PROVINCIAL BUDGET(S) Provincial Tax Memorandum 2016

Transcription

1 PROVINCIAL BUDGET(S) Rafqat Hussain & Co. Chartered Accountants 81 Abu Bakar Block, Garden Town, Lahore-Pakistan T: , F: URL: 1 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

2 WITH COMPLIMENTS To our Clients and Associates We are pleased to summarize the important changes proposed in Finance Bill (s) 2016, presented in the provincial assemblies of Punjab, KPK and Sindh. Under the Constitution, taxing rights on rendering of services, disposal and use of immovable properties and agricultural income tax inter alia are with the provinces. All changes proposed through the Provincial Bills are effective July 1, 2016 subject to approval by the provincial assemblies. Major receipts of the provinces are from sales tax on rendering of services. Stamp duties, registration fees, motor vehicle tax, property tax and agricultural income tax also inter alia fall within the ambit of provincial fiscal legislation. The proposals in the Provincial Bills are to be approved by the respective assemblies and should not generally be acted upon without obtaining appropriate advice. The memorandum can also be accessed on our website If you require any information or have queries with regard to the proposed amendments in the Finance Bill (s), please feel free to contact us. Rafqat Hussain & Co. Chartered Accountants June 14, 2016 Lahore 2 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

3 Page Number Executive Summary 4 Punjab Finance Bill Sindh Finance Bill KPK Finance Bill P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

4 EXECUTIVE SUMMARY Sales tax on services is taxed, wherever applicable, by the respective provinces and the sale of goods is taxed by the Federal Government. Principally, a value added tax system is in place in Pakistan therefore, sales tax on goods and services either at Federal or Provincial levels is admissible as input tax whilst discharging the respective output tax liability, unless specifically made inadmissible. Since 2011, 2012 and 2013 Provincial Governments of Sindh, Punjab and Khyber Pakhtunkhwa respectively have started collecting sales tax on services. Tax on services in Islamabad Capital Territory(ICT) being collected by Federal Govt, so in order to harmonise the list of services taxable in Islamabad Capital Territory (ICT) with the services taxable in the Provinces, number of new services rendered in ICT are proposed to be taxable through Federal Finance Bill Following collection targets for provincial sales tax has been set by the provinces for fiscal year ; Revised [Rupees in Billion] 1. Khyber-Pakhtunkhawa Sindh Punjab Federal Government has retained federal sales tax at 17 percent on goods, and 16 per cent has on services in ICT. Punjab has retained the rate of 16 per cent. However, in Khyber Pakhtunkhwa general rate of sales tax on services, except few services is 15 per cent and Sindh has, across the board, except few services, reduced the standard rate to 13 per cent. A comparison of provincial budgets of Sindh and Punjab revealed that a disparity in sales tax rates on services has been witnessed in provincial budgets of The matter of disparity in rates is to be considered on national level. Over the years, more and more service sectors are being brought within the ambit of tax. 4 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

5 PUNJAB FINANCE BILL-2016 S.No Proposal Relevant Section/ Clause/ Schedule PUNJAB SALES TAX ON SERVICES ACT, Recovery of tax short or not withheld Section 14(3) 2 Input tax credit not allowed Section 16, 16A & 16B 3 Penalty for late filling of return Section 48(2) 4 Powers of adjudication of Deputy Commissioner Section 60(1)(B) 5 Additions to the list of taxable services Second Schedule STAMP DUTY Stamp Act, 1899 PROPERTY TAX ENTERTAINMENT DUTY FEE FOR REGISTRATION OF VEHICLE MOTOR VEHICLES TAX CVT ON POWER OF ATTORNERY INFRASTRUCTURE DEVELOPMENT CESS TAX ON IMPORTED MOTOR CARS Punjab Urban Immovable Property Tax Act, 1958 Punjab Entertainment Duty Act, 1958 Punjab Motor Vehicles Taxation Act, 1958 Punjab Finance Act, 1973 Punjab Finance Act, 2010 Punjab Infrastructure Development Cess Act 2015 Punjab Finance Act, P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

6 PUNJAB SALES TAX ON SERVICES ACT, 2012 RECOVERY OF TAX SHORT OR NOT WITHHELD -Section 14(3) A new sub-section 3 proposed to be inserted in section 14 through which recovery procedure of tax short or not withheld by a withholding agent has been made part of the law. Now, recovery for tax short or not withheld can be made from the withholding agent. INPUT TAX ADJUSTMENT -Section 16, 16A & 16B Certain enabling provisions have been introduced to empower the authority to restrict the input tax adjustment. It is proposed that input tax will not be available for tax amount for a transaction exceeding value of fifty thousand rupees being not paid through proper banking channel. A new section 16B regarding inadmissibility of input tax has been introduced. Previously, such procedure was prescribed in Rules. This will strengthen the legal position that anything, which is related with determination of sales tax liability, should principally be governed through the provisions of main statute. PENALITY FOR LATE FILLING OF RETURN -Section 48(2) Penalty for late filling of return proposed to be increased by 100%. POWERS OF ADJUDICATION OF DEPUTY COMMISSIONER -Section 60(1)(B) The floor of monetary threshold of one million for Deputy commissioner (DC) is proposed to be omitted to enable DC to adjudicate cases involved tax upto one million as well. ADDITIONS TO THE LIST OF TAXABLE SERVICES Second Schedule Following new services are proposed to be taxed and added at the end of second schedule to the Punjab Sales Tax Act, 2012; S.No S.No of 2 nd schedule to the Description of services H.S Code Proposed Rate of Tax PST 1 60 Services provided by cosmetic and plastic surgeons and hair transplant services but: EXCLUDING: Services provided to acid or burn victims and respective headings 6 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m Sixteen per cent

7 2 61 Services provided by warehouses or depots for storage including cold storages Services provided by Packers including handling and packaging services. Provincial Tax Memorandum and respective headings , , and respective headings Sixteen per cent Sixteen per cent Description of certain existing taxable services as mentioned in 2nd schedule to the Punjab Finance Act, 2012 proposed to be changed/enlarged/rationalized along with their classification(s), resultantly scope of existing services increased/clarified as under; S.No of 2 nd sched ule to the PST Existing Description of services 1 Services provided by hotels, motels, guest houses, marriage halls and lawns (by whatever name called) including pandal and shamiana services clubs including race clubs and caterers. (including all ancillary or allied services such as floral or other decoration, furnishing of space whether or not involving rental of equipment and accessories) Proposed new description of services after insertion Services provided by hotels, motels, guest houses, marriage halls and lawns (by whatever name called) including pandal and shamiana services, catering services (including all ancillary/allied services such as floral or other decoration, furnishing of space whether or not involving rental of equipment and accessories) and clubs including race clubs and their membership services including services, facilities or advantages, for a subscription or any other amount, to their members. ; Proposed change in Classificat ion in Column No 3 of 2 nd schedule the PST to Effect Seeks to enlarge the scope of Catering services clubs to include membership services including all ancillary or allied services to their members. 2 Advertisement on television and radio, excluding advertisements (a) sponsored by an agency of the Federal or Provincial Advertisement on television and radio or advertisement services showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, excluding " , and respectiv e headings ; 7 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m Seeks to enlarge the scope of advertisement services to include advertisement services showcasing of

8 Government for health education; (b) financed out of funds provided by a Government under an agreement of foreign grant-inaid; and (c) conveying public service message, if telecast on television by the World Wide Fund for Nature (WWF) or United Nations Children s Fund (UNICEF) 12 Advertisements on hoarding boards, pole signs and sign boards and on closed circuit TV, Websites or Internet advertisements: (d) sponsored by an agency of the Federal or Provincial Government for health education; or (e) financed out of funds provided by a Government under an agreement of foreign grant-in-aid; or (f) conveying public service message, if telecast on television by the World Wide Fund for Nature (WWF) or United Nations Children s Fund (UNICEF). ; and All kinds of advertisement services including advertisements on hoarding boards, pole signs and sign boards and on closed circuit TV, websites or internet, advertisements through brand activation in any mode, advertisement on moving vehicles, aerial advertising, advertisement through provision of space or time, or on bill-boards, public places, buildings, conveyances, cell phones, automated teller machines, or through offering product exclusivity in any manner. ; and 14 Construction services and services provided by contractors of building (including water supply, gas supply and sanitary works), roads and bridges, electrical and mechanical works (including air conditioning), horticultural Provincial Tax Memorandum , , and respective headings. ; 8 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m any product or services by different modes. Further respective headings of HS Codes added to cover the new services. Seeks to enlarge the scope of services to include all kind of advertisement services. Seeks to enlarge the scope of Construction services to include all kind of construction services.

9 works, multi-discipline works (including turn-key projects) and similar other works but: EXCLUDING: (i) where the tax is otherwise paid by registered persons as property developers, builders or promoters for building construction; or (ii) where the construction work is funded under an agreement of foreign grant-in-aid or involves construction of consular buildings; or Provincial Tax Memorandum 2016 Further exemption earlier available to Government civil works including those of Cantonment Boards proposed to be withdrawn. (iii) residential construction projects where the covered area does not exceed 10,000 square feet for a house and 20,000 square feet for an apartment except where construction services are provided to construct more than one house or more than one apartment building. ; 15 Services provided by property developers, builders and promoters (including their allied services) EXCLUDING: Services provided by property developers, builders and promoters (including their allied services) As the tax is levied on the basis of area, so reference of value 9 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

10 Actual purchase value or documented cost of land. 31 Services provided by business support services. Services provided for specified purposes including fumigation services, maintenance and repair (including building and equipment maintenance and repair including after sale services) or cleaning services, janitorial services, dredging or desilting services and other similar services etc. Services provided by business support services including business auxiliary services. Services provided for specified purposes including fumigation services, maintenance and repair (including building and equipment maintenance and repair including after sale services) or cleaning services including collection and processing of domestic waste and street cleaning services, janitorial services, dredging or desilting services and other similar services etc. Provincial Tax Memorandum , and respectiv e headings 98.22, and respectiv e headings proposed to be omitted. Seeks to enlarge the scope of services to include auxiliary services and respective HS Code. Seeks to enlarge the scope of services to include collection and processing of domestic waste and street cleaning services and respective HS Code. 10 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

11 STAMP DUTY 1. Presently stamp 3% is being charged on the value of immovable property in case of transfer of a right or interest in housing sector i.e. cooperative housing societies/private housing societies etc. However, valuation tables notified by the District Collector under section 27-A is not applicable on such transfers. It is prosed that Article 63-A of Schedule-I of the Stamp Act, 1899 meant for transfer of a right or interest relating to an immovable property may be inserted in section 27-A of the Act ibid so that the assessment of the land may be made according to the valuation table. 2. Section 29 of the Stamp Act, 1899 imposes responsibility as to who shall pay the stamp duty at the time of execution of the instruments. However, the instruments of contract (Article 22-A), Decree, Rule of a Court or an Order of a Court (Article 27-A), Gift (Article 33) and transfer of a right or interest relating to an immovable property in cooperative housing societies etc. (Article 63-A) are not included in section 29 of the Stamp Act, 1899, which causes ambiguity regarding the responsibility to pay the stamp duty. In order to remove this ambiguity. It is proposed that the Article Nos. i.e. 22-A, 27-A, 33 & 63-A of Schedule-I may be included in section 29 of the Act ibid. 3. At present, stamp 3% is being charged on the instrument of Power of Attorney if the same is executed for consideration but valuation tables are not applicable. Similarly, stamp duty of Rs. 1200/- per instrument is being charged when the Power of Attorney is executed for authorizing the agent to sell the property. The Finance Bill proposed the same rate of stamp duty if the Power of Attorney is executed for consideration but the value shall be calculated according to the valuation table notified by the District Collector concerned. Moreover, the rate of Rs.1200/- is proposed to be 2% of the value of the property according to the valuation table if it is executed between persons other than spouses or between one wife or widow and another wife or widow of the same husband, or between father, mother, son, daughter, grandparents, grandchildren or siblings. For the purpose Article 48(b), 48(bb) of Schedule I of the Stamp Act, 1899 is proposed to be inserted in Section 27-A of the Act ibid, so that the value of the property may be assessed according to the valuation table notified by the District Collectors under Section 27-A of the Stamp Act, This amendment shall discourage purchasers to register Power of Attorneys instead of registering sale deeds. 11 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

12 PROPERTY TAX 1. It is proposed that tax on vacant plots will be levied after two years of delivery of possession to the owner. Following measure proposed in this regard; a. New definition of building and lands proposed to be inserted in section 2 vide clause (aa) as follows; buildings and lands include vacant plots or a parcel or portion thereof having fixed boundaries intended for specific purpose including residential, commercial or industrial use. ; b. A clause j is added in section 4 after clause I to exclude the vacant plot from exemption from property tax and proposed that a vacant plot whose possession is handed over to the owner for the first time and remains vacant or without construction for a period not more than two years from date of delivery of possession. c. A proviso proposed to be inserted in section 5-A that the annual value of a vacant plot shall be in accordance with the valuation table notified for respective locality of the rating area. 2. The provision relating to exemption of building and lands used exclusively for educational purposes is proposed to be clarified by adding an Explanation. Entertainment Duty Entertainment duty is proposed to be withdrawn from petty entertainments such as well of death, swings and magic shows. Fee for Registration of Motor Vehicles It is proposed that option to pay tax in lump sum and periodic payments extended to motor rickshaws and motor vehicle having engine capacity exceeding 1000cc but not exceeding 1300cc be provided respectively. Further the rates are also proposed for lump sum option. Motor Vehicle Registration Tax Effective from 1 July 2016 a new slab introduced as exceeding 1500cc but not exceeding 2000cc and 3% proposed for this slab. 12 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

13 CVT on Power of Attorney Presently the rate of Capital Value Tax on Power of Attorney is Rs.100/- per square foot, which is creating hardship for the public due to heavy taxation. To rationalize levy of taxes on power of attorney, it is being proposed that the Stamp 2% may be levied and CVT on Power of Attorney may be abolished at the same time. Infrastructure Development Cess To levy the cess, definition of value substituted and the following new definition is proposed; value means the value of goods being imported or exported, as determined by an officer of customs for purposes of the Customs Act, 1969, provided that in case of goods manufactured, produced or consumed in Pakistan, the value shall be determined by reference to the value determined under the Sales Tax Act, 1990 for purposes of levy and payment of sales tax. One-Time Tax on imported motor cars One-time tax on the imported motor cars registered after 30 June 2016 proposed to be levied at the followings rate. Sr. No. Category of imported motor car Rate of Tax (a) Motor car with engine capacity exceeding 1300cc but not exceeding 1500cc. Rs. 70,000 (b) Motor car with engine capacity exceeding 1500cc but not exceeding 2000 cc. Rs. 150,000 (c) Motor car with engine capacity exceeding 2000cc but not exceeding 2500 cc. Rs. 200,000 (d) Motor car with engine capacity exceeding 2500cc Rs. 300, P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

14 SINDH FINANCE BILL-2016 S.No Proposal Relevant Section/ Clause/ Schedule SINDH SALES TAX ON SERVICES ACT, Revision in Sindh Sales Tax Rates Second Schedule 2 Concept of negative list of services First & 2 nd Schedules 3 Additions to the list of taxable services Second Schedule 4 New definitions introduced Section 2 5 Time limit prescribed for filing of refund Section 15 6 Input tax credit not allowed Section 15A 7 Joint and several liability of persons Section 18 8 Sales of taxable activity or transfer of ownership Section 19 9 Time limit to issue show-cause notice and recordkeeping Sections 23, 27, & Separate return when rate of tax changes Section 30(5) 11 Recovery of tax not levied or short-levied Section 47(1B) & 47(6) 12 Appointment of Member SRB Tribunal Section Enhancement of certain exemption threshold Notification No. SRB-3-4/7/2013 dated June 18, 2013 INFRASTRUCTURE CESS PROPERTY TAX STAMP DUTY Schedule of Sindh Finance Act, 1994 West Pakistan Act, 1958 Section 31, 73 and Schedule to the Stamp Act, 1899 SINDH COMPANIES PROFITS (WORKERS PARTICIPATION) ACT, P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

15 SINDH SALES TAX ON SERVICES ACT, 2011 REVISION IN RATE OF SALES TAX Second Schedule The standard rate of Sindh Sales Tax (SST) is proposed to be reduced from 14% to 13%. It has been mentioned in the salient features issued by SRB that the rate of sales tax for telecommunication services presently chargeable to tax at 18% is proposed to be increased to 19%. Moreover, the reduced rate of 6% presently applicable on certain services is also announced to be increased to 8%. Currently following services are subject to 6% as notified vide Notification SRB-3-4/8/2013, dated 01 July 2013; Renting of immovable property services Legal practitioners and consultants Accountants and auditors Tax consultants Construction services Program producers and production houses Corporate law consultants Persons engaged in inter-city transportation or carriage of goods by road or through pipeline or conduit Ready mix concrete services CONCEPT OF NEGATIVE LIST OF SERVICES -First & 2 nd Schedules It has been stated in the Budget Speech by the Provincial Finance Minister that necessary legislation for introduction of the negative list system of sales tax on services is proposed to be initiated soon after the budget, with a view to making this system effective and enforceable with effect from December 01, From this date, all services rendered, provided, initiated, originated or consumed in the Province of Sindh shall be subject to Sindh Sales Tax on Services unless they form part of a negative list which will represent services not liable to tax. ADDITIONS TO THE LIST OF TAXABLE SERVICES Second Schedule Following services are proposed to be included in second schedule and to be taxed effective July 1, 2016: 1. Chartered Flights within Sindh or originating from any airfield in Sindh. 2. Other Consultants including human resource and personnel development consultants in addition to existing category of tax consultants. 3. Public Relations services. 4. Cosmetic and plastic surgery services and transplantation. 15 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

16 5. Visa processing services, including advisory or consultancy services for migration or visa application filling services. 6. Debt Collection services and other debt recovery services provided or rendered by debt collection agencies or recovery agencies or other persons. 7. Supply Chain Management or distribution (including delivery) services. The services of chartered flights are already subject to levy of Federal excise duty at 16%. The proposed amendment to levy sales tax on Chartered Flight Services needs to be examined in relation to Constitutional right of Provinces to levy taxes on inland and air travel. Distribution of goods and supply chain management represent activity which is covered under the Federal Sales Tax Act. The charge of tax on such activity by the Provinces will require legal sanction which is apparently not available under the Constitution. It appears that the proposed levy is restricted to delivery services (of goods) in relation to supply chain management and distribution activity. No definition has been proposed for distribution and supply chain management services. NEW DEFINITIONS INTRODUCED -Section 2 Following new definitions, are proposed to be inserted to clarify the scope of such services: Section 2(29A) Cosmetic and plastic surgery Section 2 (31A) Debt collection and other debt recovery services Section 2 (69A) Public relation services Further the definition of the term notification in the official Gazette is also proposed to be inserted under section 2(60A) of Sindh Sales Tax Act retrospectively with effect from 01 July TIME PERIOD FOR REFUND-Section 15 Refund arising as a result of a claim of adjustments or deductions is proposed to be made on yearly basis in the month following the end of financial year. Previously no time period was prescribed for such claim. INPUT TAX CREDIT NOT ALLOWED Section 15A A new section 15A regarding inadmissibility of input tax has been introduced. Previously, such procedure was prescribed in Rule 22A of the Sindh Sales Tax on Services Rules, This will strengthen the legal position that anything, which is related with determination of sales tax liability, should principally be governed through the provisions of main statute. Further following specific restrictions have inter alia been proposed on the admissibility of input tax: 16 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

17 Provincial Tax Memorandum 2016 The amount of sales tax paid on the telecommunication services in excess of 19% and the amount of sales tax paid on other taxable goods or services in excess of 13%. Goods or services procured or received by a registered person during a period exceeding six months prior to date of commencement of the provision of taxable services by him. This is against the VAT principles, which would certainly lead to increase in cost of doing business. JOINT AND SEVERAL LIABILITY OF PERSONS WHERE TAX UNPAID- Section 18 The provisions of Section 18 describes the joint and several liability of the registered service provider and registered service recipient in the event of any non-payment of tax. The liability for charge and recovery has now been extended to all persons including unregistered persons receiving such services. This would effectively mean that the objective of this amendment is to remove the immunity which was deemed to be applicable for the reason that a person receiving the taxable service was unregistered at the time of incidence of tax. SALE OF TAXABLE ACTIVITY OR TRANSFER OF OWNERSHIP Section 19 In the case of transfer of taxable activity as a going concern, the tax incidence lies on the transferee whenever the services are rendered. A proviso has been added whereby in the case of any tax unpaid at the time of transfer, the same shall have the first charge on the assets of the business and the person buying and selling the business shall be jointly and severally liable for such tax. TIME LIMIT TO ISSUE SHOW-CAUSE NOTICE AND RECORD-KEEPING - Sections 23, 27, & 47 The limitation of time period for undertaking the following actions under the Sindh Sales Tax Act, 2011 is proposed to be revised from 5 to 8 and 10 years: Issuance of show cause notice for recovery of tax under sections 23 and 47 in certain specified circumstances. Retention and production of records and documents under Section 27(1) is also proposed to be enhanced from 5 years to 10 years. SEPARATE RETURN WHEN RATE OF TAX CHANGES -Section 30(5) It is proposed to omit sub-section (5), which requires to file two separate returns for each portion of tax period, showing the application of different rates of tax. Since e-filing of returns caters adequately the rate change issue, as such the provision may not have any utility, as such it is now to be withdrawn. 17 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

18 RECOVERY OF TAX NOT LEVIED OR SHORT-LEVIED -Section 47(1B) & Section 47(6) Recovery procedure of tax short or not withheld by a withholding agent has been made part of the law. Now, recovery for tax short or not withheld can be made from the withholding agent. APPOINTMENT OF MEMBER SRB TRIBUNAL -Section 60 It is proposed to enhance the tenure of the Member of SRB Tribunal from 5 years to 10 years from date of his / her appointment by the Government. EXEMPTION THRESHOLD FOR CERTAIN SERVICES ENHANCED It has been announced that a minimum annual threshold for the levy of sales tax on certain services as prescribed under Notification No. SRB-3-4/7/2013 dated June 18, 2013 will be enhanced from Rs 3.6 million to Rs 4 million per annum. The services included are Restaurants and Caterers, Beauty Parlors / clinics and slimming clinics, auto workshops, workshops for electric or electronic equipment and automobile washing, laundries and drycleaners. EXEMPTION FOR INTERNET AND BROADBAND SERVICES Exemption threshold for internet and broadband users is proposed to be increased from 2mbps speed and Rs per user per month to 4mbps speed and Rs. 2,500 per user per month, respectively. INFRASTRUCTURE CESS The Sindh Development and Maintenance of Infrastructure Cess was introduced under section 9 of Sindh Finance Act, 1994 and the rules made thereunder. Amendment proposed in the schedule to the respective schedule and under the revised Schedule, the levy of such tax will be based on the weight of imported goods starting from 1,250 KG to those exceeding 16,000 KG. This cess is presently charged on a composite basis having relation with the value assessed by the Customs authorities and a cess based on the weight of the goods. Now, the rate in relation to the value of goods has been revised upward and a charge on the basis of weight being 1 paisa per Kilometer has been related to the distance covered within the province. 18 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

19 PROPERTY TAX The Sindh Urban Immovable Property Tax Act, 1958 ( 1958 Act ) imposes tax on the immovable properties in an urban area. The Sindh Finance Bill, 2016 proposes to amend the 1958 Act. It is proposed that a rebate equal to five percent of the amount of annual tax for a financial year will be allowed on annual rental value of immovable property if the amount of annual tax is paid in lump sum by 30 September of respective financial year. Surcharge is currently imposed to any amount not exceeding ten percent which is now proposed to straight 10%. STAMP DUTY The Sindh Finance Bill, 2016 propose amendments in section 31, 73 and schedule to the Stamp Act, 1899 to increase the rates of stamp duty on certain documents including Bill of Entry, bill of exchange and Power of Attorney. Provincial Government of Sindh has already levied and collecting cess on total value of a consignment of goods, as assessed by the Customs authorities, upon entering the Sindh province from outside the country through Air or Sea and on its movement. SINDH COMPANIES PROFITS WORKERS PARTICIPATION ACT, 2015 After passage of Eighteenth Constitutional amendment, The Government of Sindh, has enacted the Sindh Companies Profits (Workers Participation) Act, 2015, (the 2015 Act) which is deemed to be effective from The practical application of retrospective legislation needs to be examined in relation to the Companies which have already discharged the liability under Federal Law for a period from July 1, 2011 to the date of enactment of this 2015 Act. Both WPPF and WWF have been enacted under the Provincial legislations of Sindh which effectively means that for workers and establishment situated in Sindh, the Federal law will not be applicable and the levy shall be required to be paid under the Scheme prescribed under the Sindh Acts. However, corresponding amendments are required to be made in the Income Tax Ordinance, 2001 to expressly provide for the admissibility of contributions under the Provincial WWF and WPPF laws as well as to exempt the receipts of workers under the Provincial WPPF Scheme. The rate of profit allocation to workers under the Sindh Act is also 5% in line with the Federal legislation. As per the WPPF Act, the excess over the profit allocable to workers under the Scheme shall have to be transferred to Federal WWF. This matter needs to be examined as there is now a Provincial WWF in place. 19 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

20 The levy is, in principle, based on the entities being a company formed under the Federal legislation namely viz. the Companies Ordinance, It is considered that a mechanism / procedure would have to be prescribed for allocation / attribution of profits or workers to which this Provincial levy will be applicable in case the operations and organisation of the company is not limited to the Province of Sindh. The general scheme of the 2015 Act is similar to the Companies Profits (Workers Participation) Act, 1968, (the 1968 Act) however, some important deviations as under: (i) (ii) (iii) (iv) (v) Eligibility: Companies employing 50 persons were required to establish a Workers Participation in Profits Fund (WPPF) under the 1968 Act of Federation. This limit prescribed under the 2015 Act of Sindh is 100 persons. Workers: The definition of Worker has been extended to include workers employed by the contractor. "Worker" in relation to a company is defined to mean an employee of the company, including employed by or through the contractor, who falls within the definition of the worker as defined in Clause (xxx) of section 2 of the Industrial Relations Ordinance, 2002, and has been working for or in the company for a period of not less than six months. Disbursement of Benefits: The wage categories for the disbursement of benefits to the workers as against to previous ones have been proposed to be amended as follows: (a) Workers drawing average minimum monthly wages as fixed by the Government from time to time. (b) Workers drawing average minimum monthly wages as fixed by the Government from time to time but not exceeding Rs. 20,000. (c) Workers drawing average minimum monthly wages exceeding Rs. 20,000. Maximum Share: The maximum share a worker can receive is proposed to be four times of the minimum wages for unskilled worker as given in the Schedule of Minimum Wages for Unskilled Workers Ordinance, Applicability of Law: The Scheme applies to all companies which are engaged in Industrial undertakings as defined in the Schedule to the Act which is primarily in line with those covered by 1968 Act. 20 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

21 KHYBER PAKHTUNKHWA FINANCE BILL-2016 S.No Proposal Relevant Section/ Clause/ Schedule THE KHYBER PAKHTUNKHWA FINANCE ACT, Addition to the list of services First Schedule 2 Powers of Officers Section 56 3 Appellate Authorities Section 56-A 4 Regulations Section 114 STAMP DUTY Stamp Act, 1899 PROFESSIONAL TAX Khyber Pakhtunkhwa Finance Act, P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m

22 THE KHYBER PAKHTUNKHWA FINANCE ACT, 2013 Additions to the list of services First Schedule Certain services proposed to be included in the First Schedule (i.e., the list of services which can be taxed) but are not yet proposed to be included in the Second Schedule (i.e., list of taxable services ): Facilities for travel by road; Cargo services by road; Visa processing services including advisory or consultancy services for foreign education or for migration; and Valuation services including competency and eligibility testing services. Powers of Officers Section 56 Powers of officers of the Authority are proposed to be streamlined by: Empowering an officer to exercise powers and discharge duties of officers subordinate to him; Empowering the Authority to limit, restrict or impose conditions on exercise of powers by officers; and Empowering the Authority to notify certain officers to exercise powers or functions of senior officers. Appellate Authorities Section 56-A It is proposed to empower the authority to extend powers of Collector (Appeals) to Additional Collector till the appointment of regular Collector (Appeals). Taxpayer or the officer not below the rank of additional collector were allowed to appeal before the Tribunal only against the order of Collector (Appeals). It is now proposed that both the parties now can file appeals before the Tribunal against any order of Collector (Appeals), Collector or the Authority. Regulations Section 114 Except where specific approval is required from the Council, authority is proposed to be empowered to make regulations or specify procedures, not inconsistent with the rules. STAMP DUTY The Bill propose to enhance the rates of stamp duty on certain documents including arms licenses of prohibited bores. ROFESSIONAL TAX The Bill proposes to levy professional tax on Association of Persons and sole proprietors at varying rates. 22 P a g e W e b s i t e : w w w. r a f q a t. c o m E m a i l : i n f r a f q a t. c o m