1. Income Tax (Amendment) Ordinance 2021 Promulgated to Extend Tax Amnesty for Construction Sector
On 19 January 2021, the President of Pakistan promulgated the Income Tax (Amendment) Ordinance 2021 (ITO 2021) to extend tax amnesty granted to construction sector to mitigate the adverse effects of the Covid-19 pandemic on the economy, especially on jobs. The ITO 2021, which entered into force retrospectively from 1 January 2021, has amended section 100D, section 120 and the Eleventh Schedule of the Income Tax Ordinance 2001 (ITO 2001) to extend the following deadlines concerning tax amnesty for construction sector:
ü The deadline for completion of projects for availing tax amnesty has been extended to 30 September 2023 from 30 September 2022.
ü The deadline for availing tax amnesty on capital investment made in new projects in the form of money or land has been extended to 30 June 2021 from 31 December 2020.
ü The deadline for availing tax amnesty by the first purchaser of a building or a unit of the building purchased from the builder regarding purchase price of the building or unit of the building has been extended to 31 March 2023 from 30 September 2022; and
ü The deadline for availing tax amnesty by the purchaser of a plot for the purpose of construction of building has been extended to 30 June 2021 from 31 December 2020, and the deadline for commencing construction on such plot(s) has been extended to 31 December 2021 from 31 December 2020.
The ITO 2021 has also amended the registration and filing of returns by builders and developers. Accordingly, the builders or developers will electronically register a project on IRIS through the website of the Federal Board of Revenue (FBR) on or before 31 December 2021, and by 30 June 2021 for claiming benefit under section 100D(3) of the ITO 2001.
2. FBR’s Rules for Rewarding Informers of Tax Evasion
On 22 January 2020, the FBR issued the Inland Revenue Reward Rules, 2021 (reward rules) for rewarding informers/whistleblowers of tax evasion. As per rule 5(7) of the reward rules, an informer/whistleblower will be eligible for a reward at the rate of 20% of the tax sought to be evaded in a single case subject to a ceiling amount of PKR 5 million. Tax sought to be evaded means:
ü the detection of an unregistered person liable to be registered and/or detection of evasion or non-assessment including short-assessment of tax by a registered person or detection of payment of inadmissible refunds or claim of inadmissible input tax resulting in, and leading to, an assessment/determination of tax owed to the state under the Sales Tax Act, 1990 (STA), the Federal Excise Act, 2005 (FEA), and the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, provided corresponding penalty under section 33 of the STA and section 19 of the FEA representing an amount of tax sought to be evaded must have been imposed ; and
ü the difference between the tax originally paid on the basis of income originally assessed/declared and the tax calculated/computed on account of re-assessment of income framed on the basis of information collected or provided resulting in and leading to an assessment/determination of tax owed to the state under the Income Tax Ordinance, 2001, provided corresponding penalty under SI.12 of section 182(1) of the ITO 2001 representing an amount of tax sought to be evaded must have been imposed.
To be eligible for reward under the reward rules, an informer or whistle-blower must:
ü be registered for the purpose of being an informer or whistle-blower;
ü provide information in the shape of concrete evidence, which conclusively leads to detection of tax evasion, formation of assessment/reassessment and eventual recovery of the evaded tax; and
ü lodge a claim on the prescribed format on the conclusion of the above processes.
The FBR has issued reward rules through SRO 78(I)/2021 and these have come into force with effect from 1 January 2021.
3. FBR’s Guidelines for Supply of Taxable Goods from Tax-exempt Areas
On 26 January 2021, the FBR published guidelines for bringing taxable goods from tax-exempt areas into taxable areas.
A person who intends to bring taxable goods from tax-exempt areas into a taxable area is required to be registered for the purpose of sales tax and is liable for payment of tax or taxes and furnishing of prescribed documents such as sales tax invoice, goods declaration for imported goods and e-transport advice.
Moreover, such a person is required to electronically generate e-transport advice in the form specified in STR 32 by logging in to FBR’s computerized system. However, a taxpayer who is not blacklisted or suspended pursuant to section 21 of the Sales Tax Act, 1990 (Act), and who has filed sales tax returns under section 26 of the Act within the stipulated deadlines for the last two immediately preceding tax periods is allowed to generate e-transport advice, which can be cancelled within 12 hours of its issuance if goods are not transported.
E-transport advice is valid for one day for distance of up to 100 kilometres in the taxable areas and one additional day for every distance up to 100km thereafter. However, the tax authorities may extend the validity period of e-transport advice upon receiving written request from taxpayer if taxable goods were not transported due to unavoidable circumstances.
Taxpayer is obliged to provide details of e-transport advice to the recipient of the supply who is required to convey his acceptance or rejection of taxable goods through FBR computerized system. However, this requirement is not applicable where taxable goods are brought into taxable areas by manufacturer or importer to be sold at self-own, self-managed, self-administered or self-operated distribution, wholesale or retail outlet.
Only one e-transport advice may be generated against a single invoice or a stock advice. However, one conveyance may carry multiple e-transport advices in case it is transporting taxable goods relating to multiple invoices or stock advices.
Any taxable goods brought from tax exempt areas into taxable areas in violation of the guidelines will be liable for seizure along with the conveyance. The adjudicating authority may confiscate such taxable goods by passing written order, which will be disposed of by the concerned tax authorities if taxpayer has not exercised option of paying fine in lieu of confiscation.
Full procedures and requirements for bringing taxable goods from tax exempt areas into taxable areas are provided in SRO 96(I)/2021, that has inserted new Chapter X-A (rule 69A to rule 69H) into the Sales Tax Rules 2006.
The author is serving as Additional Commissioner Inland Revenue at Federal Board of Revenue, Pakistan. He can be contacted at email@example.com