Summary of tax proposals 1990-91.
A. DIRECT TAXES
I. INCOME TAX
- It has been proposed to abolish the Simplified Procedure of Assessment and to introduce Self Assessment Scheme for the existing non-company cases with income below Rs. 200,000. Expected revenue gain is Rs. 500 million (+). - It has been proposed to increase the rate of super tax for private companies from 15 per cent to 20 per cent. Expected revenue gain is Rs. 260 million (+). - It has been proposed to lower the income limit from Rs. 200,000 to Rs. 100,000 for the purposes of 10 per cent surcharge in non-salary cases. Further, in non-salary cases qualifying for acceptance under the Self Assessment Scheme with declared income upto Rs. 100,000, a surcharge of Rs. 600 has been proposed. Expected revenue gain is Rs. 60 million (+). - It has been proposed to lower the exemption limit of Rs. 15,000 to Rs. 10,000 in respect of dividend income from NIT, ICP and listed companies. Expected revenue gain is Rs. 8 million (+). - It has been proposed to lower the exemption limit from Rs. 15,000 to Rs. 10,000 in respect profit on PLS accounts and to reduce the limit of Rs. 100,000 to Rs. 50,000 in respect of bank profits and raising the rate for the withholding of tax from 5 per cent to 7.5 per cent. Expected revenue gain is Rs. 40 million (+). - It has been proposed to tax the receipts of casual and non-recurring nature amounting to Rs. 25,000 and above and to provide for final with-holding of tax at 7.5 per cent in respect of prizes on prize bonds and winnings from a raffle, lottery or crossword puzzle. Expected revenue gain is Rs. 50 million (+). - It has been proposed to put a restriction on the upper limit of deductible expenditure on salaries of the directors of a domestic private company upto 20 per cent of its total income or Rs. 20,000 per month for each director. - It has been proposed to withdraw exemption in respect of income of Provincial Seed Corporations and income from rendering of agro-services and renting out of agricultural machinery. - It has been proposed that the scope of exemption to cooperative societies may be limited to their dealings with members if they are engaged in sale of goods, letting of godowns and warehouses, marketing and processing of agricultural produce, purchase and supply of agricultural implements, seeds and livestocks, etc. or if they are engaged in cottage industry and agricultural or rural credit. - It has been proposed that, for purposes of tax rates, income from pension may be clubbed with other income of a pensioner whose total income (including pension) exceeds Rs. 100,000 per annum. - It has been proposed that any expenditure incurred by a tax payer at any time in a sum exceeding Rs. 25,000 may not be allowed as deductible unless it is made through crossed cheque or bank draft. - It has been proposed that where any sum exceeding Rs. 100,000 is claimed to have been received as loan otherwise than by a crossed cheque drawn on a bank, it may be deemed to be the income of the tax payer. - It has been proposed to allow initial depreciation at the rate of 25% on buildings and library books and 25 per cent normal depreciation per annum on laboratory equipment owned and used by private educational institutions. - It has been proposed to raise the present income limit of Rs. 100,000 to Rs. 150,000 for the purposes of payment of advance tax in non-company cases. - It has been proposed to prescribe a limit of two years for the finalisation of penalty proceedings under the Income Tax Ordinance, 1979. - It has been proposed that the rebate in tax on export income may be allowed only once to the firm or association of persons engaged in the export business and not again to any partner of the firm or member of the association in respect of the same exports. - It has been proposed that tax credit at the rate of 15 per cent of the amount invested by a Pakistani company in the purchase of plant and machinery installed between 1st July, 1990 and 30th June, 1993 for balancing, modernization and replacement purposes may be allowed.
II. CAPITAL VALUE TAX
- It has been proposed that (i) the scope of Capital Value Tax may be extended to AOPS, HUFs, firms and companies; (ii) the CVT may be payable also if capital assets are acquired by gifts; and (iii) the exemption in respect of immovable urban commercial property with land area not exceeding 250 square yards may be withdrawn. Expected revenue gain is Rs. 45 million (+).
Summary of Tax Proposals Central Excise Duties:
(a) Excisable Goods:
- It is proposed to levy duty on the following luxury goods @ 5 per cent ad valorem:
(b) Deep Freezers
(c) Arms and ammunition - It is proposed to increase the rate of duty on cotton yarn and man-made yarn from Rs. 2.00 to Rs. 4.00 per kg. and on knitting yarn from Rs. 1.00 to Rs. 2.00 per kg. - It is proposed to increase the rates of excise duty on cement at the following rates:
(a) Ordinary grey portland cement from
Rs. 332 to Rs. 400 per tonne. (b) Slag cement from Rs. 300 to Rs. 362
per tonne. (c) All other sorts of cement from Rs.
350 to Rs. 422 per tonne. - It is proposed to increase the rate of duty on un-manufactured tobacco used in the manufacture of cigarettes from Rs. 2.00 per kg. to Rs. 2.20 per kg. - Sugar produced by a factory in excess of its previous year's production is proposed to be exempted from 50 per cent of the leviable duty provided it had worked for a full crushing season in that year. - It is proposed to levy central excise duty on beverages on the basis of installed spouts in the filling machines. The rate per spout in respect of manufacturers of foreign brand beverages is proposed at Rs. 6.5 lacs, and for local brand beverages at Rs. 1.5 lacs. A flat rate of excise duty of Rs. 30,000 is proposed for factories with 5 or less number of spouts and post-mix dispensers. - It is proposed to increase the rate of duty on aerated waters from Rs. 1.00 to Rs. 3.00 per unit container if filled in container containing not more than 250 milliliters, and at the rate of 30 paisa per 25 milliliters if filed in container containing more than 250 milliliters. - It is proposed to exempt beverage concentrate from the levy of central excise duty. - Rate of excise duty on following goods is being reduced:
(a) Soaps from 20% to 12% (b) Detergents from 20% to 12%
(c) Electric fluorescent tubes from 15% to 10% (d) Paraffin & slack wax
from 30% to 20%
(b) Excisable Services:
- It is proposed to levy duty on freight charged for carriage of goods by air @ 5 per cent of the charges. - It is proposed to levy duty on courier services at 10 per cent of the charges. - It is proposed to levy duty on services rendered by Insurance Companies by way of insuring goods @ 3 per cent of the premium. Life insurance will, however, remain exempt. - It is proposed to levy duty on telex services @ 5 per cent of the charges. - Rate of duty on television and radio advertisements of beverages, cigarettes and cosmetics etc. is proposed to be increased from 5 per cent to 10 per cent of the charges. - It is proposed to subject services provided or rendered to parties or functions attended by more than 50 persons by hotels, restaurants, clubs etc., whether indoors or outdoors to, excise duty @ 30 per cent of the charges. - Exemption of duty on telephone, telegraph telex and laundry services provided by dutiable hotels is proposed to be withdrawn. Resultantly, these services will now be chargeable to duty @ 10 per cent of the charges.
(c) License Fee on Excisable Services:
- It is proposed to levy license fee on excisable services and other services as mentioned elsewhere.
- Import surcharge: Increase in the rate of import surcharge is proposed from 7 per cent to 10 per cent.
- Motor vehicles: Customs duty on four wheel drive vehicles like Pajero is proposed to be increased from 80 per cent to 100 per cent and on motor cars of engine capacity exceeding 1300 cc by 10 per cent.
- Plastic: Customs duty on plastics in primary form is proposed to be increased from 40 per cent to 50 per cent and on semi-manufactures of plastics from 80 per cent to 100 per cent.
- Hiring of Services of Private Firm: To check under-invoicing of selected items of imports and over-invoicing of plant and machinery, the services of a private firm have been hired.
- Tallow: Customs duty on tallow is proposed to be increased from 20 per cent to 25 per cent.
- Luxury Boats: The existing rate of 20 per cent duty on luxury boats is proposed to be increased from 20 per cent to 30 per cent. Incentives /protection for the local Industry.
- Industrialization of Rural Areas: ECC has recently approved a package of incentives for setting up industries in the rural areas whereby machinery meant for projects set up in such areas would be exempt from customs duty and sales tax.
- Electronic Industry: Certain components having exclusive use in the electronic industry are proposed to be exempted from customs duty and sales tax. It is further proposed to streamline the procedure for granting concessions on the raw materials imported by the electronic industry.
- Cement Industry: Plant and machinery imported for the manufacture of Portland Cement is exempt from customs duty. This concession is proposed to be extended to machinery for the manufacture of any type of cement.
- Leather Industry: Clicking presses meant for the leather industry are proposed to be exempted from customs duty.
- Packing Material used in Dairy/Fruit Juices Industry: Packaging material namely aluminium foil and polystyrene foil/sheet for dairy/fruit juices products proposed to be exempted from customs duty.
- Domestic Electric Appliances: Concessional rate of 40 per cent customs duty on raw materials for the manufacture of domestic electric appliances is proposed to be re-fixed at 20 per cent duty with 12.5 per cent sales tax. This concession is proposed to be extended to blenders, electric shavers, room heaters, hair dryers, cassette players and to similar other item.
- Television Components: The existing concessionary rate of 25 per cent customs duty on components imported by recognised manufacturers of TV sets is proposed to be reduced to 20 per cent duty and sales tax is proposed to be levied on these components, which will get adjusted against the sales tax payable at the manufacturing stage.
- Polyester Chips: Customs duty on polyester chips is proposed to be increased from 30 per cent to 50 per cent.
- Polyester Fibre: Customs duty on polyester fibre is proposed to be increased from Rs. 15 per kg to Rs. 20 per kg.
- Personal Computers: 10 per cent customs duty and 12.5 per cent sales tax is proposed to be levied on small desk type personal computers.
- Paper sacks: Customs duty on paper sacks is proposed to be increased from 60 per cent to 80 per cent.
- Transfer Paper: Customs duty on transfer paper is proposed to be increased from 40 per cent to 80 per cent.
- Tractor Tyres: Customs duty is proposed to be levied @ 10 per cent on agricultural tractor tyres.
Rationalization of Tariff Rates
- Reduction of Maximum Duty Slab from 125 per cent to 100 per cent: A number of items subject to 125 per cent rate of duty in the First Schedule to the Customs Act are proposed to be subjected to 100 per cent rate of duty. Besides, cumulative rate of duty (statutory + regulatory) on a few other items which is in excess of 100 per cent is also proposed to be reduced to 100 per cent.
- Wood Pulp: The existing duty of 20 per cent on pulp is proposed to be bifurcated into 10 per cent customs duty and 12.5 per cent sales tax adjustable at manufacturing stage.
- Cameras and Image Projectors: Existing customs duty of 80 per cent on photographic cameras, cinematographic cameras, image projectors and photographic enlargers of less than 16 mm is proposed to be reduced to 50 per cent.
- Newsprint: Last year customs duty at the rate of Rs. 3000 per ton was levied on newsprint. It is proposed to reduce this rate to Rs. 1500 per ton.
- Active Dried Yeast: Customs duty on active dried yeast, which is an essential item for food industry, is proposed to be reduced from 100 per cent to 60 per cent.
- Bobbins for Textile Industry: Plastic and wooden bobbins are chargeable to 80 per cent duty while bobbins made of paper and paper-board are chargeable to 40 per cent duty. A uniform rate of 60 per cent is proposed to be levied on all types of bobbins.
- Palm Oil: The distinction between the industrial and commercial imports of palm oil is proposed to be eliminated.
- Railway and Tramway Locomotives: Statutory rate of duty on railway or tramway locomotive equipment is proposed to be brought down to 20 per cent in line with the rate of duty applicable to rolling stock of Railways through exemption notifications.
- Bicycles: Duty on raw materials imported for manufacturing bicycles components is proposed to be reduced from 50 per cent to 20 per cent in line with the duty structure on auto-parts and the facility of repayment of Rs. 110 per bicycle is proposed to be withdrawn.
- Automatic Circuit Breakers: The existing regulatory duty of 40 per cent on moulded case circuit breakers, earth leakage circuit breakers and air circuit breakers is proposed to be withdrawn as these are not manufactured locally.
- Sterilizing Granules: Sterilizing granules used for sterilizing baby milk bottles are proposed to be exempted from customs duty.
Withdrawal of Exemptions:
- Old and used construction machinery: Concessionary duty of 20 per cent on old and used construction machinery imported by Pakistani construction firms is proposed to be withdrawn as operations of such companies abroad have been wound up.
Streamlining of Procedures
- Self-adhesive Insulation Tape: The duty free import of PVC film-sheet for manufacturing self-adhesive insulation tape is proposed to be subjected to appropriate conditions.
- Increase in the Baggage Allowances: The duty free allowances for tourists, and Pakistanis returning from India is proposed to be increased from Rs. 500 to Rs. 1000.
- Regulatory Duty and Exemption Notifications: Regulatory duty leviable on various items is proposed to be incorporated in the statutory rates of duty wherever possible. Application of regulatory duties and exemption notifications is also proposed to be streamlined with a view to removing legal lacunae and embiguities.
- Amalgamation of Notifications: The existing notification granting exemption on plant and machinery for engineering industry and similar other notifications are proposed to be consolidated under one notification.
- Prior Release of Urgent Consignments: A provision is proposed to be added in the Customs Act to facilitate clearance of consignments of urgent nature prior to normal documentation and payment of customs duties.
- Warehousing: In order to streamline the warehousing operations, suitable amendments have been proposed in sections 12, 84, 86, 98, 115, 116 and 156 of the Customs Act.
- Rate of Foreign Exchange: The existing provision in the Customs Act, 1969 regarding conversion of import value into Park rupee at the exchange rate prevalent on the day of filing of Bill of Entry or Bill of Export is proposed to be amended to a day preceding the date of the filing of Bill of Entry for home consumption or ex-bond Bill of Entry or a Bill of Export, as the case may be.
- Deferment of Customs Duty: A provision is proposed to be added in the Customs Act for deferment of customs duty.
- Import and Iqra Surcharge: Provision for exemption and repayment are proposed to be incorporated in the law regarding Iqra surcharge and import surcharge to provide for various exigencies whereby repayment or exemption is required to be provided.
- Provisions Collection of Taxes Act, 1931: The provisions of Provisional Collection of Taxes Act, 1931 whereby new taxes and any increase in the existing taxes is given immediate effect on announcement of the annual budget, is proposed to be made applicable both for increase and for reduction in the duties and taxes.
|Printer friendly Cite/link Email Feedback|
|Date:||Jul 1, 1990|
|Previous Article:||An analysis of the Finance Act 1990.|
|Next Article:||An economic evaluation of budget 1990.|