Islamabad August 22 2022: Government increase the amount of tax being collected on tobacco, cigarette and cars to raise an amount of PKR 70 billion through Ordinance called the Tax Laws (Second Amendment) Ordinance, 2022.
The president gave the approval to the Ordinance on the advice of the prime minister under the Article 89(1) of the Constitution.
Under the Ordinance, the amendments have been made in Sales Tax Act 1990, Income Tax Ordinance 2001, Federal Excise Act 2005 and Finance Act 2022.
Sales tax shall be charged from retailers, other than those falling in Tier-1, through their monthly electricity bills, at the rate of five percent where the monthly bill amount does not exceed rupees twenty thousand and at the rate of seven and half percent where the monthly bill amount exceeds the aforesaid amount and the electricity supplier shall deposit the amount so collected directly without adjusting against his input tax. Government targets to collect PKR 27 billion under this head.
Single cylinder agriculture diesel engines (compression ignition internal combustion piston engines) of 3 to 36 Horse Power is exempted from sales tax.
FED on tobacco has been increased from “Ten rupee” to “Three hundred and ninety rupees”.
On Tier one cigarette FED is increased from “five thousand nine hundred” to “six thousand five hundred” while on tier two cigarette FED is raised from “one thousand eight hundred and fifty” to “two thousand and fifty”.
Government made these changes in the tax law to meet the IMF condition of tax collection as it has abolished fixed on electricity bills for retailers to forego an amount of PKR15 billion. In the budget, the government imposed a fixed tax on the monthly electricity bills of retailers. It imposed PKR 3,000 tax on monthly bills of up to PKR 30,000, PKR 5,000 on monthly bills of more than PKR 30,000 but less than PKR 50,000 and PKR 10,000 on monthly bills of more than PKR 50,000. These tax amounts were to be doubled if the name of a retailer did not appear on the Active Taxpayers List (ATL) on the date of issuance of the monthly electricity bill.
Under tax amendments, FED for targeted collection of Rs.14 billion is imposed on motor vehicle held in Pakistan that includes car, caravan automobiles, jeep, limousine, pickup, sports utility vehicle, trucks, vans, wagon and any other automobile. But this is not applied to a motor vehicle used for public transportation, carriage of goods and agriculture machinery; and any motor vehicle held in Pakistan by a foreign diplomat or a foreign diplomatic mission.