ISLAMABAD: Finance Minister Ishaq Dar on Saturday successfully struck agreements with textile and service sector tycoons and announced the imposition of 10 percent regulatory duty on import of cotton yarn from India and grey and processed fabric as well as devising a formula of tax payment for service providers.
For 12 service providers, the government announced a new facility either to pay a minimum tax at the reduced rate of 2 percent and provide accounts for audit for the tax year 2016 or pay 8 percent minimum tax with a carry forward facility.
After holding a series of meetings with All Pakistan Textile Mills Association (APTMA) and value added sectors here at the FBR headquarters, Finance Minister Ishaq Dar on Saturday night told reporters about the different steps taken to resolve the problems being faced by the textile sector.
He said that regulatory duty of 10 percent will be levied on the import of cotton yarn and grey and processed fabric with effect from November 1, 2015.
— The Export Re-financing Facility (ERF) rate shall be reduced by 1 percent (100 basis points).
— The ginning and spinning sectors will qualify for Long Term Finance Facility (LTFF).
— The rate of LTFF will be reduced by 100 basis points.
— To resolve the issue of pending sales tax refunds, committees consisting of representatives from industry and the FBR will be constituted in each Regional Tax Office (RTO).
— Efforts will be enhanced for the prevention of smuggling.
Representatives of the textile industry thanked the finance minister for the steps announced and assured they would extend support to the government in its efforts for the promotion of a tax culture and enhancement.
Senator Ishaq Dar chaired a meeting to consider options regarding minimum income tax on various corporate service sectors. Representatives of 12 such sectors were present in the meeting held at the Ministry of Finance.
The finance minister, it may be recalled, had constituted a committee to review taxation under section 153(1)(b) of the Income Tax Ordinance 2001. The five-member committee was headed by Haroon Akhtar Khan, SAPM on Revenue.
The committee invited all the stakeholders who had approached the FBR through their representatives to discuss the issue with the support of financial data. Twelve corporate sectors had approached the FBR and presented their case to redress their grievances.
Each corporate service sector was heard by the committee and financial data discussed. The gist of the representation of nearly all the aggrieved sectors was that they operated on a very low margin of profit and 8 percent minimum tax could not be absorbed by them. The committee after having discussions with the representatives of the corporate service sectors submitted its report to the finance minister. After examining the report and meeting the representatives of above mentioned sectors, the finance minister decided that the 12 corporate service sectors i.e. freight forwarding services (SEA), air cargo services (air freight), courier services, manpower outsourcing services, hotel services, security guard services, software services, tracking services, advertising services, share registrar services, engineering services and car rental services, shall have one of the following two mutually exclusive options:
(a) To opt out of minimum tax as referred to in clause-b of the sub-section 3 of section 153 of the Income Tax Ordinance 2001 and present their accounts for audit by giving an irrevocable undertaking in writing by the date specified by the government for tax year 2016.
Provided that in such case, tax liability shall not be less than 2 percent of the gross turn over.
(b) To pay minimum tax at 8 percent of the gross turnover and entitled to carry forward this minimum tax if it exceeds the actual tax payable after assessment. However, the unadjusted amount of tax shall be carried forward and adjusted against the tax liability of subsequent years up to a maximum of five years.
The representatives of the corporate service sectors agreed to recommendation that the committee proposed. The finance minister assured the representatives that after completion of due codal formalities, requisite notifications shall be issued effective from Nov 1, 2015.
They thanked the finance minister for giving them a patient hearing to arrive at an amicable decision regarding minimum tax. They assured the government of full support to promote a tax culture and improve the tax to GDP ratio of Pakistan.
The SAPM on Revenue Haroon Akhtar Khan, FBR chairman and other senior officials of the Ministry of Finance and FBR were also present.
