12.

INCOME TAX

— The basic exemption limit on incomes is proposed to be enhanced from
Rs.300,000 to Rs.350,000
— A tax credit equal to 100% of tax payable is proposed to encourage enhanced equity financing, and to provide relief to new corporate industrial undertakings established on or after 1st July 2011, with 100% equity financing. —The rate of tax deductible on Cash Withdrawals from Banks is proposed to be reduced to 0.2% from existing 0.3%.
— The maximum cumulative limit for investments in shares and for premium paid to Insurance Company investments is fixed @ 15% of the taxable income, with maximum upper limit for investment upto five hundred thousand.
— Tax relief is proposed to be provided to withdrawals exceeding Rs.500,000 from a Voluntary Pension Fund.
—For encouraging companies’ enlistment on stock exchange, the existing tax credit equal to 5% is proposed to be enhanced to 15%.
—NTN and CNIC of eligible taxpayers are proposed to be provided expressly along with other particulars, in the withholding tax statements filed by withholding agents.
—The requirement of mandatory filing of return of income by the commercial and Industrial consumers of electricity with annual billing above one million rupees is proposed.
—In order to discourage the practice of arbitrage by banks for receiving ‘dividends’ from Asset Management Companies, the rate of tax on such return is proposed to be enhanced from 10% to 20%.
—For encouraging investments made by non-residents in Government Securities,the withholding tax on profit on debt deductible @ 10% is proposed to be a final tax.
—The withholding tax on profit on debt deductible @ 10% arising from investment in Government securities by individual is also proposed to be a final tax.
—After imposition of capital gain tax on Modarba certificates and instruments of redeemable capital traded at stock exchange through Finance Act 2010, the 0.01% CVT on such instruments is proposed to be withdrawn in order to encourage their trade.

SALES TAX

–Sales tax rate has been reduced from 17% to 16%.
–Scope of federal excise duty reduced and special excise duty eliminated to reduce the burden of multiple taxation.
–Reduction in the quantum of excise duty on cement and withdrawal of excise duty on white cement.
–Reduction in the rate of federal excise duty leviable on aerated beverages from 12% to 6%.
–Federal excise duty levied on services provided by property developers or promoters to reduce the level of taxation which will in turn reduce the quantum of taxation on housing sector already subject to levy of Capital Value Tax.
–Exemption on local supply of reclaimed lead to recognized manufacturers of lead batteries has been proposed to check misuse of the facility whereby taxes are charged by the suppliers of reclaimed lead but is not deposited into the exchequer.
–Immediate full adjustment of sales tax paid on import or local purchase of capital goods has been allowed to mitigate the cash flow of industrial sector and to ensure timely and quick adjustment of input tax paid.
– Withdrawal of exemption of sales tax on defence stores at import and local supply to bring it in line with international best practices
–Revision in the upward limit of duty slabs to enhance the burden of Federal Excise Duty on locally produced Cigarettes.
–The exemption regime is being rationalized with objective to reduce its scope only to selected sectors.
–The value addition tax levied on commercial importers is being enhanced from 2% to 3%, which is levied and collected at import stage.
–Exemption of sales tax on cement/concrete blocks and bricks has been withdrawn to extend similar treatment in line with other inputs used in the construction industry.
–The sales tax leviable on sugar at import and local supply stage has been withdrawn and federal excise duty @ 8% is being levied on aforesaid stages.
–The zero-rating regime has been rationalized to limits its application only to selected sectors.
–The Federal Excise Duty leviable on filter rods for cigarettes has been rationalized from Rs.1 per filter rod to 20% ad val.

CUSTOMS

–Regulatory duty reduced, particularly on edible items.
–5% reduction made on pharmaceutical raw materials.
– Concession announced for butyl acetate on import of its raw materials (Sabutol).
–Incentives for glass industry through concession on its two major raw materials namely “mirror backing paint” and “waste/scrap of glass”.
–Incentive for CNG compressors manufacturing industry through concession on its 15 components.
–Concession in machinery and equipment to incentivize oil exploration companies.
–Concession on raw material of audio cassettes.
–Incentive for hi-tech car audio manufacturing industry through concession on import of mechanism for car audio system.
–Tariff rationalization on bars, rods and profiles of refined copper and copper alloy.
–Corrections in descriptions of PCT codes 2923.9010 and 2930.9060.
–Creation of separate PCT codes for brass scrap and armoured cash carrying vehicle.
–Tariff correction to remove ambiguity in re-import scheme.

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